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Accused patent infringers: Who deserves the attorney-client privilege and who doesn't?

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Everyone of a certain -- how shall we shall this? -- "mature" age should remember the lines of Arlo Guthrie's "Alice's Restaurant." In that classic Vietnam-era anti-war song, Guthrie describes his surprise when he discovers a prior conviction for mere littering relegates him to a rejected draft classification of "Group W" alongside "Mother-rapers" and "Father-stabbers." (For those who are age- or memory-deficient, you can find the lyrics at www.arlo.net/resources/lyrics/alices.shtml).

Although the lyrics won't be as memorable, a similar song is now being written in the U.S. Court of Appeals for the Federal Circuit, and the score could affect every party accused of patent infringement. This time, the surprise concerns the rights to privileged communications with litigation counsel to which Guthrie's Mother-rapers and Father-stabbers were entitled -- but parties accused of willful patent infringement may not be.

Few principles are as fundamental in our common law as the sanctity of the attorney-client privilege. For more than a century, the Supreme Court has repeatedly reaffirmed the application of that privilege to all litigants, whether civil or criminal, and its goal to encourage full and frank communication between clients and attorneys. Ironically, although Guthrie and his Group W comrades could communicate candidly with their trial counsel, the result might be different had their "crime" been willful infringement.

Willful patent infringement can arise when a person discovers a patent may have some bearing on her activities. At that point, the law imposes a duty to exercise appropriate care to investigate the patent and to avoid infringing activities. If that person is later found to infringe, her failure to exercise appropriate care can establish willfulness and result in an enhancement of the damages.

To avoid a finding of willful infringement, accused infringers must show they held reasonable, good faith beliefs either that they did not infringe or that the patent was invalid or unenforceable. But, here's the "rub" with the attorney-client privilege: A common method to demonstrate good faith is through proof that the accused infringer obtained the advice of a competent lawyer. And, if they disclose that opinion during the litigation, they waive the attorney-client privilege for all communications with that attorney regarding the opinion.

To avoid subjecting their communications with litigation counsel to that same waiver, most accused infringers retain a different law firm to serve as their litigation counsel. However, in a case titled In re Seagate Technology, LLC, the Court of Appeals for the Federal Circuit is currently considering whether an accused infringer's reliance upon an attorney's opinion in defense of a willfulness charge results in a waiver of the attorney-client privilege even for separate litigation counsel. The consequences of that decision could have immense impact.

There are reasonable arguments on both sides. To begin with, established case law applies common sense to hold that accused infringers cannot pick and choose the opinion they desire to disclose and to withhold others that are unfavorable. That rule precludes an accused infringer from "shopping" for opinions. Moreover, patent infringement is considered a continuing activity. If litigation counsel provides a less-than-favorable view of the client's position, that advice arguably bears upon the infringer's claim of good faith.

Accused infringers also have valid arguments. Arlo Guthrie's fellow Group W felons enjoyed the attorney-client privilege. So why preserve the privilege for persons accused of heinous crimes, but deny the same protection to civil litigants accused only of patent infringement? Furthermore, the loss of the litigation privilege will effectively deny accused infringers essential candor and open communication with litigation counsel. And, retroactive application of a new privilege waiver rule will harm litigants who have acted reasonably up to this point with the expectation of privilege. Finally, there are many legal disputes in which parties defend the good faith of their continuing conduct through reliance upon an attorney opinion without fear of waiver of the litigation privilege. Why should patent law anomalously impose a waiver?

Until the Seagate case is finally resolved, accused infringers should tread carefully in their communications even with trial counsel:

¥ Take even greater care in the decision to rely upon and disclose an opinion of counsel as a defense to willful infringement (no disclosure; no waiver);

¥ Establish clear guidelines with your trial counsel about what their role will be and how you will communicate; and

¥ Operate from the beginning of the litigation on the assumption that you will waive your litigation privilege and any litigation commentary regarding a prior opinion will have to be disclosed.

In the meantime, at least some of us will drift back to the days of Arlo Guthrie and Alice's Restaurant.

Swinton is a partner and Welland an associate of the IP Litigation practice in the San Diego office of Latham & Watkins LLP.

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