The Software IP Report

Common Interest Privilege Covers Non-Attorneys in Patent Case

The District of Massachusetts held that the common interest exception to third-party privilege waiver protected communications disclosed to a licensee and non-attorney expert. Crane Security Technologies, Inc. v.  Rolling Optics, AB, No. 14-12428-LTS (D. Mass. Feb 3, 20017).  Crane Security Techs. Inc sued Rolling Optics, AB for infringing patents related to anti-counterfeiting measures on currency, e.g., metallic colored strips with images that appear to move when the bill is moved. Rolling Optics filed a motion to compel documents allegedly related to  a violation of the on-sale bar of 35 U.S.C. § 102(b). The documents were shared with a potential licensee and a non-attorney investment banker. Magistrate Judge Kelley denied the motion to compel, declaring the documents privileged under the common-interest exception to third-party privilege waiver.

Typically, disclosure of a document protected by attorney-client privilege to a third party waives the privilege. However, when the third party shares a substantially identical legal interest (i.e., a “common interest”) in the subject matter of a legal communication, the attorney-client privilege is not waived. Because the third party has a common legal interest in the privileged communication, courts will not waive attorney-client privilege with the communication is shared with that third party.

Communications between a potential licensee and a patentee are within the common-interest exception because both parties have a shared interest in obtaining strong patents. Crane licensed the asserted patents from the patentees, which were still in prosecution at the time of licensing. Rolling Optics claimed that because Crane and the patentees did not have a confidentiality agreement, the communications were not privileged. The Court held, however, that because the communications were directed to drafting patent claims and that the tenor of the communications indicated an intent to remain confidential, the disputed communications concerned a common legal interest and were privileged.

Crane engaged a financial services firm to assist in acquiring the asserted patents. Crane shared communications regarding legal advice with the financial services firm. Communications with third parties can fall under the common-interest exception when the communications were intended to be confidential and the third party was necessary to provide the legal advice requested. The Court held that because the negotiations concerned the complicated acquisition of patents worth over $100 million dollars, working with the financial services firm was necessary to provide the legal advice for the acquisition and the communications were privileged.

Lessons for Practice

The common-interest exception appears troubling at first since it is understood that releasing a privileged communication to a third party destroys the privilege. But the common-interest exception is rather narrow, and parties seeking documents can overcome the exception. The legal interest must be identical, not just similar. Furthermore, the interest must be legal, not solely commercial. Finding a third party to a communication may seem like a sure waiver, but be careful before furiously drafting up those motions and show the court why the common-interest doctrine may not apply.

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