When evaluating the risk that a given disclosure could result in waiver, in addition to considering the facts, one must also analyze choice of law and venue issues. As discussed herein, those issues are especially relevant in the context of business discussions involving patents, where the common interest question might ultimately be decided in an out-of-state district court.
Consider, for example, a business discussion in California between a California corporation and an out-of-state entity in which the participants wish to share information about legal issues such as patent validity or the feasibility of asserting infringement claims against other entities. The California corporation may assume that the question of whether common interest privilege protects such discussions is governed by California law. If there is subsequent state court litigation, that assumption is likely (although not necessarily, especially if the litigation is outside of California) correct. For example, many state courts apply the Restatement (Second) of Conflict of Laws § 139, which provides, in part, that “[e]vidence that is privileged under the local law of the state which has the most significant relationship with the communication but which is not privileged under the local law of the forum will be admitted unless there is some special reason why the forum policy favoring admission should not be given effect.” Id. (emphasis added). However, if the California corporation or the other party to the negotiation is later involved in patent litigation, that litigation will be subject to federal jurisdiction. 28 U.S.C. § 1338 (2012). Therefore, if another party to that patent litigation seeks the negotiation documents in discovery, the question of whether they are protected by the common interest privilege may instead be decided under federal law. Fed. R. Evid. 501 (federal common law governs privilege in all federal cases, except where state law supplies the law of decision). Moreover, it is difficult to predict in advance which federal district court will decide the issue, as patent infringement actions can be filed in any district in which “the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b) (2012). Adding yet another layer of complexity, while all patent cases are appealed to the Federal Circuit, the Federal Circuit applies “regional circuit law to procedural questions” such as privilege, resulting in circuit-to-circuit variations. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1272 (Fed. Cir. 2001).
The uncertainty as to which court will ultimately determine whether a disclosure is protected by the common interest privilege makes it even more difficult to predict the risk of waiver at the time a disclosure is made. At a high-level, most federal courts require the party asserting the privilege to establish that it shares a common legal interest (as opposed to a purely commercial interest) with the party with whom it was communicating, that the communication was in furtherance of that legal interest, and that it was made in confidence. See, e.g., FlatWorld Interactives v. Apple, Inc., 12-CV-01956 WHO (EDL) Dkt. No. 260 (N.D. Cal. December 2, 2013) (citing U.S. v. Schwimmer, 892 F.2d 237, 243-44 (2d Cir. 1989)).
Beyond this baseline, however, there can be substantial variation in how the common interest doctrine is applied among the federal courts. The following orders issued in patent cases around the country during the last several months are illustrative. Eagle Harbor Holdings, LLC v. Ford Motor Co., No. C11-5503 BHS, 2015 WL 196713 (W.D. Wash. Jan. 14, 2015). In this recent opinion from within the Ninth Circuit, a district court held that the common interest privilege did not protect transmission of attorney-client communications between non-lawyer business associates. Defendant Ford moved to compel communications between plaintiff Eagle Harbor and its business associates on topics such as “advice of counsel regarding infringement of patent.” Id. at *2. The court rejected Eagle Harbor’s assertion of common interest privilege over those communications, holding that “the attorney-client privilege protects open and frank discussions with counsel when seeking legal advice, but does not protect disclosure of such advice to third parties.” However, the court held that any information confidentially exchanged between the business associates that also qualifies as attorney work product remained protected. Id. at *2-3. In this regard, the Eagle Harbor court drew a distinction between a “Powerpoint presentation containing advice of counsel,” which the court stated would likely qualify as work product, and “personal opinions” of business associates about the legal advice, which it held would not. The court explained that the work product doctrine is designed to provide broad protection against disclosure to “adversaries,” and thus “is not as easily waived as the attorney-client privilege.”
Drone Technologies, Inc. v. Parrot S.A., No. 14-cv-00111 AJS (W.D. Pa. Feb. 20, 2015), ECF No. 189. In Drone, a special master appointed by the district court was presented with an assertion of common interest privilege over discussions between the defendant’s attorneys and non-attorney employees of Apple, a party the defendant argued shared a common interest. The special master found the common interest privilege inapplicable, holding that it only protects communications between attorneys on behalf of the members of the common interest group. The court further held that, even if the common interest privilege extended to communications by non-attorneys, the defendants also had not established that its communications with Apple were sufficiently confidential or related to a common legal interest.
Koninklijke Philips N.V. v. Zoll Medical Corp., No. 10-cv-110141 NMG (D. Mass. Sept. 10, 2014), ECF No. 761. Magistrate Kelley in the District of Massachusetts took a seemingly broader view of the common interest privilege’s application to non-attorneys, denying a motion to compel production of “e-mails between Philips’ employees and employees of another company concerning legal matters.” The opinion does not discuss whether attorneys were directly involved in the communications. Instead, the court reasoned that the common interest privilege applied based on a more generalized showing that the two companies “shared a common legal interest in protecting their products against allegations of patent infringement.”
Endotach LLC v. Cook Medical Inc., No. 13-cv-01135 LJM (S.D. Ind. Sept. 2, 2014), ECF No. 223. In Endotach, a district court in the Southern District of Indiana addressed the applicability of the common interest privilege to licensing negotiations between non-attorney employees of two businesses. The court took an approach slightly different from any of the other orders described above. While it rejected a bright-line rule that business person-to-business person communications are ineligible for common interest privilege protection, it held that such communications can be privileged only if “(1) one party is seeking confidential information from the other on behalf of an attorney, (2) one party is relaying confidential information to the other on behalf of an attorney, and (3) the parties are communicating work-product that is related to the litigation.” Under the particular facts presented, the court found no evidence establishing any of those elements, and therefore rejected application of the common interest privilege.
ENDNOTE
(1) See Lisa S. Glasser, Ethically Speaking: Seahaus v. Superior Court: An Uncommon Fact Pattern Highlights Complexities of the Common Interest Privilege in California, Orange County Lawyer, Vol. 56, No. 7 (July 2014).
Lisa Glasser is a partner at Irell & Manella LLP, specializing in intellectual property and business litigation. She can be reached at lglasser@irell.com.