Free Motion to Compel - District Court of Colorado - Colorado

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I N T HE U NITED S TATES D ISTRICT C OURT F OR T HE D ISTRICT O F C OLORADO Civil Action No. 03-CV-02579-RPM-BNB VARCO, L.P., Plaintiff, vs. PASON SYSTEMS USA CORP., Defendant.

PLAINTIFF'S MOTION TO COMPEL DEFENDANT TO PRODUCE DOCUMENTS

Pursuant to Fed. R. Civ. P. 37(a)(2)(B), Plaintiff Varco, L.P. ("Varco"), by its counsel, respectfully submits this Motion to Compel Defendant to Produce Documents ("Motion"). Specifically, Varco seeks an order compelling Defendant Pason Systems USA Corp. ("Pason") to produce documents relevant to Pason's "advice of counsel" defense to Varco's claims of willful patent infringement. As grounds for this request, Varco states as follows: CERTIFICATION PURSUANT TO LOCAL RULE 7.1(A) The undersigned certifies that, pursuant to Fed. R. Civ. P. 37(a)(4)(A), Varco's counsel has made good faith efforts to obtain the discovery sought in this Motion without the court's intervention. Undersigned counsel has conferred with Pason's counsel and is authorized to represent that Pason opposes this Motion.

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INTRODUCTION In this action, Varco contends that Pason willfully infringed United States Patent No. 5,472,142 (the `142 patent). Varco further contends that Pason willfully continued to infringe the `142 patent after (1) Varco filed this suit; (2) the United States Patent and Trademark Office ("PTO") determined that the `142 patent is valid; and (3) Pason received a legal opinion stating that its device operates within the scope of at least one of the claims of the `142 patent. Pason claims that, because it relied on two legal opinions stating that its device does not infringe the `142 patent, any ensuing infringement of the patent is not willful. The two legal opinions are: a letter written by attorney Terry Leier ("Leier") to Pason's outside counsel H. Ronald Hansford on February 8, 2000, and a letter written by Leier to Pason president Jim Hill ("Hill") on October 29, 2002. Pason has thus refused to produce the requested documents, despite the fact that it is asserting a "reliance on advice of counsel" defense to Varco's claim for willful infringement. As the Federal Circuit has recently enunciated, in patent litigation, when an alleged infringer asserts its advice-of-counsel defense regarding willful infringement of a particular patent, it waives immunity for any document or opinion that embodies or discusses a communication to or from it concerning whether that patent is valid, enforceable, and infringed by the accused. In re Echostar Comm. Corp., 448 F.3d 1294, 1304 (Fed. Cir. 2006) (emphasis added). Notwithstanding this legal authority, Pason has refused to disclose all documents embodying or discussing its communications concerning whether the `142 patent is valid and enforceable or infringed by Pason's device. For example, Pason has listed on

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its privilege log and refused to produce the following documents, contending that the documents are protected by the attorney-client privilege and work product immunity: 1. A January 26, 2004 letter with enclosures from Leier to Pason employee Bob Rodda ("Rodda") (PAS 00001-00005); 2. Letters and emails exchanged by Leier and Pason employee David Dolezsar ("Dolezsar") from September 30, 2002 through August 19, 2003 (PAS 0012300133, 00779, 00780, 00781, 00784-00785, 00786, 00787); 3. A January 16, 2003 email from Dolezsar to Hill (PAS 00782-00783); 4. Letters from Leier to Hill dated October 29, 2002 and December 25, 2002 (PAS 00890-00903 and PAS 00904-00905); 5. Notes concerning a telephone meeting attended by Leier, Dolezsar, and three other individuals (PAS 00804-00808); 6. A February 25, 2004 email from Pason employee Francis Dunlop to Rodda and Pason employee Trevor Holt (PAS 01336); 7. Undated handwritten notes entitled "Terry Lier [sic]" (PAS 00799-00802); 8. Undated handwritten notes entitled "Francis' Notes . . ." (PAS 00803); 9. Undated document entitled "Notes" (PAS 00798); and 10. Invoices from Blake, Cassells & Graydon LLP ­ Leier's law firm ­ to Pason for legal services from February 2002 through December 2003 (PAS 00839-00851). See Ex. 1. Further, Pason has refused to produce documents "constituting, containing or reflecting any oral or written communication between the defendant and Mr. Terry L. Leier regarding any opinions with respect to infringement, validity and/or enforcement

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of the `142 patent" to the extent such documents were "prepared [after the] commencement of litigation." See Ex. 2 at 11-12. 1 Pason's failure to produce all of the documents described above has no legal basis and unduly prejudices Varco's ability to prepare for trial. In asserting an "advice of counsel" defense, Pason cannot pick and choose the protected communications that it will disclose. By waiving the attorney-client privilege and work product protection for two of Leier's written opinions, Pason necessarily waived the privilege and protection for all documents embodying or discussing its communications concerning whether the `142 patent is valid and enforceable or infringed by Pason's device. Accordingly, Varco respectfully requests an order compelling Pason to produce all such documents. ARGUMENT Federal Circuit law governs the discoverability issues that arise from assertion of the "advice of counsel" defense in a willful patent infringement case, because those

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Varco requested production of: 36. All documents constituting, containing or reflecting any oral or written communication between the defendant and Mr. Terry L. Leier regarding any opinions with respect to infringement, validity, and'or enforcement of the `142 Patent.

Pason responded: OBJECTION: Pason objects to this Request as seeking documents covered by the attorney work product and attorney-client privileges. RESPONSE: Without in any way waiving this objection, Pason has produced responsive documents prepared prior to commencement of litigation. Ex.2 at 11-12.

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issues involve issues of substantive patent law. See Echostar, 448 F.3d at 1298. "Once a party announces that it will rely on advice of counsel . . . in response to an assertion of willful infringement, the attorney-client privilege is waived" for "all other communications relating to the same subject matter." Id. at 1299 (quotations omitted; emphasis added); see also 1 E THAN H ORWITZ & L ESTER H ORWITZ , P ATENT L ITIGATION : P ROCEDURE & T ACTICS § 5.01[4], at 5-86 (2006) ("When some opinion letters are submitted to rebut a charge of willful infringement, the [attorney-client] privilege is waived as to any other such opinions of counsel on the same subject matter. Moreover, the patentee is entitled to discover the full nature, extent, and basis of the advice given by counsel and the facts surrounding defendant's good faith reliance on such advice. This is so because willful infringement issues are fact questions determined from `the totality of the circumstances.'" (citing Antonious v. Wilson Sporting Goods Co., No. 89 C 6675, 1990 WL 106530, at *2 (N.D. Ill. July 10, 1990)). Reliance on the "advice of counsel" defense also waives work product protection for "documents that embody a communication between the attorney and the client concerning the subject matter of the case," as well as "documents that discuss a communication between attorney and client concerning the subject matter of the case but are not themselves communications to or from the client." Echostar, 448 F.3d at 1302. The only types of documents that are excluded from the scope of the waiver are "documents analyzing the law, facts, trial strategy, and so forth that reflect the attorney's mental impressions but were not given to the client." Id.

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"The waiver of attorney-client privilege or work product protection does not . . . exist solely at a particular point of time, such as when the client receives the opinion from counsel." Akeva L.L.C. v. Mizuno Corp., 243 F. Supp. 2d 418, 423 (M.D.N.C. 2003). Rather, "because infringement is a continuing activity, the requirement to exercise due care and seek and receive advice is a continuing duty." Id. Thus, "once a party asserts the defense of advice of counsel, this opens to inspection the advice received during the entire course of the alleged infringement," and "the waiver of attorney-client privilege or work product protection covers all points of time, including up through trial." Id. (emphasis added). Similarly, "[s]ince the waiver encompassed the subject matter of advice, . . . all opinions received by counsel must be revealed, even those opinions the client receives from attorneys other than opinion counsel." Id. (emphasis added). "The totality of the circumstances test requires that all knowledge gained by the infringer relating to the advice subject matter must be revealed so that the factfinder can make its own determination as to whether the reliance was reasonable." Id. These rules defining the scope of the waiver "prevent a party from using the advice he received as both a sword, by waiving privilege to favorable advice, and a shield, by asserting privilege to unfavorable advice." Echostar, 448 F.3d at 1303. They also prevent counsel from withholding pertinent advice from an opinion letter, while providing unfavorable advice to his or her client in separate communications that the client attempts to immunize from discovery under a claim of privilege.

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Under these rules, Varco is entitled to examine all documents embodying or discussing Pason's communications concerning whether the `142 patent is valid and enforceable or infringed by Pason's device. Such documents include those created at any point in time, including after the commencement of this litigation. Such documents also include those embodying or discussing Pason's communications with any counsel, not just Leier. The circumstances of this case make Pason's production of these documents particularly critical. Leier wrote a letter to Pason's outside counsel on February 8, 2000. See Ex. 3. In that letter, Leier stated that (1) claim 1 of the `142 patent was not infringed, see id. at 5-7; (2) claim 11 was invalid in view of a prior patent issued to Justin Varney, see id. at 10; and (3) he did not have sufficient information to determine whether Pason's device infringed claim 14. See id. Pason provided the February 8, 2000 opinion letter in support of its "advice to counsel" defense to Varco's claim of willful infringement. On January 23, 2004, 2 Pason instituted a re-examination of the `142 patent in the PTO, contending that the `142 patent was not valid in view of the Varney patent. See Ex. 4. The PTO rejected Pason's arguments and determined that the contested claims of the `142 patent were valid. See Exs. 5 and 6. In May 2004, Leier sent an email to several Pason employees, concluding that Pason's device operates "within the

Varco (formerly known as Wildcat Services) served Pason with the Summons and Complaint in this lawsuit in early January 2004.

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parameters of claim 14" of the `142 patent at least some of the time, thus infringing the 142 patent. See Ex. 7 at 2. Even after learning of the PTO decision reaffirming the validity of the `142 patent and the May 2004 opinion from Leier, Pason has continued to argue that Leier's February 2000 and October 2002 opinions justify its "advice of counsel" defense. 3 The trier of fact will need to determine whether Pason's continued reliance on the earlier legal opinions constitutes willful infringement. In preparing for trial, Varco is entitled to examine the entirety of Pason's communications with counsel regarding the subject matter of those opinions , as well as the facts and circumstances surrounding Pason's other communications with counsel concerning the validity, enforceability and/or infringement of the `142 patent. In accordance with the Federal Circuit's recent decision in Echostar, see 448 F.3d at 1304, Pason is required to produce all documents embodying or discussing its communications with any counsel concerning whether the `142 patent is valid and enforceable or infringed by Pason's device. CONCLUSION Pason chose to inject its communications with counsel into this dispute when it asserted an "advice of counsel" defense and waived the attorney-client privilege and work product protection for two legal opinions provided by one of its attorneys. Pason cannot waive the privilege and protection for two communications that it alleges

In his October 29, 2002 opinion letter to Pason, Leier stated: "Since infringement is country specific, I have addressed the matter of infringement from a Canadian perspective only as we are a Canadian law firm." Ex. 8 at 1.

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support its defense, while denying Varco the opportunity to review other communications that may undercut that defense.

WHEREFORE, Varco respectfully requests that the Court: 1. Order Pason to produce the following documents immediately: a. b. The documents labeled PAS 00001-00005, identified on Pason's privilege log as "Letter from T. Leier to B. Rodda with enclosures"; The documents labeled PAS 00123-00133, PAS 00779, PAS 00780, PAS 00781, PAS 00784-00784, PAS 00786, and PAS 0078, identified on Pason's privilege log as comprising correspondence between Pason employee David Dolezsar and Pason's counsel Terry Leier; The documents labeled PAS 00782-00783, identified on Pason's privilege log as comprising correspondence between Pason employee David Dolezsar and Pason president Jim Hill; The documents labeled PAS 00890-00903 and PAS 00904-00905, identified on Pason's privilege log as comprising correspondence between Pason's counsel Terry Leier and Pason president Jim Hill; The documents labeled PAS 00804-00808, identified on Pason's privilege log as comprising notes concerning a telephone meeting attended by Pason's counsel Terry Leier and Pason employees including Trevor Holt; The documents labeled PAS 00799-00802, identified on Pason's privilege log as comprising handwritten notes entitled "Terry Lier [sic]"; The document labeled PAS 01336, identified on Pason's privilege log as comprising an email exchanged among Pason employees Francis Dunlop, Bob Rodda and Trevor Holt dated February 24, 2004; The documents labeled PAS 00839-00851, identified on Pason's privilege log as comprising billing invoices to Pason from the firm at which Terry Leier was employed from February 2002 to December 2003, to the extent such records contain any information concerning the preparation and delivery of or discussions concerning any opinion of Pason's counsel regarding the issues of infringement or validity of the `142 patent;

c.

d.

e.

f. g.

h.

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i. j. k.

The document labeled PAS 00803, identified on Pason's privilege log as "Francis' Notes . . ."; The document labeled PAS 00798, identified on Pason's privilege log as "Notes"; and All documents embodying or discussing a communication to or from Pason concerning whether the `142 patent is valid, enforceable, or infringed by Pason.

2. Order Pason to pay the reasonable attorneys' fees incurred by Varco in bringing this Motion, pursuant to Fed. R. Civ. P. 37 (a)(4)(A). 3. Order such other and further relief as the Court deems just and proper. Dated this 5th day of October, 2006. Respectfully submitted,

s/Jane Michaels Jane Michaels Joseph T. Jaros H OLLAND & H ART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Tel. (303) 295-8000 Fax (303) 295-8261 [email protected] [email protected] Guy E. Matthews Robert M. Bowick M ATTHEWS , L AWSON , B OWICK & A L -A ZEM , PLLC 2000 Bering Drive, Suite 700 Houston, Texas 77057 Tel. (713) 355-4200 Fax (713) 355-9689 [email protected] [email protected] ATTORNEYS FOR PLAINTIFF VARCO, L.P.

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C ERTIFICATE O F S ERVICE I hereby certify that on October 5, 2006, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following: [email protected] [email protected]

s/Jane Michaels _________________________
3612343_3.DOC

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