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

     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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     David Donoghue at the Chicago IP Lit. Blog reports today about a discovery matter in a Northern District of Illinois patent case: Se-Kure Controls, Inc. v. Diam USA, Inc., No. 06 C 4857, 2008 WL 169029 (N.D. Ill. Jan. 17, 2008) (Cox, Mag. J.). According to David, Magistrate Judge Cox "granted in part a motion to compel discovery regarding defendant’s advice of counsel defense. The Court ordered defendants to product a technical witness that provided opinion counsel information because opinion counsel was unable to remember the substance of conversations between the two. The Court also ordered production of communications between opinion counsel and trial counsel related to the patent in suit. These communications were within the scope of defendant’s waiver, even though a deposition of trial counsel would not have been allowed." 

     This opinion is one of many to be published post-Seagate, and further illustrates the extent to which courts will allow discovery once the opinion of counsel defense is raised by defendants in patent litigation matters. Click here for summaries of other post-Seagate cases.

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     By now, those who follow patent issues in this country will undoubtedly have heard of In Re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), in which the Federal Circuit heightened the standard for establishing willful patent infringement to a recklessness standard, and clarified the scope of the waiver of attorney-client privilege and work product immunity with regard to opinions of counsel relied on by defendants accused of willfully infringing. Several courts have since addressed the Seagate opinion in some detail, including the U.S. District Court for the Southern District of New York, which is presiding over the original Seagate matter (Convolve, Inc. v. Compaq Computer Corp., No. 00-civ-5141). 

     In the Convolve case, Seagate opposed Convolve's claims of willful patent infringement by relying on an opinion generated by its engineering staff together with its in-house counsel and a patent agent (they also relied on outside counsel’s opinion). Convolve then moved for an order compelling Seagate to allow discovery from Seagate's in-house counsel. The court didn't buy Seagate’s argument that the opinion was simply an engineering report, and instead found that Seagate had waived the attorney-client privilege as to all documents within the scope of the waiver as defined in In re Echostar Communs. Corp. It ordered Seagate to produce not just emails concerning the in-house opinion, which Seagate previously had produced, but any letters, memorandum, conversations, or the like between the Seagate's attorney and his client, as well as any documents referencing the communications between attorney and client concerning the opinion.  Memorandum and Order (Jan. 22, 2008).

     This ruling would have been different had Seagate not conducted its own internal patent infringement investigation before engaging outside counsel, and then relied on that investigation to establish that its actions did not rise to the level of recklessness. Companies that use in-house employees to investigate patent infringement claims (which is common), and then help in-house attorneys to develop an opinion regarding patent infringement, should not expect documents and conversations about that investigation to remain protected under the attorney-client privilege or work product doctrine, even if the company later procures and relies on an opinion from outside counsel. You just never know how far a judge will go with a waiver under In re Echostar.

     Check back later for a summary of what other courts are saying about In re Seagate.

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