Shea et al v. Bonutti Research Inc et al

Filing 157

ORDER granting 139 Defendant's Sealed Motion to Compel Return of Privileged Documents. Signed by Judge Gregory L Frost on 4/4/13. (sem1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
WILLIAM F. SHEA, LLC, et al.,
Plaintiffs,
Case No. 2:10-cv-615
Judge Gregory L. Frost
Magistrate Judge Norah McCann King

v.
BONUTTI RESEARCH, INC.,
Defendant.

OPINION AND ORDER
This matter is before the Court on Defendant Bonutti Research, Inc.’s (“BRI”) sealed
motion to compel the return of certain privileged documents produced inadvertently during
discovery. (ECF No. 139.) Also before the Court are Plaintiff William F. Shea, LLC’s (“Shea”)
sealed memorandum in opposition to BRI’s motion (ECF No. 141) and BRI’s sealed reply in
support of the motion (ECF No. 149). For the reasons set forth below, the Court GRANTS BRI’s
motion and ORDERS the return of the privileged documents cited in BRI’s motion.
I.

Background

In this lawsuit, Shea seeks recovery of commissions allegedly due for certain transactions
negotiated on behalf of Defendant BRI. Shea claims entitlement to unpaid commissions,
calculated as a percentage of royalties that BRI earns from the transactions. In May 2012,
various entities related to BRI reached agreement with Acacia Research Group LLC (“Acacia”)
to assign approximately 175 Bonutti patents as well as certain license agreements that are at
issue in this litigation. The transaction closed on June 8, 2012. Shea contends that this
transaction included royalty streams from which it is entitled commissions.

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In August 2012, this Court ordered discovery reopened for the limited purpose of
allowing Shea to obtain information related to the Acacia transaction. Pursuant to the Court’s
order, Shea requested production of documents related to the Acacia transaction. In late
September 2012, BRI produced more than 15,000 pages of documents relating to the Acacia
transaction. In its cover letter provided with the documents, BRI’s counsel stated: “To the extent
any privileged communications are inadvertently included in this production as part of our effort
to get these documents to you as quickly as possible, we expect they will be returned to us.”
By letter dated October 5, 2012, less than a week after receiving BRI’s document
production, Shea’s counsel notified BRI’s counsel that BRI may have inadvertently produced
privileged documents. More than three weeks later, on October 29, 2012, BRI notified Shea that
it had discovered an inadvertent production of privileged documents. Ten days later, BRI’s
counsel identified eleven inadvertently produced documents in a letter to Shea’s counsel,
claiming that the documents were privileged under the “common interest doctrine.” BRI
requested the return of the documents. Shea responded on November 20, 2012, disputing the
applicability of the “common interest doctrine” and refusing to return the eleven documents.
BRI now moves to compel the return of the purportedly privileged documents under paragraph
15 of the Protective Order previously entered in this case. (ECF No. 23.)
II.

Discussion

The Protective Order in this case allows the producing party in discovery (here, BRI) to
seek an order from this Court compelling the destruction or return of privileged materials
inadvertently produced to the receiving party (i.e., Shea). (ECF No. 23 at & 15.) BRI invokes
this provision, arguing that the eleven documents at issue are protected by the attorney-client
privilege’s “common interest doctrine.”

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The eleven documents at issue contain legal analysis of BRI’s and Acacia’s counsel
regarding which of BRI’s patent claims cover certain products in the marketplace. BRI argues
that such analysis is covered by the attorney-client privilege. (ECF No. 139-1 at PAGEID#
6318.) See, e.g., THK Am. v. NSK, Ltd., 917 F. Supp. 563, 566 (N.D. Ill. 1996). In opposing
BRI’s motion for an order compelling return of the eleven documents, Shea does not contest the
notion that the attorney-client privilege applies to the documents. (ECF No. 141 at PAGEID#
6501.) Rather, even assuming that the documents would otherwise be protected by the attorneyclient privilege, Shea contends that BRI waived any applicable attorney-client privilege by
disclosing the documents to Acacia. (Id.)
As a general rule, the attorney-client privilege is waived by voluntary disclosure of
otherwise privileged communications to third parties. See In re Columbia/HCA Healthcare
Corp., 293 F.3d 289, 294 (6th Cir. 2002). But BRI relies on the so-called “common interest”
doctrine, which operates as an exception to the general rule that disclosure of privileged materials
to a third party waives the privilege. See Cooey v. Strickland, 269 F.R.D. 643, 652 (S.D. Ohio
2010). This exception typically arises when parties “are either represented by the same attorney
or are individually represented, but have the same goal in litigation.” Id. Under such
circumstances, the parties may freely share otherwise privileged communications with each other
without waiving the privilege. Id. See also Fresenius Med. Care Holdings, Inc. v. Roxane Labs.,
Inc., No. 2:05-cv-889, 2007 WL 895059 at *2 (S.D. Ohio Mar. 21, 2007). The purpose of the
“common interest” doctrine is to permit persons with similar legal interests “to enjoy the same
ability to communicate confidentially about their common interests with multiple attorneys that
each client enjoys separately.” Id. (citing In re Regents of University of California, 101 F.3d
1386, 1389 (Fed. Cir. 1996)). A communication is privileged under the common interest

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doctrine “as long as it deals a matter on which parties have agreed to work toward a mutually
beneficial goal, even if those parties are in conflict on some points.” Cooey, 269 F.R.D. at 652.
BRI argues that the documents it asks to be returned fall squarely within the coverage of
the common interest doctrine. Citing Fresenius and Regents, BRI argues that the doctrine is not
necessarily limited to litigation situations; rather, the doctrine can apply in connection with
patent rights. (ECF No. 139-1 at PAGEID# 6319.) In this case, BRI posits that its interests were
closely aligned with Acacia despite the fact that they exchanged documents in the context of an
arms-length negotiation regarding the price Acacia was to pay for certain patent-related assets of
BRI. Both BRI and Acacia had an interest in the strength and scope of the patents that were the
subject of the negotiations. Sharing that common interest, argues BRI, it was natural for the
parties to want to exchange their respective analyses of potential patent issues. (ECF No. 139-1,
at PAGEID# 6320.) Moreover, there was also a litigation component of the common interest
calculus lurking beneath the negotiations between BRI and Acacia. Acacia contemplated
prosecution of a patent infringement lawsuit that BRI had previously filed against another
medical company. (Id. at PAGEID# 6322.)1 Moreover, Acacia filed several infringement
lawsuits based on certain BRI patents after it closed on the BRI deal in June 2012. (Id.)
For its part, Shea disputes the applicability of the common interest doctrine to situations
in which parties exchanged otherwise privileged communications in the context of a commercial
transaction. Relying principally on cases from other jurisdictions, Shea contends that the
common interest exception does not extend to situations in which otherwise privileged materials
are exchanged between adverse parties negotiating an arms-length business transaction. See,
e.g., Net2Phone, Inc. v. eBay, Inc., No. 06-2469, 2008 U.S. Dist. LEXIS 50451, at *24 (D.N.J.

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Bonutti Research, Inc v. Fonar Corp., No. 2:11-cv-05907 (E.D.N.Y. filed Dec. 2, 2011).
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June 26, 2008); Katz v. AT&T Corp., 191 F.R.D. 433, 437-38 (E.D. Pa. 2000); Baxter Travenol
Labs., Inc. v. Abbott Labs., No. 84-c-5103, 1987 U.S. Dist. LEXIS 10300, at*7 (N.D. Ill. June
17, 1987). Shea argues that because Acacia had no interest in BRI’s patents until the Acacia-BRI
transaction closed in June 2012, there could be no “common interest” in the any legal analysis
having to do with those patents until after the closing date. (ECF No. 141 at PAGEID# 650304.)
Upon review, the Court finds that BRI has the better of the arguments. This Court has
held that the common interest doctrine applies, despite parties being in conflict on some points,
so long as the privileged communications deal “with a matter on which parties have agreed to
work toward a mutually beneficial goal.” Cooey, 269 F.R.D. at 652. And in particular to the
patent context, this Court has also noted that the common interest doctrine is not limited to
litigation situations. Fresenius, 2007 WL 895059 at *3. Indeed, in Fresenius, the Court
observed that the “interest in obtaining a strong and enforceable patent is a legal interest which,
although it furthers a commercial transaction, is also the proper subject of communications with
attorneys for purposes of seeking and obtaining financial advice.” Id. Thus, Fresenius found
that the common interest doctrine applied to attorney-client privileged documents that were
exchanged between parties who were negotiating a purchase of patents and pending patent
applications. Id. at *2-3.
The applicability of the common interest doctrine to preserve the privilege attached to the
documents at issue is even stronger in this case than in Fresenius. The Court in Fresenius found
that the common interest doctrine applied—preventing waiver of the attorney-client privilege—
even though the parties “did not share legal documents out of some ephemeral concern that
litigation might be instituted by some third party if they completed their asset purchase.” Id. at

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*3. In this case, not only did Acacia and BRI share an interest in the existence of “strong and
enforceable” patents, there were also a number of patents for which Acacia had an interest in
either commencing or continuing litigation.
The documents at issue in this case relate directly to the patents that BRI was assigning to
Acacia in connection with the parties’ transaction that closed in June 2012. Given the subject
matter of the documents and the parties’ shared interest in the patents being enforceable, the
exchange of privileged documents in connection with those patents falls squarely within the
common interest doctrine.
III.

Conclusion

For the foregoing reasons, the Court GRANTS BRI’s sealed motion to compel return of
privileged documents (ECF No. 139). Pursuant to paragraph 15 of the Protective Order (ECF
No. 23) in this case, Shea shall, within five business days of the date of this Order, return or
confirm destruction of the eleven documents at issue in BRI’s motion, including all copies and
summaries thereof and other materials solely derived from the privileged or protected materials.
(ECF No. 23, at & 15.)
IT IS SO ORDERED.
/s/ Gregory L. Frost
GREGORY L. FROST
UNITED STATES DISTRICT JUDGE

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