The en banc Federal Circuit announced January 26, 2007, that it will consider the scope of the waiver of attorney-client privilege that results when a defendant relies upon advice of counsel to deny willful infringement. The waiver issue arises in virtually every patent litigation and the ramifications of the court’s decision could be significant.

The sua sponte per curiam order in In re Seagate Technology, LLC, 2007 WL 196403 (Fed. Cir. Jan. 26, 2007) came on a petition for a writ of mandamus that challenged a discovery order to produce attorney opinions for which the privilege was deemed waived by the advice-of-counsel defense to willfulness. The en banc Federal Circuit will consider whether that waiver extends to communications with trial counsel and whether it has an effect on work-product immunity. Finally, the court has also asked whether the standard of care for willfulness announced in its 1983 Underwater Devices ruling should be reconsidered.

Specifically, the Federal Circuit’s per curiam order poses these questions:

  1. Should a party’s assertion of the advice of counsel defense to willful infringement extend the waiver of the attorney-client privilege to communications with that party’s trial counsel? See In re EchoStar Communication Corp., 448 F.3d 1294 (Fed. Cir. 2006).
  2. What is the effect of any such waiver on work-product immunity?
  3. Given the impact of the statutory duty of care standard announced in Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir.1983) on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?

EchoStar as Background

The Seagate case will not be the first time the Federal Circuit has examined waiver issues. In May 2006, the Federal Circuit in EchoStar ruled on a petition for a writ of mandamus under similar circumstances. (See also May 15, 2006 Legal Alert: Federal Circuit Clarifies the Scope of the Privilege Waiver When Relying on Opinion of Counsel). The court there first rejected EchoStar’s attempt to insulate trial counsel from waiver by claiming that it relied only on in-house counsel. Instead, the court ruled that reliance on an opinion of counsel defense waives the privilege for "any attorney-client communications relating to the same subject matter, including communications with counsel other than in-house counsel…." EchoStar at 1299.

The EchoStar court also analyzed work-product immunity, concluding that the waiver arising out of an advice-of-counsel defense to willful infringement extends to documents that "embody" a communication between the attorney and client on the subject matter of the case. It is important to note, however, that this limited waiver does not extend to documents that analyze the law, facts, or trial strategy and/or that reflect the attorney’s mental impressions where those documents are not given to the client.

The court further noted that "when an alleged infringer asserts the advice of counsel defense regarding willful infringement of a particular patent, it waives its immunity for any document or opinion that embodies or discusses a communication to or from it concerning whether that patent is valid, enforceable and infringed by the accused." Id. at 1304. According to the EchoStar court, the overarching goal of waiver "is to prevent a party from using the advice he received as both a sword, by waiving privilege to favorable advice, and a shield, by asserting privilege to unfavorable advice." Id. at 1303.

The Circumstances Leading to the En Banc’s Ruling in Seagate

District courts have struggled with interpreting EchoStar, thus resulting in differing interpretations and varying scopes of waiver, particularly as it applies to trial counsel communications. Particularly vexing to district courts has been a footnote in the EchoStar opinion that indicates that waiver may extend throughout the course of a litigation, beyond the date of the opinion.

The en banc Federal Circuit apparently will now address some of the lingering unresolved questions. In Seagate, defendant Seagate chose to rely on an advice of counsel defense to willful infringement and waived privilege with regard to three opinions from opinion counsel on the topics of infringement, validity and enforceability. The district court ordered production of communications from any of Seagate’s attorneys, including trial counsel, relating to infringement, validity and enforceability. The district court ruled that trial counsel’s uncommunicated work product remained immune from discovery under the work product doctrine because opinion counsel and trial counsel were separate and independent. The district court further ruled that the time period of the waiver began when Seagate became aware of the patents at issue and will end when Seagate’s alleged infringement stops.

Seagate argues in its mandamus papers that when trial counsel is independent from opinion counsel, the sword-and-shield concerns disappear and, thus, EchoStar’s policy balancing test results in protection of trial counsel’s communications. Seagate further argues that if EchoStar extends waiver to separate and independent trial counsel then EchoStar is in direct conflict with the Federal Circuit’s prior jurisprudence.

In response, patent holders Convolve and MIT argue that the bright line rule of blanket trial counsel immunity proposed by Seagate is contrary to EchoStar and Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004). Convolve and MIT argue that willfulness is a totality of the circumstances evaluation, and Federal Circuit precedent directly rejects a bright line test for determining the breadth of a privilege waiver. Convolve and MIT also argue that the district court’s order is consistent with the law because it employs a properly proscribed subject matter waiver focusing on Seagate’s state of mind by limiting the waiver to information communicated to Seagate regardless of the identity of the communicating attorney together with properly defined temporal limitations.

This area of the law remains uncertain pending the Federal Circuit’s en banc review. Under the current law, the ultimate conclusion regarding waiver of trial counsel communications varies depending upon the facts of the case and the particular judicial jurisdiction. Defendants in patent cases should work closely with counsel to ensure that privileged communications are protected to the maximum extent possible under the law.

© 2007 Sutherland Asbill & Brennan LLP. All Rights Reserved.

This article is for informational purposes and is not intended to constitute legal advice.