Thanks to a precedential appellate decision dealing with fairness considerations in privilege disputes, Kilpatrick, Townsend & Stockton may be able to escape contempt sanctions for resisting a subpoena in a patent fight between Wi-LAN Inc. and LG Electronics Inc. But whatever the firm’s fate, the lesson for Wi-LAN is the same: It’s never a good idea to volunteer your lawyers’ analysis of your patent rights to a potential litigation target.

Last week the U.S. Court of Appeals for the Federal Circuit vacated a decision by U.S. District Judge Jeremy Fogel in San Jose, who ruled in August 2011 that Kilpatrick was in contempt of a pair of discovery orders. Fogel sanctioned the firm for failing to fully comply with the orders, which stemmed from an LG subpoena for records over which Wi-LAN claimed attorney-client privilege. A three-judge Federal Circuit panel concluded Friday that Fogel should have applied a fairness balancing test to determine the scope of Wi-LAN’s privilege. The appellate court remanded the case back to the district court to decide whether Kilpatrick should still be sanctioned.

Here’s the backstory: Wi-LAN holds a patent related to “V-chip” technology for blocking certain television programming. A few years ago LG, which had licensed the patent, asserted that its TVs didn’t use the technology and stopped paying royalties on the license. Wi-LAN responded in January 2010 with a warning to LG: A forwarded letter–marked “confidential”–in which Wi-LAN’s lawyers at Kilpatrick advised Wi-LAN’s general counsel that LG was infringing the patent and still owed royalties.

The letter failed to persuade LG to start paying royalties, but it still made an impression. After Wi-LAN sued LG in federal court in Manhattan for alleged infringement, LG’s lawyers at Greenberg Traurig subpoenaed Kilpatrick for materials related to the letter. Kilpatrick moved to quash the subpoena in federal court in San Jose, arguing that even if Wi-LAN waived its attorney-client privilege over the letter by sending it to LG, that waiver only extended to the letter itself.

The district court disagreed, and when Kilpatrick failed to compel with discovery orders enforcing the subpoena, the firm was held in contempt and ordered to pay LG’s attorney fees. Kilpatrick appealed.

Applying Ninth Circuit law, the Federal Circuit ruled Friday that “the district court erred by rejecting considerations of fairness?-i.e., whether LG would be unfairly prejudiced by Wi-LAN’s assertion of privilege against discovery into attorney-client communications beyond the four corners of the Townsend letter?-when assessing the scope of waiver.” The panel vacated the lower court’s rulings, including the sanctions and contempt findings against Kilpatrick, and sent the case back to Judge Fogel for another go-round.

We left messages with Kilpatrick’s David Sipiora and with LG counsel James Lukas Jr. of Greenberg Traurig to ask about the ruling, but we didn’t immediately hear back.

Whatever Fogel decides, it may be too late to make a difference in Wi-LAN’s underlying patent case against LG: U.S. District Judge Lewis Kaplan in Manhattan threw out the company’s infringement claims in March. That ruling is also on appeal before the Federal Circuit.

This article originally appeared in The Am Law Litigation Daily.