Federal Circuit Clarifies Scope Of Advice-Of-Counsel Waiver

Thursday, June 1, 2006 - 01:00


On May 1, 2006 the Court of Appeals for the Federal Circuit ("Federal Circuit") issued an order with opinion in the case of In re EchoStar Communications Corp., which clarifies an area of uncertainty concerning the proper scope of the waiver of the attorney-client privilege and work product immunity in cases where parties accused of patent infringement rely on opinions of counsel to defend against claims of willful infringement.

The common scenario involving willful infringement in patent litigation is quite familiar. A patentee sues a defendant for patent infringement claiming that the defendant is willfully infringing his patent and thus seeks treble damages based upon the willful infringement allegations. The defendant previously had obtained an opinion from patent counsel addressing the issues of infringement, invalidity and/or unenforceability of the patent and relies on that opinion to rebut the charge of willful infringement. As a result of the defendant's reliance on the opinion, he must waive the attorney-client privilege with respect to the subject matter of the opinion. What is the proper scope of this waiver? Does the waiver cover only attorney-client communications, or does it also extend to attorney work product? If so, does work product that is not communicated to or shared with the defendant have to be produced? Does the waiver extend to post-complaint communications and work product as well? Assuming trial counsel and opinion counsel are different, does any of the trial counsel's work product also have to be produced as a result of the waiver?

Prior to the Federal Circuit's In re EchoStar decision, the answers to these questions varied greatly from district to district, or even from judge to judge within the same district, thus making it difficult for a defendant to make an informed decision regarding whether to assert the advice-of-counsel defense to willful infringement. In re EchoStar should make this decision easier because it clarifies some of these areas of uncertainty by establishing a standard for determining the proper scope of the waiver associated with the advice-of-counsel defense to willful infringement.

Prior Conflicting Approaches

When a party asserts the opinion of counsel defense against a charge of willful infringement, the party waives, at a minimum, the attorney-client privilege as to the subject matter of the opinion. It is well-established that such a waiver will require the party to waive the attorney-client privilege as to all communications between the party and its opinion counsel regarding the same subject matter, since selective waiver of the privilege could lead to the inequitable result that the party could waive privilege as to favorable advice and at the same time assert its privilege as to unfavorable advice.

Beyond that basic premise, however, there has been no uniform approach among the district courts in determining the extent to which the waiver extends beyond the waiving party's communications with opinion counsel. To the contrary, district courts have taken inconsistent and often conflicting approaches when deciding whether the waiver resulting from reliance on the opinion of counsel defense also should include waiver of the attorney work product immunity, should extend beyond opinion counsel to also include trial counsel, or whether the temporal scope of the waiver should be limited to communications preceding the filing of the complaint. Indeed, even judges within the same district court have taken conflicting approaches in deciding the scope of the waiver. The practical effect of this lack of uniformity is that it makes the already difficult decision of whether to rely on an opinion of counsel even more difficult due to the lack of certainty when trying to determine what the scope of the waiver will be in a particular case if the advice-of-counsel defense is asserted.

Some courts have favored a narrow approach to the waiver, finding that an attorney's work product is not included within the scope of the waiver unless it is communicated to the client, since the primary focus should be on the client's state of mind. This is the approach that was taken by Judge McKelvie in the District of Delaware in the case of Thorn EMI N. Am., Inc. v. Micron Tech., Inc., where he found that opinion counsel's work product that was not communicated to the client need not be produced because such work product is not probative of the client's state of mind. Other courts have favored an intermediate approach to waiver, extending the scope of waiver to opinion counsel's work product, regardless of whether it actually was communicated to the client. These courts justify this broader approach on the basis that the narrower approach such as in the Thorn case could encourage patent attorneys to deliberately omit damaging information from their opinion letters in order to insulate their clients from a finding of willful infringement. This broader approach to waiver was favored by a different judge in the District of Delaware, Judge Sleet, in the case of Mosel Vitelic Corp. v. Micron Technology, Inc., who specifically rejected the approach taken in the Thorn case as being overly narrow.

Still other courts have favored an even broader approach to the waiver. Such courts maintain that the focus should be not only on the state of mind of the alleged infringer, but also on the state of mind of the alleged infringer's lawyer, since that could be relevant to the issue of "what really was in the client's mind." This is the approach that was favored by yet another judge in the District of Delaware, Judge Farnan, in the case of Novartis Pharmaceuticals Corp. v. EON Labs Manufacturing, Inc., in which he also ruled that the accused infringer's waiver should be considered absolute, thus encompassing all materials relating to the subject matter of the opinion, including attorney work product, irrespective of whether it was actually communicated to the accused infringer. Judge Farnan also ruled in that case that trial counsel's work product also was discoverable because trial counsel and opinion counsel were from the same law firm.

District courts also have been inconsistent with respect to temporal limitations on the scope of the waiver. Some courts have limited the waiver to pre-complaint communications and work product, based upon the enhanced interest in protecting against disclosure of trial strategy and planning. Other courts, like the court in Novartis, have refused to place any temporal limitations on the waiver, holding that post-complaint communications and work product, including communications with trial counsel, are discoverable, reasoning that infringement is a continuing activity and thus the requirement to seek and receive advice is a continuing duty.

The In re EchoStar Decision

The In re EchoStar decision arose from a patent infringement lawsuit brought by TiVo Inc. against EchoStar Communications Corporation, in which TiVo alleged that EchoStar was willfully infringing one of TiVo's patents. In response to the allegation of willful infringement, EchoStar asserted the defense of reliance on advice of counsel based upon a non-infringement opinion provided by its in-house counsel prior to the filing of the action. After the action was filed, EchoStar also obtained additional legal advice from its trial counsel, but elected not to rely on that advice to rebut TiVo's willfulness claim. The district court held that as a result of EchoStar's reliance on the advice of its in-house counsel to rebut the willfulness claim, EchoStar had waived its attorney-client privilege and attorney work product immunity as to advice of any counsel regarding infringement, including its trial counsel. The district court further ruled that such waiver extended to all work product, including trial counsel's work product, whether or not actually communicated to EchoStar. EchoStar and its trial counsel petitioned the Federal Circuit for a writ of mandamus challenging the district court's ruling requiring production of trial counsel's work product not provided to EchoStar.

As an initial matter, the Federal Circuit ruled that its own law, rather than that of the regional circuit, governed the issue of the extent of the privilege waiver when a party asserts the advice-of-counsel defense. The Court then held that when EchoStar chose to rely on the advice of its in-house counsel as a defense against willfulness, it waived the attorney-client privilege with regard to any attorney-client communications relating to the same subject matter, including communications with counsel other than in-house counsel, which would include communications with its trial counsel. As to EchoStar's argument that the waiver should not extend to advice and work product given after the litigation began, the Court responded that "[w]hile 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."

As to the scope of the waiver for attorney work product, the Court focused on three categories of work product: "(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." Since the first category of documents falls within the waiver of the attorney-client privilege when a party relies on the advice-of-counsel defense, the Court concluded that such documents thus must be produced.

As to the other two categories of documents, the Court analyzed the work product waiver based on the rule that it should extend "only so far as to inform the court of the infringer's state of mind." The Court thus concluded that the second category of work product, which are documents that are not communicated to the client, are not discoverable, since such documents provide "little if any assistance to the court in determining whether the accused knew it was infringing, and any relative value is outweighed by the policies supporting the work product doctrine." With regard to the third category of documents, the Court concluded that such documents fall within the waiver and must be produced, reasoning that they "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." The Court did note, however, that the third category of documents could potentially include within the same document the second category of work product - i.e., legal analysis that was never communicated to the client. The Court recommended redacting such information in those situations and, if necessary, having the district court review such materials in camera.

The Court then summarized its analysis by concluding that "when an alleged infringer asserts its 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 the patent is valid, enforceable, and infringed by the accused."


The In re EchoStar decision should help to provide guidance and more certainty to the determination of the proper scope of the waiver associated with the advice-of-counsel defense to willful infringement. In addition, while the decision limits the waiver in some respects by excluding certain categories of attorney product from the waiver, in other respects it seems to take an expansive view of what may be included within the scope of the waiver. For example, although the decision refers to the waiver as applying to the "same subject matter" of the advice relied upon, it also seems to take a broad view of what may be considered the "same subject matter," stating that an alleged infringer relying on the advice-of-counsel defense "waives its immunity for any document or opinion that embodies or discusses a communication to or from it concerning whether the patent is valid, enforceable, and infringed by the accused." This statement suggests that even if the advice relied upon is limited to, for example, an infringement analysis (as was the advice that EchoStar had relied upon), the waiver nevertheless could extend to documents or opinions concerning validity and enforceability. Also, the decision suggests in dicta that trial counsel communications and work product would be discoverable if relevant to ongoing willful infringement that is at issue in the litigation. From a practical standpoint, ongoing willful infringement always will be at issue in the litigation, except in those rare instances in which the accused infringer ceases the alleged infringing activity after the litigation is commenced. Thus, it would appear that under In re EchoStar trial counsel communications or work product relevant to the ongoing infringement could be discoverable.

Vito J. DeBari is a Partner in the New York office of Kramer Levin Naftalis & Frankel LLP. His practice is focused in IP litigation. For footnotes, see our Website, www.metrocorpcounsel.com.

Please email the author at vdebari@kramerlevin.com with questions about this article.