Delaware District Court Denies Production of Documents Pertaining to Third-Party Licensing Company Holding That the Documents Are Protected by the Common Interest Privilege

August 12, 2011

Xerox Corporation ("Xerox") filed a patent infringement action against Google and Yahoo! in the United States District Court for the District of Delaware. After construing certain terms of the patent-in-suit as part of a claim construction proceeding, the district court resolved a discovery dispute between the parties over the production of communications between Xerox and a third-party licensing company, IPValue. Google and Yahoo! sought production of documents that Xerox exchanged with IPValue and which Xerox had listed on its privilege log based on a common interest privilege.

Google and Yahoo! contended that the documents could not be protected by the common interest privilege because the relationship between Xerox and IPValue is purely commercial. Xerox disagreed contending that both it and IPValue retain attorneys to perform legal analyses on issues relating to patent rights and because Xerox and IP Value have a joint objective of successfully asserting the Xerox intellectual property rights, which requires close cooperation between the companies. IPValue is a patent licensing company that works with other companies to help monetize their patent portfolios. Prior to the litigation, Xerox and IPValue had entered into agreements designating IPValue as Xerox's worldwide agent for intellectual property licensing.

In denying the request made by Google and Yahoo! for production of the communications between Xerox and IPValue, the district court found that Xerox had met its burden of proof to establish that a common interest privilege exists between Xerox and IPValue. The district court found that "Xerox and IPValue had an allied, uniform, agency relationship. The relationship between these two entities is sufficiently imbued with common legal interests in that it plainly relates to litigation." In addition to finding the common interest privilege met by the fact that the two coordinated litigation efforts, the district court also found significant that IPValue's payment was contingent on the outcome of litigation. "Because IPValue's compensation from Xerox is based on a contingency fee, Xerox and IPValue share a common interest in Xerox prevailing in the instant litigation and the two companies have operated with the expectation that any shared privileged communications would be kept confidential and protected from disclosure."

In reaching this conclusion, the district court distinguished this situation from the facts in Leader v. Facebook, 2010 WL 845980 (D. Del. Feb. 22, 2010) in which the court found no common interest between a patentee and potential investors in litigation. The district court noted that in Leader, "the documents as to which privilege was being asserted were created at a time when the patentee and the potential investors were negotiating at arms-length; at that time, no common interest existed." The district court noted that in this case the facts were different as the common interest privilege was asserted as to documents that were created when Xerox and IPValue were working together. "Here, by contrast, the documents over which Xerox is asserting privilege relate exclusively to a time frame in which IPValue was already retained by, and working for and with, Xerox."

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The important take away from this case is the sharp distinction that the courts in Delaware have drawn between documents created before an agreement is signed and documents created after the agreement is signed when a third-party and the patent holder are working together to enforce the patent rights. The documents created prior to the agreement are subject to discovery, while the documents created in furtherance of the efforts to enforce the patent after the agreement is signed are not.

Xerox Corp. v. Google Inc. and Yahoo! Inc., Case No. 10-136-LPS (D. Del. Aug. 1, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.

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