Fairness Applies to • Waiver, but do not Disclose Letters • from your Attorney

Kilpatrick Townsend & Stockton LLP v. LG Electronics, Inc., [2011-1626] (July 13, 2012) [CLEVENGER, Moore, Reyna] The Federal Circuit vacated contempt sanctions against the Kilpatrick law firm for failing to produce documents in response to a subpoena, finding that the District Court did not apply the proper analysis of privilege.

DISCUSSION: In an attempt to persuade LG that it owned Wi-Lan royalties, Wi-Lan sent LG a copy of a letter  Wi-Lan received from its outside counsel from the Townsend firm.  The letter did not persuade LG, so Wi-Lan sued LG for patent infringement, using the Kilpatrick firm.  LG took the position that by sharing the letter from Townsend, Wi-Lan waived privilege as too all firms, and subpoenaed documents from the Kilpatrick firm.

The Federal Circuit found that the applicability of attorney-client privilege where subject matter jurisdiction depends on a question of patent law is governed by federal common law, although questions about the handling of subpoenas were governed by the law of the regional circuit.  The Federal Circuit found that the Townsend letter was both privileged and confidential, and its disclosure was a waiver of privilege at least as to the letter.  The Federal Circuit said that modern law requires fairness balancing for certain varieties of privilege waiver.  FRE 502(a) required fairness in the scope of waiver in the contest of litigation, and the Federal  Circuit concluded that the Ninth Circuit would apply fairness in a pre-litigation context as well, and thus the district court erred when it failed to consider fairness.  The Federal Circuit declined to evaluate fairness in the first instance and remanded it for further proceedings,  The Federal Circuit vacated the contempt finding, but noted that the Kilpatrick firm failed to pursue it options to properly contest the subpoena.

BEST PRACTICES: In this case the marking of every page as confidential contributed to the finding that the documents were privileged.  Attorneys should be careful what they mark as "confidential" or "privileged".  Attorneys should also remind clients not to disclose their communications to third parties.