Crane Security Technologies, Inc. et al v. Rolling Optics AB
Magistrate Judge M. Page Kelley: ORDER entered. Order on Rolling Optics AB's Motion to Compel Production of Documents improperly withheld (# 192 ). Please see order for details. (Moore, Kellyann)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CRANE SECURITY TECHNOLOGIES, )
INC. AND VISUAL PHYSICS, LLC,
Civil Action No. 14-12428-LTS
ROLLING OPTICS, AB
ORDER ON ROLLING OPTICS AB’S
MOTION TO COMPEL PRODUCTION
OF DOCUMENTS IMPROPERLY WITHHELD (#192).
February 3, 2017
Crane Security Technologies, Inc., is the exclusive licensee of the five U.S. patents at
issue in this case.1 The patents “relate generally to optical systems that project synthetic images
that ‘move’ and that include image icons formed as voids or recesses.” #79 ¶ 1. Crane “is the
exclusive supplier of banknote paper for United States currency and also supplies other
counterfeit-deterrent banknote papers and security devices used around the world.” Id. ¶ 2.
Crane Security is part of a family of companies that includes its parent, Crane & Co.,
Inc. #79 ¶ 2. Visual Physics, LLC, a wholly-owned subsidiary of Crane, is the owner of the
patents. Id. ¶ 3. In this Order the plaintiffs generally will be referred to as “Crane.”
Crane asserts that an “optical system” that is made using the patents - which, for example, on a
$100 bill appears as a small strip of metallic-blue paper with images in it that appear to move
around when the bill is moved - is difficult to copy, and so is “extremely useful as [an] anticounterfeiting feature on currency.” Id. ¶ 1.
Defendant Rolling Optics (RO) describes itself as a nanotechnology company that
“makes and sells innovative 3D micro-optic foils. Typical applications for these foils are for use
on product labels or packaging, to enhance or create brand impact or to assure the genuineness of
a branded product.” #13 ¶ 3. Crane claims that the foils that RO makes and sells, “intended for
use on security labels and stickers for certain consumer goods such as fashionable footwear,
cognac, wine, champagne, and business cards,” infringe its patents. #79 ¶ 14.
Plaintiffs seek a declaration that Visual Physics is the owner and Crane is the exclusive
licensee of the five patents, that each patent is valid and enforceable, and that RO is infringing
on each of the patents. They also seek monetary and injunctive relief. Id. ¶¶ 53-59.
RO initially counterclaimed for, among other things, declaratory judgment of invalidity
and non-infringement of the five patents. #87.2 In August 2016 Judge Sorokin allowed RO’s
motion to add an inequitable conduct counterclaim. #245. In short, RO claims that the patents
are invalid, because when applying for the patents, Crane (together with the company from
which Crane purchased the patents, Nanoventions (NV)), withheld information from the Patent
and Trademark Office that would have established that the inventors had violated the “on-sale
Many of the pleadings are filed under seal. After initial citations to both redacted and
unredacted documents, citations will be to sealed, unredacted documents.
bar” in 35 U.S.C. § 102(b).3 See #245, Judge Sorokin’s Order, and #254, answer to plaintiffs’
amended complaint and counterclaim.4
RO filed a motion to compel production of documents improperly withheld as privileged.
##192, 198 (unredacted memorandum in support). Crane opposed the motion, ##220, 221
(unredacted), and RO responded, ##225, 243-3 (unredacted). Judge Sorokin referred the motion
to this court on August 29, 2016. #246. On October 31, this court held a hearing on the motion
and after argument ordered the parties to confer and Crane to revise its privilege log. #261. On
December 1, 2016 this court held a telephone conference and ordered Crane to file the revised
log and copies of the documents still in dispute for ex parte review, and the parties to file any
post-hearing memoranda, by December 19, which they did. ##269, 276, 276-1 (unredacted),
278, 278-1 (unredacted). Then the parties filed replies. ##283, 285, 289 (unredacted). On
January 9, 2017, the court held a telephone conference at which the court sought to clarify which
documents RO was disputing; asked Crane to provide certain additional documents; and asked
Crane to provide additional declarations regarding certain documents.5 #290. Crane provided the
requested documents and declarations. ##291-94. The parties filed letters with the court
35 U.S.C. § 102(b) provides that the PTO will deny a patent to an inventor who applies
for the patent more than one year after making an attempt to profit from his invention by putting
it on sale. Merck & Cie v. Watson Laboratories, Inc., 822 F.3d 1347, 1350-51 (Fed. Cir. 2016).
RO stated that it expected the withheld documents would support its inequitable conduct
counterclaim, which “asserts that two of the named inventors at Nanoventions, and two
executives at Crane, and their patent lawyer, were aware of and concealed” the fact that the
patents were invalid under the on-sale bar, 35 U.S.C. § 102. #278-1 at 2-3. The court found
nothing in the withheld documents that reveals that anyone was aware of this alleged issue.
At the telephone conference on January 9 the court stated that it had read the hundreds
of challenged documents listed in RO’s filing #278-1, and since it appeared that the privilege log
accurately described those documents, the court would not read every challenged document. In
the end, however, in preparing this Order, the court did read all of the documents.
concerning the telephone conference. ##297, 298. On January 30, 2017, the court ordered Crane
to further justify its claim of privilege as to certain documents and on February 2, Crane
responded ex parte. ## 299-301.6
II. Factual background
In August 2002 Crane entered into a Confidentiality Agreement with NV, because Crane
was interested in using NV’s optical system as a security device on currency. See #222-1. NV
had not patented the technology at that time. Thereafter, the parties entered into the following
additional agreements: in September 2003, Crane and NV entered into a Non-Disclosure
Agreement in order to negotiate Crane’s obtaining a license to use NV’s technology, #222-3; in
April 2004, they entered into a License Agreement in which NV granted Crane a license to use
the technology, which by that time had been patented, #222-2; in September 2007, they entered
into another Non-Disclosure Agreement, #222-4; and in September 2008 they signed a Unit
Purchase Agreement, which finalized Crane’s purchase of the patents-in-suit, effectuated
through Crane’s aquiring a subsidiary of NV, Visual Physics. #222-7.
When executives at Crane first became interested in NV’s technology, they were
concerned that it was not protected by a patent. See, e.g., #183-38 (Crane executive explains in
email dated October 28, 2003 that he and patent counsel for Crane “are zeroing in on the IP right
now since almost nothing is more important than that.”) Crane began to investigate licensing or
acquiring NV’s technology, see #276-1 at 7, and began exchanging legal advice with NV
concerning acquiring patents on the technology. See, e.g., privilege log nos. 37-47 (emails dated
In Crane’s ex parte response it satisfactorily answered the court’s questions and asserted
that it would provide certain redacted documents to RO.
November 2003, between patent counsel for Crane, Mary Bonzagni, patent counsel for NV,
Todd Deveau, and the inventor of the technology, Richard Steenblik, concerning patent
prosecution.) Over the next several years Crane continued to cooperate with NV concerning
further patenting the technology and eventually, after negotiating with NV for many months,
purchased the intellectual property from NV in 2008. ##276-1 at 7; 279-2 at 2.
RO challenges approximately 600 entries on Crane’s privilege log totaling about 4,000
pages of privileged documents.7 ##276-1 at 1; 283 at 2 n.1. The documents can be divided into
four categories. First, there are documents dated before April 16, 2004, which is when the
License Agreement between Crane and NV took effect. #278-1 at 14. Second, RO seeks
documents between Crane and NV from the time of the License Agreement in April 2004, up to
the time Crane agreed to purchase the patents-in-suit in 2008. Id. at 15. Third, RO seeks
communications between Crane and an investment banking firm that Crane retained to assist
with the acquisition of the patents-in-suit. Id. at 16. Finally, RO seeks documents that Crane
shared with non-parties; communications between non-attorneys; and attorneys’ memoranda to
the file. Id. at 17-20.
The court has read all of the challenged documents and the privilege log. The court finds
that all of the documents are privileged, for the reasons set out below.
III. The law pertaining to privilege
RO requested documents, among others, concerning the subject matter of the patents-insuit; the conception of the claimed inventions; documents authored or sent by the inventors,
Richard Steenblik and Mark Hurt; prior art; documents concerning the prosecution of the
patents-in-suit; definitions of claim terms; the first sale, public use or public disclosure of any
patented product; and licensing of the patents-in-suit. #198 at 13-14. Crane argues only that the
withheld documents are privileged; Crane does not argue that they are not relevant.
Fed. R. Civ. P. 26(b)(1) provides that parties may obtain discovery “regarding any
nonprivileged matter that is relevant to any party’s claim or defense and proportional to the
needs of the case.” Plaintiffs assert attorney-client privilege and also argue that the community
of interest exception to third-party waiver applies to certain challenged documents. Plaintiffs
bear the burden of establishing that the privilege applies. State of Maine v. United States Dep’t
of the Interior, 298 F.3d 60, 71 (1st Cir. 2002). “If the privilege is established and the question
becomes whether an exception to it obtains, the devoir of persuasion shifts to the proponent of
the exception.” FDIC v. Ogden Corp., 202 F.3d 454, 460 (1st Cir. 2000).
While this is a patent case, the issues raised here pertaining to privilege and waiver are
not unique to patent law and thus First Circuit law concerning privilege applies.8 See In re
Spalding Sports Worldwide, Inc., 203 F.3d 800, 804 (Fed. Cir. 2000) (because issue whether
“licensor and a licensee are joint clients for purposes of privilege under the community of
interest doctrine...[is] not unique to patent law,” regional circuit law applies).
A. Attorney-client privilege - in general
Wigmore set out the elements of the attorney-client privilege:
‘(1) Where legal advice of any kind is sought (2) from a professional legal advisor
in his capacity as such, (3) the communications relating to that purpose, (4) made in
confidence (5) by the client, (6) are at his instance permanently protected (7) from
disclosure by himself or by the legal adviser (8) except the protection be waived.’
Cavallaro v. United States, 284 F.3d 236, 245 (1st Cir. 2002) (quoting 8 J. H. Wigmore, Evidence
The Federal Circuit applies “regional circuit law to procedural questions that are not
themselves substantive patent law issues so long as they do not (1) pertain to patent law, ... (2)
bear an essential relationship to matters committed to our exclusive control by statute, or (3)
clearly implicate the jurisprudential responsibilities of this court in a field within its exclusive
jurisdiction...”. GFI, Inc. v. Franklin Corp, 265 F.3d 1268, 1272 (Fed. Cir. 2001) (internal
§ 2292, at 554 (McNaughton rev. 1961)). The privilege is limited in that it “applies only to the
extent necessary to achieve its underlying goal of ensuring effective representation between
lawyer and client.” In re Grand Jury Subpoena (Custodian of Records, Newparent, Inc.), 274
F.3d 563, 571 (1st Cir. 2001) (citing Fisher v. United States, 425 U.S. 391, 403 (1976)); see also
In re Keeper of Records (Grand Jury Subpoena Addressed to XYZ Corp.), 348 F.3d 16, 22 (1st
Cir. 2003) (attorney-client privilege is narrowly construed because it “stands as an obstacle of
sorts to the search for truth”).
Communications must “have been intended to be confidential and made for the purpose of
giving or obtaining legal advice” to qualify as privileged. Cavallaro, 284 F.3d at 245. Disclosing
attorney-client communications to a third party undermines the privilege. Id. at 247.
B. The common-interest doctrine
The common-interest doctrine, which is not an independent privilege but is an exception
to the rule that the attorney-client privilege is waived when privileged information is disclosed to
a third party, applies when parties share a substantially identical interest in the subject matter of a
legal communication.9 See Cavallaro, 284 F.3d at 249-50, citing In re Grand Jury Subpoena,
274 F.3d 563, 573 (1st Cir. 2001). One application of the doctrine as it pertains to patent cases is
discussed in the leading case In re Regents of the Univ. of California, 101 F.3d 1386, 1390 (Fed.
Cir. 1996). In Regents, the Federal Circuit explained that “[c]onsultation with counsel during
This exception to the waiver rule goes by many names, see, e.g., Hilsinger v. Eyeego,
LLC, 2015 WL 11120842, at *2 (D. Mass. Aug. 13, 2015). For the sake of consistency the court
here will refer to the “common-interest doctrine,” a term which the court in Cavallaro applied to
a situation concerning multiple parties with different attorneys, see 284 F.3d at 249. The First
Circuit there acknowledged that the nomenclature was less important than the analysis
(“[w]hether one refers to ... ‘common interest,’ ‘joint defense,’ ‘joint client,’ or ‘allied lawyer’
doctrines does not change the outcome of this case...”) Id. at 250.
patent prosecution meets the criteria of compliance with law and meeting legal requirements,
thereby reducing or avoiding litigation, and is within the scope of subject matter that is subject to
the attorney-client privilege.” Id. at 1391. The court noted that it had long been held that “‘[a]
community of legal interests may arise between parties jointly developing patents; they have a
common legal interest in developing the patents to obtain greatest protection and in exploiting the
patents.’” Id. at 1389 (quoting Baxter Travenol Labs, Inc. v. Abbott Labs., 1987 WL 12919, at *1
(N.D. Ill. June 19, 1987)) and (citing SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 514 (D. Conn.
Feb. 4, 1976) (“Whether the legal advice was focused on pending litigation or on developing a
patent program that would afford maximum protection, the privilege should not be denied when
the common interest is clear”), appeal dismissed, 534 F.2d 1031 (2nd Cir. 1976)).
The Regents court, following this precedent, held that communications between a
potential licensee and an inventor/patentee were privileged under the common-interest doctrine
because “both parties had the same interest in obtaining strong and enforceable patents.” 101
F.3d at 1390. It did not matter that one party had not retained the other party’s attorney: “the
issue is not who employed the attorney, but whether the attorney was acting in a professional
relationship to the person asserting the privilege.” The court concluded that “the legal interest
[between the potential licensee and the inventor/patentee] was substantially identical because of
the potentially and ultimately exclusive nature” of the license agreement: “Valid and enforceable
patents” on the inventions “are in the interest of both parties.” Id.
The test for application of the doctrine requires that the interest be “identical, not similar,
and be legal, not solely commercial.” Id. With regard to what “legal interest” means in the
context of patent cases, other courts have followed Regents in finding that communications
concerning the strength and enforceability of patents between parties who are negotiating
exclusive patent licenses are protected under the common-interest doctrine, even though the
communications obviously have a commercial purpose, as well. Regents, 101 F.3d at 1390
(quoting Duplan Corp.v. Deering Milliken, Inc., 397 F. Supp. 1146, 1172 (D.S.C. 1974) (“The
fact that there may be an overlap of a commercial and a legal interest for a third party does not
negate the effect of the legal interest in establishing a community of interest”)); Hilsinger v.
Eyeego, LLC, 2015 WL 11120842, at *2 (D. Mass. Aug. 13, 2015) (approvingly citing Regents
for the proposition that communications between parties negotiating licensing agreement were
privileged as they were pursuing common legal strategy concerning enforcement of patents-insuit); Luminara Worldwide, LLC v. Liown Electronics Co., Ltd., Case No. 0:14-cv-03103-SRNFLN, ECF No. 427, at 15-18 (D. Minn. Mar. 29, 2016) (interests in obtaining and protecting
strong and enforceable patent rights are regularly found to be common legal interests held by a
patentee and its licensee and communications in further of those interests are protected by the
community of interest doctrine); MPT, Inc. v. Marathon Labels, Inc., 2006 WL 314435, at *7
(N.D. Ohio Feb. 9, 2006) (licensee and patent owners have common legal interest).
C. The doctrine of United States v. Kovel
Another exception to the rule that disclosing attorney-client communications to a third
party destroys the privilege is when an expert, such as an accountant or, as in this case, an
investment banker, is employed to assist a lawyer in rendering legal advice. In Cavallaro, 284
F.3d at 247, the First Circuit approvingly cited United States v. Kovel, 296 F.2d 918, 921 (2d Cir.
1961), where the Second Circuit applied the exception to communications involving an
accountant who was assisting an attorney in preparing a client’s case. In Kovel, the court found
that since “the complexities of modern existence prevent attorneys from effectively handling
clients’ affairs without the help of others,” the attorney-client privilege includes persons who act
as attorneys’ agents. Id.
The court in Cavallaro, however, stressed that the third-party’s assistance must be nearly
indispensable or serve some specialized purpose in facilitating attorney-client communications.
Cavallaro, 284 F.3d at 249; see Dahl v. Bain Capital Partners, 714 F. Supp. 2d 225, 227-28 (D.
Mass. 2010) (third-party’s assistance must be “nearly indispensable,” must “play an interpretive
role,” and must be made for purpose of rendering legal advice); Conway v. Licata, 104 F. Supp.
3d 104, 125 (D. Mass. 2015) (Sorokin, J.) (community of interest doctrine did not protect
communications where third party merely “introduced” plaintiffs to counsel and “assisted” in
conversations with counsel and negotiations, and no showing was made that his assistance was
IV. The disputed documents
A. Pre-April 16, 2004 communications between Crane and NV
The first group of documents at issue are those that pre-date the April 2004 Licensing
Agreement between Crane and NV. See privilege log at 1-12. Many of the communications are
between inventor Richard Steenblik and NV’s patent counsel, Todd Deveau, between Mr.
Steenblick and patent counsel for Crane, Mary Bonzagni, or between the two attorneys.
the communications consist of requests for, discussion of, or the provision of legal advice
pertaining to patent prosecution. RO argues, among other things, that documents between Crane
and NV are not privileged because they did not have any confidentiality agreement, “written or
otherwise,” in place that protected communications concerning patents, nor did Crane and NV
have a common legal interest in the patents in question. #243 at 1-2.10
First, certain of the communications are between Mr. Steenblik and counsel for NV during
the time when Mr. Steenblik and NV were applying for patents for his inventions, see, e.g.,
privilege log nos. 1-6. These clearly are protected by the attorney-client privilege. See In re
Spalding Sports Worldwide, Inc., 203 F.3d at 805–06 (invention record, provided to attorney “for
the purpose of securing primarily legal opinion, or legal services, or assistance in a legal
proceeding,” constitutes privileged communication). These documents, which date from 2003 to
2005, were obtained by Crane when it purchased the patents-in-suit from NV, by acquiring Visual
Physics, in 2008. See #292 at 1-2, Declaration of John Kittredge, and accompanying list of
documents. This court is unaware of any law, and RO does not cite any, that when one company
purchases another, the files that it inherits in which an inventor and counsel for the acquired
company were working together to apply for a patent somehow lose their privilege. These
documents are privileged and shall not be disclosed.
The rest of the documents in this category are dated beginning in October 2003. See
privilege log at 3. The court rejects RO’s argument that during this time the parties did not have
any agreement that information shared concerning patents would be confidential. In August
2002, approximately a year before any of the communications at issue were made, NV and Crane
entered into a mutual Confidentiality Agreement for the purpose of “discussing and exploring
business opportunities related to security thread for banknote paper.” #222-1. The
The privilege log also lists documents dated after the License Agreement in 2004 that
are between Crane and NV and relate to prosecution of patents, see, e.g., privilege log at 13-17.
These documents, regardless of their date, are privileged for the reasons set out in this section of
Confidentiality Agreement protected both sides’ information. Its term was two years, so it
expired in August 2004. Id. at ¶¶ 1-2, 12. RO argues that the 2002 Confidentiality Agreement
“says nothing about patents” and so “had nothing to do with the sharing of privileged
communications regarding patent prosecution.” #243 at 1. However, by November 2003, just
after the starting date of the documents RO of which seeks to compel disclosure, the parties
exchanged a draft License Agreement, #222-5, so there is no question that at the time of the
communications at issue, Crane and NV had an expectation that their communications would be
confidential and Crane, seeking to license NV’s technology for use on currency, had a keen
interest in the strength and enforceability of NV’s patents. In addition, a review of the documents
in question leaves no doubt that the parties were working together to draft patent claims that
protected their mutual interests. Further, it is obvious, given the tenor of the parties’
communications, that they considered these communications to be confidential. See, e.g.,
privilege log no. 64, email dated November 20, 2003, from NV’s patent counsel to Crane’s patent
counsel, copying the inventors and CEO Martin of NV, providing legal advice and requesting
legal advice about patent prosecution.
The License Agreement, which the parties were negotiating at the time of the
communications in question, provided that Crane would have an exclusive license with regard
“to the Field,” #222-2 at 4, which was defined as “security thread in government-issued paper
currency.” Id. at 2 (“This license is exclusive as to the Field.”). Crane and NV were bound to
“cooperate with each other regarding the prosecution of patent cases and shall take all reasonable
steps necessary to maintain the patent and other Intellectual Property Rights” concerning the
technology at issue. Id. at 16. Crane and NV were required to notify each other of infringement,
to meet concerning it, and to decide the best course of legal action to protect their shared interests.
Id. at 17.
RO argues that the License Agreement was not “exclusive” because Crane’s license was
limited to the field of security threads on currency as defined in the Agreement, and further
argues that negotiations preceding the April 2004 License Agreement are not privileged. #278-1
at 1-3. Both arguments fail. It is clear, first, as discussed above, that communications between
parties concerning the strength and enforceability of patents as they are negotiating exclusive
license agreements are protected under the common-interest doctrine. Regents, 101 F.3d at 1390;
see also Luminara, supra at 15-18 (citing cases). Second, the fact that an agreement is limited to
a specific field, even a “narrow” one, does not vitiate the privilege. See Hilsinger, supra at *4;
Baxter Travenol Labs., 1987 WL 12919, at *2 (community of interest doctrine upheld between
potential exclusive licensee and licensor where eventual license agreement was for limited
RO argues that the lack of a common legal interest between Crane and NV is evidenced
by emails that were disclosed to RO by Crane in which NV’s CEO, Brian Martin, rebuffs Crane’s
offers to control NV’s patent application process. #278-1 at 3-7. For example, in one email from
the time the parties were negotiating the License Agreement, dated November 20, 2003, CEO
Martin rejected a proposal from Crane that the Agreement require NV to consult with Crane
about “all actions to be taken by [NV] with respect to its patents...” by saying, “[w]e handle our
Crane points out that its profit from the “narrow field” was over $260 million from
2005 to 2015. ##276-1 at 4 (citing exh. 4), 277-8 (unredacted).
own intellectual property.” Id. at 4.12 This email does not, as RO asserts, mean that Crane and
NV had no area of common legal interest. NV clearly had plans to utilize its technology in
applications beyond the field of currency protection, see ##192-11, 199-6 (unredacted) (email
from NV CEO Martin to Crane executive stating that inventors “have more than a dozen patents
and are taking all steps necessary to broadly protect our technology both inside and outside Crane
& Co.’s licensed field”), so it comes as no surprise that NV was hostile to the idea that Crane
would control all of its patent efforts. The fact that the parties periodically disagreed concerning
the division of rights between them does not mean that they did not have a common interest in the
patents in question. A review of the 34 disputed communications in this category that are listed
in RO’s memorandum, #278-1 at 14, demonstrates that, despite CEO Martin’s periodic
complaints concerning Crane’s perceived over-reaching, NV and Crane, with input from
attorneys and executives from both sides and the inventor, were in fact seeking and receiving
confidential legal assistance from one another in prosecuting the patents that concerned Crane.13
Contrary to RO’s suggestions, see, e.g., #198 at 9, and in contrast to the tone of CEO
Martin’s quoted emails, id. at 6-7, the disputed documents demonstrate “cooperation in fact
toward the achievement of a common [legal] objective.” FDIC v. Ogden Corp., 202 F.3d at 461;
This email and others in which Martin expressed reluctance to allow Crane to control its
patent development properly were disclosed to RO by Crane, because while the common-interest
doctrine protects communications regarding the enforceability of patents, it does not protect
“communications relating to the parties’ rights among themselves in the patents,” because
“[s]uch communications are not related to the parties’ joint interests.” See, e.g., Baxter Travenol
Labs, 1987 WL 12919, at *2.
RO argues that Regents does not apply in this case because there, the party seeking to
license the patent, Lilly, had the right to control the prosecution of the patents along with the
owner of the patents. #278-1 at 13. The court rejects the notion that both parties’ having total
control over patent prosecution is the litmus test for their having a common legal interest.
see also North River Ins. Co. v. Columbia Cas. Co, 1995 WL 5792, at *4 (S.D.N.Y. Jan. 5, 1995)
(“What is important is not whether the parties theoretically share similar interests but rather
whether they demonstrate actual cooperation toward a common legal goal”). These documents
are correctly logged by Crane as communications concerning legal advice, sought from and given
by attorneys, about the patent process and concerning the strength of the patents in light of the
license that Crane was seeking.14
In short, the parties had a common legal interest that is widely recognized in the law,
namely, the interest that potential licensees and patent owners have in successfully prosecuting
patent applications as established in Regents, supra, 101 F.3d at 1390-91. During the time in
question the parties were bound by a Confidentiality Agreement and were negotiating an
exclusive License Agreement. The communications themselves demonstrate both that the parties
were working together to develop strong patents and an expectation that the communications
would be confidential. The documents are privileged and the privilege was not waived.
B. Communications from the time of the License Agreement in April 2004 to the time
Crane agreed to purchase the patents-in-suit in 2008
RO argues that communications between Crane and NV negotiating the acquisition of the
patents, including “due diligence communications and documents,” are not privileged, because
Crane and NV were negotiating at arms’ length, and so did not have a common legal interest.
#278-1 at 15-16.
Communications between NV and Crane in furtherance of Crane’s purchase of the
Another reason RO argues that Crane and NV did not cooperate in prosecuting the
patents is that in a deposition, a retired Crane employee, who is not a lawyer, said that Crane did
not share legal advice concerning patents with NV. #278-1 at 6-7. The short answer to this
argument is that the documents themselves belie this testimony.
patents, insofar as they concern the strength and enforcement of the patents that Crane was
seeking to purchase, are privileged. This is a common-sense application of the Regents holding.
See High Point SARL v. Sprint Nextel Corp., 2012 WL 234024, at *9 (D. Kan. Jan. 25, 2012)
(citing Regents, supra, in support of ruling that communications between seller of patents and
potential buyers were privileged under common-interest doctrine: “[a]lthough [the seller] and the
other companies had adversarial interests when they were negotiating the possible transfer of the
patents, they still had a common legal interest in the validity, enforceability and potential
infringement of the patents-in-suit”), motion for reconsideration in part allowed on other
grounds, 2012 WL 1580634 (D. Kan. May 4, 2012); Hewlett-Packard v. Bausch & Lomb, Inc., 15
F.R.D. 308, 310 (N.D. Cal. Apr. 9, 1987) (Bausch & Lomb did not waive privilege by disclosing
attorney’s opinion letter concerning validity and possible infringement of patent to non-party with
whom it was attempting to negotiate the sale of a business as parties had common interest in
whether patent was valid and enforceable.).
RO cites In re JP Morgan Chase & Co. Securities Litigation, 2007 WL 2363311, at *5
(N.D. Ill. Aug. 13, 2007) for the proposition that companies that are negotiating a merger cannot
have a common interest because their interests are in conflict. #278-1 at 15-16. JP Morgan is not
a patent case. Here, as long as the communications between buyer and seller concern the strength
and enforceability of the patents, they are primarily for a legal purpose and are protected under
the common-interest doctrine.15
In support of its argument that communications between NV and Crane prior to the
acquisition are merely “due diligence” and are not privileged, RO also cites Fed. Trade Comm’n
v. Abbvie, Inc., 2015 WL 8623076, at *10 (E.D. Pa. Dec. 14, 2015). #198 at 27-28. The portion
of Abbvie that RO cites, in which the court says that due diligence communications that are
created for business purposes and not for legal purposes are not privileged, concerns
Many of the communications in this second category are between non-attorneys. RO,
citing FTC v. Abbvie, 2015 WL 8623076, at *3 (E.D. Pa. Dec. 14, 2015), argues that the
common-interest doctrine only applies to communications between attorneys who are sharing
information, while acknowledging, however, that “there is a split in authority” on this point. #198
at 23-24; #278-1 at 19. As a fallback, RO argues that even where clients with a common legal
interest are discussing privileged advice among themselves, the discussion must be directly and
explicitly “at the direction of counsel” in order to be privileged. Id. at 20.
RO disregards the realities of communications between attorneys and clients and between
non-lawyers who share a common legal interest. As an initial matter, Crane rightly points out that
RO’s own privilege log contains numerous entries between non-lawyers for which it claims
common-interest protection. See ##276-1 at 11; 283 at 5; 286 (list of examples from RO’s
privilege log). Notwithstanding RO’s own failure to adhere to it, the proposed rule is simply
unworkable in a case like the present one, where multiple attorneys and executives are working
together, with the help of assistants who gather or communicate information for them. For
example, many of the communications RO complains of, #278-1 at 19, such as privilege log nos.
320 and 604, consist of non-lawyers’ sending privileged requests for information, or coordinating
the delivery of legal advice, at an attorney’s direction. It cannot be that these communications,
simply because an assistant made them at the request of a lawyer rather than the lawyer’s making
them herself, are not privileged. Another communication RO complains of, #278-1 at 19,
privilege log no. 203, is a communication from the CEO of Crane to the CEO of NV that consists
communications that the court found were not privileged to begin with. Id. In contrast, here, the
communications are seeking or giving legal advice specifically with regard to the strength of the
patents in issue.
entirely, and explicitly, of advice from Crane’s patent attorney concerning the strength of the
patents that NV was seeking. This is a clear effort on Crane’s part to assist NV by providing
legal assistance in prosecuting a patent that was in both parties’ interests, and is privileged under
the holding of the Regents case.
The court has reviewed all of the communications in this category and finds that they are
either seeking or discussing legal advice.16 The fact that communications are between nonlawyers does not per se waive the privilege. In In re Prograf Antitrust Litigation, 2013 WL
1868227, at *3, (D. Mass. May 3, 2013), the idea that non-lawyers could discuss or relay legal
advice without copying an attorney was so uncontroversial that Judge Zobel, incorporating it into
her ruling, did not even discuss it. Other courts have held the same. See Gucci America, Inc. v.
Gucci, 2008 WL 5251989 (S.D.N.Y. Dec. 15, 2008) (if privileged information is shared between
parties that have a common legal interest, “the privilege is not forfeited even though no attorney
either creates or received that communication”); INVISTA North America S.a.r.l. v. M&G USA
Corp., 2013 WL 12171721 (D. Del. June 25, 2013) (common-interest doctrine protects
communications between non-attorneys); IBJ Whitehall Bank & Trust v. Cory & Associates, Inc.,
1999 WL 617842, at *6-7 (N.D. Ill. Aug. 12, 1999) (attorney-client privilege exists for
communications between non-lawyers: “[s]o long as the parties keep the advice within their circle
of common interest, the privilege is not waived”); McCook Metals LLC v. Alcoa Inc., 192 F.R.D.
The court also finds that the communications in question were limited to those in a
“need to know” position regarding attorneys’ advice. See, e.g., In re Prograf Antitrust
Litigation, 2013 WL 1868227, at *3 (D. Mass. May 3, 2013) (Judge Zobel, setting out rules for
determining whether documents are privileged, holds that communications between non-attorney
employees who “discuss or relay counsel’s legal advice” must be in a “need to know” position
“or bear some responsibility for the subject matter underlying the consultation.”).
242, 255 (N.D. Ill. March 2, 2000) (“it appears implicit in present day litigation with multiple
attorneys required for proper representation that attorneys must be allowed to confer with each
other regarding the representation of a client on a privileged basis in the same way that clients
must be able to discuss the advice of counsel amongst themselves on a privileged basis”)
C. Communications between Crane and an investment banking firm that pre-date Crane’s
acquisition of the patents-in-suit
In late 2007, Crane engaged the financial services firm of Brown Brothers Harriman &
Co. (BBH) to assist Crane in acquiring NV’s patents.17 The acquisition as a whole involved more
than $100 million and BBH was paid $1.25 million for its services. #279-2 at 5.
Attorney James Hackett was outside counsel to Crane and provided legal advice regarding
the acquisition of NV’s intellectual property. In his declaration, Attorney Hackett addresses the
communications in dispute that he and other attorneys from his law firm exchanged with
representatives from BBH from June to September 2008 concerning the acquisition of NV’s
patents. He states, “I shared legal advice with Crane’s advisors at BBH, in strict confidence,
where it was necessary for BBH to facilitate our provision of legal advice.” #279-2 at 2. The
communications with BBH were in part concerning the drafting of “the agreements necessary to
accomplish the acquisition.” Id. With regard to the drafting of such documents, Attorney
The engagement letter states that BBH, among other things, would “advise and assist”
in formulating an “effective strategy” for the transaction, assist in determining “the most
advantageous financial structure for any particular Transaction,” assist in negotiations
concerning the transaction, and “to the extent necessary or useful, assist in coordinating the
activities of other professional firms whose services may be required by [Crane], including
attorneys, accountants, consultants, and others.” The letter further provides that BBH would keep
all of Crane’s information confidential. #279-3 at 2 (engagement letter).
In drafting and negotiating the acquisition agreements, Crane required both
privileged legal advice from attorneys and the expertise of BBH regarding corporate
transactions, all of which needed to be coordinated to assist Crane in reaching the
optimum effective agreements. The provision of the agreements necessarily related to the
strategy, financial arrangements, and deal structure that BBH was required to formulate,
and the agreements are legal contracts that also required legal advice to codify, so my
attorney team and the team at BBH were required to share information to assist each other
in giving the necessary advice to Crane.
Id. at 4-5.
Attorney Hackett expected that the legal advice he shared with BBH, which was similar to
work he had done on other “significant corporate transactions throughout [his] career,” to be
confidential and privileged. Id. at 5.
The court here, following the holding of the First Circuit in Cavallaro, finds that those
communications that included BBH, counsel, and Crane that were made in order to facilitate
communication between Crane and its attorneys for the purpose of seeking legal advice, that were
indispensable to the provision of legal advice, and that were intended to be confidential, are
protected. Cavallaro, 284 F.3d at 246-49.
The court in Cavallero provided guidance for applying its general holding to particular
facts. One pertinent question is whether the client actually was seeking advice from the third
party, or from the attorney. Id. at 247. In Cavallero, the court questioned whether the attorney, a
senior partner at Hale and Dorr with “over twenty years’ experience, and a specialist in trust and
estates,” truly required advice from the accountant, or whether the attempt to protect the
accountant’s communications under the attorney-client privilege, where the parties were under
investigation for tax fraud, was a subterfuge. Id. at 249.
In the context of this case, the question whether the client was primarily seeking advice
from BBH or from attorneys is closely related to whether the communications concern legal or
business advice. That is, was BBH assisting the attorney in some critical way in giving legal
advice, or was the attorney serving as a passthrough for business advice? “A key component of the
privilege is that the communications with the attorney must call upon the attorney in his or her
capacity as a legal advisor.” America’s Growth Capital, LLC v. PFIP, LLC d/b/a Planet Fitness,
2014 WL 1207128, at *2-3 (D. Mass. Mar. 14, 2014) (Stearns, J.) (giving of business advice and
requests for such advice not protected). Of course, the difficulty in distinguishing legal from
business advice is obvious and has been noted in the cases. See America’s Growth, 2014 WL
1207128, at *3 (distinctions between legal and business matters in context of communications with
in-house counsel “hard to draw”) (citing United States v. Windsor Capital Corp., 524 F. Supp. 2d
74, 81 (D. Mass. 2007)). Business and legal concerns often overlap, and no one would argue that
when lawyers advise clients concerning business matters such as the drafting of contracts, their
advice is not privileged. See, e.g., Marusiak v. Adjustable Clamp Co., 2003 WL 21321311, at *2
(N.D. Ill. June 5, 2003) (“while it is true that solely personal or business advice is not protected by
the attorney-client privilege, legal advice relating to business matters clearly is”); Weeks v.
Samsung Heavy Industries, Ltd., 1996 WL 288511, at *2 (N.D. Ill. May 30, 1996) (attorney-client
privilege not vitiated simply because attorney weighs business considerations in rendering legal
Applying the criteria from Cavallaro here, first, there is no question that the
communications were intended to be confidential: the court credits the declaration of Attorney
Hackett, that the communications were made in “strict confidence,” #279-2 at 5, and the emails
themselves demonstrate that the parties assumed they were confidentially sharing information.
With regard to the purpose of the communications at issue, while BBH’s engagement letter states
only in relevant part that Crane hired BBH to “assist in coordinating the activities of other
professional firms whose services may be required by [Crane], including attorneys...”, the court
accepts Attorney Hackett’s assertion that he understood that Crane hired BBH in part to facilitate
the provision of legal advice to Crane, #279-2 at 2, not only because he states it in his declaration
but because the documents themselves demonstrate that Attorney Hackett in fact persistently asked
BBH for help in crafting legal advice.18 The court finds that the advice as related to the clients in
the emails is legal advice, not business advice. Therefore, the communications at issue here are for
the primary purpose of communicating with the attorney and not with the banker.19
One typical entry, privilege log no. 1248, is an email from BBH employee John Molner
to Attorney James Hackett, copying executives at Crane and others at BBH. Mr. Molner,
responding to an email asking for his comments, is agreeing that something is difficult to
understand and is then framing questions for the attorney about technical aspects of a proposed
contract. This email is an example of the investment banker facilitating communication between
Attorney Hackett and his client for the purpose of providing legal advice, by providing
professional advice within his area of expertise to assist the attorney in understanding complex
business issues so that he can draft a contract for his clients. Another typical email chain,
privilege log nos. 1142, 1144-6, and 1171, is between Attorney Hackett to Mr. Molner and Crane
executives concerning a contract, where Mr. Molner is asking to review a certain document
drafted by patent attorney Mary Bonzagni in order to assist Attorney Hackett in providing advice
to his client. Privilege log no. 1250 is an email from Attorney Bonzagni to Crane’s President,
Attorney Hackett, and Mr. Molner, asking them to review a certain draft of an agreement
pertaining to the intellectual property. In other words, she is seeking BBH’s input so that she
may provide legal advice to her client. Another series of emails, privilege log nos. 1231-32, is
between BBH representatives and Attorneys Bonzagni and Hackett, where BBH is asking for
legal advice prior to reviewing certain documents. Finally, another typical email is privilege log
no. 1234, where Attorney Hackett is giving legal advice and soliciting feedback on his advice
from his client and from BBH after drafting a contract.
After review of the documents, the court asked Crane to justify its claim of privilege for
certain documents which the court deemed to be primarily business-related, and in fact, Crane
either justified its claim of privilege for those documents or produced them to RO. See #301 (ex
parte response by Crane) at 3-4.
With regard to the importance of BBH’s role in the provision of legal advice to Crane,
Attorney Hackett states that he shared legal advice with BBH where it was “necessary to
accomplish” a legal purpose and that the client “required both privileged legal advice from
attorneys and the expertise of BBH regarding corporate transactions.” Id. at 2, 5. Compare
Conway, 104 F.Supp. 3d at 125, (Judge Sorokin holds that communications involving a third party
who only “introduced” plaintiffs to counsel and “assisted” in conversations with counsel and
negotiations, where no showing at all was made that his assistance was “nearly indispensable,’
were not protected by the attorney-client privilege.)
While the First Circuit has not decided a case directly on point, there are cases holding that
in certain circumstances financial advisors are “indispensible” to the provision of legal advice. In
Stafford Trading, Inc. v. Lovely, 2007 WL 611252, at *6, 8-12 (N.D. Ill. Feb. 22, 2007), the party
asserting the privilege, like Crane in this case, had retained an investment banker to assist in
facilitating an acquisition. Id. at *1. The court, after exhaustively reviewing the many cases for
and against upholding the privilege in such a situation, held that “[m]any courts have recognized
that, in today’s market place, attorneys need to be able to have confidential communication with
investment bankers to render adequate legal advice,” and found that the privilege would hold for
instances where the banker and counsel confidentially communicated for the purpose of obtaining
or providing legal advice. Id. at *7 (citing cases); see also Calvin Klein Trademark Trust v.
Wachner, 124 F. Supp. 2d 207, 209 (S.D.N.Y. 2000) (Rakoff, J.), (attorney communications with
banker privileged because banker, functioning as an expert, advised attorney regarding whether
certain information was “material” in legal sense, and so was serving “an interpretive function” for
RO cites, among other cases, U.S. v. Ackert, 169 F.3d 136 (2nd Cir. 1999), #198 at 22, in
support of the proposition that the privilege should not apply here. In Ackert, an investment
banker working for Goldman, Sachs approached Paramount Corporation with an investment
proposal, and Paramount’s tax counsel subsequently conferred with the banker about the tax
implications of the proposed investment. The deal was ultimately consummated with another
investment firm. Some years later, the IRS, conducting an audit of Paramount, sent a summons to
the Goldman, Sachs banker seeking his testimony about the proposal. Id. at 138. The Second
Circuit found that communications between the attorney and the banker were not privileged: “[A]
communication between an attorney and a third party does not become shielded by the attorneyclient privilege solely because the communication proves important to the attorney’s ability to
represent the client.” Id. at 139. The court quoted 8 Wigmore on Evidence § 2317 at 619
(McNaughton rev. ed. 1961): “‘It is ... not sufficient for the attorney, in invoking the privilege, to
state that the information came somehow to him while acting for the client nor that it came from
some particular third person for the benefit of the client.’”) Id. The court held that because the
banker’s role in that case was not strictly “to translate or interpret information given to [the
attorney] by his client,” the privilege was waived. Id. at 140.
Here, unlike in Ackert, where an investment banker approached a client with an unsolicited
business deal, Crane specifically retained BBH to assist in a particular transaction. The
information that BBH was providing cannot be said to have “somehow come to” Crane’s attorneys
from a third party, compare Ackert, 169 F. 3d at 140. BBH’s participation was sought by the
client, in part, to assist the attorney. It was more than merely “important,” as according to Crane’s
attorney, BBH’s advice was necessary, or required, for him to render advice to his client. Further,
unlike in Ackert, where the IRS was investigating the parties, the court has found no evidence here
that the claim of privilege is a “subterfuge.” Cavallero, 284 F. 3d 249.
In summary, the negotiations here concerned a substantial transaction: the acquisition of a
company for over $100 million dollars. Attorney Hackett’s assertion that it was necessary for him
to have input from BBH in order adequately to advise his client concerning this complicated deal
is credible. The court notes that Attorney Hackett states that it was his practice to collaborate
confidentially with third parties such as BBH and had done so “on significant corporate
transactions throughout my career.” #279-2 at 5.20 This is not a situation, such as in Caravallo,
where even a seasoned attorney necessarily would already know all he needed to in order to do his
job drafting contracts and advising his client in this matter. Nor does it appear the privilege is
being claimed after the fact as a means of gaining an unfair advantage in litigation. Compare
Caravallo, 284 F. 3d 249.
The emails including BBH are privileged and shall not be disclosed.
D. Documents that Crane shared with third parties; communications between nonattorneys; and attorneys’ memoranda to the file.
The court has carefully reviewed all of the documents in this category and finds that they
Certain statements are made on the privilege log that are not in Attorney Hackett’s
declaration, for example, that “Nanoventions’ representative in negotiations was a banker,” thus
suggesting that it was necessary for Crane to consult with a banker in order to negotiate the
purchase of the company. See, e.g., privilege log no. 1231. The court has not considered
statements made in the privilege log that are not in any declaration.
For the reasons set out above the court finds that the documents are privileged and shall not
/s/ M. Page Kelley
M. Page Kelley
United States Magistrate Judge
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