The U.S. District Court for the District of Colorado granted a motion in limine to preclude testimony from corporate executives about their "business understanding" regarding infringement because the defendant previously refused to disclose that information claiming it was privileged. In doing so, the district court reaffirmed the adage that a party cannot use the attorney-client privilege as both a sword and a shield.
In this case, plaintiffs alleged that defendant's generic drug infringed its patent covering a method of treating hair loss. Before trial, plaintiffs filed two motions in limine seeking to exclude (1) evidence of prior litigation and (2) evidence related to defendant's intent to infringe. The court granted plaintiffs' first motion in limine to exclude evidence of the prior lawsuits because, inter alia, the evidence was more prejudicial than probative.
In the second motion in limine, plaintiffs moved to exclude defendant's evidence relating to its executives' "business understanding" as to whether it was entitled to practice the methods claimed in the asserted patent. Plaintiffs argued that the executives obtained their understanding from legal counsel, and that it should be excluded because defendant refused discovery of the same evidence based on privileged. The defendant responded that its executives' understanding was based on public information, including the litigation history between the parties, and therefore did not fall within the scope of information it previously withheld as privileged.
To evaluate the arguments, the district court grouped the evidence defendants sought to introduce into three categories: (1) statements that the plaintiffs had "thrown in the towel" after losing three previous lawsuits between the parties, (2) statements by the defendant's legal department giving it the go-ahead to launch its generic product and (3) statements related to the outcome of the prior litigation. According to the district court, the evidence in each category would only be admissible if it was either the subject of a waiver or not derived from advice of counsel.
As to the first two categories of evidence, the district court found the statements were clearly derived from advice of counsel. In particular, defendant's understanding that plaintiffs were "throwing in the towel" and that it had the "green light" to practice the claims was not public information, and must have been obtained from counsel. Because defendant refused discovery into advice it received from counsel, it was precluded from presenting testimony from its executives about their "business understanding" of that advice at trial. As to the third category, the district court found the executives' understanding regarding the outcome of prior litigation was based on public information, and therefore not privileged even if obtained from counsel. But that finding did not save defendant because the district court separately excluded testimony related to prior litigation through plaintiffs' first motion in limine.
Practice Tip: In cases involving allegations of willful, contributory or induced infringement, defendants face a difficult choice of whether to waive privilege or potentially face trial without exculpatory evidence regarding their scienter. Thus, it is important to develop an early understanding of the evidence that may be relied on to negate allegations of intent and the source of that evidence to make informed decisions related to privilege during discovery. Likewise, patentees should take deliberate steps in discovery to ensure that defendants are forced to choose whether to waive privilege or forego such evidence.
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