Patent Watch: Wi-LAN, Inc. v. LG Elecs., Inc.

Alerts / July 23, 2012

[W]hen a client discloses to another person the content of a privileged attorney communication, [fairness balancing is required to determine whether] the resulting privilege waiver may extend beyond the communication itself to other related matter.

On July 13, 2012, in Wi-LAN, Inc. v. LG Elecs., Inc., the U.S. Court of Appeals for the Federal Circuit vacated and remanded the district court's contempt order against Kilpatrick Townsend & Stockton LLP for failing to comply with a discovery order. The Federal Circuit stated:

This appeal requires us to assess the consequences of Wi-LAN's disclosure of the Townsend letter to its rival LG. We have no difficulty concluding that this disclosure implicated Wi-LAN's attorney-client privilege. Though Kilpatrick Townsend suggests that the Townsend letter was always intended to be disclosed, and so was never really confidential (and so never really privileged), the available evidence demonstrates otherwise. The Townsend letter is marked "CONFIDENTIAL" on every page. It is addressed from an attorney to his client and contains detailed legal opinions. Kilpatrick Townsend has not offered evidence (as opposed to attorney argument) to justify departing from the obvious conclusion that the letter was at least initially confidential. We therefore agree with the district court that Wi-LAN's disclosure of the letter waived both that confidentiality and Wi-LAN's attorney-client privilege, at least as to the letter itself.

The question presented by this appeal thus concerns not whether Wi-LAN waived its privilege, but how far the waiver extended. Kilpatrick Townsend argues that under a fairness balancing test the scope of waiver should be narrow, essentially limited to the Townsend letter itself and reaching no other communication between Wi-LAN and Kilpatrick Townsend. LG, on the other hand, believes the waiver should be broad, exposing to discovery a wide swath of attorney-client communications, both pre- and post-dating the Townsend letter, relating to the subject matter addressed therein. Kilpatrick Townsend does not argue here, as it did below, that Federal Rule of Evidence 502 should govern the scope of waiver here, on the theory that disclosures "in the context of" a federal proceeding qualify for the benefit of the rule.

It is well-established that when a client discloses to another person the content of a privileged attorney communication, the resulting privilege waiver may extend beyond the communication itself to other related matter. LG suggests that this is both the beginning and the end of the inquiry. It says Wi-LAN waived privilege as to the Townsend letter, so it ipso facto waived privilege as to all other communications on the same subject matter. Kilpatrick Townsend, on the other hand, argues that basic considerations of fairness preclude a broad waiver in this case. It claims that LG is unable to articulate any prejudice it would suffer by assertion of privilege to matters beyond the four corners of the letter, and so there is no equitable reason to extend the waiver beyond the letter. Kilpatrick Townsend argues that by rejecting its attempt to incorporate such a fairness inquiry into assessing the scope of waiver, the district court legally erred.

Kilpatrick Townsend's plea for fairness balancing in this appeal resonates with certain trends in federal privilege law. The parties do not dispute that modern law requires fairness balancing for certain varieties of privilege waiver. . . . We conclude that the Ninth Circuit would find fairness balancing to be required. . . . The doctrine of implied waiver is invoked when a party makes the content of his attorney's advice relevant to some claim or defense in the case. Even if the party does not expressly disclose the advice received, but only alludes to it, the privilege can be deemed waived by implication.

As between the two directions put forward by the parties -- one requiring fairness balancing for extrajudicial discloses, the other barring it -- we conclude that the Ninth Circuit's cases support the former far better than the latter. The Ninth Circuit has repeatedly endorsed fairness balancing in a variety of circumstances; more to the point it has never set forth, either expressly or inherently, any rule barring fairness's application to extrajudicial disclosures. Nor do the Ninth Circuit's cases suggest any policy reason why the fairness protections available for express disclosures in litigation should be unavailable to those who waive privilege pre-litigation. Such a rule, which LG promotes in this appeal, seems to us bad policy, and we decline to adopt it on the Ninth Circuit's behalf.

For the foregoing reasons, we conclude that the district court erred by rejecting considerations of fairness -- i.e., whether LG would be unfairly prejudiced by Wi-LAN's assertion of privilege against discovery into attorney-client communications beyond the four corners of the Townsend letter -- when assessing the scope of waiver here. None of the orders considering scope of waiver in this case applied such a test. However, we decline the parties' invitation to evaluate fairness ourselves in the first instance. We therefore vacate the magistrate and district court's orders concerning the scope of Wi-LAN's waiver and remand for further proceedings.

We also vacate the district court's entry of contempt sanctions against Kilpatrick Townsend but note the district court's discretion to revisit the issue on remand. As a general matter the Ninth Circuit defers to a trial court's finding of contempt. Even in this appeal, where we agree with Kilpatrick Townsend that the district court committed legal error in its application of privilege doctrine, that is not the same as excusing failure to comply with a judicial order. In some cases one who disputes a subpoena's lawful scope has no alternative but to invite a contempt citation in order to obtain appellate review. Here, however, Kilpatrick Townsend had options that it did not pursue. Nevertheless, it is not for this court to determine whether and to what extent Kilpatrick Townsend should pay a penalty for its failure to either properly move the district court for certification of an interlocutory appeal or to seek mandamus review from this court when faced with an unlawful production order.

If you have questions about the material presented above, please contact Dr. Lawrence M. Sung (lsung@bakerlaw.com or 202.861.1537) or any member of our Intellectual Property Team.

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