Maryland Intellectual Property Law Blog

Conspiracy Theory Fails to Convince Federal Circuit

higgins@blankrome.com (Brian Wm. Higgins) — Mon, 25 Aug 2008 21:07:46 -0500

Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., No. 2007-1448 (Fed. Cir., argued March 7, 2008; opinion August 25, 2008)

Petersburg, Virginia-based Star Scientific, Inc., sued R.J. Reynolds Tobacco Co. for infringement of U.S. Patent Nos. 6,202,649 and 6,425,401 in the U.S. District Court for the District of Maryland in 2001. A bench trial on the issue of the enforceability of the asserted patents was held in 2005. On June 25, 2007, the District Court found Star’s patents to be unenforceable on the basis of inequitable conduct by Star’s attorneys during prosecution of Star’s patents before the U.S. Patent & Trademark Office. Thereafter, Star characterized the decision as “stunning and totally without support in the record,” and concluded that “the opinion ignores significant portions of the record, distorts others, and spins a tale that is unrecognizable to those who attended the trial.” The Federal Circuit reversed.

Background

In August 1998, Star's Jonnie Williams, the named inventor, engaged Delmendo of Sughrue to prosecute a patent application on a tobacco curing process aimed at lowering TSNA levels. Delmendo was sent a letter on August 28, 1998, by Star consultant Dr. Harold Burton in which Burton wrote that Chinese tobacco products contain very low TSNA levels, probably due to radiant heating. Delmendo testified that he spoke with Burton, analyzed the letter, and ultimately concluded that neither it nor its content was material to the contemplated patent application.

Delmendo later filed a provisional patent application for Williams disclosing that some nations, including China, still utilize radiant heat curing, and stating "It has been determined that [the radiant heat] process as applied to tobacco grown in the United States yields tobacco products with high levels of TSNA." Exactly one year later, Delmendo filed a non-provisional application that deleted the statement that radiant heat curing of U.S.-grown tobacco produced "high levels of TSNA." Instead, the application disclosed: "I have discovered that it is possible to somewhat reduce the TSNA levels by not venting combustive exhaust gases into the curing apparatus or barn."

Shortly thereafter, Williams and Star terminate Sughrue's engagement and hired Banner & Witcoff. Rivard and Hoscheit from Banner met with Delmendo to discuss the transfer of files and the status of pending applications. Paul Perito, a partner of the law firm Paul, Hastings, who became the chairman of Star, tapped Scott Flicker from Paul Hastings to facilitate the transfer of files from Sughrue to Banner. Upon receiving the files, Rivard searched them for prior art but did not notice the Burton letter. Rivard filed an Information Disclosure Statement ("IDS") discussing and distinguishing certain prior art, but did not include the Burton letter. Rivard filed a continuation with an IDS listing many of the same references as his earlier IDS, but also did not include the Burton letter.

In June 2002, while waiting for the continuation application to issue as a patent, Rivard became aware of the Burton letter and other data when Star's trial counsel, Crowell & Moring ("Crowell"), informed him that RJR had raised those documents in litigation. Rivard's initial reaction was that they should be disclosed out of an abundance of caution. Several Crowell attorneys exchanged e-mails amongst themselves discussing whether they thought the Burton letter was required to be disclosed to the PTO; however, the letter was never disclosed to the PTO.

Analysis

In reaching its decision, the Federal Circuit said,

The need to strictly enforce the burden of proof and elevated standard of proof in the inequitable conduct context is paramount because the penalty for inequitable conduct is so severe, the loss of the entire patent even where every claim clearly meets every requirement of patentability. Just as it is inequitable to permit a patentee who obtained his patent through deliberate misrepresentations or omissions of material information to enforce the patent against others, it is also inequitable to strike down an entire patent where the patentee only committed minor missteps or acted with minimal culpability or in good faith. As a result, courts must ensure that an accused infringer asserting inequitable conduct has met his burden on materiality and deceptive intent with clear and convincing evidence before exercising its discretion on whether to render a patent unenforceable.

Deceptive Intent Prong

The Federal Circuit found that the District Court's finding of deceptive intent as to both patents-in-suit was based primarily on its acceptance of RJR's theory that Williams and Star conspired to deliberately prevent Delmendo and his colleagues at the Sughrue firm from disclosing the Burton letter to the PTO by replacing them with the Banner firm and purposely keeping the Banner firm ignorant of the Burton letter. The Federal Circuit held that this "quarantine" theory was not supported by clear and convincing evidence, in that RJR's evidence had a major gap—RJR failed to elicit any testimony or submit any other evidence indicating that Star knew what the Burton letter said prior to replacing the Sughrue firm.

Materiality Prong

The Federal Circuit found that an interrogatory response, which Star disclosed to the PTO, contained the critical information that the prior art had achieved low to insignificant levels of TSNA, and that the information contained in the Burton letter would therefore have been cumulative during prosecution by the time the Banner lawyers were made aware of the letter in June 2002.

Read Part 1 of this post.

Hillcrest Labs Sues Nintendo and Its Wii Video Game

higgins@blankrome.com (Brian Wm. Higgins) — Sun, 24 Aug 2008 21:28:59 -0500

Hillcrest Laboratories, Inc. v. Nintendo Co., Ltd. et al

Hillcrest Labs sued Nintendo of America (based in Redmond, WA, Nintendo Ltd. is based in Kyoto, Japan), maker of the widely-popular "Wii" (TM), for patent infringement on August 20, 2008, in the US District Court for the District of Maryland one day after its U.S. Patent 7,414,611 issued (three other US patents being asserted are 7,139,983, 7,158,118, 7,262,760). Rockville, MD-based Hillcrest alleges that Nintendo's "Wii" video game machines and remote controllers directly, contributorily, induce, and willfully infringe its patents. Hillcrest also filed a separate patent infringement action with the US International Trade Commission.

Claim 1 of the '611 patent recites:

1. A system comprising: means for generating, from a first sensor, a first output associated with motion of a handheld device; means for detecting, by a second sensor, acceleration of said handheld device and outputting at least one second output; and means for processing said first output and said at least one second output, said processing means including: means for determining an orientation in which said handheld device is held using said at least one second output; and means for compensating said first output based on said determined orientation by performing a two-dimensional rotational transform on said first output to generate an output which is substantially independent of said orientation.

Hillcrest is seeking monetary damages from Nintendo Japan and Nintendo of America, and a permanent injunction. In a published statement, Hillcrest states that since 2001 it "has pioneered technology that allows consumers to interact with digital media on television using motion-control and pointing techniques. The company holds 29 patents in this area worldwide, and has filled for more than 100 related patents."

The Washington, DC, office of Finnegan Henderson filed the complaint on behalf of Hillcrest.

Patent Lawsuit Filings Down in July 2008

higgins@blankrome.com (Brian Wm. Higgins) — Wed, 13 Aug 2008 21:04:20 -0500

According to statistics compiled by Kyle Fleming at the Patent Appeal Tracker Blog using PACER data, there were 241 patent litigation cases filed in July 2008 in 50 different judicial districts. That's 14 fewer lawsuits than in June 2008. The Eastern District of Texas led the way with 25 filings, followed by Central District of California (21), Northern District of California (19), District of New Jersey (17), and District of Delaware (16). The US District Court for the District of Maryland was tied for 24th with just two new filings in July.

Maryland's SafeNet Patented Technology Secures Beijing Olympic Coverage

higgins@blankrome.com (Brian Wm. Higgins) — Mon, 11 Aug 2008 21:59:06 -0500

Maryland's SafeNet announced earlier this month that it had been hired by CCTV, the national television network of the People's Republic of China, to secure from copyright infringement CCTV's live and on-demand online video footage of the 2008 Summer Olympic Games. SafeNet, which has 43 patents and 31 patent applications currently pending, is employing digital rights management (DRM) software to prevent video from being distributed and viewed by anyone except those who are authorized. According to the company's announcement, SafeNet's technology was given a trial and evaluated during the CCTV.com broadcasts of the 2008 European Cup soccer tournament earlier in 2008.

Senate Passes Legislation Impacting IP Laws

higgins@blankrome.com (Brian Wm. Higgins) — Wed, 06 Aug 2008 05:00:00 -0500

Senate Passes Bill to Fix Administrative Law Judge Status

Reacting to revelations that several PTO Administrative Law Judges may have been appointed to their positions without proper authority, the Senate introduced and then passed S.3295 on July 22, 2008. The legislation, if enacted, would allows the Secretary of Commerce, in his or her discretion, to deem the appointment of an administrative patent or trademark judge who, before the date of the enactment of the legislation, held office pursuant to an appointment by the Director, to take effect on the date on which the Director initially appointed the administrative patent or trademark judge. The bill, introduced by Sen. Patrick Leahy, Chairman, Senate Judiciary Committee, would also provide those ALJs a statutory defense if someone were to challenge their initial appointment.

Enforcement of Intellectual Property Rights Act of 2008

On July 24, 2008, Senators Leahy, Specter, Bayh, Voinovich, Feinstein, and Cornyn introduced S. 3325 Enforcement of Intellectual Property Rights Act of 2008. Among other things, the legislation would authorize the U.S. Attorney General to commence a civil action against any person who engages in conduct constituting a criminal offense under the copyright laws, 17 U.S.C. § 506, upon proof of such conduct by a preponderance of the evidence (compared to the much high criminal standard, the preponderance standard is estimated to result in more enforcement of copyright laws). A person found liable may be subject to a civil penalty under section 504 which shall be in an amount equal to the amount which would be awarded under 18 U.S.C. 3663(a)(1)(B) (i.e., the amount of the loss sustained by each victim as a result of the offense, considering the financial resources of the defendant) and restitution to the copyright owner aggrieved by the conduct.

Number of IP Lawsuits Increases in Maryland

higgins@blankrome.com (Brian Wm. Higgins) — Tue, 05 Aug 2008 21:05:33 -0500

Even in soft economic times, companies continue to protect their intellectual property assets. According to statistics available from Justia.com, 63 complaints alleging liability under patent, copyright, and/or trademark laws were filed in the U.S. District Court for the District of Maryland during the period January 1 through July 31, 2008 (those complaints named approximately 80 defendants, some several times). For the same period in 2007, just 52 complaints were filed (but close to 100 named defendants). That's a 21% increase in the number of filings in 2008.

Federal Circuit Considers Whether Justiciable Case or Controversy Exists in Hatch-Waxman Case

higgins@blankrome.com (Brian Wm. Higgins) — Sat, 26 Jul 2008 11:02:20 -0500

Merck & Co. Inc. v. Apotex Inc., No. 2007-1362 (Fed. Cir. July 16, 2008) (non-precedential)

     In this appeal, the Federal Circuit affirmed and vacated a decision by the U.S. District Court for the District of Delaware (J. Sleet) in favor of Plaintiff-Appellee Merck & Co., Inc. (“Merck”).

     Merck obtained approval from the FDA to market the drug FOSOMAX®. It sued Apotex for patent infringement when Apotex filed an Abbreviated New Drug Application (“ANDA”) seeking FDA approval to commercialize a generic version of FOSOMAX®. Apotex counterclaimed for a declaratory judgment of patent invalidity and noninfringement.

     Following discovery, Merck granted Apotex a covenant not to sue for infringement of all patents-in-suit, and moved to dismiss all claims and counterclaims on the grounds that the case no longer presented an Article III case or controversy. Apotex then moved to amend its counterclaims to add a claim for a violation of the Sherman Antitrust Act, 15 U.S.C. § 2. The district court denied Apotex’s motion to amend its counterclaims, and granted Merck’s motion to dismiss all claims and counterclaims for lack of Article III jurisdiction.

     On appeal, the Federal Circuit affirmed the district court’s denial of Apotex’s motion to add an antitrust counterclaim, and vacated the district court’s decision regarding infringement and invalidity as moot and remanded with instructions to dismiss the claims as moot. In reaching those decisions, the Federal Circuit stated that a justiciable Article III controversy may continue to exist between a patentee drug company and an ANDA filer in the context of the Hatch-Waxman Act even after the patentee drug company has granted the Paragraph IV ANDA filer a covenant not to sue. Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1296-97 (Fed. Cir. 2008). However, in this case, two events after oral argument on appeal rendered the infringement and validity claims moot:

The FDA decided to treat the statutory automatic 30-month stay on Apotex’s ANDA as dissolved once the district court dismissed the case; thus Apotex's ANDA could be approved; and

Teva, which filed the first ANDA against FOSOMAX®, began marketing its generic FOSOMAX® on or about February 6, 2008, so Apotex no longer suffered a delay in entering the market that is traceable to Merck and redressible by a court judgment.

eBay's Liability for Counterfeit Goods Sold on its Website Decided

higgins@blankrome.com (Brian Wm. Higgins) — Tue, 15 Jul 2008 09:17:25 -0500

"eBay tumbled Tiffany's carefully stacked legal arguments," writes law professor and Counterfeit Chic blogger Susan Scafidi. On Monday, the U.S. District Court for the Southern District of New York held that eBay is not liable to Tiffany & Co. for the sale of counterfeit goods through its auction website. The court ruled that Tiffany, and similar companies, are ultimately responsible for policing their trademarks online, rather than auction-based companies like eBay. "The court's ruling is in line with well established legal precedent which holds that the obligation to enforce trademarks rests with the trademark holder," wrote eBay in a published statement on its website Monday.

You win one, you lose one. In stark contrast to the findings of the New York court, just a few weeks ago the Tribunal de Commerce court in Paris ordered Ebay to pay over $60 million dollars to Louis Vuitton and Christian Dior for allowing the sale of counterfeit merchandise through the company's auction website. The Paris court described eBay's anti-counterfeit measures as "empty." The court concluded that eBay had committed "serious errors" in permitting the sale of counterfeit goods, which, the court found, violated Louis Vuitton and Christian Dior's copyrights and trademarks. eBay is apparently appealing the ruling. In a published statement on its website, eBay characterized Louis Vuitton's and Christian Dior's lawsuit as an "overreaching...attempt to impose, in France, a business model that restricts consumer choice through an anti-competitive business practice."

TTAB: Dont Overreach When Identifying Services Associated With One's Trademark

higgins@blankrome.com (Brian Wm. Higgins) — Sat, 12 Jul 2008 06:16:26 -0500

In Grand Canyon West Ranch v. Hualapai Tribe, TTAB No. 91162008 (June 30, 2008), the Trademark Trial and Appeal Board found that an applicant, not registrant, committed fraud on the Trademark Office when it represented to the Office that it provided services in association with its mark GRAND CANYON WEST that, in fact, it did not offer.

Applicant Hualapai Tribe ("People of the Tall Pine"), whose tribal lands border the Colorado River and Grand Canyon in the western portion of the Canyon, filed an application for the mark GRAND CANYON WEST for a variety of services under Section 1(a), App. Ser. No. 76484111. The examiner prosecuting the application issued an office action requesting further clarification as to the services associated with the mark. The applicant responded in kind, stating that it provided, among other services, horseback rides, bicycle tours, and tractor-based tram rides. During the publication phase, the mark was opposed by Grand Canyon West Ranch, which argued that the mark was merely descriptive, and that the applicant had committed fraud on the PTO by including services in the application that they were not, in fact, offering under the mark.

The Board found that the mark was not merely descriptive. However, it agreed with Ranch's fraud argument. Specifically, the Board found that there was no evidence that applicant provided horseback rides, bicycle tours, or tractor-based tram rides, as identified in the application. The applicant argued that the error was inadvertent, that it was due to innocent and reasonable reliance on the examiner's instructions to applicant suggesting appropriate services. The Board said that it could not excuse the error. The applicant, it wrote, had an affirmative duty to correct the identification set forth in the examiner's amendment if it contained errors.

Acknowledgment: information for this post provided by Alain Lapter, Esq.

Targeted Patent Reform Legislation: Cutting Some Slack for Missed Deadlines

higgins@blankrome.com (Brian Wm. Higgins) — Fri, 11 Jul 2008 10:28:42 -0500

35 U.S.C. § 156(d)(1) requires the submission of a patent term extension (PTE) application within 60 days from the date the patentee obtains permission from the FDA to commercially market or use a drug product that is the subject of a new drug application (NDA). This provision was enacted because FDA review of NDAs may take years after a patent covering the drug that is the subject of the NDA has issued by the PTO.

On June 23, 2008, the U.S. House of Representatives passed by voice vote H.R. 6344, which had been introduced the same day by Rep. Delahunt (D-MA), and is similar to a provision included in the House version of the Patent Reform Act of 2007. The current bill is entitled "To provide emergency authority to delay or toll judicial proceedings in United States district and circuit courts, and for other purposes." Sec. 4 states:

"The Director may accept an application under this section that is filed not later than three business days after the expiration of the 60-day period provided in subsection (d)(1) if the applicant files a petition, not later than five business days after the expiration of that 60-day period, showing, to the satisfaction of the Director, that the delay in filing the application was unintentional."

The bill would retroactively cover Massachusetts-based The Medicines Company, which filed a PTE application for U.S. Patent No. 5,196,404 on the 62d day after FDA approved its NDA for ANGIOMAX, an anticoagulant.

Status: Received in the Senate and read twice and referred to the Committee on the Judiciary.

Hat tip to the Anticipate This! Patent and Trademark Law Blog.

New Blog Covers "Green" Patents

higgins@blankrome.com (Brian Wm. Higgins) — Sat, 05 Jul 2008 05:00:00 -0500

Eric Lane, a patent attorney at Luce, Forward, Hamilton & Scripps in the firm's Intellectual Property and Climate Change & Clean Technologies practice groups, publishes the Green Patent Blog. This relatively new website is dedicated to discussing and analyzing intellectual property issues relating to clean technologies and renewable energy. Mr. Lane's timing couldn't be better, given the media and consumer product industries' hightened interest in all things green.

Federal Trademark Trends in Maryland: First Half 2008

higgins@blankrome.com (Brian Wm. Higgins) — Thu, 03 Jul 2008 05:00:00 -0500

U.S. Patent & Trademark Office (PTO) records show that for the period January through June 2008, the PTO received 28 trademark applications from Maryland resident or entities (based on a search of "owner address" records using TESS). That number is a 55% decline in the number of applications received for the same period in 2007 (62), but only a 3% decline over 2006 numbers (29).

The number of registrations to Maryland individuals or entities in the first half of 2008 was down compared to last year. According to the PTO, 23 registrations were effective during the period January through June 2008, which is a 4% decline in the number of registrations for the same period in 2007 (24 registrations), but is the same number of registrations in 2006 (23).

Number of Patents Issued to Marylanders Continues Recent Trends

higgins@blankrome.com (Brian Wm. Higgins) — Wed, 02 Jul 2008 05:00:00 -0500

U.S. Patent & Trademark Office (PTO) records show that for the period January through June 2008, the PTO granted 986 patents naming at least one Maryland resident as an inventor or joint inventor (based on residence addresses supplied by patent applicants to the PTO). That is a 1% decline in the number of patents issued to Maryland inventors for the same period in 2007 (993), and a 5% decline over 2006 numbers (1,038).

The number of published patent applications naming at least one Maryland inventor in the first half of 2008 was up compared to last year. According to the PTO, 1,579 patent applications naming at least one Maryland inventor were published during the period January through June 2008, which is a 6% increase in the number of patent applications published for the same period in 2007 (1,495 patent applications), and a 5% increase over 2006 numbers (1,511).

Copyright Office Announces Electronic Registration

higgins@blankrome.com (Brian Wm. Higgins) — Tue, 01 Jul 2008 18:44:25 -0500

Last September, the Copyright Office issued an announcement that it had begun beta testing of its web-based registration system, which was part of a new "electronic Copyright Office" (eCO) program (see Copyright Office Announces Electronic Registration Testing). Beginning July 1, 2008, the Copyright Office will offer its online registration system to the public. Instruction for making claims to copyrighted works may be found here.

According to a recent Copyright Office announcement, online registration through the eCO is the preferred way to register basic claims for literary works; visual arts works; performing arts works, including motion pictures; sound recordings; and single serials. Advantages of online filing include a lower filing fee; the fastest processing time; online status tracking of your claim; secure payment by credit or debit card, electronic check, or Copyright Office deposit account; and the ability to upload certain categories of deposits directly into eCO as electronic files.

To register a claim electronically, go to the Copyright Office website at www.copyright.gov and click on the eCO logo shown above.

Alleging Infringement by Corporate Officers Requires More Than Just Bare Allegations

higgins@blankrome.com (Brian Wm. Higgins) — Sat, 21 Jun 2008 21:42:29 -0500

Nacre AS v. Silynx Communications, Inc., No. 07-cv-02676, filed Oct. 2, 2007; assigned to J. Williams.

     Plaintiff Nacre AS is a Norwegian company that alleges ownership of U.S. registered trademark QUIETPRO, as well as U.S. Patent No. 7,039,195 (“Ear Terminal”) and U.S. Patent No. 6,567,524 (“Noise Protection Verification Device”). In September 2007, Nacre filed a trademark opposition proceeding against Rockville, MD-based Silynx Communications' QUIETOPS mark before the U.S. Trademark Trial and Appeal Board. That proceeding was stayed when, in October 2007, Nacre filed the above lawsuit against Silynx and its CEO, Gil Limonchik, alleging trademark and patent infringement. On June 12, 2008, the infringement allegations against Limonchik were dismissed without prejudice. Memorandum and Opinion (June 12, 2008). Limonchik, who according to court papers was a former Nacre consultant, had filed a motion to dismiss with prejudice under Rule 12(b)(6) (failure to state a claim).

     In granting the motion as to Count I (trademark infringement), Judge Williams stated that in order for a trademark claim against a corporate officer to survive a Rule 12(b)(6) motion, a plaintiff must allege, in addition to a corporation's infringing activity, that the individual corporate officer played an active role in the infringing activity. In this case, Judge Williams found Nacre's complaint failed to state factual allegations to indicate what actions Limonchik had taken in an individual capacity to infringe upon the QUIETPRO (R) mark. The only relevant allegations in Nacre's complaint, Judge Williams said, were "Defendant have and are infringing the rights of Nacre in QUIETPRO (R) under 15 U.S.C. 1125 and the common law" and "Defendants' infringement of Nacre's rights in QUIETPRO (R) is and has been willful." Neither of those statements mentioned what specific role Limonchik played in the infringement, Williams found.

     In granting the motion as to Counts II and III (patent infringement), Judge Williams found Nacre's complaint failed to allege facts sufficient to preclude dismissal of these counts. No part of the complaint, he wrote, offered facts to justify piercing the corporate veil, to demonstrate Limonchik's specific intent or action to induce infringement or facts to support contributory infringement liability.

     Nacre's case is not completely lost, however. Judge Williams' dismissal was made, as noted above, without prejudice as to Nacre's right to amend its complaint to add more factual allegations:

"Plaintiff has walked a fine line in drafting the complaint. It is possible to conjecture facts which would support Defendant Limonchik's liability in this case. However, the law requires a plaintiff to allege enough facts to put the defendant on notice of the claims and the grounds for those claims. Here, Plaintiff has not stated clear grounds for the claims alleged in the complaint."

     Judge Williams noted that "[Limonchik] has not offered any evidence that he would be prejudiced by an amendment [of the complaint], that an amendment would be futile, or that Plaintiff engaged in undue delay. * * * Defendant asks for dismissal with prejudice solely on the grounds that Plaintiff has failed to allege sufficient facts."

Grimm's Guide to Asserting Attorney-Client Privilege

higgins@blankrome.com (Brian Wm. Higgins) — Thu, 12 Jun 2008 05:00:00 -0500

In Victor Stanley, Inc. v. Creative Pipe, Inc., No. 06-2662 (D. Md. May 29, 2008), U.S. Chief Magistrate Judge Grimm describes the proper means for asserting that documents are protected or immune from discovery because of the attorney-client privilege or attorney work product doctrine. Judge Grimm's explanation comes at the end of his opinion in Victor Stanley, published two weeks ago.

The Issue

Because a party responding to a Rule 34 request for the production of discovery is entitled to refuse to produce documents if they are privileged or work product protected, Judge Grimm pointed out that the Federal Rules of Civil Procedure require that when doing so, the responding party must “describe the nature of the documents, communications, or tangible things not produced or disclosed--and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.” The most common way to do this, he wrote, is by using a privilege log, which identifies

Each document withheld,
Information regarding the nature of the privilege/protection claimed,
The name of the person making/receiving the communication,
The date and place of the communication, and
The document’s general subject matter.

What Really Happens?

In actuality, Judge Grimm, who in his position as Magistrate referees all kinds of discovery disputes, found that lawyers infrequently provide all the basic information called for in a privilege log, and if they do, it is usually so cryptic that the log falls far short of its intended goal of providing sufficient information to the reviewing court to enable a determination to be made regarding the appropriateness of the privilege/protection asserted without resorting to extrinsic evidence or in camera review of the documents themselves. Few judges, he said, find that the privilege log is ever sufficient to make the discrete fact-findings needed to determine whether a privilege/protection was properly asserted and not waived.

What Should Lawyers Be Doing?

According to Judge Grimm, parties should be wary of filing a response to a Rule 34 document production request that asserts privilege/protection as a basis for refusing to make requested production without having a factual basis to support each element of each privilege/protection claimed for each document withheld, because doing so is a sanctionable violation.

Insuring that a privilege or protection claim is properly asserted in the first instance and maintained thereafter involves a several step process, Judge Grimm wrote.

(1)  First, pursuant to FRCP 26(b) (5), the party asserting privilege/protection must do so with particularity for each document, or category of documents, for which privilege/protection is claimed.

(2)  After that, if the requesting party challenges the sufficiency of the assertion of privilege/protection, the asserting party may no longer rest on the privilege log, but bears the burden of establishing an evidentiary basis–by affidavit, deposition transcript, or other evidence– for each element of each privilege/protection claimed for each document or category of document. A failure to do so warrants a ruling that the documents must be produced because of the failure of the asserting party to meet its burden.

(3)  If the asserting party makes this showing, and the requesting party still contests the assertion of privilege/protection, then the dispute is ready to submit to the court, which, after looking at the evidentiary support offered by the asserting party, can either rule on the merits of the claim or order that the disputed documents be produced for in camera inspection.

Result

In Victor Stanley, Judge Grimm said that had he not ruled that Defendant's 165 inadvertently produced documents waived the privilege/protection status of the documents, then the effect of a failure by the Defendants to comply with the court’s order regarding the proper manner in which to assert privilege/protection would have warranted an order to produce the materials for failure to carry the burden of demonstrating the existence of the privilege/protection claimed.

E-Discovery: Inadvertent Disclosure of Privileged Documents May Waive Attorney-Client Privilege

higgins@blankrome.com (Brian Wm. Higgins) — Sun, 08 Jun 2008 09:28:25 -0500

U.S. Chief Magistrate Judge Paul W. Grimm is a leading jurist in the field of electronic discovery. In Victor Stanley, Inc. v. Creative Pipe, Inc., No. 06-2662 (D. Md. May 29, 2008), Judge Grimm discusses the approach the U.S. District Court for the District of Maryland may take when deciding whether the inadvertent production to an adversary of attorney-client privileged or work-product protected materials constitutes a waiver.

Background

In Victor, the parties entered into a joint protocol to search and retrieve relevant ESI responsive to Plaintiff’s Rule 34 requests. After the protocol was used to retrieve responsive ESI, Defendants reviewed the documents to locate any that were privileged or attorney work-product prior to production to Plaintiff. Defendants had previously expressed concern that privilege review of the responsive documents would delay production unnecessarily and cause undue expense. To address this concern, Defendants gave their computer forensics expert a list of keywords to be used to search and retrieve privileged/protected documents. However, Defendants also acknowledged the possibility of inadvertent disclosure of privileged/protected documents, and requested that the court approve a “clawback agreement.” Later, Defendants notified the court that because Judge Garbis had extended the discovery deadline by four months, Defendants would be able to conduct a document-by-document privilege review, thereby making a clawback agreement unnecessary.

After receiving Defendants’ ESI production in September, 2007, Plaintiff began their review of the materials. They soon discovered documents that potentially were privileged or work-product protected, and immediately segregated this information and notified Defendants.

Applicable Law

As noted by Judge Grimm, courts have taken three different approaches when considering inadvertent production. The Fourth Circuit Court of Appeals has yet to decide which approach it will follow, although individual district courts within the circuit, Grimm notes, have adopted the intermediate balancing approach. Under the intermediate approach, the court balances a number of factors to determine whether the producing party exercised reasonable care under the circumstances to prevent against disclosure of privileged/protected information, and if so, there is no waiver. The intermediate test requires the court to balance the following factors to determine whether inadvertent production of attorney-client privileged materials waives the privilege:

(1) the reasonableness of the precautions taken to prevent inadvertent disclosure;

(2) the number of inadvertent disclosures;

(3) the extent of the disclosures;

(4) any delay in measures taken to rectify the disclosure; and

(5) overriding interests in injustice.

Judge Grimm commented that decisions of the Fourth Circuit suggest that it is inclined to adopt the strict approach. Under the strict approach, there is a waiver because once disclosed there can no longer be any expectation of confidentiality.

Discussion

Under the strict approach, Judge Grimm found there was no legitimate doubt that Defendants’ production of 165 asserted privileged/protected documents waived the attorney-client privilege and work-product protection.

However, even under the intermediate test, the result would be the same, he said. Below are some of the key points in Victor.

     Keyword searches: Selection of the appropriate keyword search and information retrieval technique requires careful advance planning by persons qualified to design effective search methodology, Judge Grimm wrote. The implementation of the methodology selected should be tested for quality assurance; and the party selecting the methodology must be prepared to explain the rationale for the method chosen to the court, demonstrate that it is appropriate for the task, and show that it was properly implemented. Compliance with the Sedona Conference Best Practices for use of search and information retrieval will go a long way towards convincing the court that the method chosen was reasonable and reliable, which, in jurisdictions that have adopted the intermediate test for assessing privilege waiver based on inadvertent production, may very well prevent a finding that the privilege or work-product protection was waived.

     In Victor, Judge Grimm found that the Defendants failed to demonstrate that the keyword search they performed on the text-searchable ESI was reasonable. Defendants failed to provide the court with information regarding the keywords used; the rationale for their selection; the qualifications of Defendant and attorneys to design an effective and reliable search and information retrieval method; whether the search was a simple keyword search, or a more sophisticated one, such as one employing Boolean proximity operators; or whether they analyzed the results of the search to assess its reliability, appropriateness for the task, and the quality of its implementation.

     Non-Waiver Agreement: As noted above, Defendants voluntarily abandoned their request for a court-approved non-waiver agreement, and advised the court that they did not need this protection. Instead, they elected to do a document-by-document privilege review. According to Judge Grimm, had Defendants not abandoned their request, they would have been protected from waiver. When they undertook an individualized review of the context-searchable ESI and determined that they could only review the title pages, they neither sought an extension of time from the court to complete an individualized review, nor did they reinstate their request for a court-approved non-waiver agreement, despite their awareness of how it would have provided protection against waiver.

Comments:

In Lorraine v. Markel American Insurance Co. , 241 F.R.D. 534 (D. Md. 2007), Judge Grimm outlined evidentiary rules that must be considered when ESI is proffered to the court during litigation. The 100+ page opinion discusses considerations given to the relevancy, authentication, and probative value of ESI
Lorraine followed on the heels of the U.S. District Court for the District of Maryland’s Suggested Protocol for Discovery of Electronically Stored Information (2007), also written, to a large degree, by Judge Grimm (see related link on this blog: Maryland District Court Magistrate Judge Grimm Offers Insight Into E-Discovery)
For more on Victor, see:
- On The Record Blog: E-Discovery errors take toll on judges, too
- EDD Update (Law Technology News/Law.com): Grimm Prognosis for ESI Search
- The Daily Record: E-Discovery Error Waivers Attorney-Client Privilege

Trade Secret Lawsuits on the Rise

higgins@blankrome.com (Brian Wm. Higgins) — Fri, 23 May 2008 00:05:00 -0500

Hat tip to the Womble Carlyle Trade Secret Blog for publishing interesting statistics about trade secret lawsuits filed in the US. In its post a few weeks ago, the Womble bloggers reported the results of their search of the Westlaw federal database (federal district, appeals and Supreme Court cases) for the term "trade secrets," which returned 905 cases for 2007. That was a 20% increase over the number of published cases in 2006 (754 cases), and a 231% increase since 1997 (273 cases). Check out their post for cautionary notes relating to the results. The bloggers' conclusion: "it would be hard to deny that something's going on."

Womble's research also found that there were 79 cases reported in 2007 relating to the federal Computer Fraud & Abuse Act, which was a 46% increase over 2006 (54 cases), and a 780% increase over 1997 (1 case).

Out of curiosity, I searched Lexis' "MD Federal & State Cases, Combined" database for "trade secrets" and found 7 reported cases in 2007, compared to 14 in 2006 (not all of which are actual trade secret cases):

Phoenix Renovation Corp. v. Rodriguez, 2007 U.S. App. LEXIS 29253 (4th Cir. 2007) (unpublished)
GO Computer, Inc. v. Microsoft Corp., 508 F.3d 170; 2007 U.S. App. LEXIS 26722 (4th Cir. 2007)
Darden v. Peters, 488 F.3d 277; 2007 U.S. App. LEXIS 12115 (4th Cir. 2007), cert. denied, 2008 U.S. LEXIS 2125 (2008)
DRC, Inc. v. Custer Battles, LLC, 2007 U.S. App. LEXIS 11518 (4th Cir. 2007) (unpublished)
NaturaLawn of Am., Inc. v. West Group, LLC, 484 F. Supp. 2d 392; 2007 U.S. Dist. LEXIS 29774 (4th Cir. 2007)
Tobacco Tech., Inc. v. Taiga Int'l N.V., 2007 U.S. Dist. LEXIS 13083 (D. Md. 2007)
Conaway v. Deane, 401 Md. 219; 2007 Md. LEXIS 575 (Md. 2007)

Copyright: New Rules and Other News

higgins@blankrome.com (Brian Wm. Higgins) — Wed, 21 May 2008 10:02:17 -0500

Copyright Office Publishes Notice of Proposed Rulemaking to Amend Current Regulations Governing Group Registrations

In its Notice of Proposed Rulemaking, the Copyright Office is proposing to amend 37 CFR Part 202, the current regulations governing group registrations, to allow the grouping of individual works on one registration application. Under the proposal, applicants who take advantage of the group registration option would be required to file their claims electronically. Comments are due on or before May 30, 2008. The stated purpose of the amended regulations is to increase online registrations (link to Copyright Office).

RIAA Lawsuit Victory Against Individual Getting a Second Look

William Patry at The Patry Copyright Blog posted an interesting article recently concerning one of the most watched music industry lawsuits (see "Breaking Development in Thomas Making Available Case"). As Patry notes, the case of Capitol v. Thomas in Minnesota "has been watched worldwide," due primarily to the large amount of the jury verdict awarded against Ms. Thomas (who, by the way, has moved for a new trial on the basis that the amount awarded was unconstitutionally excessive). As discussed by Patry and reported by the Recording Industry v. The People Blog, attention given the jury award has now shifted after the District Court "adjourned the briefing schedules for the determination of whether it had committed a 'manifest error of law' when it accepted the RIAA's proposed jury instruction that merely 'making available' [a music file] constituted an infringement of the distribution right and overlooked the controlling Eighth Circuit case, National Car Rental System v. Computer Associates, which had held that there can be no infringement of the 17 USC 106(3) 'distribution right' without actual dissemination of copies or phonorecords."

For other RIAA posts on this website, see "Recording Industry Follows Through on Threats to Sue" and "Downloading Music Benefits Both Consumers and Artists, Study Finds".

Discussion: IP Licensing Issues Impacting Maryland Entities

higgins@blankrome.com (Brian Wm. Higgins) — Mon, 19 May 2008 10:06:30 -0500

The Maryland State Bar Association - Intellectual Property Section is co-sponsoring a rountable discussion this Wednesday concerning IP licensing issues. The "IP Licensing Issues from an In-House Perspective: A Roundtable Discussion" event is being presented shortly after registration beginning at 8:00 AM. The event is being co-hosted by Offit Kurman, in their Maple Lawn, MD, office, which is not too far from I-95 and even closer to MD-29.