On November 22, 2023, United States Magistrate Judge Victoria Reznik (S.D.N.Y.) provided some rare insight into “the applicability and scope of the attorney-client privilege as it relates to patent counsel.” Op. at 1. Judge Reznik explained that the attorney-client privilege belonged to the assignee and not the inventor.

In a dispute over the development of biodegradable diapers, Plaintiff Richards argued that: “[s]he has a right to discover all patent-related attorney-client communications because she had an implied attorney-client relationship with patent counsel, which made her a joint client with Defendant Everyone’s Earth.” Id. Richards also argued that “Defendants waived attorney-client privilege by disclosing patent-related communications to her and others . . . placing the attorney-client relationship directly at issue . . . and by selectively disclosing some communications about the patents but not others.” Id. Finally, Plaintiff urged that “Defendants’ communications with patent counsel are not privileged because the crime-fraud exception applies.” Id. The court rejected each argument.

The court first addressed “whether th[e] privilege belongs solely to Everyone’s Earth . . . or is shared with Plaintiff as a joint client.” Id. at 3. It considered six factors: “(1) whether a fee arrangement was entered into or a fee paid; (2) whether a written contract or retainer agreement exists indicating that the attorney accepted representation; (3) whether there was an informal relationship in which the attorney performed legal services gratuitously; (4) whether the attorney actually represented the client in one aspect of the matter (e.g., a deposition); (5) whether the attorney excluded the individual from some aspect of the representation to protect another client’s interest; and (6) whether the purported client believes that the attorney was representing him and whether this belief was reasonable.” Id. The court found that each factor weighed against a finding of an attorney-client relationship between Plaintiff and patent prosecution counsel. It explained that “[t]here is no evidence that Plaintiff entered a fee arrangement, paid a fee to, or had a contract or retainer agreement with patent counsel” and that “[t]here is no evidence that patent counsel performed any legal services gratuitously for Plaintiff.” Id. at 3-4. Rather, submissions to the patent office on behalf of Plaintiff were “activities [] performed to further patent counsel’s provision of legal services to [Defendant],” the assignee. Id. at 5. The court also noted that “Defendants excluded Plaintiff from several communications between patent counsel and representatives of Everyone’s Earth, including billing and other business matters.” Id. at 5. For the final factor, the court noted that “a person’s subjective belief that an attorney-client relationship exists, alone, is typically insufficient to show that such a relationship exists” and determined that “Plaintiff should have known that her work . . . was for the benefit of Everyone’s Earth (to which she believed she would have a beneficial interest) and that patent counsel was prosecuting the patents for Everyone’s Earth, and not Plaintiff.” Id. at 5-6. Based on that analysis, the Court held that “Plaintiff may not discover all communications between Defendants and patent counsel to which Plaintiff was not directly privy.” Id. at 6.

The court next addressed Plaintiff’s waiver argument and found that “Plaintiff served as an agent to Everyone’s Earth when she communicated with patent counsel regarding the prosecution of the patents” and explained that as “an agent of Everyone’s Earth, Plaintiff’s communications with parent counsel did not waive the privilege.” Id. at 7. Plaintiff also argued that “Defendants waived attorney-client privilege by disclosing communications to ‘third parties and lower-level employees,’” specifically “paralegals and administrators.” Id. at 8. The Court explained that “communications among patent counsel and employees and agents of Everyone’s Earth . . . did not destroy the privilege,” as they were agents “of either the attorney or the client.” Id.

Next, the court addressed Plaintiff’s argument that there was an “at-issue waiver.” As the court noted, “an at-issue waiver occurs when the party asserts a claim or defense that he intends to prove by use of the privileged materials or when the privileged materials are indispensable to that party’s claims or defenses.” Id. at 9. Because Defendants had not yet filed an answer, they had raised no claims or defenses that could present an at-issue waiver. Moreover, the court found that “Plaintiff cannot unilaterally create an implied waiver” through her own claims. Id.

Plaintiff also argued that because she had received some privileged communications during patent prosecution, a selective disclosure of privileged communications had occurred, resulting in a waiver. The court disagreed, finding that “Defendants do not appear to be using attorney-client privilege ‘both as a shield and a sword’” and explaining that “[t]he communications were disclosed to Plaintiff based on her role as inventor, which required her assistance in prosecuting the patents . . . not . . . due to a ‘strategic decision.’” Id. at 10. However, the court found that Plaintiff may use during litigation privileged communications that were disclosed to her during the patent prosecution process. “Because those communications were intentionally disclosed to Plaintiff, though without waiver, she ‘rightfully possesses these materials’ and it ‘seem[s] obvious to [the Court] that [Defendants] cannot prevent her from relying on them in [prosecuting] her lawsuit against [Defendants].” Id. at 11.

Finally, the court considered Plaintiff’s argument that a Defendant had “committed fraud and inequitable conduct on the USPTO” by misrepresenting inventorship and had “utilized the legal services of the patent attorneys in the commission thereof.” Id. at 13. Because the question of inventorship and the Defendant’s contribution, or lack thereof, to the claims of the patent were “a hotly disputed factual issue in the case,” the court found that Plaintiff had “not met her burden of establishing the crime-fraud exception.” Id. at 13.

As a result, the court concluded that the privilege for documents relating to patent prosecution was held by the assignee and not Plaintiff and there was no waiver of the privilege or any crime fraud exception, but that Plaintiff could use privileged documents in her possession in the litigation despite the absence of a waiver.

The case is Richards v. Kallish, No. 22-cv-9095 (S.D.N.Y.).