Maryland Intellectual Property Law Blog : Maryland Intellectual Property Lawyer & Attorney : Brian Wm. Higgins : Serving Baltimore, Columbia, Frederick

• Nacre AS v. Silynx Communications, Inc., No. 07-cv-02676, filed Oct. 2, 2007; assigned to J. Williams.

     Plaintiff Nacre AS is a Norwegian company that alleges ownership of U.S. registered trademark QUIETPRO, as well as U.S. Patent No. 7,039,195 (“Ear Terminal”) and U.S. Patent No. 6,567,524 (“Noise Protection Verification Device”). In September 2007, Nacre filed a trademark opposition proceeding against Rockville, MD-based Silynx Communications' QUIETOPS mark before the U.S. Trademark Trial and Appeal Board. That proceeding was stayed when, in October 2007, Nacre filed the above lawsuit against Silynx and its CEO, Gil Limonchik, alleging trademark and patent infringement. On June 12, 2008, the infringement allegations against Limonchik were dismissed without prejudice. Memorandum and Opinion (June 12, 2008). Limonchik, who according to court papers was a former Nacre consultant, had filed a motion to dismiss with prejudice under Rule 12(b)(6) (failure to state a claim).

     In granting the motion as to Count I (trademark infringement), Judge Williams stated that in order for a trademark claim against a corporate officer to survive a Rule 12(b)(6) motion, a plaintiff must allege, in addition to a corporation's infringing activity, that the individual corporate officer played an active role in the infringing activity. In this case, Judge Williams found Nacre's complaint failed to state factual allegations to indicate what actions Limonchik had taken in an individual capacity to infringe upon the QUIETPRO (R) mark. The only relevant allegations in Nacre's complaint, Judge Williams said, were "Defendant have and are infringing the rights of Nacre in QUIETPRO (R) under 15 U.S.C. 1125 and the common law" and "Defendants' infringement of Nacre's rights in QUIETPRO (R) is and has been willful."  Neither of those statements mentioned what specific role Limonchik played in the infringement, Williams found.      

     In granting the motion as to Counts II and III (patent infringement), Judge Williams found Nacre's complaint failed to allege facts sufficient to preclude dismissal of these counts. No part of the complaint, he wrote, offered facts to justify piercing the corporate veil, to demonstrate Limonchik's specific intent or action to induce infringement or facts to support contributory infringement liability.

     Nacre's case is not completely lost, however. Judge Williams' dismissal was made, as noted above, without prejudice as to Nacre's right to amend its complaint to add more factual allegations:

"Plaintiff has walked a fine line in drafting the complaint. It is possible to conjecture facts which would support Defendant Limonchik's liability in this case. However, the law requires a plaintiff to allege enough facts to put the defendant on notice of the claims and the grounds for those claims. Here, Plaintiff has not stated clear grounds for the claims alleged in the complaint."

     Judge Williams noted that "[Limonchik] has not offered any evidence that he would be prejudiced by an amendment [of the complaint], that an amendment would be futile, or that Plaintiff engaged in undue delay. * * * Defendant asks for dismissal with prejudice solely on the grounds that Plaintiff has failed to allege sufficient facts."

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     In Victor Stanley, Inc. v. Creative Pipe, Inc., No. 06-2662 (D. Md. May 29, 2008), U.S. Chief Magistrate Judge Grimm describes the proper means for asserting that documents are protected or immune from discovery because of the attorney-client privilege or attorney work product doctrine. Judge Grimm's explanation comes at the end of his opinion in Victor Stanley, published two weeks ago.

The Issue

     Because a party responding to a Rule 34 request for the production of discovery is entitled to refuse to produce documents if they are privileged or work product protected, Judge Grimm pointed out that the Federal Rules of Civil Procedure require that when doing so, the responding party must “describe the nature of the documents, communications, or tangible things not produced or disclosed--and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.” The most common way to do this, he wrote, is by using a privilege log, which identifies

1. Each document withheld,
2. Information regarding the nature of the privilege/protection claimed,
3. The name of the person making/receiving the communication,
4. The date and place of the communication, and
5. The document’s general subject matter.

What Really Happens?

     In actuality, Judge Grimm, who in his position as Magistrate referees all kinds of discovery disputes, found that lawyers infrequently provide all the basic information called for in a privilege log, and if they do, it is usually so cryptic that the log falls far short of its intended goal of providing sufficient information to the reviewing court to enable a determination to be made regarding the appropriateness of the privilege/protection asserted without resorting to extrinsic evidence or in camera review of the documents themselves. Few judges, he said, find that the privilege log is ever sufficient to make the discrete fact-findings needed to determine whether a privilege/protection was properly asserted and not waived.

What Should Lawyers Be Doing? 

     According to Judge Grimm, parties should be wary of filing a response to a Rule 34 document production request that asserts privilege/protection as a basis for refusing to make requested production without having a factual basis to support each element of each privilege/protection claimed for each document withheld, because doing so is a sanctionable violation.

     Insuring that a privilege or protection claim is properly asserted in the first instance and maintained thereafter involves a several step process, Judge Grimm wrote.

(1)  First, pursuant to FRCP 26(b) (5), the party asserting privilege/protection must do so with particularity for each document, or category of documents, for which privilege/protection is claimed.

(2)  After that, if the requesting party challenges the sufficiency of the assertion of privilege/protection, the asserting party may no longer rest on the privilege log, but bears the burden of establishing an evidentiary basis–by affidavit, deposition transcript, or other evidence– for each element of each privilege/protection claimed for each document or category of document. A failure to do so warrants a ruling that the documents must be produced because of the failure of the asserting party to meet its burden.

(3)  If the asserting party makes this showing, and the requesting party still contests the assertion of privilege/protection, then the dispute is ready to submit to the court, which, after looking at the evidentiary support offered by the asserting party, can either rule on the merits of the claim or order that the disputed documents be produced for in camera inspection.

Result

     In Victor Stanley, Judge Grimm said that had he not ruled that Defendant's 165 inadvertently produced documents waived the privilege/protection status of the documents, then the effect of a failure by the Defendants to comply with the court’s order regarding the proper manner in which to assert privilege/protection would have warranted an order to produce the materials for failure to carry the burden of demonstrating the existence of the privilege/protection claimed. 

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     U.S. Chief Magistrate Judge Paul W. Grimm is a leading jurist in the field of electronic discovery. In Victor Stanley, Inc. v. Creative Pipe, Inc., No. 06-2662 (D. Md. May 29, 2008), Judge Grimm discusses the approach the U.S. District Court for the District of Maryland may take when deciding whether the inadvertent production to an adversary of attorney-client privileged or work-product protected materials constitutes a waiver.

Background

     In Victor, the parties entered into a joint protocol to search and retrieve relevant ESI responsive to Plaintiff’s Rule 34 requests.  After the protocol was used to retrieve responsive ESI, Defendants reviewed the documents to locate any that were privileged or attorney work-product prior to production to Plaintiff. Defendants had previously expressed concern that privilege review of the responsive documents would delay production unnecessarily and cause undue expense. To address this concern, Defendants gave their computer forensics expert a list of keywords to be used to search and retrieve privileged/protected documents. However, Defendants also acknowledged the possibility of inadvertent disclosure of privileged/protected documents, and requested that the court approve a “clawback agreement.” Later, Defendants notified the court that because Judge Garbis had extended the discovery deadline by four months, Defendants would be able to conduct a document-by-document privilege review, thereby making a clawback agreement unnecessary.

     After receiving Defendants’ ESI production in September, 2007, Plaintiff began their review of the materials. They soon discovered documents that potentially were privileged or work-product protected, and immediately segregated this information and notified Defendants.

Applicable Law

     As noted by Judge Grimm, courts have taken three different approaches when considering inadvertent production. The Fourth Circuit Court of Appeals has yet to decide which approach it will follow, although individual district courts within the circuit, Grimm notes, have adopted the intermediate balancing approach. Under the intermediate approach, the court balances a number of factors to determine whether the producing party exercised reasonable care under the circumstances to prevent against disclosure of privileged/protected information, and if so, there is no waiver. The intermediate test requires the court to balance the following factors to determine whether inadvertent production of attorney-client privileged materials waives the privilege:

(1) the reasonableness of the precautions taken to prevent inadvertent disclosure;

(2) the number of inadvertent disclosures;

(3) the extent of the disclosures;

(4) any delay in measures taken to rectify the disclosure; and

(5) overriding interests in injustice.

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