Court Rules That Crime-Fraud Exception Trumps Attorney-Client Privilege Where Patent Holder Made Series of False Representations to the Patent and Trademark Office

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HTC Corporation and HTC America, Inc. ("HTC") moved for a finding that this patent infringement action is "exceptional" under the Patent Act's fee-shifting provision which authorizes the award of attorney fees and costs to prevailing parties in "exceptional cases." 35 U.S.C. § 285.

The district court had previously found that the patents in suit were unenforceable due to inequitable conduct before the patent office. Intellect Wireless, Inc., v. HTC Corp., 910 F. Supp. 2d 1056 (N.D. Ill. 2012), aff'd, 732 F.3d 1339 (Fed. Cir. 2013). The prior rulings establish prima facie support for a finding of an exceptional case. See Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1329 (Fed. Cir. 2003) (quoting Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001)). As a result, the district court had granted HTC's request for additional limited document discovery was granted.

During this additional limited discovery, an issue over attorney-client privilege arose and HTC asserted that the attorney-client privilege could not be asserted to protect the documents at issue because of the crime-fraud exception. The district court then addressed that issue. "This court has found, and the Federal Circuit has affirmed, a series of false representations of material fact relating to invention, demonstration, actual reduction to practice, and diligence. The court has found that Daniel Henderson, the patentee and owner of IW, intended to deceive the PTO. The PTO was injured by the issuance of unenforceable patents."

As explained by the district court, "[s]ince the affirmance of this case by the Federal Circuit, HTC has obtained by subpoena from Robert Tendler, the attorney who prosecuted the patents-in-suit before the PTO, an e-mail exchange between Henderson and Tendler in February 2007. The communications clearly reveal Henderson's awareness of false content in a filed declaration and instruct Tendler to confer with Niro about the matter. This exchange alone warrants the document discovery sought and deprives IW of any attorney-client privilege."

The district court then explained that even if the litigation attorneys were unaware of the communication that had no bearing on the privilege issue. "The fact that attorneys at Niro now state that they were unaware of the February 2007 communications between Henderson and Tendler and contend that Tendler did not communicate with them about the false declaration filed with the PTO is not relevant to the question of whether IW has an attorney-client privilege. The loss of the privilege depends upon the wrongdoing of the party, not the conduct or knowledge of the lawyers. In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1090 (9th Cir. 2007), abrogated on other grounds, Mohawk Ind., Inc. v. Carpenter, 558 U.S. 100 (2009); State Farm Mut. Auto. Ins. Co. v. Hawkins, 2011 WL 595810 *3 (E.D. Mich. Feb. 10, 2011)."

Accordingly, the district court concluded that the attorney-client privilege could not prevent the production of the documents withheld by the attorneys.

Intellect Wireless, Inc. v. HTC Corp., Case No. 09 C 2945 (N.D. Ill. May 6, 2014)

 

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Jeffer Mangels Butler & Mitchell LLP on:

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