Opinion
Cause No. 1:03-CV-0170-DFH
April 11, 2003.
ENTRY ON EMERGENCY MOTION TO COMPEL
Most trademarks protect names or symbols, but a product's shape may be trademarked in some instances. See, e.g., Kohler Co. v. Moen Inc., 12 F.3d 632 (7th Cir. 1993) (divided decision upholding validity of trademark for shape of faucet and handle design); Wiley v. American Greetings Corp., 762 F.2d 139, 141-42 (1st Cir. 1985) ("It is hornbook law that `[o]rdinary geometric shapes such as circles, ovals, squares, etc., . . . are regarded as non-distinctive and protectable only upon proof of secondary meaning.'"), quoting J. Thomas McCarthy, Trademarks and Unfair Competition, § 7:12, at 172 (1973); Brooks Shoe Mfg. Co., Inc. v. Suave Shoe Corp., 716 F.2d 854, 858 (11th Cir. 1983), also quoting McCarthy, supra.
After protracted administrative proceedings, defendant Honeywell International, Inc. secured from the Trademark Trial and Appeal Board in 1990 trademark registration No. 1,622,108 ("the '108 registration") for the round shape of its thermostats. On February 4, 2003, after an exchange of correspondence with defendant Honeywell, plaintiff Eco Manufacturing LLC filed this action seeking a declaratory judgment that circular thermostats it intends to manufacture and sell would not violate Honeywell's trademark rights. Honeywell has responded by moving for a preliminary injunction blocking plaintiff Eco Manufacturing from manufacturing or selling circular thermostats. A hearing on the motion for preliminary injunction is scheduled for May 19, 2003. The parties are engaged in expedited discovery.
Plaintiff Eco Manufacturing produced in discovery a letter from its attorney expressing the opinion that a proposed design for a circular thermostat would not infringe Honeywell's '108 registration or Honeywell's trade dress, and would not violate the federal trademark anti-dilution act, 15 U.S.C. § 1125(c). Honeywell then sought discovery of additional matters relating to that opinion, including attorney-client communications about earlier designs and the attorney's drafts, research files, and thought processes in developing the opinion. Eco Manufacturing and its attorneys raised attorney-client and attorney work product privilege objections to some of those additional discovery requests relating to the subject matter of the opinion letter. Honeywell filed an emergency motion to compel additional discovery responses from Eco Manufacturing and its counsel regarding the subject matter of the opinion letter. The court directed expedited briefing and held a hearing on March 26, 2003.
The parties agree that Eco Manufacturing's disclosure of the opinion letter effected a waiver of the attorney-client privilege regarding all attorney-client communications on the subject matter of the letter. See, e.g., Abbott Laboratories v. Baxter Travenol Laboratories, Inc., 676 F. Supp. 831, 832 (N.D.Ill. 1987); Micron Separations, Inc. v. Pall Corp., 159 F.R.D. 361, 363-64 (D.Mass. 1995); see also Lorenz v. Valley Forge Ins. Co., 815 F.2d 1095, 1099 (7th Cir. 1987) (applying Indiana law: "By offering an attorney's testimony to a specific communication, a client waives the attorney-client privilege only as to disclosure of other communications on the specific matter to which the attorney testified."), citing Key v. State, 132 N.E.2d 143, 145 (Ind. 1956). A party waiving the privilege may not merely pick and choose, disclosing favorable communications and concealing unfavorable ones. E.g., Abbott Laboratories, 676 F. Supp. at 832; Eli Lilly Co. v. Zenith Goldline Pharmaceuticals, Inc., 149 F. Supp.2d 659, 661 (S.D. Ind. 2001). Also, the parties agree that the attorney work product privilege has been waived to the extent it might apply to any attorney-client communications that are also covered by the attorney-client privilege.
The parties disagree on two issues: (1) whether the subject matter of the disclosed opinion letter includes prior communications about earlier designs of plaintiff's circular thermostat, and (2) whether the waiver also effected a broader waiver of the attorney work product privilege, so as to require disclosure of the opining attorney's files and thought processes that were not communicated to the client.
I. Earlier Attorney-Client Communications
The opinion letter disclosed by Eco Manufacturing is dated December 9, 2002. The letter was written after many months of dialogue between Eco Manufacturing and its attorneys. In January 2002, the same law firm provided to Eco Manufacturing a draft opinion letter on an earlier design of a circular thermostat. At least initially, Eco Manufacturing took the position that legal advice on earlier designs was not advice on the same subject matter as that of the December 9, 2002 letter. The court rejects this position.
The "same subject matter" standard for waiver "seeks to prevent the selective, calculated disclosure of privileged communications." United States v. Skeddle, 989 F. Supp. 917, 919 (N.D.Ohio. 1997); accord, Chinnici v. Central DuPage Hospital Assoc., 136 F.R.D. 464, 465 (N.D.Ill. 1991); Teachers Ins. and Annuity Ass'n of America v. Shamrock Broadcasting Co., 521 F. Supp. 638, 641 (S.D.N.Y. 1981). The goal of the "same subject matter" standard is to ensure that a client, to use the shibboleth almost always invoked in such cases, cannot use waiver of the privilege as a sword as well as a shield. At bottom, the scope of waiver is a matter of basic fairness to the opposing party.
As Judge Carr explained in United States v. Skeddle, the "same subject matter" standard has not been defined precisely, apart from a general instruction to construe the concept narrowly. 989 F. Supp. at 919. The issue in Skeddle was the extent of a waiver that occurred when a corporation's general counsel testified about some of his privileged conversations in the course of investigating an alleged scheme to defraud his employer-client. The defendants in the criminal case argued that the testimony waived the attorney-client and work product privileges as to the entire content of the corporation's investigative file. The court rejected that position and then, to assist other courts and counsel, articulated several factors that courts may consider in determining the scope of the waiver:
Among the factors which appear to be pertinent in determining whether disclosed and undisclosed communications relate to the same subject matter are: 1) the general nature of the lawyer's assignment; 2) the extent to which the lawyer's activities in fulfilling that assignment are undifferentiated and unitary or are distinct and severable; 3) the extent to which the disclosed and undisclosed communications share, or do not share, a common nexus with a distinct activity; 4) the circumstances in and purposes for which disclosure originally was made; 5) the circumstances in and purposes for which further disclosure is sought; 6) the risks to the interests protected by the privilege if further disclosure were to occur; and 7) the prejudice which might result if disclosure were not to occur. By applying these factors, and such other factors as may appear appropriate, a court may be able to comply with the mandate that it construe "same subject matter" narrowly while accommodating fundamental fairness.989 F. Supp. at 919.
Those factors are useful guides in considering whether privileged communications concern the "same subject matter." The point is at least implicit in the Skeddle factors, but worth noting specifically: in determining the scope of the waiver, the court must keep a close eye on the legal relevance of the communications that have been disclosed. The goal is to ensure that the opposing party has a fair chance to litigate the contested issues for which those communications are relevant. This court took that approach in Eli Lilly Co. v. Zenith Goldline Pharmaceuticals, finding that a waiver of the privilege for opinions given prior to the act of infringement did not waive the privilege for later, post-infringement communications because they simply would not be probative of the infringer's state of mind at any relevant time. 149 F. Supp.2d at 663.
In this case, the December 9, 2002 opinion letter is relevant because one factor in evaluating likelihood of confusion in trademark law is whether the accused infringer intended to copy the registered mark. See, e.g., Meridian Mutual Ins. v. Meridian Ins. Group, Inc., 128 F.3d 1111, 1115 (7th Cir. 1997) (specifying factors relevant to likelihood of confusion); accord, Barbecue Marx, Inc. v. 551 Ogden, Inc., 235 F.3d 1041, 1044 (7th Cir. 2000) (noting that intent is one of the three most important factors), citing Eli Lilly Co. v. Natural Answers, Inc., 233 F.3d 456, 461-62 (7th Cir. 2000). Reasonable reliance on the advice of competent counsel, especially if given before embarking on activities of alleged infringement, may be relevant in evaluating the accused infringer's intentions.
These issues about the scope of waiver have been litigated most often in patent infringement cases, where advice of counsel is relevant to the issue of willfulness and the enhanced remedies it can trigger under 35 U.S.C. § 285. See, e.g., Westvaco Corp. v. International Paper Co., 991 F.2d 735, 743 (Fed. Cir. 1993); Minnesota Mining and Mfg. Co. v. Johnson Johnson Orthopaedics, Inc., 976 F.2d 1559, 1580-81 (Fed. Cir. 1992) (affirming finding of willfulness despite in-house patent counsel's opinion of invalidity). Advice of counsel ordinarily comes into play in patent cases only when liability has been found. In trademark cases like this one, advice of counsel is relevant to the likelihood of confusion element for proving liability. However, the court sees no significant difference between the roles that advice of counsel may play in patent law and trademark law that would affect the issue of the scope of the waiver of privileges.
As applied to this case, the court finds that the relevant subject matter is the intellectual property issues relating to Eco Manufacturing's development of a circular thermostat design, from approximately May 2001 through the date that Eco Manufacturing received Honeywell's "cease-and-desist" letter in January 2003. The starting date reflects an earlier "blind" inquiry by another attorney for Eco Manufacturing who asked Honeywell on June 1, 2001 whether "a substantial duplicate of your model T87F" thermostat would infringe any Honeywell patents. That letter opened the dialogue with Honeywell that resulted in this lawsuit. The record indicates a continuing dialogue between Eco Manufacturing and its attorneys during that time.
The attorneys' and Eco Manufacturing's activities all concerned an evolving project for a product design. The documents show that the project evolved from intending "a substantial duplicate" of a Honeywell design to a modified design which, according to Eco Manufacturing and its lawyers, does not violate Honeywell's rights. The reasons for and good faith of plaintiff's changes in the design are likely to be hotly contested on the merits.
Eco Manufacturing disclosed the December 9, 2002 opinion letter and the earlier letter of advice from the other attorney for the apparent purpose of establishing Eco Manufacturing's lack of intent to violate Honeywell's intellectual property rights, including trademark rights, in manufacturing and selling circular thermostats. Honeywell is entitled to see the more complete picture so that it can offer any challenges to Eco Manufacturing's claims of good faith. Extending the scope of the waiver to include privileged communications on this entire subject matter should prevent unfair prejudice to Honeywell without threatening the interests protected by the attorney-client privilege. Having voluntarily waived the privilege as to at least one helpful opinion, Eco Manufacturing is not entitled to conceal other communications regarding earlier stages of the same project.
Accordingly, Honeywell's motion to compel is granted to the extent that Honeywell is entitled to discover from Eco Manufacturing and its attorneys all attorney-client communications regarding the intellectual property issues presented by Eco Manufacturing's development of circular thermostat designs from May 2001 through receipt of Honeywell's cease-and-desist letter. This order includes disclosure of the information about product design that Eco Manufacturing provided to its attorneys for purposes of evaluating those legal issues, as well as giving Honeywell an opportunity to learn what information was not provided to its attorneys.
II. Attorney Work Product
The second disputed question is whether Eco Manufacturing's waiver of the attorney-client privilege regarding the December 9, 2002 opinion letter also effected a broader waiver of the attorney work product privilege, so as to entitle Honeywell to discover the attorney's internal files and to question the opinion's author about his thought processes, apart from the actual communications between attorney and client. Eco Manufacturing and its attorneys could reasonably anticipate litigation after Honeywell sent a letter dated July 18, 2001 to Eco Manufacturing's lawyer warning his client not to use a round design. The parties appear to agree that other elements of the work product privilege are present, at least as applied to the attorney's internal files, work papers, and thought processes that were not communicated to Eco Manufacturing itself.
Honeywell argues that it needs a fair opportunity to challenge Eco Manufacturing's evidence about advice of counsel. Honeywell wants to explore, for example, whether Eco Manufacturing disclosed troublesome facts to its attorneys. As indicated above, Honeywell is entitled to do so. These are matters of communication relevant to Eco Manufacturing's intent and whether it relied reasonably and in good faith on the advice of counsel. But Honeywell also wants to explore whether the attorneys provided careful, independent, and objective advice about the legal issues, regardless of whether the information in question was communicated between Eco Manufacturing and its attorneys. Eco Manufacturing contends that the relevant intent is its own intent, not that of its attorneys, so that only communications between Eco Manufacturing and its attorneys and Eco Manufacturing's internal analysis of the attorneys' advice could be relevant to its intent evidence based on the advice of counsel.
Whether a deliberate waiver of the attorney-client privilege as to advice of counsel also effects a waiver of the attorney work product privilege as to the attorneys' internal drafts, thought processes, and research that were not communicated to the client is a question that has divided a number of district courts, without specific guidance from appellate courts.
On one side, for example, district courts held that waivers were limited to matters actually communicated between attorney and client in Thorn EMI North America, Inc. v. Micron Technology, Inc., 837 F. Supp. 616, 620-22 (D.Del. 1993); Steelcase Inc. v. Haworth Inc., 954 F. Supp. 1195, 1199 (W.D.Mich. 1997); and Nitinol Medical Technologies, Inc. v. AGA Medical Corp., 135 F. Supp.2d 212, 218-19 (D.Mass. 2000). These courts have reasoned that the relevant intent is that of the client, not of the attorney. Thus, reliance on advice of an attorney effects a waiver only regarding information known to the client, which could be relevant in deciding whether the client reasonably relied on the advice of the attorney.
On the other side, district courts ordered discovery of opining attorneys' internal drafts, research notes, and thought processes in Greene, Tweed of Delaware, Inc. v. DuPont Dow Elastomers, L.L.C., 202 F.R.D. 418, 420, 422 (E.D. Pa. 2001); Novartis Pharmaceuticals Corp. v. Eon Labs Mfg., Inc., 206 F.R.D. 396, 399 (D.Del. 2002); Mushroom Associates v. Monterey Mushrooms Inc., 24 U.S.P.Q.2d 1767, 1771 (N.D.Cal. 1992); and Handgards, Inc. v. Johnson Johnson, 413 F. Supp. 926, 929-31 (N.D.Cal. 1976), among other cases. These courts have asserted that a fair test of the client's reliance on an attorney's opinion requires a full opportunity to explore the attorney's reasoning, including examination of internal drafts, research files, and thoughts and doubts that were never communicated to the client. See, e.g., Novartis Pharmaceuticals, 206 F.R.D. at 399.
Another case ordering discovery of internal attorney work product shows the room for variation in individual cases. In Michlin v. Canon, Inc., 208 F.R.D. 172 (E.D.Mich. 2002), the court's opinion reasoned primarily in terms of why privileges had been waived as to communications between the attorney and client. In deciding also to order discovery of attorney work product that had not been communicated to the client, the court relied on the fact that the defense counsel and been "less than forthcoming with the court," id. at 173, and was concerned that trial attorneys might have manipulated the information provided to their colleague who wrote the opinion letter, id. at 174. In such cases, the reasons for finding a broader waiver may be compelling.
To decide whether the waiver reaches attorney work product in the attorney's files and thought processes, one must focus on why any of this information might be relevant to the merits of the case before the court. As noted above, the accused infringer's intent is an important factor relevant to the likelihood of confusion about the source of its products. But as with the issue of willful patent infringement, the issue relevant to the likelihood of confusion is the intent of the accused infringer — Eco Manufacturing — not the intent of its attorneys. See, e.g., Ortho Pharmaceutical Corp. v. Smith, 959 F.2d 936, 944 (Fed. Cir. 1992) (patent case); Micron Separations, Inc. v. Pall Corp., 159 F.R.D. 361, 362 (D.Mass. 1995) (same).
With that focus on what is relevant in the lawsuit, the scope of the waiver is easier to resolve. A party who confronts an advice of counsel defense is not required to accept that defense at face value. The issue is whether the client honestly and reasonably relied on advice of counsel, not whether the attorney giving the advice was competent or even intellectually honest. See, e.g., SRI Intern., Inc. v. Advanced Technology Laboratories, Inc., 127 F.3d 1462, 1465 (Fed. Cir. 1997) (in deciding willfulness where infringer obtained advice of counsel, issue depends on whether client relied on advice reasonably and in good faith); Ortho Pharmaceutical Corp. v. Smith, 959 F.2d at 944 (importance of attorney's opinion "does not depend upon its legal correctness" but on whether the opinion was "thorough enough, as combined with other factors, to instill a belief in the infringer that a court might reasonably hold the patent is invalid, not infringed, or unenforceable") (emphasis added). As Judge McKelvie explained in the patent context in Thorn EMI:
In determining whether or not an infringer's reliance on an opinion of counsel was reasonable, courts have found it relevant to look to when the infringer sought counsel's advice (before or after commencing the infringing activities); the infringer's knowledge of the attorney's independence, skill and competence; the infringer's knowledge of the nature and extent of analysis performed by counsel in providing the opinion; and whether the opinion contains sufficient internal indicia of credibility, including a validity analysis predicated on a review of the file histories, and an infringement analysis that compares and contrasts the potentially infringing method or apparatus with the patented inventions.837 F. Supp. at 620. Essentially the same reasoning applies in a trademark infringement case, though the internal indicia of credibility will be those relevant to trademark law rather than patent law. See Minnesota Specialty Crops, Inc. v. Minnesota Wild Hockey Club, L.P., 210 F.R.D. 673, 676 (D.Minn. 2002).
Under this reasoning, the communications between attorney and client are obviously fair game. The client who claims reasonable reliance on advice of counsel must disclose the factual information it provided to its attorneys, its own internal evaluations of opinions it receives, any communications of preliminary opinions, and any editing or feedback provided by the client. Because the relevant intent is the intent of the client, however, there is no reason to order disclosure of an attorney's internal drafts, research notes, or thought processes that were never shared with the client. Thorn EMI, 837 F. Supp. at 622; Steelcase, 954 F. Supp. at 1198-99.
To support its motion, Honeywell argues that it is entitled to show that the attorney's opinion for Eco Manufacturing is an incompetent or misguided opinion. Honeywell appears to contemplate a deposition of the opining attorney in which Honeywell's counsel would confront the opining attorney with various facts and legal authorities and ask the opining attorney to try to justify his opinion in the face of those facts and authorities. Such a deposition would be a waste of time and would not likely lead to the discovery of admissible evidence. Even if the attorney were to confess in a deposition that he had come to believe his opinion was wrong, such an admission would say nothing about the relevant intent — that of the attorney's client. "The facts of consequence to the determination of a claim of willful infringement relate to the infringer's state of mind. Counsel's mental impressions, conclusions, opinions or legal theories are not probative of that state of mind unless they have been communicated to that client." Thorn EMI, 837 F. Supp. at 622 (holding that advice of counsel defense to claim of willful patent infringement did not waive attorney work product privilege on matters not communicated to client). The same reasoning applies to the issue of Eco Manufacturing's intent with respect to Honeywell's trademark rights.
Thus, to undermine Eco Manufacturing's reliance on the attorney's opinion, Honeywell must show that Eco Manufacturing itself did not reasonably and honestly rely on the opinion. That might be shown in several possible ways, but the attorney's "mental impressions, conclusions, opinions, or legal theories" are not relevant to the effort unless they were communicated to the client. Perhaps, for example, Eco Manufacturing chose not to provide all the relevant facts to its attorneys. Perhaps the opinion letter made factual assumptions that Eco Manufacturing knew or should have known were simply incorrect. Perhaps Eco Manufacturing officials who read the opinion knew enough applicable law to see a glaring omission in the legal analysis. Perhaps after Eco Manufacturing received an earlier draft opinion, it put some form of pressure on its attorneys to obtain a more favorable opinion. Also, as Judge McKelvie explained in Thorn EMI:
This court relied on such factual errors, for example, in concluding that reliance on an opinion of counsel was not reasonable in Eli Lilly Co. v. Zenith Goldline Pharmaceuticals, Inc., 2001 WL 1397304, *21-24 (S.D.Ind. Oct. 29, 2001).
See, e.g., Johns Hopkins University v. CellPro, Inc., 152 F.3d 1342, 1364 (Fed. Cir. 1998) (affirming finding of willful infringement in patent case; inside patent attorney who received opinion letters should have recognized failure to address key issues for inequitable conduct theory of invalidity).
Thus, [plaintiff] Thorn should be entitled to discover facts relating to when [defendant] Micron sought the advice, what Micron knew about the law firm's independence, skill and competence to provide the opinions, what Micron knew about the nature and extent of analysis performed by the firm, and what Micron knew and had concluded about the credibility, value and reasonableness of the opinions.837 F. Supp. at 621. But there is no point in ordering discovery of the opining attorney's internal files or in ordering him to answer deposition questions that amount to an attempt to force him to confess error, absent some indication that any asserted error was communicated to or recognized by Eco Manufacturing.
The analysis in Thorn EMI and Steelcase was criticized rather harshly in Cordis Corp. v. SciMed Life Systems, Inc., 980 F. Supp. 1030 (D.Minn. 1997) (describing rule as "impractical, and fundamentally unsound"). This court believes, however, that there is much less actual disagreement between those courts than the Cordis opinion suggests. Cordis was also a patent infringement case in which advice of counsel was raised as a defense to a charge of willful infringement. Because the relevant intent was that of the accused infringer rather than its attorneys, the court held that the plaintiff was not entitled to discover "the legal research, and preliminary drafts of the opinion letters, that were ultimately transmitted to [the law firm], unless those drafts were reviewed, and/or edited by the employees or agents of the Defendant." 980 F. Supp. at 1034 (court saw "no prospect" for the development of evidence relevant to willfulness).
The Cordis court also held, however, that the plaintiff was entitled to explore the factual basis for the attorney's opinion, including some experiments commissioned by the attorney and apparently reported in the opinion letter. See Nitinol Medical Technologies, 135 F. Supp.2d at 218 (discussing this aspect of Cordis). The Cordis court recognized that a client is entitled to rely on an attorney's expert ability to analyze the law, but concluded that "a rigorous examination of the factual predicates for an opinion of patent counsel, in defense of a claim of willfulness, is essential." 980 F. Supp. at 1033. That finding is consistent with Thorn EMI, which recognized that the opposing party was entitled to explore what the client "knew and had concluded about the credibility, value and reasonableness of the opinions." 837 F. Supp. at 621; accord, Nitinol Medical Technologies, 135 F. Supp.2d at 219 (allowing discovery of matters that attorney discussed with or otherwise conveyed to defendant); Steelcase, 954 F. Supp. at 1198-99 ("privilege must be deemed waived concerning all documents in the client's hands that refer or relate to counsel's opinion or represent information relayed to counsel as a basis for the opinion"). If the client knew or should have known that the attorney's opinion was built upon invalid factual foundation, then reliance on the opinion would be unreasonable. See Eli Lilly Co. v. Zenith Goldline, 2001 WL 1397304 at *21-23 (finding infringement was willful where client knew or should have known that opinion of invalidity was based on factual errors).
To be sure, the approach in Thorn EMI and Steelcase creates some risk that intentional infringement (of patent or trademark rights) could be obscured by reliance upon deliberately incompetent opinions. See Cordis, 980 F. Supp. at 1034 n. 1 (criticizing Thorn EMI and Steelcase on this basis). But the approach of Novartis, Greene, Tweed of Delaware, Mushroom Associates, and Handgards creates a substantial risk of confusion and wasted time, money, and effort as lawyers duel over the ultimate merits of an opinion when the only relevant question is whether the client honestly and reasonably relied on the opinion. None of those cases offer a compelling reason for believing that an attorney's private papers and thoughts would be probative of the client's ability to rely on the attorney's advice. Also, independent attorneys have substantial internal and external reasons to provide competent and honest advice to their clients. Applying the waiver of privileges to all relevant matters communicated between attorney and client gives the opposing party ample room to challenge the relevant factual assertions, which deal with the client's ability to rely upon its attorney's advice.
Accordingly, Honeywell's emergency motion to compel is denied with respect to documents, thoughts, and other matters covered by the attorney work product privilege that were not communicated by counsel to Eco Manufacturing. In light of the mixed results of the motion and the reasonable grounds for disagreement on these issues, the court declines to award either side its attorney fees and costs relating to the motion. See Fed.R.Civ.P. 37(a)(4)(C).
Finally, the court extends the discovery deadline to May 2, 2003 for completion of discovery following up on this decision.
So ordered.