Summary: The Federal Circuit clarifies the scope of the waiver of attorney-client privilege and work product protection that results when an accused patent infringer asserts an advice of counsel defense to a charge of willful infringement. Case: In Re Seagate Technology, LLC, Civ. No. 830 (Fed. Cir. 2007) (en banc) (Newman, J., Garjarsa, J., concurring).
Convolve, Inc., and MIT (“Convolve”) sued Seagate, alleging willful infringement of U.S. Patent Nos. 4,916,635, 5,638,267, and 6,314,473. Prior to the lawsuit, Seagate had obtained from outside counsel three opinion letters covering infringement, validity, and enforceability of those patents. Seagate notified Convolve of its intent to rely upon the three opinions in defending itself against willful infringement. It then disclosed its outside counsel’s work product and made him available for deposition. Convolve then moved to compel discovery of any communications and work product of Seagate’s other counsel, including its trial counsel. The S.D.N.Y. sided with Convolve, concluding that Seagate waived the attorney-client privilege for all communications between it and any counsel, including opinion, trial, and in-house counsel, concerning the subject matter of the opinion letters.
In response, Seagate filed a petition for writ of mandamus with the Federal Circuit, which was granted. After ordering
en banc review, the Federal Circuit ordered the S.D.N.Y. to reconsider its order compelling discovery. In doing so, the Federal Circuit overruled its earlier decision in
Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983), and clarified the scope of the waiver of attorney-client privilege and work product protection that results when an accused patent infringer asserts an advice of counsel defense to a charge of willful infringement. The court’s opinion addressed three significant issues: the standard for awarding enhanced damages, the scope of the waiver of trial counsel-client privileged communications, and the scope of the waiver of trial counsel’s work product.
Standard for Awarding Enhanced Damages in Patent Cases
The Federal Circuit concluded that the duty of care it announced in Underwater Devices was akin to negligence, which was a lower threshold compared to other comparable civil statutory frameworks. Such a low standard, the court said, “does not comport with the general understanding of willfulness in the civil context…, and it allows for punitive damages in a manner inconsistent with Supreme Court precedent.” Accordingly, the court overruled the Underwater Devices standard and held that proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness, a higher standard than negligence. “Because we abandon the affirmative duty of due care,” the court wrote, “we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.”
Scope of Attorney-Client Waiver
Noting that district courts have reached varying results with respect to whether communications with trial counsel are waived when a client relies upon opinion of counsel as a defense to a charge of willfulness, the Federal Circuit said:
“[W]e conclude that the significantly different functions of trial counsel and opinion counsel advise against extending waiver to trial counsel. Whereas opinion counsel serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker. And trial counsel is engaged in an adversarial process. * * * Because of the fundamental difference between these types of legal advice, this situation does not present the classic “sword and shield” concerns typically mandating broad subject matter waiver. Therefore, fairness counsels against disclosing trial counsel’s communications on an entire subject matter in response to an accused infringer’s reliance on opinion counsel’s opinion to refute a willfulness allegation. “
The court supported its position with several additional reasons, but it also noted that in reaching its decision, “[w]e do not purport to set out an absolute rule.” Trial courts should continue, the court said, to exercise their discretion in unique circumstances to extend waiver to trial counsel, such as if a party or counsel engages in “chicanery” (def'n: trick, trickery, subterfuge).
Scope of Work Product Waiver
Relying upon the same rationale limiting waiver of the attorney-client privilege with regard to trial counsel, the Federal Circuit concluded that a party relying upon opinion counsel’s work product does not waive work product immunity with respect to trial counsel. This general limitation is necessary because of the nature of the work product doctrine, the court said, and because protecting lawyers from broad subject matter disclosure “strengthens the adversary process, and . . . may ultimately and ideally further the search for the truth.” However, the Federal Circuit also stated “we leave open the possibility that situations may arise in which waiver may be extended to trial counsel, such as if a patentee or his counsel engages in chicanery.”
Held: Seagate’s petition for a writ of mandamus was granted; the district court was ordered to reconsider its discovery orders in light of the Seagate opinion.
Comments:
- This case may strengthen the long held belief by patent attorneys that patent litigation trial counsel should be different than opinion counsel. See William L. LaFuze, Matthew R. Rodgers & Michael A. Valek, Exculpatory Patent Opinions and Special Problems Regarding Waiver of Privilege, 6 J. MARSHALL REV. INTELL. PROP. L. 313 (2007) (available here)
- In the Seagate opinion, the Federal Circuit noted that a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer’s pre-filing conduct. By contrast, when an accused infringer’s post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement. A patentee who does not attempt to stop an accused infringer’s activities in this manner should not be allowed to accrue enhanced damages based solely on the infringer’s post-filing conduct. Similarly, if a patentee attempts to secure injunctive relief but fails, it is likely the infringement did not rise to the level of recklessness. What does this say about the use of injunctions in patent cases in the future?
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Plaintiff STX, LLC, a Baltimore-based lacrosse equipment manufacturer, has sued Defendant J. deBeer & Son, Inc., for allegedly infringing STX's U.S. Patent No. 