The Patent Trial Bar Breathes A Sigh Of Relief: In Re Seagate

Thursday, November 1, 2007 - 01:00

I. Introduction

While much has been written - and will be written - regarding the Seagate 's wholesale rewrite of the willfulness standard, this article focuses on how it made changes to the rules regarding the attorney-client privilege and work product immunity.

On August 20, 2007, the United States Court of Appeals for the Federal Circuit ("CAFC" or "Federal Circuit") issued a unanimous en banc decision that created significant modifications to the way patent trial attorneys communicate with their clients. In this regard, the decision, In re Seagate Technology, LLC , 2007 WL 2358677, Misc. No. 830 (Fed. Cir. Aug. 20, 2007), removed significant ambiguities created by In re EchoStar Communications Corp. , 448 F.3d 1294 (Fed. Cir. May 1, 2006).

II. The EchoStar Decision

EchoStar provided that when an accused infringer chooses to rely on an opinion of counsel in defending an allegation of willful infringement, it waives the attorney-client privilege with regard to any attorney-client communications relating to the same subject matter. Since being issued, EchoStar has been applied broadly by district courts to invade the attorney-client relationship with trial counsel.

The court held that "when EchoStar chose to rely on the advice of in-house counsel, it waived the attorney-client privilege with regard to any attorney-client communications relating to the same subject matter," including communications with a law firm whose opinion EchoStar chose not to rely on. Id. at 1299 (emphasis added). The court identified three categories of work-product potentially relevant to an 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 .

Work product immunity was deemed waived as to the first category of documents, because these items fall under the attorney-client communication waiver, which the court deemed to encompass "any documentary communications such as opinion letters and memoranda." Id. Significantly, the court noted that the waiver of opinions extends to include advice and work product given to the client after litigation began, "when the advice is relevant to ongoing willful infringement, so long as that ongoing infringement is at issue in the litigation." Id. at 1303, n. 4.

Finally, the court summarized its legal findings with an ambiguous and sweeping statement: "Therefore, 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 that patent is valid, enforceable, and infringed by the accused." Id. at 1304 (emphasis added).

III. District Court Decisions Applying In re EchoStar

In the subsequent months, several district courts applied the EchoStar case to the facts before them, which would have a grave impact on patent trial counsel. The cases also show that - with two lines of cases emerging regarding the application of EchoStar to trial counsel - the decision created considerable confusion.

One set of district courts refused to interpret Echostar as extending the waiver to trial counsel. See, e.g., Indiana Mills & Mfg., Inc. v. Dorel Indus., Inc. , 2006 WL 1749413, (S.D. Ind. May 26, 2006); Ampex Corp. v. Eastman Kodak Co. , 2006 WL 1995140 (D. Del. July 17, 2006). Another set of district courts interpreted Echostar as extending the waiver to trial counsel. See, e.g., Beck Systems, Inc. v. Managesoft Corp. , 2006 WL 2037356 (N.D. Ill. July 14, 2006); Intex Recreation Corp. v. Team Worldwide Corp. , 439 F.Supp.2d 46 (D.D.C. July 14, 2006); Genentech, Inc. v. Insmed Incorporation , 442 F.Supp.2d 838 (N.D. Cal. August 10, 2006); Informatica Corp. v. Business Objects Data Integration, Inc. , 454 F.Supp.2d 957 (N.D. Cal. July 14, 2006); Informatica Corp. v. Business Objects Data Integration, Inc. , 2006 WL 2329460 (N.D. Cal. August 9, 2006); Affion Net Patents, Inc. v. Martiz, Inc. , 440 F. Supp. 2d 354 (D. Del. July 28, 2006); Outside the Box Innovations, LLC v. Travel Caddy, Inc. , 455 F.Supp.2d 1374 (N.D. Ga. October 6, 2006).

IV. Difficulties Created By EchoStar For Patent Trial Counsel

While the EchoStar decision did not specifically mention trial counsel, its statements effectively captured trial counsel in its sweep. Leading up to the Seagate decision, it was clear that a majority of district courts were reading EchoStar to mandate a waiver of protection for trial counsel communications and work product, thereby eviscerating, in large part, the protections set forth in Motorola, Inc. v. Vosi Technologies, Inc. , 2002 WL 1917256 (ND Ill. 2002). In Motorola , the court held that all post-suit opinions of trial counsel (which, in that case, was different from opinion counsel) that the defendant was going to rely upon, were, without exception, protected from disclosure. Id. at *2.

EchoStar thus restrained the freedom of trial counsel to conduct litigation in his/her client's best interest. In light of the court's broad and unclear statement regarding "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," EchoStar , 448 F. 3d at 1304, trial counsel could not communicate freely and comfortably with clients and/or colleagues regarding the validity, enforceability and infringement of a patent-in-suit. In light of this decision, how could an attorney have advised his/her client to settle a case without compromising the client's position, should the case proceed to trial? How would an attorney have conveyed the reasons for his/her view without simultaneously harming the client's interests? Would an attorney have had to balance the harm of engaging in dialogue with the client against the harm of avoiding this dialogue? These questions underscore the strategic quagmire into which the Federal Circuit had thrust patent trial attorneys and their clients.

V. The Federal Circuit Clarifies The Ambiguities Created By EchoStar: In re Seagate

It was with this backdrop that the Federal Circuit reconsidered, inter alia, whether the waiver of the attorney-client privilege applied to patent trial counsel. In Seagate , the court presented three questions:

1. "Should a party's assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party's trial counsel?

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?" Id.

The court held:

1. Waiver does not extend to trial counsel communications, as a general rule.

2. Waiver does not extend to trial counsel work product, as a general rule.

3. The court overruled the long-standing duty-of-care standard set forth in Underwater Devices and changed the standard for proving willful infringement.

The court held that "as a general proposition..., asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel." Id. at *9. Describing the attorney-client privilege as the "oldest of privileges," the court noted that the purpose of it is to "encourage full and frank communication." Id. at *6.

Further, the court held that "as a general proposition, relying on opinion counsel's work product does not waive work product immunity with respect to trial counsel." Id. at *10. The court noted that, unlike the attorney-client privilege, which provides absolute protection from disclosure, work product protection is qualified and may be overcome by need and undue hardship. Id.

The court left trial courts free, however, to exercise discretion regarding whether to extend the attorney-client and work product waiver to trial counsel, in "unique circumstances such as if a party or counsel engages in chicanery." Id. at *9 and *10.

Finally, the court noted that the work product doctrine extends work product protection not only to "documents and tangible things," but to "nontangible" work product as well. Thus, the court prevented the patentee from deposing Seagate's trial counsel. Otherwise, while attorneys' files would be protected from discovery, the attorneys themselves would not be able to assert a work product objection to being deposed. Id. at *11.

Thus, the court concluded that the significantly different functions of trial counsel and opinion counsel militate against extending waiver to trial counsel. Id. at *7. The court noted,

Whereas opinion counsel serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker . . . fairness counsels against disclosing trial counsel's communications on an entire subject matter in response to an accused infringer's reliance on opinion counsel's opinion to refute a willfulness allegation. Id.

The Seagate decision, therefore, serves to relieve many concerns created by Echostar for accused infringers and trial counsel. Trial attorneys and their clients can more freely discuss litigation strategy with a significantly smaller chance of facing a privilege and/or work product waiver. To be sure, however, the decision does leave some issues open. For example, the Court declined to address waiver with respect to in-house counsel, as the questions presented for en banc review did not encompass this issue. Id. at 19, n. 2. Thus, this and related issues will remain open for some time.

Mark P. Kesslen is a Member of Lowenstein Sandler PC and Chair of the Intellectual Property section of the firm's Tech Group. He provides strategic guidance to technology-based businesses in patent strategy (licensing, litigation and prosecution) outsourcing and alliances. Nader A. Abadir is a registered patent attorney and an Associate in the firm's Litigation Department.

Please email the authors at or with questions about this article.