SPX Corp. v. Bartec USA, LLC

Citations: 247 F.R.D. 516; 2008 U.S. Dist. LEXIS 26282; 2008 WL 130787Docket: No. 06-14888

Court: District Court, E.D. Michigan; January 1, 2008; Federal District Court

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The Court grants SPX Corporation’s renewed motion to compel defendant Bartec USA, LLC to produce documents previously withheld under attorney-client privilege and the work-product doctrine in a patent infringement case. SPX alleges that Bartec copied its design for a handheld tool used in servicing tires equipped with remote tire monitoring systems. Initially, SPX requested these documents in June 2007, and although Bartec agreed to provide some communications after electing an advice-of-counsel defense against allegations of willful infringement, it did not produce all requested documents. Bartec argues that the withheld documents are protected by privilege, but the Court finds that Bartec's privilege log is insufficient for determining the scope of the privilege waiver. While the Court acknowledges that SPX has overstated the privilege waiver's scope, it concludes that Bartec has not adequately demonstrated that the withheld documents are outside the waiver. Thus, the motion is granted, and Bartec is ordered to produce the documents.

The case stems from SPX’s original complaint filed on October 30, 2006, asserting willful infringement of U.S. Patent 6,904,796, which pertains to a tool essential for servicing tires with remote tire monitoring systems, as these require electronic calibration post-rotation. Bartec counterclaimed, asserting the patent's invalidity and non-infringement. SPX later amended its complaint to include additional defendants related to the distribution of Bartec’s allegedly infringing products, with Bartec Auto ID asserting further counterclaims regarding the patent's validity based on allegations of inequitable conduct before the Patent and Trademark Office.

Amendments to the pleadings occurred in August 2007, culminating in the Court's dismissal of the case against General Parts on August 27, 2007, based on a stipulation between the parties. Throughout the litigation, discovery disputes arose, prompting the plaintiff to file multiple motions to compel between March and June 2007. Magistrate Judge Steven Pepe ruled on some of these motions, with a significant hearing held in mid-August regarding a motion to compel discovery related to communications about the '796 patent's potential invalidity and unenforceability.

Notably, on February 7, 2006, Ryan Massey, an attorney for Bartec, sent a letter to Robert Gilling of G-5 Electronics, LLC, asserting that the '796 patent was invalid due to prior art and possibly unenforceable due to inequitable conduct. This letter, characterized as an unconventional opinion letter because it was directed at the opposing party rather than Bartec's clients, was central to SPX's motions. SPX argued that this letter constituted a waiver of privilege regarding attorney-client communications on the matter and sought to prevent Bartec from using it as a defense against SPX’s claims of willful infringement.

During prior hearings, the discussions indicated that the letter sent to Gilling could impact the privilege of communications between Bartec and its counsel, especially since it was acknowledged that there were additional communications that had not been produced to the Court. The dialogue highlighted the complexity of determining whether the February 7 letter was the sole opinion referenced and the implications for attorney-client privilege in the context of the ongoing infringement claims.

Bartec has not yet definitively decided whether to use the advice-of-counsel defense, which could impact the admissibility of communications with their counsel, Mr. Massey. The court indicated that relying on the advice of counsel would necessitate disclosing all related communications. A hearing on August 13, 2007, was postponed due to Bartec's indecision, with a deadline set for September 13, 2007, for Bartec to notify both the court and the plaintiff of its decision. Bartec subsequently confirmed it would assert this defense and agreed to produce relevant documents, leading the court to deny the motion to compel as moot. However, the plaintiff later renewed its motion, arguing that Bartec had only partially complied with document production requirements and that many documents in Bartec's privilege log fell under the waiver due to their defense election. The privilege log was criticized for lacking detail. The plaintiff seeks an order to compel Bartec to produce all pre-suit attorney-client communications related to the '796 patent, asserting that such documents are vital for questioning Mr. Massey during his deposition. Additionally, the plaintiff requests communications involving Mr. Massey post-opinion issuance, as well as all documents concerning the '796 patent, irrespective of authorship or communication status.

The plaintiff alleges that the defendant has wrongfully withheld uncommunicated work product, specifically targeting Massey’s work product, although the scope of the request remains ambiguous. The defendant agrees to produce Massey’s February 7, 2006 opinion letter and other related confidential attorney-client communications but limits its waiver of privilege to communications regarding the '796 patent's potential invalidity or non-infringement. Bartec asserts it can still claim privilege for communications with trial counsel, work product of trial counsel, and Massey’s work product that does not involve attorney-client communications with Bartec, even if related to the same subject matter as the February 7 opinion letter.

Bartec intends to counter SPX's claims of willful infringement by demonstrating it acted reasonably based on counsel's advice regarding the '796 patent. Relevant case law indicates that a potential infringer has a duty to seek legal advice upon awareness of another's patent rights, although later rulings remove the obligation to obtain such advice. Bartec's defense could lead to a waiver of privilege, including work-product privilege, which is currently contested. The criteria for attorney-client privilege, as defined by Dean Wigmore, include the seeking of legal advice in confidence from a professional legal adviser. To claim work-product protection, documents must be shown to have been created primarily for litigation purposes. Federal Circuit law governs the substantive issues of willful infringement and the associated waiver of privilege in discovery contexts.

The advice-of-counsel defense leads to a waiver of both attorney-client privilege and work-product immunity concerning communications about patent infringement, validity, and enforceability. The Federal Circuit established that any document or opinion related to these communications is discoverable, including those that memorialize oral discussions. When an alleged infringer invokes this defense, they waive protection for all related communications, ensuring that they cannot selectively disclose favorable information while concealing unfavorable communications. However, legal opinions and mental impressions from counsel that were not communicated to the client remain protected. The focus of willfulness hinges on the infringer's knowledge or beliefs rather than uncommunicated counsel preparations.

The extent of privilege waiver regarding trial counsel differs; while invoking the advice-of-counsel defense affects attorney-client privilege for opinion counsel, it does not automatically extend to trial counsel communications. The Federal Circuit clarified that trial counsel's pre-suit communications are largely irrelevant, thereby limiting their disclosure under this defense. Courts can still exercise discretion in unique circumstances to extend waiver to trial counsel if misconduct is evident. Additionally, although the advice-of-counsel defense may implicate work-product protection, such waiver does not extend to trial counsel’s work product without exceptional circumstances.

SPX's request for all documents from Bartec’s attorneys is deemed overbroad. Uncommunicated work product not documenting lawyer-client conversations remains protected by work-product privilege. Communications with trial counsel after the lawsuit's filing date (October 30, 2006) are unlikely to impact the willfulness assessment or Bartec’s reliance on counsel’s advice regarding pre-suit conduct. Confidential communications unrelated to the '796 patent's validity, unenforceability, or non-infringement are also privileged. However, Bartec's privilege log fails to adequately demonstrate which documents fall under these protections, as required by Rule 26(b)(5) of the Federal Rules of Civil Procedure. This rule mandates that a party withholding information due to privilege must provide enough detail for others to assess the privilege claim, and the burden lies with the party asserting the privilege. The privilege log should identify each document and the involved parties, but Bartec's log lacks the necessary detail, leading to a rejection of its privilege claims. Furthermore, when a party invokes advice of counsel concerning willful infringement, it waives the attorney-client privilege for related communications. Bartec has not shown that withheld documents are outside the scope of this waiver. The Court concludes that Bartec has not met the burden to establish any valid privilege over the documents sought by SPX, thereby granting SPX's motion to compel document production by January 9, 2008.