Evonik Degussa GmbH v. Materia Inc.
Filing
314
OPINION re 233 Order. Signed by Judge Noel L. Hillman on 8/24/2011. (nms)
UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE
Evonik Degussa GmbH,
Plaintiff,
v.
Materia Inc., et al.,
Defendants.
Materia Inc.,
Counterclaim
Plaintiff,
and
University of New Orleans
Foundation,
Third-Party
Plaintiff,
v.
Evonik Degussa GmbH.,
Counterclaim
and
Third-Party
Defendant.
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Civil Action No.
09-cv-636 (NLH-JS)
CONSOLIDATED
OPINION
APPEARANCES:
Daniel Christopher Mulveny
Alan Richard Silverstein
Bindu Ann George Palapura
Brian R. Lemon
Claudia Schultze
Daniel J. Harbison
Eric James Evain
Jeffrey B. Bove
R. Eric Hutz
Rudolf E. Hutz
Connolly, Bove, Lodge & Hutz
The Nemours Building
1007 North Orange Street
P.O. Box 2207
Wilmington, DE 19899
Attorneys for Plaintiff Evonik Degussa GmbH
Jack B. Blumenfeld
Julia Heaney
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899
Attorneys for Defendant Materia Inc., Third Party Plaintiff
The University of New Orleans Foundation and Counter Claimant
Materia Inc.
Aaron M. Raphael
aaron.raphael@jalindeman.com
PRO HAC VICE
Attorney for Defendant Materia Inc. and Counter Claimant
Materia Inc.
Jeffrey A. Lindeman
jeff.lindeman@jalindeman.com
PRO HAC VICE
Attorney for Defendant Materia Inc. and Counter Claimant
Materia Inc.
Michael F. Orman
morman@nixonpeabody.com
PRO HAC VICE
Attorney for Defendant Materia Inc. and Counter Claimant
Materia Inc.
2
Daniel Christopher Mulveny
Alan Richard Silverstein
Bindu Ann George Palapura
Claudia Schultze
Eric James Evain
Jeffrey B. Bove
Rudolf E. Hutz
Connolly, Bove, Lodge & Hutz
The Nemours Building
1007 North Orange Street
P.O. Box 2207
Wilmington, DE 19899
Attorneys for Third Party Defendant Evonik Degussa GmbH and
Counter Defendant Evonik Degussa GmbH
HILLMAN, District Judge
In this case, a consolidated patent infringement action,
Plaintiff Evonik Degussa GmbH (hereinafter “Evonik”) alleges
Defendant Materia Inc. (hereinafter “Materia”) willfully
infringes U.S. Patent Nos. 7,378,528 (hereinafter “‘528") and
7,652,145 (hereinafter “‘145").
In response, Materia alleges
Evonik’s patents are unenforceable because of inequitable
conduct.
Third Party Plaintiff, the University of New Orleans
Foundation (hereinafter “the Foundation”) joins Materia and
counterclaims that Evonik willfully infringes the Foundations
U.S. Patent No. 7,622,590.
Presently before the Court is Evonik’s partial appeal of the
March 18, 2011 Order entered by the Honorable Joel S. Schneider,
U.S.M.J.
This Order granted in part and denied in part Materia
and the Foundation’s request for the production of several of
Evonik’s privileged documents.
For the reasons discussed below,
Magistrate Judge Schneider’s Order will be affirmed.
3
I. BACKGROUND
In connection with the prosecution of its ‘528 and ‘145
patents, Evonik’s patent counsel sent four “transmittal letters”1
(hereinafter “letters”) to Evonik advising it of its duty of
candor to the United States Patent and Trademark Office
(hereinafter “USPTO”).2
During the course of discovery, Evonik
produced these four letters.
Approximately six months later,
during the deposition of Evonik’s patent attorney Ashley Pezzner
(hereinafter “Mr. Pezzner”), Materia marked the letters as
exhibits, and asked Evonik’s counsel whether they were
inadvertently produced.
Counsel responded affirmatively, and
asserted the attorney-client privilege.
Several weeks later,
however, Evonik concluded that the letters were not privileged.
Viewing the letters as privileged and their initial disclosure as
waiver, Materia requested that Judge Schneider order Evonik to
produce the letters and all communications between Mr. Pezzner
and the other attorneys involved in the prosecution of patents
‘528 and ‘145.
On March 17, 2011, Judge Schneider heard oral argument on
Materia’s request.
Evonik contended it did not waive its
attorney-client privilege because the letters did not provide any
1
Transmittal letters are cover letters sent from an attorney to
his client that enclose communications the lawyer received from
the United States Patent and Trademark Office.
2
These letters were dated February 16, 2005, July 11, 2007,
July 30, 2007, and January 11, 2008.
4
legal advice they were form letters that contained general
statements of the law.
Accordingly, their disclosure did not
constitute a waiver of privilege because the letters were never
privileged.
After the conclusion of argument, however, Judge
Schneider determined that despite Evonik’s characterization of
the letters as form, they “are, in fact, privileged
communications” because they contain “legal advice and satisfy
the criteria of attorney/client communications.” Doc. 269, Tr.
54.
Although he denied Materia’s request for a broader waiver,
Judge Schneider held that Evonik partially waived its attorneyclient privilege with respect to all communications received from
its counsel concerning general disclosure instructions in
connection with the prosecution of ‘528 and ‘145 patents. See id.
at 56-57 (“[G]iven the general nature of the communication that
were disclosed, yes, they were privileged, but they were of a
general type of instruction, not regarding specific references.
The Court does not believe that it needs to order any broader
waiver of the attorney/client privilege in order to prevent any
unfairness to the defendants in this case”).
Evonik partially
appeals this Order and contends that the letters were not
privileged communications because they were merely form letters
sent by counsel.3
3
Evonik concedes that if the Court deems the letters
privileged, the scope of the waiver decided by Judge Schneider is
proper.
5
II. DISCUSSION
A. Standard for Appeal of Magistrate Judge Order
A United States Magistrate Judge may hear and determine any
non-dispositive pretrial matter pending before the court pursuant
to 28 U.S.C. § 636(b)(1)(A).
A district court judge will only
reverse a magistrate judge’s opinion on pretrial matters if it is
“clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A);
Fed. R. Civ. P. 72(a); L. Civ. R. 72. 1(c)(1)(A).
Under this
standard, a finding is clearly erroneous when “although there is
evidence to support it, the reviewing court on the entire
evidence is left with the definite and firm conviction that a
mistake has been committed.” Norguard Ins. Co. v. Serveon Inc.,
No. 08-900, 2011 WL 344076, at * 2 (D. Del. Jan. 28, 2011).
“A
district judge’s simple disagreement with the magistrate judge’s
findings is insufficient to meet the clearly erroneous standard
of review.” Andrews v. Goodyear Tire & Rubber Co., Inc., 191
F.R.D. 59, 68 (D.N.J. 2000).
A ruling is contrary to law if the
magistrate judge has misinterpreted or misapplied applicable law.
Gunter v. Ridgewood Energy Corp., 32 F. Supp. 2d 162, 164 (D.N.J.
1998).
The party filing the notice of appeal bears the burden of
demonstrating that the magistrate judge’s decision was clearly
erroneous or contrary to law. Exxon Corp. v. Halcon Shipping Co.,
Ltd., 156 F.R.D. 589, 591 (D.N.J. 1994).
6
B. Attorney-Client Privilege
“Evidentiary privileges are an exception to the general rule
that relevant evidence is admissible.” Rhone-Poulenc Rorer Inc.
v. Home Indem. Co., 32 F.3d 851, 862 (3d Cir. 1994).
Courts have
historically recognized the importance of the attorney-client
privilege because of its well established purpose of fostering
full disclosure and communication between the attorney and
client. Upjohn Co. v. U.S., 449 U.S. 383, 389 (1981) (“The
attorney-client privilege is the oldest of the privileges for
confidential communications known to the common law. . . . Its
purpose is to encourage full and frank communication between
attorneys and their clients and thereby promote broader public
interests in the observance of law and administration of justice.
The privilege recognizes that sound legal advice or advocacy
serves public ends and that such advice or advocacy depends upon
the lawyer’s being fully informed by the client”) (internal
quotations and citations omitted).
Thus, to ensure that a client
“remains free from apprehension that consultations with a legal
adviser will be disclosed”, Rhone-Poulenc Rorer Inc., 32 F.3d at
862, the privilege protects the communications from “compelled
disclosure.” In re Teleglobe Commc’ns Corp., 494 F.3d 345, 359
(3d Cir. 2007); see Klitzman, Klitzman and Gallagher v. Krut, 744
F.2d 955, 960 (3d Cir. 1984) (“It generally is acknowledged that
the attorney-client privilege is so sacred and so compellingly
important that the courts must, within their limits, guard it
7
jealously”) (quoting Chore-Time Equipment, Inc. v. Big Dutchman,
Inc., 255 F. Supp. 1020, 1021 (W.D. Mich. 1966)).
However,
before this privilege applies, the party asserting it must prove
that the communication was “(1) a communication (2) made between
privileged persons (3) in confidence (4) for the purpose of
obtaining or providing legal assistance for the client.” In re
Teleglobe Commc’ns Corp., 494 F.3d at 359.
Presently, the
parties only dispute the fourth (4) element; that is, whether the
purpose of the communication was to provide legal advice to
Evonik.
An attorney furnishes legal advice when he provides an
opinion of law, renders legal services or assists with a legal
proceeding. Rhone-Poulenc Rorer Inc., 32 F.3d at 862; In re
Spalding Sports Worldwide, Inc., 203 F.3d 800, 805 (Fed. Cir.
2000).
Because the attorney-client privilege is narrowly
construed, it “protects only those disclosures - necessary to
obtain informed legal advice - which might not have been made
absent the privilege.” Fisher v. United States, 425 U.S. 391, 403
(1976).
In other words, communications between clients,
unrelated to legal issues or advice, are not within the purview
of the attorney-client privilege. See In re Gabapentin Patent
Litigation, 214 F.R.D. 178, 186 (D.N.J. 2003) (“Including an
attorney on the distribution list of an interoffice memo, Cc’ing
numerous people who are ancillary to the discussion, one of whom
happens to be an attorney, or forwarding an e-mail several times
8
until it reaches an attorney does not amount to ‘attorney-client
communication’”).
Consequently, the privilege only applies when
the “lawyer-to-client communications [] reveal, directly or
indirectly, the substance of a confidential communication by the
client.” American Standard, Inc. v. Pfizer Inc., 828 F.2d 734,
745 (Fed. Cir. 1987).
After inspection of the four letters, the Court concludes
that Magistrate Judge Schneider’s decision was not clearly
erroneous or contrary to law.
Despite Evonik’s characterization
of the letters as routine communications only containing general
and non-specific reminders of the duty of candor owed to the
USPTO,4 they contained legal advice from Evonik’s patent counsel
to Evonik.
Specifically, the communications applied legal advice
to the ‘528 and ‘145 patent applications.5
Furthermore, any
4
Pursuant to federal law, applicants for patents and their
attorneys have a duty of candor, good faith and honesty in their
dealings with the USPTO. 37 C.F.R. § 1.56(a). Included within
this duty is the applicant’s obligation “to submit truthful
information and . . . disclose to the USPTO information known to
patent applicants or their attorneys which is material to the
examination of a patent application.” Advanced Cardiovascular
Sys. v. Medtronic Vascular, Inc., 485 F. Supp. 2d 538, 544 (D.
Del. 2007). Any failure to satisfy the duty of candor to the
USPTO constitutes inequitable conduct and may result in serious
consequences, including the unenforceability of a patent. Id.;
see also Kingsdown Med. Consultants v. Hollister Inc., 863 F.2d
867, 877 (Fed. Cir. 1988) (noting that a patent applicants
engagement in inequitable conduct with respect to one claim
renders the entire patent application unenforceable).
5
To the extent Evonik relies upon Ami/Rec-Pro, Inc. v. Illinois
Tool Works, Inc. to support its claim, the Court finds that case
neither binding or persuasive. Ami/Rec-Pro, Inc. v. Illinois Tool
Works, Inc., No. 97-5409, 1998 WL 70607 (N.D. Ill. Feb. 11,
9
notion that this type of communications is a form of routine does
not automatically render it non-privileged.
The Court must still
examine the specific contents of the letters and determine
whether they contained legal advice.
In the June 30, 2007 letter, for example, Evonik’s counsel
advised:
Even though we filed a disclosure statement, please
note that there is a continuing duty of disclosure as
imposed under U.S. law to disclose all known prior art
and other information that may be considered ‘material
to patentability.’ Copies of such information must be
provided to the U.S. Patent and Trademark Office.6
Doc. 258, Exhibit F.
Noted in the RE: section was “U.S. Patent
Application Serial No. 11/828,828.” Id.
Thus, the letters
informed Evonik of its general legal duty of candor, gave a
modicum of legal advice in the sense that they urged compliance
with that duty, and applied that duty by reference to the
specific patent applications at issue.
We acknowledge that this is a close issue.
However,
whatever decision this Court may have reached if it had been
1998).
6
The other letters included similar statements: “Under the
applicants’ duty of disclosure under 37 CFR 1.56, it is advisable
to Information Disclosure Statements . . . before the first
Office Action is issued. The duty of disclosure continues to
apply throughout the prosecution. Accordingly, if prior art
comes to your attention, please send us copies at you [sic]
earliest convenience,” Doc. 258, Exhibit D; “Additionally, if
there is any material prior art that has not been made of record
please let us know. If so, it would be better to file a
continuing application than to pay the issue fee in order to have
the references of record.” Id. at Exhibit E, G.
10
confronted with the issue ab initio, this Court applies, in the
context of this appeal, a deferential standard.
We are not left
with a “definite and firm conviction that a mistake has been
committed” and conclude that the Magistrate Judge’s decision that
the letters contained legal advice was not clearly erroneous or
contrary to law.
III. CONCLUSION
For the foregoing reasons, the Magistrate Judge Order is
affirmed.
An appropriate Order will be entered.
Date: August 24, 2011
At Camden, New Jersey
S/Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
11
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