Tech Pharmacy Services, LLC v. Alixa Rx LLC et al
MEMORANDUM OPINION AND ORDER re 192 SEALED MOTION Tech Pharmacy's Motion to Compel Defendants to Produce Improperly Clawed-Back Documents Previously Produced by a Non-Party filed by Tech Pharmacy Services, LLC. Tech Pharmacy Services, LLCs Motion to Compel Defendants to Produce Improperly Clawed-Back Documents Previously Produced by a Non-Party (Dkt. #192) is DENIED. Signed by Judge Amos L. Mazzant, III on 8/16/17. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
TECH PHARMACY SERVICES, LLC
ALIXA RX LLC, GOLDEN GATE
NATIONAL SENIOR CARE LLC d/b/a
GOLDEN LIVINGCENTERS, FILLMORE
CAPITAL PARTNERS, LLC, FILLMORE
STRATEGIC INVESTORS, LLC, and
Civil Action No. 4:15-CV-766
MEMORANDUM OPINION AND ORDER
Pending before the Court is Tech Pharmacy Services, LLC’s (“Tech Pharmacy”) Motion
to Compel Defendants to Produce Improperly Clawed-Back Documents Previously Produced by
a Non-Party (Dkt. #192).
After reviewing the relevant pleadings, the Court denies Tech
Phil Anthony (“Anthony”) and his company, Design Integrity, contracted with Alixa Rx
LLC (“Alixa”) to provide product design services related to a feature of Alixa’s automated
pharmaceutical dispensing product. On October 10, 2016, Tech Pharmacy subpoenaed Design
Integrity and requested the production of certain documents. On December 13, 2016, Design
Integrity compiled with Tech Pharmacy’s subpoena pursuant to a court’s order (Dkt. #192,
Exhibit 3). Along with many other documents, Design Integrity produced Tech Pharmacy two
emails (Bates Numbers DI 108563–108565) and attachments (Bates Numbers DI 108566–
108586) (collectively, the “Disputed Documents”) from October 2012. Specifically, the
Disputed Documents are (1) email communications between co-inventors and David Walker
(“Walker”), who Alixa retained to prosecute an unrelated patent application of which Anthony
was a co-inventor; and (2) a draft patent application that included Anthony’s comments. As part
of his contract with Alixa, Anthony assigned his patent rights to Alixa and agreed to
On February 1, 2017, Tech Pharmacy took the deposition of Mr. Huan Nguyen. Alixa
hired Mr. Nguyen to lead their team in developing the allegedly infringing remote packaging and
dispensing technology. While working for Alixa, Mr. Nguyen worked closely with Design
Integrity to develop technical elements of Alixa’s technology. During Mr. Nguyen’s deposition,
Tech Pharmacy asked about one of the Disputed Documents.
In response, counsel for
Defendants, who were representing Mr. Nguyen, instructed him to not to answer and indicated
he was going to claw back the document in question.
On February 6, 2017, Defendants formally notified Tech Pharmacy of their desire to claw
back the Disputed Documents, asserting attorney–client privilege and common interest privilege.
On March 15, 2017, Tech Pharmacy filed the present motion to compel (Dkt. #192). On March
24, 2017, Defendants filed a response (Dkt. #206). On March 29, 2017, Tech Pharmacy filed a
reply (Dkt. #212). On April 3, 2017, Defendants filed a sur-reply (Dkt. #223).
Under Federal Rule of Civil Procedure 26(b)(1), parties “may obtain discovery regarding
any nonprivileged matter that is relevant to any party’s claim or defense.”
Fed. R. Civ.
P. 26(b)(1). Relevance, for the purposes of Rule 26(b)(1), is when the request is reasonably
calculated to lead to the discovery of admissible evidence. Id.; Crosby v. La. Health & Indem.
Co., 647 F.3d 258, 262 (5th Cir. 2011). It is well-established that “control of discovery is
committed to the sound discretion of the trial court.” Freeman v. United States, 556 F.3d 326,
341 (5th Cir. 2009) (quoting Williamson v. U.S. Dep’t of Agric., 815 F.2d 368, 382 (5th Cir.
Rule 37 of the Federal Rules of Civil Procedure allows a discovering party, on notice to
other parties and all affected persons, to “move for an order compelling disclosure or discovery.”
Fed. R. Civ. P. 37(a)(1). The moving party bears the burden of showing that the materials and
information sought are relevant to the action or will lead to the discovery of admissible evidence.
Exp. Worldwide, Ltd. v. Knight, 241 F.R.D. 259, 263 (W.D. Tex. 2006). Once the moving party
establishes that the materials requested are within the scope of permissible discovery, the burden
shifts to the party resisting discovery to show why the discovery is irrelevant, overly broad,
unduly burdensome or oppressive and thus should not be permitted. Id.
Choice of Law
The parties dispute what law controls the Court’s analysis of the Disputed Documents
and Defendants’ assertion of attorney–client privilege. Tech Pharmacy contends the Court
should apply Fifth Circuit law, while Defendants argue Federal Circuit law applies.
Courts apply 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 the Federal Circuit’s exclusive control by statute;
or (3) clearly implicate the jurisprudential responsibilities of the Federal Circuit in a field within
its exclusive jurisdiction. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1272 (Fed. Cir. 2001); In
re Spalding Sports Worldwide, Inc., 203 F.3d 800, 803 (Fed. Cir. 2000). For procedural matters
that are not unique to patent issues, the perceived law of the regional circuit applies. In re
Regents of Univ. of Cal., 101 F.3d 1386, 1390 n.2 (Fed. Cir. 1996).
Defendants rely on the holding in In re Spalding to support its argument that Federal
Circuit law applies to the privilege issues presented (Dkt. #206 at pp. 4–5). The Federal Circuit
in In re Spalding held that determining the applicability of the attorney–client privilege to an
invention record “clearly implicates, at the very least, the substantive patent issue of inequitable
203 F.3d at 803.
Defendants contend the Disputed Documents constitute the
invention record for the allegedly infringed patent, and therefore the documents implicate
substantive patent law (Dkt. #206 at p. 5). However, the In re Spalding holding is narrow. Id. at
The Federal Circuit applied its own law because the invention record implicated
inequitable conduct, a specific substantive area of patent law. Id. at 803. Here, the parties do not
dispute substantive areas of patent law like inequitable conduct. Instead, the parties dispute
whether attorney–client privilege applies to communications between a company’s attorney and
a particular company employee. This issue constitutes a “procedural matter” that is “not unique
to patent issues.” In re Regents, 101 F.3d at 1390 n.2. Accordingly, the Court will apply Fifth
Circuit law in determining whether the Disputed Documents are privileged.
Fifth Circuit law also applies to Defendants’ assertion of waiver. According to the
Federal Circuit, courts apply regional circuit law to issues regarding “waiver by disclosure of
privileged material.” GFI, 265 F.3d at 1272.
As the party asserting attorney–client privilege, Defendants must prove: (1) Anthony
made a confidential communication; (2) to a lawyer, Walker; (3) for the primary purpose of
securing either a legal opinion or legal services, or assistance in some legal proceeding. United
States v. Robinson, 121 F.3d 971, 974 (5th Cir. 1997) (emphasis in original).
Defendants bear the burden of demonstrating applicability of the privilege, including that waiver
did not occur. In re Santa Fe Int’l, 272 F.3d 705, 710 (5th Cir. 2001).
The Court is unconvinced Walker was Anthony’s attorney. Alixa employed Anthony and
his company, Design Integrity, to provide product design services for a feature of Alixa’s
automated pharmaceutical dispensing machine. As part of his employment, Anthony agreed to
assign his rights to any Alixa-related invention to Alixa. Alixa retained Walker to facilitate
prosecution of a patent Anthony co-invented. Anthony’s assignment agreement required him
assist Alixa and Walker in obtaining patent protection. Particularly, Anthony was required to
communicate with Walker and execute whatever papers necessary for Walker to prosecute a
patent application on behalf of Alixa (Dkt. #192, Exhibit 11 at p. 1). The Disputed Documents
fall squarely within Anthony’s obligations under the assignment agreement. Defendants have
not demonstrated that Anthony sought or received legal advice from Walker in his individual
capacity, independent of Alixa’s prosecution of a patent he co-invented and the assignment
agreement. Thus, no attorney–client relationship existed between Anthony and Walker, and
absent such a relationship, attorney–client privilege does not attached.
Although Anthony and Walker were not in an attorney–client relationship, the Disputed
Documents are still covered under attorney–client privilege. However, the privilege derives
from Alixa and not Anthony. The Supreme Court in Upjohn Co. v. United States, 449 U.S. 383
(1981), is instructive on this point. In Upjohn, a corporation’s inside counsel questioned its
lower-level employees to determine whether the company made bribes or other illegal payments
and to advise the company accordingly. Id. at 386–87. The Supreme Court held that attorney–
client privilege covered employee communications that were “within the scope of the
employee’s corporate duties, and the employees themselves were sufficiently aware that they
were being questioned in order that the corporation could obtain legal advice.” Id. at 394–95.
Here, it is undisputed that attorney–client privilege attached to communication between
Alixa and Walker. It is further undisputed that Anthony was an employee or contractor for Alixa
when Anthony transmitted the Disputed Documents to Walker in October 2012. Following an in
camera review of the Disputed Documents, the Court finds the documents meet the requirements
set forth in Upjohn. For example, the Disputed Documents constitute: (1) communications
between Anthony and Walker on matters pertinent to Anthony’s duties to Alixa under the
assignment agreement; and (2) information that Walker could use to obtain patent protection for
Alixa. Since attorney–client privilege covered Alixa, the same privilege extends to Anthony’s
communications with Walker.
Accordingly, the Court holds the Disputed Documents are
Because the Court found the Disputed Documents privileged under attorney–client
privilege, the Court does not address Defendants’ common interest doctrine argument.
Inadvertent Disclosure and Waiver
Tech Pharmacy asserts that any privilege was waived by Anthony’s disclosure of the
Disputed Documents to Design Integrity, a non-party. Defendants claim Anthony inadvertently
disclosed the Disputed Documents by using his Design Integrity email address when
communicating with Walker. Defendants argue that this error does not demonstrate that others
at Design Integrity had access to the Disputed Documents.
An inadvertent disclosure does not operate as a waiver if: “(1) the disclosure was
inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent
disclosure; and (3) the holder promptly took reasonable steps to rectify the error.” Fed. R. Evid.
502(b). Here, Alixa is the holder of the privilege as a client of Walker. It is clear to the Court
that neither Anthony nor Defendants intended to waive attorney–client privilege by disclosing
the Disputed Documents.
During Mr. Nguyen’s deposition, Defendants learned of the
inadvertently produced documents.
Five days later, Defendants formally clawed back the
Disputed Documents and asserted privilege. As such, Defendants timely sought protection of the
inadvertently produced documents. Thus, after applying the above factors to the Disputed
Documents, the Court does not find that Defendants or Anthony waived privilege.
Alternatively, Defendants argue the disclosure was still shielded by a confidentiality
agreement between Design Integrity and Alixa. The Court does not reach this argument after
finding no waiver of privilege.
Accordingly, it is therefore ORDERED that is Tech Pharmacy Services, LLC’s Motion
to Compel Defendants to Produce Improperly Clawed-Back Documents Previously Produced by
a Non-Party (Dkt. #192) is DENIED.
SIGNED this 16th day of August, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?