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Federal Circuit Says PTO Submissions Can Waive Privilege to Future Communications

On July 20, 2017, the United States Court of Appeals for the Federal Circuit in In re OptumInsight denied OptumInsight’s petition for writ of mandamus on privilege waiver. The court held that the District Court for the Northern District of California did not clearly abuse its discretion in evaluating the proper scope of waiver.

The ‘897 patent reexamination. In June 1994, Symmetry Health Data Systems, Inc. (Symmetry) responded to a request for proposal (RFP) from Aetna Life Insurance Co. and offered to license its healthcare analytics software, Symmetry Episode Treatment Group (ETG) Program, to Aetna. More than a year later, Symmetry filed a patent application that claims and describes the ETG Program. During prosecution, Symmetry did not disclose its RFP response regarding the software license to the patent office. Symmetry's application eventually issued as U.S. Patent No. 5,835,897.

In 2000, Symmetry voluntarily requested reexamination of the '897 patent and asked the PTO to consider whether the RFP response was an invalidating offer for sale under 35 U.S.C. § 102(b). Symmetry submitted an Information Disclosure Statement and an affidavit asserting that the ETG Program was not ready for patenting at the time of the RFP response because the inventor did not conceive of all the claimed concepts until August 1994. Symmetry successfully persuaded the patent examiner that the RFP response was not an invalidating offer for sale, and Symmetry thereafter filed additional patent applications that claimed priority from the '897 patent.

Antitrust Claim. Symmetry merged with OptumInsight and after the merger, OptumInsight sued Cave Consulting Group, Inc. (Cave Consulting) for infringement of multiple healthcare analytic patents, including the '897 patent. In its defense, Cave Consulting filed an antitrust claim against the patentee for “knowingly asserting a fraudulently procured patent.”  The allegations argue that Symmetry (now part of OptumInsight) lied about the conception date of the ‘897 patent during reexamination.

To pursue its antitrust claim, Cave Consulting then demanded discovery of information relating to conception and first-sale of the ETG software. OptumInsight refused – claiming privilege, but the district court ordered disclosure, including post-merger-communications – finding that the PTO submissions constituted waiver.

Federal Circuit Analysis. Applying the Federal Rule of Evidence 502(a), the Federal Circuit noted that the intentional disclosure to a federal agency or court waives attorney-client privilege and work-product protection as to information disclosed.  The waiver also extends to otherwise undisclosed communications if they “concern the same subject matter” and “they ought in fairness to be considered together.”  The Federal Circuit explained that the “rule prevents parties from selectively disclosing privileged information as an affirmative legal strategy, but falling back on the privilege to conceal inconsistent information” (citing In re Seagate Tech., LLC, 497 F.3d 1360, 1367 (Fed. Cir. 2007)).

OptumInsight argued that Symmetry’s waiver should not apply to its post-merger communications because such a rule would preclude successor companies from having privileged conversations about the waived subject matter.  In response, the Federal Circuit refused to “adopt such a categorical rule.” Rather, the court noted that the scope of intentional waiver under Section 502 should be determined on a case-by-case basis and be based on subject matter and fairness. Further, the court noted: “Logically, if a successor company can assert privilege over its predecessor’s communications, the flipside of that principle is that a successor company can also be subject to its predecessor’s intentional waiver in certain circumstances.”

In this case, the district court found that Symmetry's waiver of attorney-client privilege was not limited to pre-litigation conduct. Symmetry petitioned for reexamination during a litigation campaign against its competitors and the district court determined that both the application and the reexamination were conducted with an eye towards litigation. Accordingly, the Federal Circuit held that the district court did not abuse its discretion in ordering OptumInsight to produce materials, including its post-merger communications, concerning the conception date and first sale of the ETG Program.

Though the Federal Circuit’s decision extended waiver to post-merger communications in this case, waiver may not apply in many post-merger discussions. For instance, the Federal Circuit emphasized limiting the scope of waiver based on subject matter and fairness. Accordingly, although attorney submissions during patent prosecution may result in waiver, such waiver is less likely to extend to subsequent patent owners or later discussions with trial counsel. However, waiver may extend if a court finds the application and patent prosecution disclosures were made with an eye toward litigation.

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