This article first appeared in the NYIPLA Bulletin
The so called “common interest doctrine” often allows different parties who share a common legal interest, but not necessarily the same counsel or the same adversaries, to share privileged information without waiving the attorney-client privilege or attorney work product immunity. Unfortunately, the doctrine, which is sometimes called the “joint defense” or “community of interest privilege,” is not uniformly applied in the courts, and is sometimes not recognized at all. This article addresses the background of the doctrine, provides a synopsis of recent developments in the relevant law, and concludes with practical strategies for increasing the likelihood of a Court finding common interest communications privileged.
The attorney-client privilege protects from disclosure confidential communications from a client to an attorney. The underlying justification for the privilege is to incentivize candid communication between a client and its counsel in order to facilitate legal advice. If a client is concerned that communications with an attorney could be revealed, information necessary for proper representation may be withheld.1 An often cited definition of the privilege is found in Proposed Federal Rule of Evidence 503(b):
A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client, (1) between himself or his representative and his lawyer or his lawyer’s representative, or (2) between his lawyer and the lawyer’s representative, or (3) by him or his lawyer to a lawyer representing another in a matter of common interest, or (4) between representatives of the client or between the client and a representative of the client, or (5) between lawyers representing the client.2
Implicit in the rule is that the privilege should extend beyond just attorney and client. There are a number of justifications for such an extension. For example, one justification is to encourage parties working under a common legal interest to benefit from advice of counsel.3 Another justification is to facilitate business transactions.4 Stated differently, if privilege is waived in disclosing information to a third party during negotiations, parties would be less likely to be forthcoming with relevant information to those negotiations and business could stagnate.
The work product doctrine protects from discovery documents developed in anticipation of litigation or for trial by an attorney, or on his behalf.5 Its rationale focuses on encouraging competent and diligent preparation by the attorney, and encompasses not only communications made from the client to the attorney, but other sources as well.6 The early case of Hickman v. Taylor noted a distinction between what is commonly referred to as “ordinary” work product and “opinion” work product, the latter commanding the greatest protection.
If otherwise protected information is disclosed to a third party, then absent an exception, the privilege or immunity can be waived.7 An important issue concerns who may waive either the attorney-client privilege or work product protection. This is particularly pertinent in the patent law context, where employee-inventors often testify but typically are not in the management or control group of the company. At least one court has expressly held that the voluntary disclosure of a privileged communication by a non-control group employee can waive privilege despite the fact that the corporation never approved the disclosure.8
Fortunately, courts have recognized exceptions to waiver in various circumstances. The “joint defense” privilege developed within the context of criminal litigation, and gradually became commonplace in the civil context.9 Eventually, courts recognized a privilege between cooperating plaintiffs. In In re Grand Jury Subpoena, 89-3 and 89-4, the Fourth Circuit determined that there was no basis upon which to distinguish co-defendants and co-plaintiffs: “the rationale for the joint defense rule remains unchanged: persons who share a common interest in litigation should be able to communicate with their respective attorneys and with each other to more effectively prosecute or defend their claims.”10
The common interest doctrine expands the joint litigant privilege to parties who share a common legal interest but may not be involved in litigation. The leading case supporting the common interest doctrine is Duplan Corp. v. Deering Milliken.11 According to the court,
A community of interest exists among different persons or separate corporations where they have an identical legal interest with respect to the subject matter of a communication between an attorney and a client concerning legal advice. The third parties receiving copies of the communication and claiming a community of interest may be distinct legal entities from the client receiving the legal advice and may be a non-party to any anticipated or pending litigation. The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial. The fact that there may be an overlap of a commercial and a legal interest for a third party does not negate the effect of the legal interest in establishing a community of interest.12
Courts have offered policy rationales for expanding attorney-client privilege via the common interest doctrine. For example, one court has stated that the purpose of the doctrine is to encourage parties working under a common legal interest “to benefit from the guidance of counsel, and thus avoid the pitfalls that otherwise might impair their progress toward their shared objective.”13 Others are concerned with stifling business: “Unless it serves some significant interest courts should not create procedural doctrine that restricts communication between buyers and sellers, erects barriers to business deals, and increases the risk that prospective buyers will not have access to important information that could play key roles in assessing the value of the business or product that are considering buying.”14
In the patent law context there have been a number of cases dealing with the boundaries of the common interest doctrine, but “[t]he legal boundaries which define the scope of the ‘common interest’ rule are by no means well defined.”15 In Hewlett-Packard v. Bausch & Lomb, the Northern District of California held that by disclosing an opinion letter by patent counsel to a third party for the purpose of a potential business transaction, the defendant did not waive privilege to that opinion letter.16 In Johnson Electric v. Mabuchi, the Southern District of New York held that the attorney client privilege was not waived when defendant’s attorney disclosed information to one of defendant’s distributors.17 In Tenneco Packaging v. S.C. Johnson & Son, the Northern District of Illinois held that disclosure of an infringement opinion during an asset purchase negotiation did not defeat the privilege, relying heavily on the fact that the disclosure was subject to a confidentiality agreement.18 On the other hand, in Libbey Glass v. Oneida, the Northern District of Ohio required that in order to maintain the privilege, the parties must demonstrate that the disclosure was for the purpose of “formulating a common legal strategy.”19
III. Recent Developments
Within the past few years, there have been a number of important changes in the law of willful infringement and induced infringement in regard to opinion of counsel evidence. These changes, coupled with changes in the common interest doctrine, raise a new set of concerns for patent practitioners.
1. Developments In Substantive Patent Law: Willful And Induced Infringement
In In re Seagate, the Court of Appeals for the Federal Circuit set a new standard which no longer requires an opinion of counsel to defeat a charge of willful infringement, but instead considers such an opinion as a factor in the willful infringement analysis.20 The Seagate court also touched upon issues of waiver, noting that “as a general proposition, relying on opinion counsel’s work product does not waive work product immunity with respect to trial counsel.”21
In re EchoStar Communications further addressed the issue of waiver when an opinion of counsel is relied on as a defense to willful infringement.22 The court concluded that once a party relies on advice of counsel as a defense to willful infringement, the attorney-client privilege is waived. Additionally, “the scope of a waiver of attorney-client privilege is that the waiver applies to all other communications relating to the same subject matter.”23
Broadcom v. Qualcomm addressed opinion of counsel evidence in the context of induced infringement, and held that the failure to obtain a non-infringement opinion from qualified independent counsel may be circumstantial evidence of intent to induce others to commit patent infringement.24 A recent district court case went even further and held that failure to obtain an opinion of counsel is “strong circumstantial evidence” that the defendant had the requisite intent to induce infringement.25
2. Developments In The Common Interest Doctrine
The court in MedioStream v. Microsoft, recently held that a third party intervenor waived privilege regarding a memo written by the intervenor’s counsel that was forwarded from an employee of the intervenor to one of defendant’s employees.26 The court rested its decision on the fact that the memo was transferred between two non-lawyer employees. “Even assuming the [common interest] doctrine is broader in patent cases, the [intervenor counsel’s] memo was transferred between two non-lawyer employees; the memo was not disclosed in the context of [the intervenor] and [defendant] jointly seeking legal advice. Therefore, the court finds that the common interest doctrine does not apply.”27 The court also found that the employee of the intervenor had authority to waive attorney-client privilege.28
The decision highlights the reluctance of some courts to expand the common interest doctrine to encompass disclosures to non-attorneys. In the MedioStream decision, the court stated “Fifth Circuit cases analyzing the question of common legal interest suggest that the doctrine applies only when co-defendants jointly seek legal advice from counsel.”29 Interestingly, the court applied Fifth Circuit, rather than Federal Circuit, law.
IV. Practical Strategies For Protecting Privilege
Certain practical considerations can increase the likelihood that privileged communications disclosed during an investigation or transaction stay privileged. The first task is to ascertain the applicable jurisdiction and understand the applicable law, which varies among the U.S. circuit courts.30 A company susceptible to suit in certain jurisdictions may want to seek alternatives to disclosure of its most sensitive communications.
When disclosure of privileged communications is warranted or necessary, the parties should execute a written common interest or joint defense agreement as evidence of their intent to keep certain communications privileged. The parties should articulate in the agreement the common legal interest that provides the basis for one party to seek the advice of the other party’s counsel.31 The agreement should outline reasonable steps that both parties will adhere to in limiting access to common interest communications. Privileged documents should be labeled as privileged and confidential. Ideally, the documents should remain in possession of the disclosing party; an online data room with password-protected access and restrictions on copying can be used to share the information.
If possible, the agreement should also recite that both parties reasonably anticipate being sued, and are sharing privileged information as part of a joint defense strategy, although a specific threat of litigation may not usually be required.32 The timing of the disclosure is important in this regard. For example, where disclosure of privileged communications is made at an early stage of a deal, where the parties are still far apart, a court may be less inclined to find a sufficient common interest. In contrast, where there is an agreement in principle and a deal is imminent, a court is more likely to find that subsequent disclosure of privileged communications does not amount to waiver.33
The impact of the recent developments in both the common interest doctrine and in the substantive law of willful and induced infringement create a difficult landscape for patent practitioners to navigate. The Federal Circuit decisions in Seagate, EchoStar and Broadcom, make clear that opinion of counsel evidence plays an important role in patent litigation. The uncertainty surrounding the common interest doctrine, however, injects the risk of waiver in situations where a party may wish to use an opinion of counsel for a purpose other than a defense to willful or induced infringement.