United States District Court, D. Massachusetts
CRANE SECURITY TECHNOLOGIES, INC. AND VISUAL PHYSICS, LLC, Plaintiffs/Defendants- in Counterclaim,
ROLLING OPTICS, AB Defendant /Plaintiff-in Counterclaim
ORDER ON ROLLING OPTICS AB'S MOTION TO COMPEL
PRODUCTION OF DOCUMENTS IMPROPERLY WITHHELD (#192).
PAGE KELLEY UNITED STATES MAGISTRATE JUDGE.
Security Technologies, Inc., is the exclusive licensee of the
five U.S. patents at issue in this case. The patents
“relate generally to optical systems that project
synthetic images that ‘move' and that include image
icons formed as voids or recesses.” #79 ¶ 1. Crane
“is the exclusive supplier of banknote paper for United
States currency and also supplies other counterfeit-deterrent
banknote papers and security devices used around the
world.” Id. ¶ 2. Crane asserts that an
“optical system” that is made using the patents -
which, for example, on a $100 bill appears as a small strip
of metallic-blue paper with images in it that appear to move
around when the bill is moved - is difficult to copy, and so
is “extremely useful as [an] anti-counterfeiting
feature on currency.” Id. ¶ 1.
Rolling Optics (RO) describes itself as a nanotechnology
company that “makes and sells innovative 3D micro-optic
foils. Typical applications for these foils are for use on
product labels or packaging, to enhance or create brand
impact or to assure the genuineness of a branded
product.” #13 ¶ 3. Crane claims that the foils
that RO makes and sells, “intended for use on security
labels and stickers for certain consumer goods such as
fashionable footwear, cognac, wine, champagne, and business
cards, ” infringe its patents. #79 ¶ 14.
seek a declaration that Visual Physics is the owner and Crane
is the exclusive licensee of the five patents, that each
patent is valid and enforceable, and that RO is infringing on
each of the patents. They also seek monetary and injunctive
relief. Id. ¶¶ 53-59.
initially counterclaimed for, among other things, declaratory
judgment of invalidity and non-infringement of the five
patents. #87. In August 2016 Judge Sorokin allowed
RO's motion to add an inequitable conduct counterclaim.
#245. In short, RO claims that the patents are invalid,
because when applying for the patents, Crane (together with
the company from which Crane purchased the patents,
Nanoventions (NV)), withheld information from the Patent and
Trademark Office that would have established that the
inventors had violated the “on-sale bar” in 35
U.S.C. § 102(b). See #245, Judge Sorokin's
Order, and #254, answer to plaintiffs' amended complaint
filed a motion to compel production of documents improperly
withheld as privileged. ##192, 198 (unredacted memorandum in
support). Crane opposed the motion, ##220, 221 (unredacted),
and RO responded, ##225, 243-3 (unredacted). Judge Sorokin
referred the motion to this court on August 29, 2016. #246.
On October 31, this court held a hearing on the motion and
after argument ordered the parties to confer and Crane to
revise its privilege log. #261. On December 1, 2016 this
court held a telephone conference and ordered Crane to file
the revised log and copies of the documents still in dispute
for ex parte review, and the parties to file any
post-hearing memoranda, by December 19, which they did.
##269, 276, 276-1 (unredacted), 278, 278-1 (unredacted). Then
the parties filed replies. ##283, 285, 289 (unredacted). On
January 9, 2017, the court held a telephone conference at
which the court sought to clarify which documents RO was
disputing; asked Crane to provide certain additional
documents; and asked Crane to provide additional declarations
regarding certain documents. #290. Crane provided the
requested documents and declarations. ##291-94. The parties
filed letters with the court concerning the telephone
conference. ##297, 298. On January 30, 2017, the court
ordered Crane to further justify its claim of privilege as to
certain documents and on February 2, Crane responded ex
parte. ## 299-301.
August 2002 Crane entered into a Confidentiality Agreement
with NV, because Crane was interested in using NV's
optical system as a security device on currency. See
#222-1. NV had not patented the technology at that time.
Thereafter, the parties entered into the following additional
agreements: in September 2003, Crane and NV entered into a
Non-Disclosure Agreement in order to negotiate Crane's
obtaining a license to use NV's technology, #222-3; in
April 2004, they entered into a License Agreement in which NV
granted Crane a license to use the technology, which by that
time had been patented, #222-2; in September 2007, they
entered into another Non-Disclosure Agreement, #222-4; and in
September 2008 they signed a Unit Purchase Agreement, which
finalized Crane's purchase of the patents-in-suit,
effectuated through Crane's aquiring a subsidiary of NV,
Visual Physics. #222-7.
executives at Crane first became interested in NV's
technology, they were concerned that it was not protected by
a patent. See, e.g., #183-38 (Crane executive
explains in email dated October 28, 2003 that he and patent
counsel for Crane “are zeroing in on the IP right now
since almost nothing is more important than that.”)
Crane began to investigate licensing or acquiring NV's
technology, see #276-1 at 7, and began exchanging
legal advice with NV concerning acquiring patents on the
technology. See, e.g., privilege log nos. 37-47
(emails dated November 2003, between patent counsel for
Crane, Mary Bonzagni, patent counsel for NV, Todd Deveau, and
the inventor of the technology, Richard Steenblik, concerning
patent prosecution.) Over the next several years Crane
continued to cooperate with NV concerning further patenting
the technology and eventually, after negotiating with NV for
many months, purchased the intellectual property from NV in
2008. ##276-1 at 7; 279-2 at 2.
challenges approximately 600 entries on Crane's privilege
log totaling about 4, 000 pages of privileged
documents. ##276-1 at 1; 283 at 2 n.1. The documents
can be divided into four categories. First, there are
documents dated before April 16, 2004, which is when the
License Agreement between Crane and NV took effect. #278-1 at
14. Second, RO seeks documents between Crane and NV from the
time of the License Agreement in April 2004, up to the time
Crane agreed to purchase the patents-in-suit in 2008.
Id. at 15. Third, RO seeks communications between
Crane and an investment banking firm that Crane retained to
assist with the acquisition of the patents-in-suit.
Id. at 16. Finally, RO seeks documents that Crane
shared with non-parties; communications between
non-attorneys; and attorneys' memoranda to the file.
Id. at 17-20.
court has read all of the challenged documents and the
privilege log. The court finds that all of the documents are
privileged, for the reasons set out below.
The law pertaining to privilege
Civ. P. 26(b)(1) provides that parties may obtain discovery
“regarding any nonprivileged matter that is relevant to
any party's claim or defense and proportional to the
needs of the case.” Plaintiffs assert attorney-client
privilege and also argue that the community of interest
exception to third-party waiver applies to certain challenged
documents. Plaintiffs bear the burden of establishing that
the privilege applies. State of Maine v. United States
Dep't of the Interior, 298 F.3d 60, 71
(1st Cir. 2002). “If the privilege is
established and the question becomes whether an exception to
it obtains, the devoir of persuasion shifts to the proponent
of the exception.” FDIC v. Ogden Corp., 202
F.3d 454, 460 (1st Cir. 2000).
this is a patent case, the issues raised here pertaining to
privilege and waiver are not unique to patent law and thus
First Circuit law concerning privilege applies. See In re
Spalding Sports Worldwide, Inc., 203 F.3d 800, 804 (Fed.
Cir. 2000) (because issue whether “licensor and a
licensee are joint clients for purposes of privilege under
the community of interest doctrine...[is] not unique to
patent law, ” regional circuit law applies).
Attorney-client privilege - in general
set out the elements of the attorney-client privilege:
‘(1) Where legal advice of any kind is sought (2) from
a professional legal advisor in his capacity as such, (3) the
communications relating to that purpose, (4) made in
confidence (5) by the client, (6) are at his instance
permanently protected (7) from disclosure by himself or by
the legal adviser (8) except the protection be waived.'
Cavallaro v. United States, 284 F.3d 236, 245
(1st Cir. 2002) (quoting 8 J. H. Wigmore,
Evidence § 2292, at 554 (McNaughton rev.
1961)). The privilege is limited in that it “applies
only to the extent necessary to achieve its underlying goal
of ensuring effective representation between lawyer and
client.” In re Grand Jury Subpoena (Custodian of
Records, Newparent, Inc.), 274 F.3d 563, 571
(1st Cir. 2001) (citing Fisher v. United
States, 425 U.S. 391, 403 (1976)); see also In re
Keeper of Records (Grand Jury Subpoena Addressed to XYZ
Corp.), 348 F.3d 16, 22 (1stCir. 2003)
(attorney-client privilege is narrowly construed because it
“stands as an obstacle of sorts to the search for
must “have been intended to be confidential and made
for the purpose of giving or obtaining legal advice” to
qualify as privileged. Cavallaro, 284 F.3d at 245.
Disclosing attorney-client communications to a third party
undermines the privilege. Id. at 247.
The common-interest doctrine
common-interest doctrine, which is not an independent
privilege but is an exception to the rule that the
attorney-client privilege is waived when privileged
information is disclosed to a third party, applies when
parties share a substantially identical interest in the
subject matter of a legal communication. See
Cavallaro, 284 F.3d at 249-50, citing In re Grand
Jury Subpoena, 274 F.3d 563, 573 (1st Cir.
2001). One application of the doctrine as it pertains to
patent cases is discussed in the leading case In re
Regents of the Univ. of California, 101 F.3d 1386, 1390
(Fed. Cir. 1996). In Regents, the Federal Circuit
explained that “[c]onsultation with counsel during
patent prosecution meets the criteria of compliance with law
and meeting legal requirements, thereby reducing or avoiding
litigation, and is within the scope of subject matter that is
subject to the attorney-client privilege.” Id.
at 1391. The court noted that it had long been held that
“‘[a] community of legal interests may arise
between parties jointly developing patents; they have a
common legal interest in developing the patents to obtain
greatest protection and in exploiting the
patents.'” Id. at 1389 (quoting Baxter
Travenol Labs, Inc. v. Abbott Labs., 1987 WL 12919, at
*1 (N.D. Ill. June 19, 1987)) and (citing SCM Corp. v.
Xerox Corp., 70 F.R.D. 508, 514 (D. Conn. Feb. 4, 1976)
(“Whether the legal advice was focused on pending
litigation or on developing a patent program that would
afford maximum protection, the privilege should not be denied
when the common interest is clear”), appeal
dismissed, 534 F.2d 1031 (2nd Cir. 1976)).
Regents court, following this precedent, held that
communications between a potential licensee and an
inventor/patentee were privileged under the common-interest
doctrine because “both parties had the same interest in
obtaining strong and enforceable patents.” 101 F.3d at
1390. It did not matter that one party had not retained the
other party's attorney: “the issue is not who
employed the attorney, but whether the attorney was acting in
a professional relationship to the person asserting the
privilege.” The court concluded that “the legal
interest [between the potential licensee and the
inventor/patentee] was substantially identical because of the
potentially and ultimately exclusive nature” of the
license agreement: “Valid and enforceable
patents” on the inventions “are in the interest
of both parties.” Id.
test for application of the doctrine requires that the
interest be “identical, not similar, and be legal, not
solely commercial.” Id. With regard to what
“legal interest” means in the context of patent
cases, other courts have followed Regents in finding
that communications concerning the strength and
enforceability of patents between parties who are negotiating
exclusive patent licenses are protected under the
common-interest doctrine, even though the communications
obviously have a commercial purpose, as well.
Regents, 101 F.3d at 1390 (quoting Duplan
Corp.v. Deering Milliken, Inc., 397 F.Supp. 1146, 1172
(D.S.C. 1974) (“The fact that there may be an overlap
of a commercial and a legal interest for a third party does
not negate the effect of the legal interest in establishing a
community of interest”)); Hilsinger v. Eyeego,
LLC, 2015 WL 11120842, at *2 (D. Mass. Aug. 13, 2015)
(approvingly citing Regents for the proposition that
communications between parties negotiating licensing
agreement were privileged as they were pursuing common legal
strategy concerning enforcement of patents-in-suit);
Luminara Worldwide, LLC v. Liown Electronics Co.,
Ltd., Case No. 0:14-cv-03103-SRN-FLN, ECF No. 427, at
15-18 (D. Minn. Mar. 29, 2016) (interests in obtaining and
protecting strong and enforceable patent rights are regularly
found to be common legal interests held by a patentee and its
licensee and communications in further of those interests are
protected by the community of interest doctrine); MPT,
Inc. v. Marathon Labels, Inc., 2006 WL 314435, at *7
(N.D. Ohio Feb. 9, 2006) (licensee and patent owners have
common legal interest).
doctrine of Unite ...