United States: Federal Circuit Clarifies Scope of the Work-Product Waiver when a Party Relies on an Opinion of Counsel as a Defense to Allegations of Willfulness

In its recent decision, In re EchoStar Comm. Corp., et al., 2006 U.S. App. LEXIS 11162 (Fed. Cir. May 1, 2006), the Federal Circuit for the first time analyzed the work-product and attorney-client privilege waivers that result when a party relies on an advice of counsel as a defense to willfulness. The Court held that Federal Circuit law governs the extent of the waivers. Id. at *6. The decision provides important guidance concerning the scope of these waivers, particularly the scope of the work-product waiver.

In re EchoStar resolves a sharp division among the district courts concerning whether reliance on an opinion of counsel as part of a willfulness defense waives work-product protection for opinion counsel’s uncommunicated work product relating to the subject matter of the opinion. In granting petitions for writs of mandamus brought by EchoStar and its opinion counsel, Merchant & Gould, the Federal Circuit held that Merchant & Gould’s work product that was never communicated to EchoStar, and does not reflect a communication, is not within the scope of EchoStar’s waiver. Id. at *27.

The Federal Circuit evaluated the scope of the work-product waiver by considering three categories of documents that it regarded as potentially relevant to the advice-of-counsel defense:

(1) documents that embody a communication between the attorney and client concerning the subject matter of the case, such as a traditional opinion letter; (2) documents analyzing the law, facts, trial strategy, and so forth that reflect the attorney’s mental impressions but were not given to the client; and (3) documents that discuss a communication between attorney and client concerning the subject matter of the case but are not themselves communications to or from the client.

Id. at *18-19. (The Court acknowledged that not all work product in every case will fall neatly into one of these three categories. Id. at *19 n.3.) The Court held that when a party relies on an opinion of counsel as a defense to willfulness, the party waives its attorney-client and work-product privileges with respect to the documents in the first category. Id. at *19. The Court further ruled the party that the work-product waiver extends to the third category of documents, but does not reach documents in the second category. Id. at *20.

The Court noted the lack of governing Federal Circuit precedent concerning waiver with respect to uncommunicated work product, and the split among the district courts on this issue. Id. at *19-20. In holding that the waiver of the work-product privilege did not extend to work product that was never communicated to the client (category two work product), the Federal Circuit reasoned that "[i]t is what the alleged infringer knew or believed, and by contradistinction not what other items counsel may have prepared but did not communicate to the client, that informs the court of an infringer’s willfulness." Id. at *22. Work-product waiver, therefore, "extends only so far as to inform the court of the infringer’s state of mind." Id. at *21. Work product that was never communicated to the client can provide little, if any, assistance to the court in making its determination of whether the alleged infringer knew it was infringing. Id. at *24. The policies underlying the work-product privilege outweigh any value that discovery of the uncommunicated work product may have. Id.

With respect to the third category of work-product material, the Federal Circuit concluded that documents that reference or describe a communication between the client and the attorney, though not provided to the client, "will aid the parties in determining what communications were made to the client and protect against intentional or unintentional withholding of attorney-client communications from the court." Id. at *25. To the extent such documents also include uncommunicated legal analysis, however, this information should be redacted. Id.

Although the EchoStar opinion focused primarily on the work-product waiver, the Federal Circuit also analyzed the extent of the waiver of attorney-client privilege when an accused infringer relies on an opinion of counsel. First, the Court held that EchoStar’s reliance on advice conveyed to its executives by an in-house counsel who supervised an in-house investigation constituted reliance on advice of counsel. Id. at *8-9. Second, the Federal Circuit ruled that by relying on advice of counsel, EchoStar "waived the attorney-client privilege with regard to any attorney-client communications relating to the same subject matter." Id. at *9.

The Federal Circuit also addressed the temporal scope of the attorney-client and work-product waivers. The Court rejected the proposition that the waivers do not extend to attorney advice and work product provided after the commencement of the litigation. It stated, "While this may be true when the work product is never communicated to the client, it is not the case when the advice is relevant to ongoing willful infringement, so long as that ongoing infringement is at issue in the litigation." Id. at *19 n.4.

The Federal Circuit rarely renders precedential opinions concerning attorney-client privilege or work product issues. In re Echostar likely will be relied on as the leading opinion with respect to the scope of the waiver of the work-product and attorney-client privileges in the willfulness context for many years to come.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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