Opinion
3:00 CV 754 (JBA)
October 23, 2001
RULING ON SOUNDVIEW'S MOTION FOR PROTECTIVE ORDER
Familiarity is presumed with the factual and procedural history behind this complex antitrust and patent infringement action.
On August 27, 2001, Soundview filed the pending Motion for Protective Order and brief in support, to prohibit the non-Soundview parties, primarily Sony, from obtaining through discovery the details of Soundview's attorney-client fee arrangements with its patent reexamination counsel. (Dkt. # 312). On August 31, 2001, Sony filed its memorandum in opposition. (Dkt. # 316). Soundview filed its reply brief on September 7, 2001. (Dkt. # 320).
The brief was filed under seal. Eleven exhibits were attached: excerpts from deposition transcript of Dale A. Leavy, taken on Aug. 2, 2001 (Exh. A); copy of internal Sony e-mail (Exh. B); copy of Soundviews Request for Reexamination of the '584 patent (Exh. C); excerpts from Sony's Answer and Counterclaims, filed Aug. 19, 2001 (Exh. D); first two pages of Soundviews Claim Construction Brief (Exh. E); excerpts from deposition transcript of Carl Monroe Elam, taken on July 20, 2001 (Exh. F); copy of correspondence from Soundview (Exh. G); copy of Information Disclosure Statement for the '584 patent (Exh. H); copies of letters from Soundview's patent reexamination counsel (Exhs. I K); and copy ofPereira v. Summit Bank, 94 Civ. 1565 (WHP), 2001 U.S. Dist. LEXIS 1712 (S.D.N.Y. Feb. 21, 2001) (Exh. J).
One exhibit was attached: copy of letter from Soundview's counsel to all non-Soundview lead counsel, dated Aug. 10, 2001.
First, Soundview contends that the taking of discovery of Soundview's attorney-client fee arrangements with its patent reexamination counsel is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. (Soundview Brief at 1). In addition, Soundview argues that any nonprivileged information discovered would invade other areas protected by the attorney-client privilege. (Id.) As a result, such discovery is impermissible. In the alternative, Soundview argues that even if this information is discoverable, only the amount of the fees paid by Soundview to its attorneys and not the contract itself should be inquired into because of the potential for revealing confidential information along with unprotected fee information and, furthermore, the fee contract could be used as a launching point to invade other areas that are protected by the attorney-client privilege. (Id. at 6-7). In addition, if this Court determines that Soundview's fee information is discoverable, Soundview seeks an Order requiring the non-Soundview parties to provide reciprocal discovery to Soundview. (Id. at 2 7). Soundview also requests that a judicial officer authorized to make on the spot discovery rulings be present at any deposition which will explore fee arrangement testimony. (Id. at 2).
Sony contends that the attorney-client fee arrangement information that Soundview moves to protect is both relevant and reasonably calculated to lead to the discovery of admissible evidence establishing, inter alia, Soundview's intent to deceive the Patent and Trademark Office ["PTO"], in support of Sony's fraud, inequitable conduct and bad faith litigation claims. (Sony Brief at 1). Sony claims that Soundview's patent reexamination attorneys misrepresented to the PTO: (1) the scope of the subject matter claimed in its patent application; (2) the dates of conception and reduction to practice of that claimed subject matter; and (3) the materiality of certain references. (Id. at 3). In addition to being relevant, Sony argues that the fee arrangement information is not protected by the attorney-client privilege. (Id. at 6). As a result, it contends, the fee arrangement information is discoverable under Rule 26 of the Federal Rules of Civil Procedure. (Id. at 2).
I. DISCUSSION
A. STANDARD FOR GRANTING A MOTION FOR PROTECTIVE ORDER
Parties may obtain discovery regarding any non-privileged matter that is relevant to the subject matter involved in the pending litigation. FED. R. CIV. P. 26(b)(1). The information sought through discovery need not be admissible at trial, however, so long as it appears reasonably calculated to lead to the discovery of admissible evidence. FED. R. CIV. P. 26(b)(1). In Rule 26(b)(1), the term "reasonably calculated" means " any possibility that the information sought may be relevant to the subject matter of the action." Omega Eng'g, Inc. v. Omega, S.A., No. 3:98 CV 2464 (AVC), 2001 WL 173765, at *2 (D. Conn. Feb. 6, 2001) (emphasis added) (citation omitted).
Notwithstanding these broad discovery principles, district courts are empowered to issue protective orders to temper the scope of discovery under Rule 26(c) of the Federal Rules of Civil Procedure. See, e.g., Dove v. Atlantic Capital Corp., 963 F.2d 15, 19 (2d Cir. 1992)("[t]he grant and nature of protection is singularly within the discretion of the district court . . .") (citations omitted). Therefore, when the party seeking the protective order demonstrates good cause, "the court in which the action is pending . . . may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including . . . (4) that certain matters not be inquired into, or that the scope of the disclosure or discovery be limited to certain matters." FED. R. CIV. P. 26(c)(4).
B. RELEVANCE DETERMINATION
An inequitable conduct defense must establish, inter alia, that the patent applicant intended to deceive or mislead the PTO. See Paragon Podiatry Lab., Inc. v. KLM Labs. Inc., 984 F.2d 1182, 1189 (Fed. Cir. 1993). Inequitable conduct results from a patent applicant's submission of false information, or failure to disclose material information, with intent to deceive the PTO. See Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988), cert. denied, 490 U.S. 1067 (1989) (citation omitted). Because "[i]ntent need not, and rarely can, be proven by direct evidence," Merck Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989), establishing the "intent" element of an inequitable conduct defense "requires the fact finder to evaluate all the facts and circumstances in [the] case."Paragon Podiatry Lab., 984 F.2d at 1190 (citation omitted) (emphasis added). "Intent" is a state of mind and is a subjective element that is usually established by inferences. Id. at 1189-90. Similarly, a "motive" is defined as "[s]omething, esp[ecially] willful desire, that leads someone to act." BLACK'S LAW DICTIONARY 1034 (7th ed. 1999). Because a motive demonstrates the probability of ensuing action, it is always relevant. JOHN HENRY WIGMORE, EVIDENCE § 118 (Best Supp. 2001) (emphasis added). Furthermore, state of mind is a subjective element that is usually determined by inferences. Consequently, if Soundview's attorneys intended to deceive or mislead the PTO, evidence establishing their financial motive to secure the patent could lead to the inference that they were impelled or incited to act in accordance with that intent to deceive.
In light of the above, evidence of Soundview's attorney-client fee arrangement clearly has some tendency of making the existence of wrongful intent more or less probable than it would be without the evidence. First, the evidence is probative of the proposition that Soundview's attorneys intended to deceive the PTO. Second, establishing an intent to deceive the PTO is a proposition that is of consequence to the determination of the action. The probative value of Soundview's attorney-client fee arrangement is that it tends to establish the inference that in light of Soundview's patent reexamination attorneys' financial motive to secure the patent, such motive could have impelled them to intend to mislead or deceive the PTO.
C. PRIVILEGE OF ATTORNEY-CLIENT FEE ARRANGEMENTS
The attorney-client privilege only encompasses confidential communications necessary to obtain informed legal advice and advocacy.See In re Grand Jury Subpoena Duces Tecum Served Upon Shargel, 742 F.2d 61, 62 (2d Cir. 1984). "Since the privilege prevents disclosure of relevant evidence and thus impedes the quest for truth, . . . it must 'be strictly confined within the narrowest possible limits consistent with the logic of its principle.'" Id. (quoting 8 J. WIGMORE, EVIDENCE § 2291 (McNaughton rev. ed. 1961)). As a result, absent special circumstances, client identity and fee information are not privileged. See id. at 62. "The party asserting the privilege and resisting discovery has the burden of establishing that privilege." Omega Eng'g, 2001 WL 173765, at *3 (citation omitted).
More specifically, revealing an attorney-client fee arrangement with his attorney does not prejudice those confidential communications necessary to obtain informed legal advice and advocacy. Vingelli v. United States, 992 F.2d 449, 454 (2d Cir. 1993). Although an attorney's fee is generally a necessary predicate to obtaining legal advice, disclosing the fee arrangement does not prevent the communications necessary for the attorney to effectively represent his client. In re Grand Jury Subpoena Served Upon Doe, 781 F.2d 238, 247-48 (2d Cir. 1985), cert. denied, Roe v. United States, 475 U.S. 1108 (1986). As a result, documents containing fee information are not protected by the privilege unless the documents also reveal the motive of the client in seeking representation, litigation strategy, or the specific nature of the services provided, such as researching a specific area of law. See Riddell Sports Inc. v. Brooks, 158 F.R.D. 555, 560 (S.D.N.Y. 1994) (citation omitted).
Soundview has not carried its burden of establishing that the attorney-client privilege applies to the fee arrangement testimony that the non-Soundview parties seek to elicit. Disclosing the fee arrangement in this case would not prejudice those confidential communications that were necessary for Soundview's reexamination attorneys to render informed legal advice. As a result, Soundview's fee arrangement with it reexamination attorneys is not protected by the attorney-client privilege.
Although Soundview contends that the actual fee contract should not be inquired into because the non-Soundview counsel may use the fee contract as a launching point to invade other areas that are protected by the attorney-client privilege, this argument is not persuasive. So long as the non-Soundview parties' depositions of Soundview's witnesses and its attorneys are limited in scope to the source of the fee, the amount of the fee, the manner of payment, the dates of payment, and the nature of fee arrangement (i.e., whether the parties contracted for a flat fee or contingent fee), which clearly are not protected by the attorney-client privilege, no other areas protected by the attorney-client privilege risk invasion.
Soundview did not seek to protect its written documentary evidence of its attorney's fee contracts in its motion for protective order. In the event, however, that such written evidence is requested, Soundview shall submit for this Court's review in camera copies of both redacted and unredacted fee arrangement information.
D. MUTUAL FEE INFORMATION DISCOVERY
Soundview's argument that this Court should order disclosure of fee information between non-Soundview parties and their counsel is without merit. Soundview's mere conclusory statement of reciprocal discovery fails to establish any relevance the fee information may have to its antitrust and patent infringement claims. To this end, its conclusory allegations are not reasonably calculated to lead to the discovery of admissible evidence. Therefore, the non-Soundview parties are not ordered to provide reciprocal discovery to Soundview.
II. CONCLUSION
Accordingly, for the reasons stated above, Soundview's Motion for Protective Order (Dkt. #312) is denied. Soundview's request for the presence of a judicial officer at depositions is also denied.
This is not a Recommended Ruling but a Ruling on discovery, the standard of review of which is specified in 28 U.S.C. § 636; FED. R. Civ. P. 6(a), 6(e) 72; and Rule 2 of the Local Rules for United States Magistrate Judges. As such, it is an order of the Court unless reversed or modified by the District Judge upon timely made objection.
See 28 U.S.C. § 636(b) (written objections to rulings must be filed within ten days after service of same); FED. R. Civ. P. 6(a), 6(e) 72; Rule 2 of the Local Rules for United States Magistrate Judges, United States District Court for the District of Connecticut; Small v. Secretary. HHS, 892 F.2d 15, 16 (2d Cir. 1989) (failure to file timely objection to Magistrate Judge's recommended ruling may preclude further appeal to Second Circuit).