Protecting Privileged Communications of In-house Counsel, Post-Halo Presented to Date: January 10, 2018 2018 Kilpatrick Townsend
Outline 1. A hypothetical 2. Refresh on the law: Willful infringement for patent (and trademark) infringement The Supreme Court s Halo ruling The use of an opinion of counsel to rebut willfulness The Federal Circuit s Seagate distinction between opinion counsel and trial counsel 3. Determining the scope of the waiver resulting from the reliance upon an opinion of counsel. 4. A recommended methodology for protecting in-house counsel s privileged communications and work product. 5. Comments on the pending In re Alcon Labs matter 2
The Hypothetical: Esteemed University v. Consolidated Gadgets, Inc. 3
Hypothetical 2015: Esteemed University is awarded patent on a gadget 2017: Consolidated Gadgets introduces Gadget Mark II 2018: Esteemed U sues Consolidated for patent infringement based on the Gadget Mark II During discovery, Consolidated discloses a 2016 opinion letter to the effect that: the claims must be construed to require a widget the Gadget Mark II has no widget and therefore, does not infringe Consolidated s privilege log shows: 1. An undisclosed opinion letter regarding validity 2. Work product and internal emails of in-house counsel relating to the validity of the Esteemed U patent 3. Many communications among management, in-house counsel and trial counsel 4. Emails regarding mock jury testing of the non-infringement theory 4
The Questions: What must be produced: 1. The validity opinion? 2. In-house work product and client communications relating to validity? 3. Communications with trial counsel? 4. In-house counsel emails re mock jury noninfringement testing? 5
Refresh on the Law 6
Treble Damages Are Available for Willful Infringement 35 USC 284: In the event either the judge or the jury awards damages: the court may increase the damages up to three times the amount found or assessed. Section 284 is the statutory basis for punitive or increased damages in a case of willful or bad-faith infringement. Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 508 (1964) 7
In Halo, Supremes Place Focus Solely on Infringer s State of Mind Previously willfulness required both (i) the absence of any objectively reasonable defense, and (ii) a nefarious state of mind. The first prong is incorrect; willfulness is determined solely by the state of mind of the defendant. State of mind is measured at the outset of the infringing conduct Existence of an exculpatory opinion is relevant to the infringer s state of mind Halo Electronics, Inc. v. Pulse Engineering, Inc., 136 S. Ct.1923 (2016) 8
Opinion of Counsel is Exculpatory Evidence Defendants reliance on opinion of counsel is part of the normal game Patent Local Rules typically provide a specific disclosure deadline Opinions work if done right: Greatbatch v. AVX, D. Del. Summary judgment of no willful infringement because defendant sought and obtained invalidity and non-infringement opinions of counsel before litigation and developed designs and processes to avoid infringement. Sociedad Espanola v. Blue Ridge, W.D.N.C. No enhancement due to the legitimate defenses at trial based on the opinions of a qualified patent attorney. Typical opinions address: invalidity alone non-infringement alone or both 9
Waiver and the Seagate Rule When a party in litigation discloses privileged communications or confidential work product, that party waives protection to any undisclosed material if: the disclosure was intentional, same subject matter, AND fairness requires that the disclosed and undisclosed material be considered together. Evidence Code, R. 502 Seagate Rule: asserting the advice of counsel defense and disclosing an opinion of opinion counsel do not constitute waiver of the attorneyclient privilege for communications with trial counsel. In re Seagate Technology, LLC, 497 F.3d 1360, 1375 (Fed. Cir. 2007). 10
Determining the Scope of Waiver 11
Question 1: The Validity Opinion Polling question: Will Consolidated be able to maintain privilege with respect to the invalidity opinion? q - Yes q - No 12
Question 1: The Validity Opinion Do undisclosed materials concern the same subject matter? Unclear. Yes: The non-infringement opinion rests on a certain claim construction. No: The invalidity opinion will also rest on a claim construction. One is infringement; the other is validity 13
Question 1: The Validity Opinion Does fairness require disclosure of the validity opinion? It depends. If counsel has elsewhere advised against the necessary claim construction, this is relevant to the decision maker s state of mind. But if invalidity opinion rests on same claim construction (or no claim construction) then nothing it offers nothing probative of recipient s state of mind Is in camera review required? 14
Question 2: In-house validity materials. Polling question: Will Consolidated be able to maintain privilege to the in-house materials relating to invalidity? q Yes q No 15
Question 2: In-house validity materials. This question tracks outside counsel opinion letter position Intentional waiver Overlapping subject matter If: a) court determines that common claim construction dictates same subject matter, and b) claim construction is addressed in validity opinion letter, then disclosure is warranted. 16
Question 3: Communications with trial counsel. Polling question: Will Consolidated be able to maintain privilege with respect to its communications with trial counsel? q Yes q No 17
Question 3: Communications with trial counsel. Straightforward application of the Seagate rule Communications and work product of trial counsel remains undiscoverable even if the client has waived privilege with respect to advice received from opinion counsel In-house counsel materials from working with trial counsel are protected too or the Seagate rule would be pointless 18
Question 4: In-house materials re mock jury. Polling question: Will Consolidated be able to maintain privilege with respect to in-house materials re mock jury testing of the non-infringement theory? q Yes q No 19
Question 4: In-house materials re mock jury. Is the subject matter the same? Yes overlap because it is the same non-infringement theory No subject is not the non-infringement theory but the litigation question of how to test it Does fairness demand disclosure? Yes the materials may reflect the defendant s state of mind as to the credibility of the non-infringement theory No trial prep is inherently different from assessment of merits Does the Seagate exception apply Yes isn t this exactly the sort of trial preparation to which the Federal Circuit was referring? No the Federal Circuit contemplates trial counsel hermetically sealed from opinion counsel. 20
Best Practices for Protection of In-House Privileges 21
Role-Confusion Leads to Waiver Burden is on the party asserting a privilege Therefore, accused infringer must show that in-house counsel materials are entitled to protection Accused infringer must demonstrate a basis for lack of waiver: in-house counsel are involved only in trial preparation (Seagate exception) and not providing advice re business decision making; OR in-house counsel are involved only in different subject matter (validity, not infringement, etc.) 22
Limiting Involvement of In-House Counsel in Opinions Divide in-house teams along same lines as outside team Opinion/FTO team Litigation team Have outside counsel address opinions to business decision maker, not in-house counsel For in-house counsel supervising opinions, a remote control role only: provide design resources limit review of drafts to accuracy of technical description Be thoughtful about the record being created Or just pick up the phone! 23
In re Alcon Labs 24
Background Johns Hopkins patents, now exclusively licensed to Bausch & Lomb Alcon obtained two opinions of non-infringement and invalidity immediately after the patent issued in 2006. JHU sued in 2017 Alcon disclosed the opinions Alcon withheld most of in-house work product and communications, contending: materials from prior to issuance of the patents was irrelevant materials post-litigation were exempted under Seagate Trial court ordered a wholesale production 25
Bad facts; bad law Alcon failed to argue several important points: lack of time overlap lack of subject matter overlap Alcon used its in-house patent litigation attorney to receive opinions The only person Alcon proffered as having a state of mind affected by the opinions was an in-house lawyer Many years between preparation of opinions and filing of litigation Multiple efforts by Alcon to obtain a license to the JHU patent after the opinion letters, suggesting that Alcon did not believe the patent was inapplicable or invalid Outcome may be scary, but possibly limited to its facts. 26
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