Mcle Self-study Article

• Jurisdiction: United States,Federal,New York,California
• Author: F. Jason Far-hadian
• Publication year: 2014
• Citation: Vol. 39 No. 1

MCLE Self-Study Article

F. Jason Far-hadian

Century IP Group

IN-HOUSE COMMUNICATION: PRESERVING THE ATTORNEY-CLIENT PRIVILEGE

(See end of this article for information on receiving 1.0 hour MCLE self-study credit in ethics.)

Joe Foresight has been in private practice for many years as a dedicated IP attorney in a New York law firm. Last month, his long-term Silicon Valley technology client offered him an in-house position to join the company as its Chief IP Counsel and VP of Business Affairs. joe accepted and is now in charge of the relatively small in--house IP group with a paralegal under his supervision. The company also has recently opened sales offices in Germany and an R&D facility in South Korea, with a transactional lawyer in Berlin and a patent agent in Seoul, both working as in-house employees.

When joe was at the N.Y. law firm, he used the standard notice at the end of his e-mails which essentially indicated that the content of the e-mail (or any attachments) may contain privileged communication and that such e-mail should be returned or destroyed if delivered to an unintended recipient. This notice, along with some other waivers and disclaimers, was automatically generated as a part of his e-mail signature, and was included at the end of every e-mail he sent, even if it was in response to his spouse's request to pick up some Chinese food on the way home.

In his new position as the VP and Chief IP Counsel, joe is responsible for reviewing and updating the company's electronic communication and data retention policy to remain in compliance with, among other things, laws and regulations related to electronic discovery. He already knows that § 917 of the California Evidence Code provides in relevant part:

• "If a privilege is claimed on the ground that the matter sought to be disclosed is a communication made in confidence in the course of the lawyer-client...relationship, the communication is presumed to have been made in confidence."
• "A communication...does not lose its privileged character for the sole reason that it is communicated by electronic means."

Joe thinks that § 917 provides some broad protection. However, since he has been advised that the company is planning on engaging in licensing activities to assert some of the patents in the corporate portfolio, joe wants to be sure to comply with his ethical duties and also avoid any accusation of spoliation by preserving all the relevant email communications concerning the potential licensing of the patents.

In the midst of all this, joe learns that the company's CEO has established an e-mail communication policy—attributed to the 19th century Massachusetts politician Martin Lomasney—as follows: "Never write if you can speak, never speak if you can nod, never nod if you can wink." As a result of this policy, company employees along with the management try not to include content of any substance in any internal e-mails. Instead, they upload data files with substantive information onto a cloud-based file server and verbally tell the other employees where to find and read the content of the files.

Contemplating this e-mail communication policy, joe quickly realizes that the process of uploading files and calling the intended persons to review the file content (versus the common practice of sending an e-mail attaching the relevant files) is inconvenient and especially burdensome if he has to keep track of the latest versions of each file as the files are revised by multiple parties over time. He also realizes that the files are typically stored on electronic media that can be accessed by anyone who can log in to the cloud-based file server.

The law firm to in-house transition that joe had envisioned is not so straightforward anymore, as joe starts to wonder whether the act of "storing" content on a file server is equivalent to "communicating" the content for the purpose of establishing attorney-client privilege. As in-house counsel, he finds himself contemplating many details, even for actions as simple as sending an e-mail. To determine which steps one may take to minimize the risks associated with electronic communications in the above scenario, let's start by revisiting some of the basics.

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THE ATTORNEY-CLIENT PRIVILEGE

In California, communication between a lawyer and a client, including e-mail communication with a corporate entity, is deemed to be privileged regardless of the mode of communication as long as there is a reasonable expectation of confidentiality in the means of communication.¹ In addition, certain documents may also be protectable under attorney work-product doctrine if prepared by an attorney in anticipation of litigation. In the following discussion, we will mainly focus on the former, i.e., the attorney-client communication privilege (hereafter the "privilege"), which can be asserted to protect a client from having to produce the privileged content. To maintain the privilege, the following must apply:²

1. The content should be communicated to a lawyer.
2. The purpose of the communication should be to seek legal advice.

Certain exceptions, such as express waiver, involvement of criminal or fraudulent activity, or lack of a reasonable expectation of confidentiality, may apply to remove the privilege.³ We will explore some of the above factors in further detail below, and particularly as pertaining to the assertion of privilege in electronic communication.

COMMUNICATION WITH IN-HOUSE COUNSEL

In the context of in-house communication, under U.S. law, the attorney-client privilege applies to content communicated between in-house counsel and the company and those who act on behalf of the company, including company employees.⁴ For example, confidential communications made by paralegals or agents of an in-house lawyer for the purpose of assisting the lawyer in communicating legal advice are privileged.⁵ Further, factual investigations conducted by an agent, such as gathering statements from employees, are privileged as long as such investigations are performed under direct supervision of in--house counsel.⁶

The privilege would also extend to communications with a patent agent working in-house under the supervision of a licensed in-house lawyer. In April, 2012, the Central District of California, in Buyer's Direct Inc. v. Belk, Inc.,⁷ held that "privilege may be invoked over communications between a client and the client's registered patent agent" even if the patent agent has acted independently. In contrast, at least one U.S. jurisdiction has found that a patent agent's communication with clients is not privileged for the same reasons that the privilege does not extend to client communication with accountants.⁸

Certain foreign countries do not recognize the privilege even when the communication is with an in-house attorney because the company is viewed as an "employer" and not a client.⁹ In particular, China, France, and Switzerland recognize no privilege for in-house counsel communication, while Germany, japan and Korea recognize a partial privilege.¹⁰ As an example, under Korea's civil law, a witness may refuse to testify if he is an attorney-at-law, a patent agent, or other person having a post responsible for keeping the privileged information "secret" under laws and regulations or on matters relating to a technical or professional secret.¹¹

Referring back to joe's situation, it would be prudent for him to have a thorough understanding of the privilege laws as applicable in Germany and Korea, since the company does business in the two countries using in-house counsel and a patent agent. Since privilege laws are more favorable in the U.S. for in-house counsel, it may be...