Advice of Counsel Defense in Patent Litigation

and Protecting Attorney-Client PrivilegeLimiting Scope of Discovery, Safeguarding Confidential Communications and Information

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TUESDAY, OCTOBER 2, 2018

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Krupa K. Parikh, Atty, Latham & Watkins, Washington, D.C.

April E. Weisbruch, Atty, Sheppard Mullin Richter & Hampton, Washington, D.C.

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

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)

66

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.

77

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)

88

Purpose of Work Product

❖ Establish zone of privacy for strategic

litigation planning.

❖ Requires counsel to do their own

work.

❖ Prevents piggybacking.

99

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)

1010

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)

1111

Willfulness & Opinions

12

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. § 285

1313

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.

1414

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 obtained 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.”

1515

Willfulness Factors – Read v. Portec (Fed. Cir. 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.

16

Willfulness-Privilege Quagmire

❖Either get an opinion, produce the opinion and waive the attorney-client privilege, or…

❖Suffer the consequences and risks of an adverse inference that you received no opinion or that the opinion was bad.

1717

2004: End Of The Inference

“We now hold that no adverse inference thatan opinion of counsel was or would have beenunfavorable flows from an alleged infringer’sfailure to obtain or produce an exculpatoryopinion of counsel.”

Knorr-Bremse, 383 F.3d 1337 (Fed. Cir. 2004)

1818

Opinions & Waiver

19

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.

2020

Reliance on Opinions & Scope of Waiver

“Precedent is inconsistent on the scope of the waiverthat ought to apply to the attorney-client privilege whenthe infringer relies upon an opinion of counsel--namely,whether the waiver applies to only pre-opinion work orpre-complaint work or whether it includes everythingright up to trial and whether it applies only to opinioncounsel or to opinion and trial counsel.”

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

2121

Inconsistent Scope of Waiver Cases

-Novartis v. Eon (D. Del. 2002) – if opinion counsel is trial counsel, all post-complaint legal advice 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 (D. Del. 1993) – opinion counsel work-product need not be produced unless communicated to client

2222

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.

2323

EchoStar – District Court

❖ Reliance on advice of in-house counsel waived A/C and W/P privilege 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.

2424

EchoStar – CAFC

❖ Applies Fed. Circuit law to scope

of waiver when advice of counsel

defense raised as defense to willful

infringement.

2525

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 privilege with regard to any communications on subject matter with any counsel, including M&G.

2626

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.

2727

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 otherwise discoverable.

2828

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.

2929

Post-EchoStar Temporal Scope of 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.

3030

Change of Willfulness Standard & Impact on Waiver: Seagate

31

Seagate, 497 F.3d 1360 (Fed. Cir. 2007)

❖ Two-part test for willfulness.

❖ Part 1 – Threshold showing of objective recklessness. No duty of care to avoid infringement. Could be based on strength of defenses at trial.

❖ State of mind of infringer not relevant.

3232

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.

3333

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.

3434

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.”

3535

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).

3636

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)

3737

Change of Willfulness Standard Again: Halo

38

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.

3939

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 of waiver.

4040

Post-Halo: Now What Do We Do?

WBIP, LLC v. Kohler Co.

• Westerbeke Corporation and Kohler are competitors who manufacture and sell

marine generators (“gen-sets”) that are used on houseboats to create electrical

power for appliances such as refrigerators and air conditioners.

• Timing Matters: Kohler cannot insulate itself from liability for enhanced damages by

creating an (ultimately unsuccessful) invalidity defense for trial after engaging in

the culpable conduct of copying, or “plundering,” WBIP's patented technology prior

to litigation.

• Proof of an objectively reasonable litigation-inspired defense to

infringement is no longer a defense to willful infringement.

829 F.3d 1317, 1340 (Fed. Cir. 2016)

42

Yes, Things Have Changed

No Waiver; Full Privilege; Willfulness Risk Goes Up?

Goldilocks

Complete Waiver

43

Visteon Global Techs., Inc. v. Garmin Int’l, Inc.

• 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 opinion at trial, admissible?

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

44

Visteon Global Techs., Inc. v. Garmin Int’l, Inc.

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.

45

Greatbatch Ltd. v. AVX Corp.

• AVX sought and obtained invalidity and non-infringement opinions of

counsel before litigation and developed designs and processes to avoid

infringement.

• AVX waived privilege, and the court assessed the merits of the

opinion.

• Length of Opinion?

• Conclusory?

• Incompetent?

• Preliminary?

• Incomplete?

• Cited art used in litigation proceedings?

• Date of Opinion relative to infringement?

2016 WL 7217625 (D. Del. Dec. 13, 2016)

46

Johns Hopkins Univ. v. Alcon Labs., Inc.

• Johns Hopkins

University (“JHU”)

sued Alcon for direct,

induced,

contributory, and

willful infringement.

• Alcon asserts opinion

of counsel defense.

47

2017 WL 3013249 (D. Del. Jul. 14, 2017)

Alcon produces 2006 and 2007 opinions of counsel

Johns Hopkins seeks all documents “related to” opinions of

counsel

Alcon refuses, producing only a privilege log of privileged

documents from 2009-2015

• Agreed to consider producing documents on the privilege log where

Johns Hopkins could show related to the subject matter of the opinions

Opinion Letters

2006-2007

Patent

issued

Patent filed

Suit was filed2000 2006 2009 2015

Privilege log

Johns Hopkins Univ. v. Alcon Labs., Inc.

48

Categories of potentially waived documents

• Pre-issuance

• Before/after certain time periods (e.g., notice of allowance, final

amendment of claims)

• Foreign patents/patent applications/proceedings

• Work product documents

• Communicated to client

• Not communicated to client likely not waived

• Post-complaint

• In-house counsel

• Outside counsel

• Opinion counsel

49

Considerations

There is often an inherent interest in using opinions, which are likely viewed as valuable

and having been worth the cost/effort

But the risk can be high: can’t undo it once privilege is waived

Consider structuring in-house counsel’s role in opinions-of-counsel and subsequent

litigation to reduce risk/impact of waiver extending to litigation issues

Appearance of client’s behavior (both pre- and post-complaint) may affect outcome

(misconduct of party seeking privilege protection was raised upfront in briefs here)

Before relying on opinions of counsel:

• Consider timing issues

• Review potentially waived documents

• Consider what other documents may need to be collected/produced, and what those documents would

say

• Consider whether certain categories might be excluded from the waiver, and how they would affect

strategy

• Consider seeking guidance from the Court on the potential scope of waiver, where appropriate

Could PTAB post-grant proceeding achieve same objective as opinions?

50

Practical Tips

• 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!

51