Advice of Counsel Defense in Patent Litigation: Protecting - - PowerPoint PPT Presentation

Advice of Counsel Defense in Patent Litigation: Protecting Attorney-Client Privilege

Limiting Scope of Discovery, Safeguarding Confidential Communications and Information

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Presenting a live 90-minute webinar with interactive Q&A Michael E. McCabe, Jr., Member, Funk & Bolton, Baltimore Eleanor M. Yost, Shareholder, Carlton Fields Jorden Burt, Tampa and Washington, D.C.

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Advice of Counsel Defense and Waiver of Privilege: An Overview

MICHAEL E. MCCABE, JR.

STRAFFORD WEBINAR

MARCH 16, 2017

Establishing A-C Privilege

Holder is or seeks to be a client; Communicates to a member of the Bar of a Court; Confidentially; For the purpose of securing primarily legal advice or services; Not for crime or fraud; The privilege is claimed and not waived by the client.

United Shoe, 89 F. Supp. 357 (D. Mass. 1950)

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Purposes of Privilege

Encourage clients to seek legal advice. Promote frank and full discussions with counsel. Aid clients to conform conduct to requirements of the law.

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Establishing Work Product

Protects attorney. A document or tangible thing; Prepared in anticipation of litigation or for trial; and Prepared by or for a party, or by or for his representative.

Hickman v. Taylor, 329 U.S. 495 (1947)

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Purpose of Work Product

Establish zone of privacy for strategic litigation planning. Requires counsel to do their own work. Prevents piggybacking.

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Two Types of Work Product

Fact work product:

Factual information that pertains to the litigation and is prepared or gathered in connection with it.

Opinion work product:

Mental impressions, conclusions, opinions, or theories concerning the litigation.

Upjohn v. United States, 101 S. Ct. 677 (1981)

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Qualified Immunity

Fact work product:

Potentially discoverable upon showing of substantial need, inability to obtain from alternative source without undue expense.

Opinion work product:

Generally absolutely immune from discovery.

• Fed. R. Civ. P. 26(b)(3)(A) & (B)

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Willfulness & Opinions

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Willful Patent Infringement

“The court may increase the damages up to three times the amount found.”

35 U.S.C. § 284

 Willfulness may support “exceptional case”

finding and award of attorneys’ fees.

35 U.S.C. § 284

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In The Beginning . . . .

Underwater Devices, 717 F.2d 1380 (Fed.

• Cir. 1983)

Infringers with actual notice of another’s patent rights have “affirmative duty” to use due care to avoid infringement. Such care “normally” requires that the infringer consult with an attorney.

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Birth of the “Adverse Inference”

Kloster, 793 F.2d 1565 (Fed. Cir. 1986) Infringer's "silence on the subject, in alleged reliance on the attorney-client privilege, would warrant the conclusion that it either

• btained no advice of counsel or did so and

was advised that its importation and sale of the accused products would be an infringement of valid U.S. patents."

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Willfulness Factors – Read v. Portec (1992)

Deliberate copying. Good faith belief of accused infringer. Infringer’s litigation behavior. Size and financial condition. Closeness of case. Duration of misconduct. Remedial action by defendant. Motivation for harm. Whether defendant attempted to conceal misconduct.

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Willfulness-Privilege Quagmire

Either get an opinion, produce the

• pinion and waive the attorney-

client privilege, or Suffer the consequences and risks

• f an adverse inference that you

received no opinion or that the

• pinion was bad.

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2004: End Of The Inference

“We now hold that no adverse inference that an opinion of counsel was or would have been unfavorable flows from an alleged infringer’s failure to obtain or produce an exculpatory opinion of counsel.” Knorr-Bremse, 383 F.3d 1337 (Fed. Cir. 2004)

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Opinions & Waiver

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Value of Opinions

Study found willfulness alleged in 92% of complaints.

Moore, Empirical Statistics on Willful Patent Infringement, 14 Fed. Cir. B.J. 227 (2004)

Post-Knorr - Opinions of counsel still valuable even if not required. Right opinion testimony could be excellent defense to willfulness allegation.

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Reliance on Opinions & Scope

• f Waiver

“Precedent is inconsistent on the scope of the waiver that ought to apply to the attorney-client privilege when the infringer relies upon an opinion

• f counsel--namely, whether the waiver applies to
• nly pre-opinion work or pre-complaint work or

whether it includes everything right up to trial and whether it applies only to opinion counsel or to

• pinion and trial counsel.”

Moore, 14 Fed. Cir. B.J. at 233

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Inconsistent Scope of Waiver Cases

Novartis v. Eon (Del. 2002) – if opinion counsel is trial counsel, all post-complaint legal advise discoverable. Thermos v. Starbucks (N.D. Ill. 1998) – Trial counsel work product must be produced if contradicts or casts doubt on opinion counsel’s opinion. Thorn v. Micron (Del. 1993) – opinion counsel work-product need not be produced unless communicated to client

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EchoStar, 448 F.3d 1294 (Fed.

• Cir. 2006)

TiVo sues EchoStar for infringement. EchoStar asserts advice of counsel defense.

Pre-suit: In-house counsel advice. Post-suit: Obtained additional advice from outside opinion firm (Merchant & Gould) but decided not to rely on it.

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EchoStar – District Court

Reliance on advice of in-house counsel waived A/C privilege and w/p relating to advice of any counsel regarding infringement. Waiver scope included communications made either before or after complaint filed and any work product of M&G, even if not communicated.

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EchoStar – CAFC

Applies Fed. Circuit law to scope of waiver when advice of counsel defense raised as defense to willful infringement.

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EchoStar – CAFC First Waiver Category

Waiver of privilege applies to all other communications relating to same subject matter. EchoStar’s choice to rely on opinion of in-house counsel waived A/C privilege with regard to any communications on subject matter with any counsel, including M&G.

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EchoStar – CAFC Second Waiver Category

W/p waiver only extends to inform court of infringer’s state of mind. What counsel prepared but did not communicate to client not relevant to willfulness. Therefore uncommunicated w/p not discoverable.

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EchoStar – CAFC Third Waiver Category

A/C and W/P waived for documents in atty’s file that reference client communications, but were not themselves communicated to client.

Discoverable.

Non-communicated w/p should be redacted from materials that may be

• therwise discoverable.

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EchoStar Temporal Scope of Waiver

M&G (post-suit) communications waived. Footnote 4 says waiver extends to a/c and w/p communicated to client post- litigation.

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Post-EchoStar Temporal Scope

• f Waiver

Some courts extended waiver to communications post-suit with trial counsel when material to subject of opinion. Others extended waiver to trial counsel communications contradicting opinion counsel. Others extended waiver to any communications with trial counsel on subject matter of opinion.

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Change of Willfulness Standard & Impact on Waiver: Seagate

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Seagate, 497 F.3d 1360 (Fed.

• Cir. 2007)

Two-part test for willfulness. Part 1 – Threshold showing of

• bjective recklessness. No duty of care

to avoid infringement. Could be based

• n strength of defenses at trial.

State of mind of infringer not relevant.

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Seagate, 497 F.3d 1360 (Fed.

• Cir. 2007)

Part 2 - Only if satisfy Part 1 does court consider whether objectively high risk either known or should have been known to accused infringer.

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Seagate and Privilege Waiver Scope

Court recognizes proper legal standard for willfulness informs relevance of evidence and proper scope of discovery.  Reiterates scope of waiver extends to all communications on same subject matter. Broad scope.

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Seagate and Privilege Waiver Scope

Different functions of trial and opinion counsel advise against extending waiver to trial counsel. Temporal limit: usually “willfulness will depend on an infringer’s pre-litigation conduct.” Trial counsel communications generally shielded from waiver stemming from advice of counsel defense. Exception for “chicanery.”

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Seagate and W/P Waiver Scope

Absent exceptional circumstances, waiver will not extend to trial counsel work product. “Chicanery” exception. Exceptional circumstances/substantial need exception per Hickman and 26(b)(3)

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Seagate Impact

Exceptional circumstance example: When opinion-authoring counsel an active member of trial team, discovery of trial counsel’s privileged communications and w/p allowed.

Tyco v. E-Z-EM (E.D. Tex. 2010)

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Change of Willfulness Standard Again: Halo

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Halo v. Pulse, 136 S. Ct. 1923(2016)

Reverses Seagate two-part willfulness test. 35 U.S.C. § 284: “the court may increase the damages up to three times the amount found or assessed.” No explicit limitation or condition. Punishment should be reserved for egregious cases typified by willful misconduct.

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Halo v. Pulse, 136 S. Ct. 1923(2016)

Court notes that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.” But Court does not say that post-suit conduct is irrelevant to willfulness. No discussion of privilege, work product, opinions of counsel, or scope

• f waiver.

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Thank You!

Michael E. McCabe, Jr.

Funk & Bolton, P.A. 410.659.4981 mmccabe@fblaw.com

Post-Halo: Now What Do We Do?

Eleanor M. Yost Shareholder Carlton Fields Jorden Burt, PA eyost@carltonfields.com

Yes, Things Have Changed

No Waiver; Full Privilege; Willfulness Risk Goes Up? Goldilocks Complete Waiver

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Garmin

• Visteon Global Technologies, Inc. v. Garmin International, Inc., Case No. 10-

cv-10578, 2016 WL 4396085, *5, E.D. Michigan (August 18, 2016)

• Garmin obtains opinions of counsel; elects not to waive attorney-client

privilege and not to use the opinions at trial

• Visteon seeks to introduce evidence at trial that Garmin obtained opinions of

counsel but has elected not to produce them for consideration by the jury at trial

• Garmin moves in limine to prevent Visteon from making arguments regarding

Garmin's opinions of counsel

• Is evidence of the fact that an alleged infringer obtained an opinion of

counsel, but elected not to waive the attorney-client privilege and rely on the

• pinion at trial, admissible?

43

Garmin

• Parker-Hannifin v. Wix Filtration Corp., Case No. 07-cv-1374, 1375, 2011 WL

976559 (N.D. Ohio March 17, 2011)

• Retractable Technologies Inc. v. Becton, Dickinson and Co., Case No. 07-cv-

250, 2009 WL 8725107 (E.D. Texas Oct. 8, 2009)

• Georgetown Rail Equip. Co. v. Holland L.P., Case No. 13-cv-366, 2014 WL

6467782, (E.D. Texas Nov. 17, 2014) The Court concludes that permitting Visteon to submit evidence of Garmin's failure to provide an opinion of counsel at trial, but prohibiting Visteon from submitting evidence that Garmin did in fact procure such an opinion but elected to maintain the attorney-client privilege and not produce that opinion at trial, strikes an appropriate balance between disallowing the prohibited adverse inference to Garmin of an unfavorable opinion of counsel while at the same time preserving Visteon's right to argue to the jury that Garmin's failure to produce such an opinion for trial can be considered as a factor in the jury's determination of willfulness.

44

Krausz

• Krausz Industries Ltd. f/k/a Krausz Metal Industries Ltd. v. Smith-Blair Inc. & Sensus

USA Inc., Case No. 5:12-cv-00570, Eastern District of North Carolina

• Opinion 1 – December 2008
• Opinion 2 – 2011
• Lawsuit initiated August 2012
• Work with trial counsel
• Work with in-house counsel

In-House Counsel Opinion Counsel Trial Counsel

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Krausz

• Smith-Blair sought Wood Herron’s opinion over the course of a number of years

(including after litigation began)

• Scope of Waiver
• Temporal
• Subject Matter
• Involved Parties
• Communications Between Opinion Counsel and Trial Counsel
• Communications Between Trial Counsel and Defendants
• Communications Between In-House Counsel and Defendants
• Communications Between In-House Counsel and Trial Counsel

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Krausz

• Krausz is correct in its assertion that its allegation of ongoing willful infringement

entitles it to discover communications and work product related to an advice of counsel defense that occurred after litigation began.

• The court also agrees that by involving opinion counsel in the substantive defense of

this lawsuit, Smith-Blair engaged in the type of conduct that justifies allowing discovery into any communications either involving or relaying information from opinion counsel to [trial counsel], or its in-house counsel.

• However, the court will restrict the scope of the waiver to the specific basis of Smith-

Blair’s advice of counsel defense: whether Smith-Blair’s product infringes Krausz’s patent.

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Krausz

• Impact
• Post-Halo, motivation to seek formal legal opinions on issues of non-infringement

and invalidity as a preemptive defense against a willfulness claim goes up

• Opinion counsel has lots of good information but don’t make them part of your trial

team; keep opinion counsel completely separate

• Not prosecution counsel; not post-grant proceedings counsel; just opinion

counsel; treat them like an expert witness

• Courts will find waiver for trial counsel communications, even if opinion counsel is

not on the communications

• Waiver of privilege for in-house counsel and his own client/employer is scary
• Use the phone!

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Questions?

Eleanor M. Yost Shareholder Carlton Fields Jorden Burt, PA eyost@carltonfields.com

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