One of the defendant’s employees had disclosed during a deposition that the company had sought a legal opinion from its attorneys as to whether its products may have infringed on the plaintiff’s patent.
The employee of defendant Epistar Corp., which makes LED products, stated that Epistar had sought legal advice after co-defendant Everlight Electronics Co. informed it of infringement concerns relating to particular products. The employee also stated that Epistar had prepared an analysis of the products for its law firm, which, according to the defendant, provided an oral opinion of non-infringement. The employee provided that testimony after a brief break in the deposition to consult with counsel.
A U.S. magistrate judge had previously denied a motion by the plaintiff, Boston University, to compel communications related to the opinion and the product analysis, finding that the employee’s disclosures were too general to constitute a waiver of the attorney-client privilege.
But Judge Patti B. Saris reversed, holding that Epistar waived the privilege by disclosing significantly more than its law firm’s bare conclusion on the infringement issue.
Saris found that the employee chose to disclose information about Epistar’s communications with its law firm — Finnegan, Henderson, Farabow, Garrett & Dunner — in a deposition, in the presence of a Finnegan attorney, and after speaking to a Finnegan attorney about whether the questions implicated privilege.
“All of these circumstances indicate that Epistar did not intend to keep these communications private. … For these reasons, logic and fairness dictate that Epistar waived its attorney-client privilege,” Saris wrote.
At the same time, however, Saris limited her order to communications relating to the non-infringement opinion, rejecting the plaintiff’s demand that Epistar produce all attorney-client communications regarding the patent in question.
The 16-page decision is Trustees of Boston University v. Everlight Electronics Co., Ltd., et al., Lawyers Weekly No. 02-228-15. The full text of the ruling can be found by clicking here.
Drawing the line
Plaintiff’s counsel Michael W. Shore of Shore, Chan, DePumpo in Dallas said the decision sends a strong message that a party cannot disclose the content of an attorney-client communication in order to gain an advantage without suffering consequences.
By disclosing what it did during the deposition, the defendant was trying to create an impression that it was acting on a legal opinion and acting reasonably, Shore said.
“They were trying to create that impression in a strong enough way to influence the decision-makers in the case but not strong enough to make a waiver [of the attorney-client privilege],” he said. “But they get sloppy and went over the line. … If you’re going to play that game on an attorney-client privilege to create an advantage, you’d better be careful about where that line exists.”
Shore also suggested that the communications in question must be damaging to Epistar, given that while his client’s appeal of the magistrate judge’s ruling was still pending, Epistar confirmed it would not assert an “advice-of-counsel” defense, which would have required a broad disclosure of otherwise privileged communications.
Shore said he does not believe Finnegan Henderson gave a non-infringement opinion. He also noted that Epistar claimed the opinion was oral, not written.
“I think we’ll see something very different than what they represented in the deposition. To give a non-infringement opinion [in this case], an attorney would have to be completely incompetent, and I don’t think they are. So we’ll see what actually occurred.”
Sean T. Carnathan, who handles complex civil litigation at O’Connor, Carnathan & Mack in Burlington, said the ruling provides an important practical lesson: If you assert advice-of-counsel as a defense at a deposition, make sure you really mean it.
“The magistrate’s decision was quite forgiving [and] would have allowed Epistar to put the horse back in the barn, so to speak,” Carnathan said. “Judge Saris essentially ruled that once you let the horse out of the barn, it stays out.”
Even then, Saris’ ruling limiting the scope of the waiver to communications related to the seeking of the legal opinion was perhaps more favorable to Epistar than one might have expected given the testimony at the deposition,” Carnathan said.
Christopher S. Schultz, a partner in Finnegan Henderson’s Boston office, represented Epistar. He could not be reached for comment prior to deadline. But David A. Barry, a Boston trial attorney who handles patent-infringement cases, said he found the ruling surprising.
“The defendant’s employee merely disclosed the fact that it had sought an infringement opinion from the lawyer by providing him with an ‘analysis’ of the challenged product, without disclosing the analysis itself or anything of substance about the product,” said Barry, who practices at Sugarman, Rogers, Barshak & Cohen.
And though Epistar did initially rely on an advice-of-counsel defense, once the defendant abandoned the defense, the court could have — and should have — allowed Epistar to revoke any prior waiver and thus maintain the confidentiality of its communications with counsel, Barry said.
“Once the defendant was no longer relying on the advice-of-counsel defense, what legitimate discovery purpose would be served by declaring a waiver of the attorney-client privilege and by giving the plaintiff free access to the lawyer’s opinion?” Barry asked.
The plaintiff, trustees of Boston University, sued defendant Epistar in U.S. District Court alleging that Epistar infringed on its patent, U.S. Patent No. 5,686,738 (the ’738 patent), for a type of gallium nitride film used in light-emitting diodes.
In the process of discovery, BU deposed Epistar’s director of intellectual property, Meng-Chun Kuo, who was represented at deposition by a Finnegan Henderson attorney.
During the deposition, Kuo testified that Epistar had been relying on an opinion from counsel in order to avoid a finding of willful infringement; she then asked to speak with her attorney in private to determine whether she was testifying about privileged information.
After speaking with the attorney, Kuo admitted that Epistar had sought an opinion from Finnegan Henderson in 2007 after co-defendant Everlight warned that Epistar products might be infringing on the ’738 patent. Kuo also stated that Epistar had prepared a report of its products that it gave to the law firm, which then told Epistar in an oral opinion that its products did not infringe on the patent.
In response to further questioning by BU’s attorneys, Kuo confirmed that when she said “no infringement,” she was referring to non-infringement of the ’738 patent by the particular products at issue, based on analysis provided by the attorneys.
Kuo further confirmed that the 2007 product analysis still existed, though she was not sure where the file was stored.
BU moved to compel production of all documents and communications related to any oral or written opinions by Finnegan Henderson to Epistar regarding the ’738 patent. The magistrate judge denied the motion, finding that Kuo merely revealed the existence of Finnegan Henderson’s infringement opinion and that when Kuo disclosed Finnegan’s legal conclusion, Epistar did not reveal the “content” of any attorney-client communications, such as what Epistar may have told its attorneys or the reasoning behind Finnegan’s conclusion.
The magistrate judge also ordered Epistar to decide whether it would be asserting an advice-of-counsel defense in response to the infringement charge. Epistar subsequently indicated that it would not be relying on such a defense.
Meanwhile, BU appealed the magistrate judge’s denial of its motion to compel.
Waiver of privilege
Saris found that Epistar had, in fact, waived the attorney-client privilege during Kuo’s deposition.
While courts are split on whether disclosure of a bare legal conclusion about infringement constitutes a waiver, Kuo’s disclosures in the case — including the circumstances under which Epistar consulted with Finnegan Henderson and the fact that Epistar had prepared a product analysis — went far beyond that point, the judge said.
“At the very least, Epistar waived its privilege over the analysis report that it prepared and gave to Finnegan, which was the basis of the legal opinion,” Saris said.
Meanwhile, she said, the circumstances surrounding Kuo’s disclosures indicated a deliberate waiving of confidentiality regarding Finnegan Henderson’s non-infringement opinion. Specifically, Kuo agreed to answer questions on that topic after a break to discuss with counsel whether such questions involved privileged information.
“[A]t no time did Kuo or her Finnegan attorney assert attorney-client privilege,” Saris said, adding that “logic and fairness” dictate a finding that the privilege was waived.
Nonetheless, Saris found no fairness concerns that would require broader discovery of all communications relating to the ’738 patent.
“In particular, Epistar has recently decided not to make communications with Finnegan an issue in this case,” the judge said. “Nor is it trying to benefit from the disclosure by, for example, using it as part of an advice-of-counsel defense.”
Accordingly, Saris concluded that Epistar would merely be compelled to disclose all attorney-client communications relating to the non-infringement opinion Finnegan Henderson provided in 2007.
Trustees of Boston University v. Everlight Electronics Co., Ltd., et al.
THE ISSUE : Was a defendant in a patent infringement case — whose employee disclosed during a deposition that the company had sought and received a legal opinion as to whether specific products may have infringed on the plaintiff’s patent — required to produce all communications relating to the opinion it received?
DECISION: Yes (U.S. District Court)
LAWYERS: Michael W. Shore of Shore, Chan, DePumpo, Dallas (plaintiff), Christopher S. Schultz of Finnegan, Henderson, Farabow, Garrett & Dunner, Boston (defense)