Sanctions May Be Too Harsh in Privilege Spat

     (CN) – A Colorado law firm should face sanctions for refusing to comply with a subpoena that it believed violated attorney-client privilege, the Federal Circuit ruled.
     The contempt sanction at issue arose from a 2011 patent dispute between Wi-LAN and LG Electronics. LG licensed V-chip technology, which enables ratings-based blocking of TV programs, from Wi-LAN’s predecessor.
     After later concluding that its televisions did not use Wi-LAN technology, LG later said it did not owe royalties.
     Wi-LAN responded with a detailed analysis of the patented technology in question prepared by the law firm Kilpatrick Townsend & Stockton under its former name of Townsend and Townsend and Crew.
     LG subsequently subpoenaed the Palo Alto firm in the Northern District of California, demanding documents and testimony relating to its analysis.
     Wi-LAN moved to quash the subpoena, arguing that attorney-client privilege protected the materials.
     After Kilpatrick Townsend lost several attempts at quashing the subpoena, the court held the firm in contempt and ordered it to pay LG’s costs and fees associated with the delay.
     The Federal Circuit, which has jurisdiction to review offshoot appeals from a patent-infringement case, vacated the contempt order and directed the lower court to take another look at whether LG’s dissemination of the attorneys’ letter waived privilege. “The question presented by this appeal thus concerns not whether Wi-LAN waived its privilege, but how far the waiver extended,” Judge Craig Clevenger wrote for a three-member panel.
     To determine that issue, the court should have applied a fairness balancing test.
     “The Ninth Circuit has repeatedly endorsed fairness balancing in a variety of circumstances; more to the point it has never set forth, either expressly or inherently, any rule barring fairness’s application to extrajudicial disclosures,” Clevenger wrote. “Nor do the Ninth Circuit’s cases suggest any policy reason why the fairness protections available for express disclosures in litigation should be unavailable to those who waive privilege pre-litigation.”
     On remand, the trial court will again consider whether Kilpatrick Townsend’s failure to comply was contempt.
     “In some cases one who disputes a subpoena’s lawful scope has no alternative but to invite a contempt citation in order to obtain appellate review,” Clevenger wrote.
     “Nevertheless, it is not for this court to determine whether and to what extent Kilpatrick Townsend should pay a penalty for its failure to either properly move the district court for certification of an interlocutory appeal or to seek mandamus review from this court when faced with an unlawful production order,” he added.

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