Opinion
3:00 CV 754 (JBA)
March 22, 2002
RULING ON SONY'S MOTION TO COMPEL PRODUCTION OF DOCUMENTS
Familiarity is presumed with the factual and procedural history behind this antitrust and patent infringement action. See Sony Elec., Inc. v. Soundview Techs., Inc., 157 F. Supp.2d 172 (D. Conn. 2001); Sony Elec., Inc. v. Soundview Techs., Inc., 157 F. Supp.2d 180 (D. Conn. 2001); Sony Elec., Inc. v. Soundview Techs., Inc., 157 F. Supp.2d 190 (D. Conn. 2001). All fact discovery was to be completed by November 21, 2001, all expert discovery was to be completed by February 1, 2002, and all dispositive motions were to be filed by February 8, 2002. (Dkts. ##347 372; see also Dkt. #324). Trial is scheduled to commence on September 2, 2002. (Dkt. #347; see also Dkt. #323).
On November 21, 2001, Sony filed a Motion to Compel Production of Documents and brief in support. (Dkts. ##354-55). Soundview's brief in opposition was filed on December 19, 2001. (Dkt. #363). Sony's reply brief was filed, under seal, on January 8, 2002. (Dkt. #366). For the reasons stated below, Sony's Motion to Compel (Dkt. #354) isgranted in part and denied in part.
Thirty exhibits were attached to Sony's brief in support, which was filed under seal (Dkt. #355): copy of Reexamination Certificate for Patent B1 4,554,584 ["'584 patent"] (Exh. 1); copy of Soundview's Privileged Documents log numbered from 1-159. copy of Carl Elam's Privileged Documents log numbered from 160-172, copy of Dale S. Leavy's Privileged Documents log numbered from 173-178, copy of Privilege Log for Eugene M. Cummings, Esq., numbered from 179-214, copy of Sony v. Soundview Technologies Privilege Log numbered from 215-379, copier of Hosier Documents Privilege log numbered from 380-417, copy of letter identifying Privileged Documents from counsel at St. Onge Steward Johnston Reens, LLC, numbered from 418-422 (Exh. 2); excerpts from deposition of David Schmidt, taken on Oct. 24, 2001 ["Schmidt Dep. Tr."](Exh. 3); copy of letter from Elam to Thomas Kundert and Bernard Franz, dated Aug. 29, 1994 (Exh. 4); copy of letter from H. Lee Browne to Elam and Leavy including a copy of an Assignment Agreement, dated Jan. 27, 1995 (Exh. 5); copies of case law (Exhs 6 14), copies of documents pertaining to reexamination of the '584 patent (Exh. 7), excerpts of the transcript from the video deposition of Carl Monroe Elam, taken on July 20, 2001 ["Elam Dep. Tr."](Exh. 8); copies of letters from Doris Johnson Hines to Soundview, dated June 6, 1997 Apr. 23, 1998 (Exhs. 9 10); copies of e-mails between Soundview and Matsushita, dated July 30, Aug. 2, 6 20, 2001 (Exh. 11); excerpts from deposition of Gerald Douglas Hosier, taken on Nov. 12, 2001 (Exh 12); excerpts of the transcript from the video deposition of Doris Johnson Hines, taken on Nov. 19, 2001 (Exh. 13); copy of Resolution on Television Broadcast Standards (Exh. 15); copies of undated letter with enclosures from Elan to FCC (Exhs. 16 17); copy of memo from Schmidt to Browne, dated Oct. 6, 1995 (Exh. 18); copy of 37 C.F.R. § 1.56 (2001) (Exh. 19); excerpts of the transcript from the video deposition of H. Lee Browne, taken on Oct. 26, 2001 ["Browne Dep. Tr."](Exh. 20); copy of letter from Hosier to Siegel, dated Sept. 8, 1999 (Exh. 21); copy of Soundview's Supplemental Responses to Sony's First Set of Interrogatories, dated Oct. 5, 2001 (Exh. 22); copy of letter from Elan to FCC, dated July 2, 1983, with enclosures (Exh. 23); excerpts from deposition of Dale A. Leavy, taken on Aug. 2, 2001 (Exh. 24); copy of Soundview's Claim Construction Brief, dated Jan. 24, 2001 (Exh. 25); copy of Sony's Opposition to Soundview's Combined Motion for a Protective Order and Memorandum of Law in Support Thereof, dated Aug. 31, 2001 (Exh. 26); copy of Ruling on Soundview's Motion for Protective Order, dated Oct. 23, 2001 (Dkt. #341) (Exh. 27); excerpts of the transcript from the video deposition of Eugene M. Cummings, taken on Nov. 19, 2001 (Exh. 28); copies of letters to Soundview's counsel, dated June 14, Nov. 6, 12, 15, 2001 (Exh. 29); and copy of Declaration of Richard S. Gresalfi in Support of Motion to Compel Soundview, dated Nov. 21, 2001 (Exh. 30).
Three exhibits were attached: copy of Second Amended Answer and Counterclaims, filed on Oct. 4, 2001 (Exh. A); copies of case law (Exh. B); and copy of Special Master's Final Report and Recommendation on Claim Construction (Exh. C).
Five exhibits were attached to Sony's reply brief: copy of letter from Browne to Thomson Consumer Electronics, Inc., dated Nov. 2, 1995 (Exh. 31); excerpts of Elam Dep. Tr. (Exh. 32); excerpts of Brown Dep. Tr. (Exh. 33); copy of case law (Exh. 34); and copy of Examiner Interview Summary Record from the Patent and Trademark Office (Exh. 35).
I. DISCUSSION
Sony's motion seeks an Order compelling Soundview to produce certain documents listed in privilege logs provided by Soundview or by persons or entities related to Soundview. (Dkt. #354; see also Dkt. #355, Exh. 2). Sony contends that its motion to compel should be granted based on the following considerations: Soundview's disclosure to third parties outside the community interest; selective production of privileged communications by Soundview during this litigation; the deliberate injection by Soundview of its reliance on attorney-client communications in this case; the crime-fraud exception; and this Magistrate Judge's Order with respect to the fee arrangements of Soundview's patent reexamination attorneys. (Dkt. #354, at 2; see also Dkt. #341).
Soundview claims that Sony's motion lacks merit and was perhaps filed in retaliation for Soundview's earlier motion to compel (Dkt. #363, at 1see also Dkts. ##344 375). With its brief in opposition, Soundview submits to the Court for its in camera review Document 159 from the privilege log, the St. Onge State of the Art Opinion Letter ["Reens Opinion Letter"](Dkt. #414, filed under seal; see also Dkt. #355, Exh. 2), and stands ready to produce any remaining documents under its control for the Court's in camera review.
A. Documents 159 and 418-422
This first category of documents sought by Sony includes correspondence during the early 1990's between Mr. David Schmidt, a founder of Soundview, and Attorney Louis Reens, of St. Onge Steward Johnston and Reens, LLC ["St. Onge Law Firm"]. Although Sony also seeks disclosure of Documents 418-422, Soundview notes in its opposition that these five documents are outside Soundview's possession; the St. Onge Law Firm responded to Sony's subpoena by withholding the documents on a log. (Dkt. #363, at 1-2). Therefore, Sony's motion to compel is denied as it relates to Documents 418-422. The following discussion therefor relates only to Document 159, the Reens Opinion Letter.
After becoming interested in V-chip technology in 1992 or 1993, Mr. David Schmidt retained the St. Onge Law Firm to advise him on matters relating to the parental control patent in question ["'584 patent"]. (Schmidt Dep. Tr. at 70 100-02). As a result of this consultation, which took place over a period of almost a year, Attorney Reens sent Mr. Schmidt the Reens Opinion Letter on October 18, 1994. (Dkt. #355, at 3). Mr. Schmidt was then in contact with Mr. Carl Elam, one of the named patent inventors, to negotiate with him for the acquisition of rights in the '584 patent. (Id.; Schmidt Dep. Tr. at 110-112). Prior to the formation of their business relationship, the results of the Reens Opinion Letter were shared not only with Mr. Elam but also with Mr. Browne, with whom Mr. Schmidt hoped to form a partnership that would take ownership of the '584 patent. (Schmidt Dep. Tr. at 136-138). An agreement was reached on January 27, 1995 wherein Mr. Elam and his co-inventor, Mr. Leavy, transferred ownership of the '584 patent to a new partnership formed by Messrs. Schmidt and Brown. (Schmidt Dep. Tr. at 123-128, 135-136).
Sony claims that any privilege associated with the Reens Opinion Letter was waived when Mr. Schmidt shared the document with third parties. (Dkt. #355, at 2-5). Soundview counters that the Reens Opinion Letter is clearly privileged in that it contains legal advice on the state of the art in content blocking technology, and contrary to Sony's assertions, Mr. Schmidt never shared the Reens Opinion Letter with Mr. Elam. (Dkt. #363, at 2). Alternatively, Soundview states that even if the Reens Opinion Letter had been distributed among Messrs. Schmidt, Browne, and Elam, it is still protected by privilege in that there is a community of interest which includes all those who actually or potentially share rights in the patent. (Id. at 3).
The attorney-client privilege protects from disclosure "confidential communications that pass in the course of professional employment from client to lawyer." United States v. Schwimmer, 892 F.2d 237, 243 (2d Cir. 1989) (citation omitted), cert. denied, 502 U.S. 810 (1991). This privilege extends to "both information provided to the lawyer by the client and professional advice given by an attorney that discloses such information." In re Six Grand Jury Witnesses, 979 F.2d 939, 944 (2d Cir. 1992) (citation omitted), cert. denied, 509 U.S. 905 (1993). Once the substance of the attorney-client communication is shared with a third party, the attorney-client privilege is waived unless the disclosed material falls under the common interest rule. See United States v. United Techs. Corp., 979 F. Supp. 108, 111 (D. Conn. 1997).
The common interest rule is an extension of the attorney-client privilege. See Schwimmer, 892 F.2d at 243 (citation omitted). The sharing of confidential information with a third party who has a common legal interest does not waive the attorney-client privilege. See Oak Indus. v. Zenith Indus., No. 86 C 4302, 1988 WL 79614, at *4 (N.D. III. July 27, 1988) (citation omitted). The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial.Id. "[T]he parties among whom privileged matter is shared must have a common legal, as opposed to commercial, interest." Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 160 F.R.D. 437, 447 (S.D.N.Y. 1995). The party who claims privilege must show that the disclosures of privileged material is made in the course of "formulating a common legal strategy." Id.
When a party claims protection under the common interest rule the parties "must share 'a common interest about a legal matter' but 'it is . . . unnecessary that there be actual litigation in progress. . . .'"United Techs. Corp., 979 F. Supp. at 111 (citation omitted). If the principal activity in which the participants were engaged was the negotiation of a business, it is not enough to qualify as a common legal strategy where the "parties apprehended that their venture involved some legal risk but that apprehension was merely a part of their larger endeavor." Libbey Glass, Inc. v. Oneida, Ltd., 197 F.R.D. 342, 349 (N.D. Ohio 1999) (citation omitted). The court should consider whether "the parties were not commonly interested, but adverse, negotiating at arm's length a business transaction between themselves." SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 514 (D. Conn.), appeal dismissed, 534 F.2d 1031 (2d Cir. 1976).
Soundview's statement that "Mr. Schmidt never stated or suggested he shared Mr. Peens' advice with Mr. Elam (Dkt. #363, at 2) is not supported by Mr. Schmidt's deposition testimony. On an ongoing basis, prior to the release of the Reens Opinion Letter and prior to the business agreement entered into on January 27, 1995, Mr. Schmidt apprised Messrs. Browne and Elam of the analysis and results of the Reens Opinion Letter:
Question: So . . . prior to January of '95 when you had this deal with Mr. Elam and Mr. Browne you had shared some of the results of Mr. keen's survey with Mr. Browne and Mr. Elam, correct? Answer: Correct.
(Schmidt Dep. Tr. at 138). That Attorney Reens' analysis was shared with Mr. Elam is not only supported by Mr. Schmidt's deposition testimony but is also evident in Mr. Elam's August 24, 1994 letter to the original attorneys he used when obtaining the patent. (Dkt. #355, Exh. 4). Furthermore, it appears that in a letter dated November 2, 1995, Mr. Browne went on to share portions of the Opinion with Thomson Consumer Electronics, Inc. (Dkt. #366, Exh. 31).
In Hewlett-Packard Co. v. Bausch Lomb Inc., the Magistrate Judge recognized that where parties are engaged in discussions concerning the sale of a business the party may have a duty to disclose certain confidential information. 115 F.P.D. 308, 310 (N.D. Cal. 1987). For example, in Hewlett-Packard, if the sale had been consummated, there was a strong possibility that the parties would end up defending the same product as against the same patent in one lawsuit. Id. The court stated that where voluntary disclosure of information was not intended to create a waiver, it must determine whether or not the party "did everything within its power to impress upon [the recipient of the confidential information] the importance of maintaining the confidentiality of the [document] and [the recipient], in turn, seems to have undertaken to hold the [document] in confidence." Id. at 311. See also Libbey Glass, 197 F.R.D. at 348 (declining to extend the common interest rule where steps do not appear to have been taken by defendant to ensure that the privileged communications would remain confidential).
Soundview has not put forth any evidence showing that Mr. Schmidt took steps to impress upon Messrs. Elan or Browne the importance of holding the Reens Opinion Letter in confidence. In fact, as outlined above, it appears that Mr. Browne went on to share certain aspects of the Reens Opinion Letter with Thomson Consumer Electronics, again not impressing on Thomson the confidential nature of the document.
Although Soundview relies on In re Regents of Univ. of California, that court concluded that the legal interest between the two parties "was substantially identical because of the potentially and ultimately exclusive nature of the . . . license agreement." 101 F.3d 1386, 1390 (Fed. Cir. 1996), cert. denied, 520 U.S. 1193 (1997). Identical circumstances are not present in the instant case; there was no patent prosecution during this time period, litigation was not pending, and the negotiations between the parties were of a commercial nature rather than a legal one.
Similar to Regents, valid, enforceable patents were of interest to Messrs. Schmidt, Elam, and Browne but these legal interests were overshadowed by the business nature of the negotiations. Mr. Schmidt's interest in Mr. Browne was as one who could both raise capital and had experience in intellectual property. (Schmidt Dep. Tr. at 128). As evidenced by Mr. Schmidt's testimony, he was looking for a "good business opportunity." (Id. at 71). According to the deposition testimony of Mr. Elam, Mr. Schmidt placed a potential value on the patent during negotiations as is consistent with a business negotiation, but patent reexamination and the possibility of litigation to enforce the patent was not considered. (Dkt. #366, Exh. 32).
This Court does not find that a claim of common interest can be sustained. The parties were negotiating a business transaction at arm's length. There has been no showing by Soundview of the development of a common legal strategy between the parties preceding the January 1995 agreement. The Court will not extend the common interest rule to information shared freely with third parties during a business negotiation; the goal was to enter a lucrative business arrangement where legal concerns, if considered, were merely a part of the larger commercial endeavor. Additionally, Soundview failed to demonstrate that the confidential nature of the Opinion was stressed to Messrs. Browne and Elam.
Therefore, Sony's motion to compel is denied as it relates to Documents 418-22 and granted as it relates to the Reems Opinion Letter, listed as Document 159 on the privilege log.
B. Documents 52, 160, 161, 176-178, 203-214, 221, 223, 224, 226-246, 248-263, 265-269, 273-284, 289-291, 295, 298, 300, 301, 303, 304, 307-315, 317-325, 333 340-342, 383, 391, 394, 399, 406 and 416
As discussed in Section 1.A. supra, rights to the '584 patent were acquired by Soundview's predecessor-in-interest in January 1995. On August 1, 1996, Soundview submitted the '584 patent for reexamination in view of numerous prior art references that had been discovered by Mr. Schmidt. (Dkt. #355, Exh. 7; Schmidt Dep. Tr. at 235, 283-285). The request for reexamination was granted, and on April 30, 1997 the United States Patent and Trademark Office rejected claims of the '584 patent in view of two of the prior art publications ["Keiser" and "Chard"] identified by Soundview. (Dkt. #355, Exh. 7; Schmidt Dep. Tr. at 286-290). On June 6, 1997, Attorney Doris Hines of Finnegan, Henderson, Farabow, Garrett Dunner, L.L.P. ["Finnegan Henderson Law Firm"] drafted an opinion letter for Soundview ["Hines Opinion Letter"], explaining that one way of overcoming the rejection based on the Chard publication would be to submit affidavits from the inventors of the '584 patent in which the investors assert an earlier date of invention than Chard. (Dkt. #355, Exh. 9). The Hines Opinion Letter concludes that there exists sufficient evidence to antedate Chard based on the inventors' "Disclosure and Record of Invention" form submitted to the Air Force. (Id.). The Hines Opinion Letter was produced by Soundview during the pending litigation and at least three witnesses provided deposition testimony concerning the opinion. (Dkt. #355, at 7-10; Dkt. #363 at 6).
Sony contends that Soundview's production of the privileged Hines Opinion Letter, Soundview's reliance on that Opinion to defend itself against Sony's counterclaims, and Soundview's intentional injection of testimony on the substance of the Hines Opinion Letter into the case requires that Soundview produce all communications with counsel during the reexamination regarding the Chard publication, as well as all communications regarding the dates of conception and reduction to practice of the invention which form the basis for Soundview's argument and declaration to the Patent Office to antedate the Chard publication. (Dkt. #355, at 10-11). Furthermore, Sony asserts that the work product doctrine does not prevent production of these documents for three reasons: Soundview cannot show any evidence that any of its privileged communications during reexamination were made in anticipation of litigation; Soundview's elicitation of testimony during deposition testimony concerning Mr. Schmidt's reliance on counsel's opinion and the production of the opinion waives any work product exception, even if it did exist; and there is a substantial need for this information which justifies vitiating any claimed work product immunity. (Id. at 11-12).
Soundview contends that to defend Sony's Fourth Counterclaim and to conclusively prove that its actions in "swearing behind" Chard were correct and in good faith, Soundview produced the opinion letter that Soundview relied upon in submitting the prior invention affidavits. (Dkt. #363, at 6). Soundview does not dispute Sony's right to examine any Soundview witness concerning the Hines Opinion Letter nor does Soundview dispute Sony's entitlement to all materials considered or relied upon in the course of Attorney Hines formulating her Opinion. (Id.). Soundview points out that these materials are listed in the Hines Opinion Letter itself. (Id.). Additionally, Soundview does not dispute the general principle that any other advice of counsel on the same subject ought to be available to the Sony parties for discovery purposes. (Id.).
Instead, Soundview argues that Sony seeks a host of completely unrelated documents which do not fall within the scope of any waiver. (Id.). Instead of simply seeking prior art status of Chard viz-a-viz the '584 patent invention dates, Soundview questions Sony's request for documents related to other topics, such as maintenance fee advice, patent number marking on products advice, interpretations of Patent Office official actions, and interpretation of other non-Chard prior art. (Id. at 6-7). Although some of the privileged documents relate to attorney analysis of whether Chard invalidates the '584 patent even if it were considered prior art, Soundview asserts that that advice is not within the scope of any waiver: the Hines Opinion Letter does not deal with all aspects of Chard but rather only with the prior art status date of Chard. (Id. at 7-8).
From the limited description provided in the Privileged Document Log, the Magistrate Judge cannot determine whether or not privilege has been waived with regard to the requested documents. Therefore, Soundview shall produce Documents 52, 160, 161, 176-178, 203-214, 221, 223, 224, 226-233, 235-246, 248-263, 265-269, 274-284, 289-291, 295, 298, 300, 301, 303, 304, 307-315, 317-325, 333, 340-342, 383, 391, 394, 399, 406 and 416 to the Magistrate Judge for her in camera review on or before April 17, 2002 . In its brief in opposition, Soundview states that documents 234 and 273 were inadvertently maintained as privileged. (Dkt. #363 at 7). These documents shall be provided to Sony by April 5, 2002, if not provided already.
C. Documents 1, 51, 52, 157, 160, 161, 176-178, 203-212, 215-246, 248-263, 265-303, 304, 306-379, 383, 391, 394, 399, 406, 416 and 417
In 1981, two years before the patent application leading to the '584 patent was filed in the Patent Office, Mr. Elam prepared a resolution for the Southern Baptist Convention describing his alleged invention. (Elam Dep. Tr. at 76-77, 88-90; Dkt. #355, Exh. 15). During that same time period, Mr. Elam sent a petition along with a copy of this resolution to the Federal Communications Commission. (Elam Dep. Tr. at 90-91, 99-100; Dkt. #355, Exh. 17). According to Mr. Elam, these two documents were the basis for his assertion to the Air Force, and later to the Patent Office, that the date of conception for his invention was May 25, 1981. (Elam Dep. Tr. at 216-17). During deposition testimony Mr. Schmidt confirmed that he received the resolution document from Mr. Elam and provided it to one of the attorneys working on the reexamination. (Schmidt Dep. Tr. at 306-08, 312-13). The documents were not disclosed to the Patent Office. (Dkt. #355, at 13). Sony contends that in order to defend Soundview against the allegation that it intentionally withheld the documents from the Patent Office, Soundview's counsel asked Mr. Schmidt about the resolution and Soundview's state of mind with respect to the document:
Q. [Soundview's counsel]: Do you recall testifying in general about a resolution authored by Carl Elam in 1981?
A. Yes.
Q. Did Soundview ever hold the belief that that resolution met the legal definition of material prior art to the [']584 patent?
[Sony's counsel]: Objection, and further evidence of waiver.
[Soundview's counsel]: The question does not call for waiver of any privilege.
[Sony's counsel]: Yes, it did.
A. The answer is — let me hear the question.
Q. Let me ask the question again.
Did Soundview ever hold the belief that such a resolution in that 1981 document met the legal definition of material prior art to the [']584 patent?
A. No, it was one of the first questions I believe asked of our patent counsel.
(Schmidt Dep. Tr. at 593-94).
Sony contends that Soundview's deliberate attempt to establish that Soundview did not believe that the resolution document met the legal definition of material art waives all privilege with counsel regarding discussions and documents regarding that legal definition. (Dkt. #355, at 14).
Soundview counters with the argument that Mr. Schmidt's deposition testimony merely states that Soundview never held a belief that a 1981 resolution document constituted material prior art such that it would have been subject to a duty of disclosure to the Patent Office. (Dkt. #363, at 8). Soundview contends that Mr. Schmidt's Rule 30(b)(6) testimony constitutes the state of mind of the company and its representatives, not an attorney-client communication per se. (Id.). Therefore, Soundview concludes that the testimony does not waive any privilege. Soundview continues by pointing out that Mr. Schmidt's embellished answer did not reveal any attorney-client communication and does not indicate anywhere in his testimony that Soundview intends to rely on any particular attorney-client communication. (Id.).
Sony relies on Black Decker, Inc. v. Hoover Svc. Ctr. for the proposition that a witness cannot inject testimony regarding various attorneys' opinions and conclusions about the validity of a patent and then assert a claim of privilege as to those same issues. Civ. No. H-87-851 (WWE), 1990 U.S. Dist. LEXIS 15599, at *9 (D. Conn. Nov. 5, 1990). However, in Black Decker, the court heard testimony "over the course of many days of hearings . . . from witnesses" where in the instant case Sony only points to one passing reference by Soundview's 30(b)(6) witness to the existence of legal advice on this particular topic. Id.
In Libbey Glass, the court noted that there is no waiver of the attorney-client privilege where "passing allusions . . . during depositions . . . did not disclose the substance of communications between . . . counsel and the deponents." 197 F.R.D. at 346. The Court finds that Mr. Schmidt's deposition testimony is more akin to this definition and therefore, Mr. Schmidt's deposition testimony did not waive the attorney-client privilege as alleged by Sony.
For the reasons stated above, Sony's motion to compel is denied with regard to documents 1, 51, 52, 157, 160, 161, 176-178, 203-212, 215-246, 248-263, 265-300, 303, 304, 306-379, 383, 391, 394, 399, 406, 416 and 417.
D. Documents 2, 61-70, 79, 300, 302, 304, 316, 397 and 398
Sony accuses Soundview of bad faith litigation under the belief that Soundview is and has been aware that Sony does not infringe any valid claim of the '584 patent. (Dkt. #355, at 15). Sony contends that the deposition testimony given on behalf of Soundview indicates that it will rely on attorney and confidential consultant opinions to fight charges of bad faith litigation:
Q. [Sony's counsel]: You said you could make the statement that Elam invented the V-chip in the context of how Mr. Markey presented the term V-chip, correct?
A. Correct.
* * *
Q. But what's your feeling that you can make that statement today on the record; what's you basis?
[Soundview's Counsel]: Objection. Calls for opinion.
A. My basis is once again the same as the document would show the response to the interrogatory answer or question posed.
Q. What is it?
* * *
A. At Soundview one of my responsibilities was to hire experts in the field who could answer questions, whether they are legal questions or technical questions, and as part of our due diligence in trying to be corporately [sic] responsible to our shareholders we sought advice on the issues of the technical implementation of Carl Elam's patent as well as the legal advice we received regarding the quality of the patent. And based on what we learned from these consultants and experts, we were able to put together a conclusion that indeed Carl Elam was the inventor of what Ed Markey coined as the V-chip.
(Schmidt Dep. Tr. at 59-61; see also Dkt. #355, at 15-16).
Q. [Sony's counsel]: Were you involved in looking at the claims to make the determination whether or not there was an issue of infringement?
A. I did nothing with regard to that without advice of counsel.
Q. But you did something with that with regard —
A. With advice of counsel. In other words, I'm not capable of determining these issues without the advice of counsel. That's why I have them.
Q. So you relied on advice of counsel and were comforted by advice of counsel as to whether or not there was a likelihood of infringement by the various consumer electronics manufacturers?
A. I made decisions based on the advice of counsel.
(Browne Dep. Tr. at 215-16). Sony relies on this deposition testimony and the holding in Black Decker to foster its theory that Soundview cannot use the substance of privileged communications to demonstrate good faith before the Patent Office without disclosing all related privileged communications. 1990 U.S. Dist. LEXIS 15599, at *9.
Soundview refutes the categorization that it has elected to rely on advice of counsel in order to rebut Sony's charge of bad faith litigation. (Dkt. #363, at 9-10). Soundview states that no such election has been made and no such election need be made, given the evidence of record. (Id.). Furthermore, Soundview asserts that Sony cannot use deposition testimony given on cross examination by Messrs. Browne or Schmidt to argue injection of the advice of counsel defense: neither Mr. Browne nor Mr. Schmidt are with Soundview anymore and neither was designated on a related Rule 30(b)(6) topic. (Id. at 9). As such, their deposition answers cannot possibly reflect Soundview's election or non-election of a particular legal strategy, such as reliance on advice of counsel, to defeat Sony's charge of bad faith litigation. (Id. at 9-10).
For the reasons addressed in Section 1.C. supra, the Court finds that the excerpts set forth above do not constitute a waiver by Soundview of the attorney-client privilege. Therefore, Sony's motion to compel documents 2, 61-70, 79, 300, 302, 304, 316, 397 and 398 is denied.
E. Documents 1, 2, 51, 52, 54, 157, 160, 161, 176-178, 202-246, 248-263, 265-304, 306-379, 383, 391, 394, 399, 406, 416 and 417
Sony's next contention is that it is entitled to the production of attorney-client privileged communications between Soundview and its attorneys regarding the reexamination of the '584 patent under the crime-fraud exception to privilege and work product immunity. (Dkt. #355, at 18). Sony has alleged that during the reexamination proceeding, Soundview's attorneys and/or inventors intentionally misrepresented the nature of the alleged invention so as to secure issuance of the patent. (Id.). Sony points to the fact that even though Messrs. Elam and Leavy did not know how to actually insert the ratings into the existing closed captioning data without disturbing the transmitted data at the time the patent application was filed, this did not stop them from distinguishing the invention from prior art by stating that the invention uses "a special character set which is transmitted in the closed captioning data stream without disturbing the transmitted data." (Dkts. #355, at 19-21; Exh. 7, at 292; Elam Dep. Tr. at 83-85, 498-500, 507; Dkt. #366, at 10). To Sony this material misrepresentation represents prima facie evidence of Soundview's intent to deceive the Patent Office and the Patent Office's reliance on the material misrepresentation thereby vitiating the attorney-client privilege and work product immunity. (Dkt. #355, at 21-22).
Soundview argues that the Special Master's report rejects Sony's position that privilege has been vitiated by the actions taken during patent reexamination. (Dkt. #363, at 11-12). Soundview disputes Sony's allegation of fraud by pointing to its patent claims, i.e., independent claim 1 does not imply any particular place in a data stream to insert rating characters and the patent is indifferent to the implementation details that have to do with where the rating characters are inserted based on the assumption that an implementing technician will do it correctly. (Id. at 12-13). Soundview asserts that it is the content of the 584 rating codes that prevents their "interfering" display, not the place where they are inserted into the data stream. (Id. at 13-15). Soundview posits that there was no intent to deceive the Examiner, no fraud on the Patent Office and, thus, no basis for vitiating the privilege under a crime-fraud exception. (Id. at 16).
"It is well-established that communications that otherwise would be protected by the attorney-client privilege . . . are not protected if they relate to client communications in furtherance of contemplated or ongoing criminal or fraudulent conduct." In re Grand Jury Subpoena Duces Tecum, 731 F.2d 1032, 1038 (2d Cir. 1984) (citations omitted). Mere allegations of a crime or fraud cannot defeat a claim of privilege; prima facie evidence that the crime or fraud has some foundation in fact is required to invoke the exception. See In re Sealed Case, 676 F.2d 793, 815 n. 84 (D.C. Cir. 1982) (citation omitted). There must be a prima facie showing that the communication was made in furtherance of the crime or fraud. See In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 807 (Fed. Cir. 2000) (citations omitted). In order to find fraud, the following indispensable elements must be present: (1) a representation of a material fact; (2) the falsity of that representation; (3) the intent to deceive or, at least, a state of mind so reckless as to the consequences that it is held to be the equivalent of intent; (4) a justifiable reliance upon the misrepresentation by the party deceived which induces him to act thereon; and (5) injury to the party deceived as a result of his reliance on the misrepresentation. See id. at 807. "[A] finding of . . . fraud . . . must be based on independent and clear evidence of deceptive intent together with a clear showing of reliance, i.e., that the patent would not have issued but for the misrepresentation or omission." Id. (citation omitted).
Sony did not present the independent and clear evidence of deceptive intent required to find fraud. Therefore, Sony's motion to compel the production of documents 1, 2, 51, 52, 54, 157, 160, 161, 176-178, 202-246, 248-263, 265-304, 306-379, 383, 391, 394, 399, 406, 416 and 417 is denied.
F. Documents 20-22, 56, 264, 406-411
On August 27, 2001 Soundview filed a Motion for Protective Order to prohibit the non-Soundview parties from obtaining through discovery the details of Soundview's attorney-client fee arrangements with its patent reexamination counsel. (Dkt. #312; see also Dkt. #341, at 1). Sony objected, contending that the attorney-client fee arrangement information 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, in support of Sony's fraud, inequitable conduct and bad faith litigation claims. (Dkt. #316, at 1;see also Dkt. #341, at 2). In this Magistrate Judge's October 23, 2001 Ruling, the Court held that Soundview's fee arrangement with its reexamination attorneys is not protected by the attorney-client privilege. (Dkt. #341, at 5).
According to Sony, Attorney Eugene Cummings refused to answer deposition questions asking whether he had been substituted as the beneficiary of Attorney Hosier's contingency contract with Soundview after Attorney Hosier's relationship with Soundview had been terminated. (Dkt. #355, at 23). Thus, Sony requests documents which concern the fee arrangements of any attorney who assisted in the reexamination of the '584 patent to the extent that they shed light on the financial stake of the reexamination attorneys to be produced or submitted to the Court for an in camera review.
Soundview argues that it has produced all potentially responsive documents in the category of reexamination fee agreements. (Dkt. #363, at 17). Soundview points out that the documents now requested by Sony either constitute the reexamination fee agreement that was produced, drafts that superseded the agreement that are not relevant, or documents which are completely unrelated. (Id. at 17-18). Soundview points out that any fee agreement entered into after April 7, 1998, when the reexamination certificate issued, simply do not speak to state of mind bearing on Sony's allegations of misconduct occurring before that date. (Id.).
Consistent with the approach taken in this Court's October 23, 2001 Ruling, Soundview shall submit for this Magistrate Judge's in camera review both redacted and unredacted copies of documents 20-22, 56, 264, and 406-411. The documents shall be submitted on or before April 17, 2002 .
G. Document 29
Soundview's brief in opposition notes that document 29, the October 7, 1998 letter from Attorney Hosier to Mr. Shigematsu, was produced several months ago as document number SVW15621-22. (Dkt. #363, at 18). Based on this information, no further production is necessary.
II. CONCLUSION
Accordingly, for the reasons stated above, Sony's Motion to Compel (Dkt. #354) is granted in part and denied in part as follows: the motion is granted with regard to document 159 on the Privilege Log; denied as it relates to documents 418-422; denied as it relates to the documents listed in Sections 1.C., 1.D. and 1.E. supra the documents listed in 1.B. and 1.F. shall be submitted to the Magistrate Judge on or before April 17, 2002 for her in camera review, except for documents 234 and 273 which shall be provided to Sony by April 5, 2002, if Soundview has not done so already.
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).