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Scope of Waiver of Work Product Triggered by Advice-of-Counsel Defense Excludes Documents Not Communicated to Client

May 04, 2006

Decision icon Decision

Last Month at the Federal Circuit - June 2006

Judges: Schall, Gajarsa (author), Prost

In In re EchoStar Communications Corp., Misc. Nos. 803, 805 (Fed. Cir. May 1, 2006), the Federal Circuit vacated the district court’s orders to the extent they compelled EchoStar Communications Corporation (“EchoStar”) and its attorneys, Merchant & Gould P.C. (“Merchant & Gould”), to produce certain work-product documents.

TiVo, Inc. (“TiVo”) sued EchoStar for willful infringement of its U.S. Patent No. 6,233,389. EchoStar relied on advice-of-counsel defense. Before filing the suit, EchoStar relied on advice of its in-house counsel. After the action was filed, EchoStar obtained additional legal advice from its outside counsel, Merchant & Gould, but chose not to rely on it. TiVo sought production of documents in the possession of both EchoStar and Merchant & Gould to further explain EchoStar’s state of mind as to infringement.

The district court held that, in asserting an advice-of-counsel defense to willfulness, EchoStar waived its attorneyclient privilege and work-product immunity relating to advice of any counsel, including Merchant & Gould, regarding infringement, including any communications made before or after filing of the suit and any work product, whether or not it was communicated to EchoStar. The district court permitted EchoStar, however, to redact information related to trial preparation and information unrelated to infringement.

In response, EchoStar produced documents, including two infringement opinions from Merchant & Gould, but no work product related to those opinions. The parties consequently sought clarification of the order. The district court clarified its order, holding that the waiver of immunity extended to all Merchant & Gould work product, whether or not it was communicated to EchoStar. The district court explained that those documents could be relevant or lead to the discovery of evidence because they may contain information that was conveyed to EchoStar, even if the documents themselves were not transmitted. Both EchoStar and Merchant & Gould petitioned the Federal Circuit for a writ of mandamus challenging the order for production of documents not provided to EchoStar.

On appeal, the Federal Circuit first noted that a writ of mandamus can be sought when the challenged order turns on a question of privilege and observed that a party may challenge only a part of the order. Additionally, the Court applied Federal Circuit law because the extent of waiver of attorney-client privilege and work-product immunity when asserting the advice-of-counsel defense in response to willful infringement is an issue of substantive patent law.

The Federal Circuit first dismissed EchoStar’s argument that it did not assert the advice-of-counsel defense because it intended to rely only on an in-house investigation supervised by in-house counsel. The Court noted that while use of in-house counsel may affect the strength of the defense, it does not affect the legal nature of the advice. Further, the Court found that when EchoStar elected 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 other counsel, such as Merchant & Gould.

The Federal Circuit next addressed the scope of the waiver. The Court stated that when a party defends its actions by disclosing attorney-client communications, it waives the attorney-client privilege to all such communications regarding the same subject matter. The Court explained that work product is a separate concept, but is discoverable if the party waives its immunity. The waiver, however, only extends to factual or nonopinion work product concerning the same subject matter as the disclosed work product.

Recognizing three categories of work product relevant to the advice-of-counsel defense, the Federal Circuit held that a party relying on the advice-of-counsel defense waives its attorney-client privilege for all communications between the client and the attorney (relating to the same subject matter), including documentary communications. The Court held, however, that work product that is never communicated to a client is not discoverable. Finally, the Federal Circuit stated that waiver extends to work product discussing communications between attorney and client concerning the subject matter of the case but that are not themselves communications to or from the client.

Under that framework, the Court concluded that Merchant & Gould work product that was not communicated to EchoStar, nor reflecting such a communication, was not within the scope of EchoStar’s waiver. Accordingly, the Federal Circuit vacated the district court’s order to the extent that the waiver of privilege was extended to Merchant & Gould documents that (1) were not communicated to EchoStar and (2) did not reference a communication between Merchant & Gould and EchoStar.