Free Order on Motion to Compel - District Court of Delaware - Delaware

Case 1:04-cv-00360-JJF Document 216 Filed 08/23/2006 Page1 0f4
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
AFFINION NET PATENTS, INC., :
Plaintiff, E
v. ; Civil Action No. 04—360—JJF
MARITZ, INC., ;
Defendant. E
MEMORANDUM ORDER
Pending before the Court is Maritz’ First Motion To Compel
Production Of Documents (D.I. 137). By its Motion, Defendant
contends that Plaintiff should be ordered to produce allegedly
privileged material that consists of communications between
Netcentives, Inc. (“Netcentives”), the previous owner of the
patent—in—suitl, and Netcentives' attorneys. Defendant argues
that this material is not privileged and must be produced because
the privilege was waived following disclosure of the material to
the previous owner, Affinion Loyalty Group, Inc., and the present
Plaintiff.
In response, Plaintiff contends that privilege was
transferred along with the ‘412 patent when the patent was sold
to Plaintiff. Plaintiff further contends that privilege was
transferred because Plaintiff and Netcentives had identical legal
interests.
1The only patent remaining in this action is United States
Patent No. 6,009,412 (“the ‘412 patent"). The other patents were
dropped when the Court granted Plaintiff's Motion To Amend (D.I.
173).9

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Plaintiff is correct that the attorney-client privilege
passes with the sale of a business or when control of a
corporation passes to new management. Graco Children's Prods. v.
Regalo, Int’l LLC, 1999 U.S. Dist. LEXIS 11392, at *10-11 (E.D.
Pa. July 29, 1999) (citing Commodity Futures Trading Comm’n v.
Weintraub, 471 U.S. 343, 349 (1985)). However, the mere
“transfer of assets, without more, is not sufficient to effect a
transfer of the privileges; control of the entity possessing the
privileges must also pass for the privileges to pass.” In re In-
Store Advertising Sec. Litig., 163 F.R.D. 452, 458 (S.D.N.Y.
1995).
According to Plaintiff, “[t]he sale here was not a simple
patent transfer — a substantial licensing business was sold . . .
.” (D.I. 149 at 2.) However, the Patent and License Purchase
Agreement that effectuated the sale makes clear that “patent
transfer" is the correct term for the transaction. (D.I. 149,
Ex. 1.) The Agreement describes the sale of “certain patents and
license agreements”; no transfer of any other operating assets is
mentioned. (Ig. at 1.) The transaction was not the sale of a
“substantial licensing business" any more than any patent can be
described as a “licensing business." Accordingly, the Court
concludes that the attorney-client privilege did not transfer to
Plaintiff with the sale of the patents—in—suit.
Plaintiff also argues that Plaintiff retains the attorney-
2

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client privilege under the doctrine of “common legal interest.”
Under this doctrine, communications made when multiple clients
consult an attorney on matters of common interest remain
privileged against third parties. Katz v. AT&T Corp., 191 F.R.D.
433, 437 (E.D. Pa. 2000); Cavallaro v. U.S., 284 F.3d 236, 249
(lst Cir. 2002). However, the Court concludes that the common
legal interest doctrine does not protect the allegedly privileged
documents in this case. The common legal interest doctrine
cannot apply to a purchaser and a seller of an asset, without
more, because the two never share an identical legal interest.
At best, they have a similar interest — the ability to enforce
the patent — at different times. Recognizing the exception in
this case would do nothing to further the purpose of allowing
“attorneys facing a common litigation opponent [to] exchange
privileged communications and attorney work product in order to
prepare a common defense without waiving either privilege.”
Schachar v. Am. Acad. of Ophthalmology, Inc., 106 F.R.D. 187, 191
(D. Ill 1985).
Plaintiff objects to the listing of document number 111 in
Netcentives' motion to compel, claiming that the document
contains legal advice rendered to NCCI, Inc., a previous name of
Plaintiff Affinion, rather than to Netcentives. The Court
accepts Plaintiff's assertion that Defendant erroneously assumed
document number 111 to be a Netcentives document, and will deny
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Defendant’s motion to compel as to this document.
As to whether Plaintiff should be required to produce
documents concerning the ‘012 patent, despite the fact that it is
no longer being asserted in the case, the Court directs the
parties to its June 8, 2006 Memorandum Opinion (D.I. 173),
wherein the Court held that documents concerning the ‘012 patent
are only discoverable to the extent that they are “actually
relevant to ineguitable conduct regarding the ‘412 patent.” (Id.
At 6.) Today’s Memorandum Order should be interpreted by the
parties in light of that Memorandum Opinion.
For the reasons set forth, the Court will grant Defendant’s
Motion to Compel Production of Documents, except as to document
number 111 and any documents outside the scope of discovery
pursuant to the Court’s June 8, 2006 Memorandum Opinion.
NOW THEREFORE, IT IS HEREBY ORDERED that Defendant's Motion
to Compel Production of Documents (D.I. 137) is GRANTED IN PART
and DENIED IN PART.
August Q;)2006 %\é¢w3 ;j§ §CLow44,%%
DATE I D ` AT S DISTRICT GE
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