On August 8, 2023, Judge Katharine H. Parker (S.D.N.Y.) denied Spectrum Dynamics Medical Limited’s (“Spectrum”) motion to compel the production of documents that it argued fell under the crime-fraud exception to the attorney-client privilege. See Spectrum Dynamics Med. Ltd. v. Gen. Elec. Co., 18-CV-11386 (Aug. 8, 2023).
Spectrum developed and sells a full-body medical imaging system called Veriton, which directly competes with GE’s StarGuide system. Spectrum contends that GE misappropriated its trade secrets to create StarGuide and defrauded the U.S. Patent and Trademark Office by falsely claiming that GE employees invented the subject matter disclosed in two GE patents (the ’113 and ’114 Patents). Spectrum claims that it invented that technology and disclosed it to GE under a nondisclosure agreement well before GE applied for the patents.
Spectrum moved to compel the production of certain documents which GE claimed were covered by the attorney-client privilege. Spectrum argued that evidence produced during discovery showed that GE had defrauded the USPTO in applying for the ’113 and ’114 Patents. Spectrum contended that documents listed on GE’s privilege log were created in furtherance of that fraud, and thus fell under the “crime-fraud” exception to the attorney-client privilege. See, e.g., In re Richard Roe, Inc., 68 F.3d 38, 40 (2d Cir. 1995) (finding that the crime-fraud exception allows for the production of documents where there is probable cause to believe that (1) a crime or fraud has been committed and (2) the privileged communications and work product were in furtherance thereof).
Judge Parker denied the motion. She first noted that “Spectrum’s motion regarding the crime-fraud exception is not aimed at particular documents on GE’s privilege log, [but] is based on facts developed in discovery that Spectrum believes proves its case that GE used its trade secrets in developing the StarGuide and misrepresented the inventorship of the ’113 and ’114 patents . . . [i]n other words, Spectrum’s motion is in actuality a motion aimed at the merits disguised as a motion to compel privileged documents.” Op. at 3-4. Nevertheless, the Court reviewed 25 documents from GE’s privilege log in camera to determine whether they gave rise to probable cause for believing GE had committed fraud. Judge Parker found that the documents were “routine communications . . . concerning the filing of a patent,” and that “[n]one evidence knowledge of Spectrum’s alleged trade secrets or a plan to commit a fraud concerning inventorship.” Id. at 4. As a result, Judge Parker found that there was no basis for applying the crime-fraud exception to GE’s privileged documents.
Spectrum also argued that, by producing a spreadsheet including ideas for an internal IP meeting, GE had waived privilege over a similar spreadsheet created in preparation for a Patent Evaluation Board meeting. Judge Parker found this argument “unpersuasive,” because the non-privileged document was produced as part of a “regular business process,” and the privileged document was “created for purposes of seeking legal advice of counsel and contained a column to record advice[.]” Id.
