Last week, Chief Magistrate Judge Thynge issued an opinion addressing a motion by accused infringers to compel the patentee to produce litigation funding discovery and opinion letters relating to the patents-in-suit.
While it involves litigation funding discovery, this case is a bit different from the recent Mavexar hearings. Here, the patentee is MHL Custom, Inc. who, it appears, is a practicing company and not an NPE. Beyond that, the case is still active (unlike some of the Mavexar cases) and the discovery is sought by the defendant, not the Court itself. In other words, this is a more typical ruling.
But the opinion is still notable. The Court granted the accused infringers' motion for three categories of material:
(a) Plaintiff’s insurance policy related to litigation funding;
(b) correspondence between Plaintiff and others concerning this insurance policy; and
(c) four opinion letters related to the patents in suit and apparently relied upon in the underwriting for the insurance policy.
MHL Custom, Inc. v. Waydoo USA, Inc., C.A. No. 21-91-RGA-MPT (D. Del. Dec. 1, 2022) (line breaks added for readability).
The patentee had opposed the motion by arguing that the documents were irrelevant and protected by privilege. The Court rejected both arguments. On relevance, the Court found that the accused infringers' document requests were ordinary and that the documents were relevant:
The requested insurance policy, correspondence, and opinion letters are clearly relevant to the instant litigation. Requests Nos. 16 and 25 are standard requests in patent litigation and relate to funding and financial interests in addition to perceived value, strengths, and weaknesses of the patents in suit. The case law cited by Plaintiff does not establish a general rule in Delaware that litigation funding materials are not relevant. Instead, the cited case law reflects a fact-based inquiry. For example, in the United Access Technologies matter, Judge Stark reviewed the materials in camera before ruling on their relevance. . . . Here, the only aspect of the insurance policy available to the court is the declarations page of that policy, which does not provide much information. . . . Further, admissibility at trial has never been the touchstone of relevance at the discovery stage.
These "standard" document requests are quoted in the opinion:
[Request No. 16:] "All Documents and Things concerning any Communications between You (including Your counsel) or any Predecessor in Interest and any Defendant or third party regarding any Patent in Suit, any Related Patent, this action, and/or the inventions described in the Patents in Suit”
[Request No. 25: ] “All Documents and Things concerning any financial interest that any Person holds or has held in any Patent in Suit, any Related Patent, or the outcome of this action.”
Keep these in mind next time you need some court-approved litigation funding discovery requests.
(Oddly, the parties redacted these requests from the public version of the opening letter brief. Luckily the Court included them in its order.)
On privilege, the Court found that the opinion letters were privileged:
11. As to the opinion letters, Plaintiff has a viable claim of attorney-client privilege. In the court’s experience, these types of documents contain legal advice from an attorney directed to a client for the purpose of providing requested legal advice. . . .
The Court found that the patentee waived that privilege, however, by disclosing the letters to the insurer's agent. Plaintiff tried to avoid waiver by asserting "insurer-insured privilege" and "community of interest" privilege, but the Court rejected both, finding that plaintiff had failed to carry its burden.
The Court also faulted plaintiff for failing to provide a privilege log to facilitate the analysis:
Having reviewed the cited cases and the body of case law governing privilege in federal courts, many of these cases involve a privilege log, something that Plaintiff admits it has not created. . . . Absent a privilege log and a clear articulation of: (a) the identity of the party asserting the privilege; (b) the specific privileges asserted; (c) the legal basis for each asserted privilege; (d) the factual basis for each asserted privilege; and (e) a detailed explanation as to why each asserted privilege applies to each and every responsive document that Plaintiff has chosen to withhold, Plaintiff’s claims of privilege remain vague and ambiguous. As the party asserting privilege, it is Plaintiff’s burden to prove that the privilege applies. . . . It has not done so.
The Court gave the patentee seven days to produce the documents (or, as to one request, to meet and confer on appropriate search terms).
Side Note: No Requirement for Patentee to Produce Its Insurance Policy in Rule 26 Initial Disclosures
It's worth noting that, while the accused infringers won their motion, they lost on their argument that plaintiff was obligated to disclose this insurance policy in its initial disclosures:
Initial disclosures. Defendants argue that Plaintiff was obligated to disclose this policy as part of its initial disclosures. . . . Plaintiff responds that it “was under no obligation to disclose or produce the Policy under Rule 26 because the Policy is not an insurance agreement ‘under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment.’” . . . Since Defendant’s counterclaims are for declaratory relief and not money damages, the court agrees with Plaintiff that there is no monetary judgment at issue that would require such a disclosure. The prospect of attorney’s fees at this stage in the litigation 29 is too remote to warrant disclosure.
So, if you want information information like this, you may want to send RFPs along similar lines to the accused infringer's RFPs 16 and 25 (quoted above).
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