Addressing scope of waiver under U.S. Court of Appeals for the Ninth Circuit law, the U.S. Court of Appeals for the Federal Circuit vacated a lower court’s production order and contempt sanctions ruling, concluding that assessing the scope of an extra-judicial express waiver of attorney-client privilege necessarily requires consideration of fairness. Wi-LAN, Inc. v. LG Electronics, Inc., Case No. 11-1626 (Fed. Cir., July 13, 2012) (Clevenger, J.) (Reyna, J., dubitante).

The case arose from a patent dispute between Wi-LAN and LG. Wi-LAN accused LG of infringing patents directed to “V-chip” technology for ratings-based blocking of television programs. Before filing suit against LG, Wi-LAN attempted to convince LG of its infringement by forwarding a privileged letter from Wi-LAN’s outside counsel that analyzed Wi-LAN’s patent rights and concluded that LG’s products infringed. The discussions were not successful and Wi-LAN sued LG for infringement of its patents. Upon the filing of the lawsuit, LG subpoenaed Wi-LAN’s outside counsel for “documents and testimony relating to the subject matter” of the letter, i.e., Wi-LAN’s allegations of LG’s infringement of its patents.

Wi-LAN’s outside counsel, Kilpatrick Townsend & Stockton LLP, moved to quash the subpoena, arguing that, even if the disclosure of the letter had resulted in a privilege waiver, this waiver should be limited to the letter itself. This argument was based in significant part on fairness balancing, the concept that a privilege waiver should extend to undisclosed materials only when the disclosed and undisclosed materials should in fairness be considered together. The lower court concluded that a broad subject-matter waiver occurred. Wi-LAN’s outside counsel Kilpatrick refused to comply with the discovery orders, was found in contempt, and appealed the contempt finding.

The Federal Circuit vacated the lower court’s ruling, concluding that the lower court should have considered Kilpatrick’s arguments regarding the fairness of limiting the scope of the extra-judicial express waiver. Considering 9th Circuit law, the Federal Circuit found that the district court erred by not considering whether LG would be unfairly prejudiced by Wi-LAN’s assertion of privilege against discovery into attorney-client communications beyond the four corners of the letter. The Federal Circuit found that considering fairness arguments in this situation “resonates with certain trends in federal privilege law.”

The Federal Circuit also vacated the lower court’s entry of contempt sanctions against Kilpatrick but acknowledged the lower court’s discretion to revisit the issue on remand. The Federal Circuit explained that sanctions might still be appropriate, given Kilpatrick’s failure take necessary actions to avoid a contempt ruling, such as properly moving for certification of an interlocutory appeal or seeking mandamus review from the Federal Circuit when faced with an unlawful production order.

In a dubitante opinion, Judge Reyna disagreed with the majority’s willingness to divine from the precedent a trend favoring fairness balancing and concluded, “as I cannot prove or disprove our result, I go along with the majority—but with doubt.”

Practice Note: The Federal Circuit appears to have articulated, in the last sentence of the majority opinion, a policy that supports immediate appellate review of all orders compelling the disclosure of privileged materials, despite the Supreme Court’s ruling in Mohawk Industries v. Carpenter, 130 S. Ct. 599 (2000), that district court orders compelling production of privileged materials are not immediately appealable as collateral orders.