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.  

"Hereby Assigns" in • an Employee Agreement • Transfers Invention

Preston v. Marathon Oil Company, [2011-1013, -1026] (July 10, 2010) [O'MALLEY, Bryson, Dyk] The Federal Circuit affirmed summary judgment that Preston assigned rights in U.S. Patent Nos. 6,959,764 and 7,207,385 by virtue of his employment agreement.

DISCUSSION: After accepting employment at will by Marathon, Preston signed an Employee Agreement pursuant to which he automatically assigned inventions he made.  He identified a CH4 Resonating Manifold as a "previous" invention.  The Federal Circuit certified the question of whether continued employment was adequate consideration for an intellectual property assignment, and the Wyoming Supreme Court answered; "yes."  The Federal Circuit rejected Preston's argument that the invention was not intellectual property under the agreement because it had already been conceived at the time of the agreement, and it rejected the argument that the invention was expressly reserved.  The Federal Circuit noted that construction of patent assignment agreements is a matter of state law.  Because the agreement required that the inventions "made or conceived" be assigned, unless the invention was both made and conceived prior to employment, the employee agreement applied.  The Federal Circuit further found that invention necessarily requires at least some definite understanding of what has been invented.  The evidence did not support the conclusion  that Preston was not in possession of an excludable invention before he began employment at Marathon.  The Federal Circuit agreed with the district court's finding that Preston's testimony regarding the level of development was not credible, and at most had little more than a vague idea before his employment began.

The Federal Circuit reversed the district courts' finding that Preston breached the employment agreement by not assigning the invention because the employee agreement to "hereby assign" automatically assigned rights to the invention without the need for any additional act.
BEST PRACTICE: One again, an employee agreements should always contain a current assignment of future inventions.

THE PENALTY FOR / FALSE MARKING IS ASSESSED PER / MISMARKED ARTICLE

The Forest Group, Inc., v. Bon Tool Company, [2009-1044] (December 28, 2009)[MOORE, Rader, Plager] The Federal Circuit reversed and remanded the $500 fine against Forest for false patent marking, and affirmed the denial of attorneys fees and the holdings that that Forest had not violated the Lanham Act, that U.S. Patent No. 5,645,515 was not invalid, and was not infringed,
DISCUSSION: The Federal Circuit held that the plain language of 35 U.S.C. § 292 requires courts to impose penalties for false marking on a per article basis, and thus remanded the $500 penalty for district court to impose a per article penalty. The Federal Circuit provided some comfort noting:
This does not mean that a court must fine those guilty of false marking $500 per article marked. The statute provides a fine of “not more than $500 for every such offense.” 35 U.S.C. § 292(a) (emphasis added). By allowing a range of penalties, the statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities. In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty.
COMMENT: This holding is of particular concern because of indications that mismarking may include statements that a product is “covered by one or more” patents on a list, or that the product is covered by an expired patent. Best Practice: Every patentee should promptly review the patent marking on its products, remove patents that do not cover the product, and consider removing patents that have expired.