Lawyers give advice. It's a big part of the job. Sometimes it's legal advice and sometimes it's business advice and sometimes (particularly for lawyers who focus on technology and intellectual property) it's hard to tell. And that can be a problem. Because the conversations clients have with their lawyers are protected—until they aren't. The idea that a client can talk freely and confidentially with her lawyer without fear that the conversation will be disclosed is fundamental to the American legal system. Lawyers and lay people alike understand that concept implicitly, and most probably assume that the protection is extremely broad, which in many cases it is.

But that common understanding conceals some very substantial pitfalls. The privilege is broad, but it is not absolute, and when it is lost the resulting inquiry can be highly invasive. Given how important the distinction between privileged and non-privileged communications can be, one might expect it to be well-defined and easy to recognize. But that is not always the case, especially where the lawyer's work product itself becomes the subject of litigation. If a lawyer is providing advice and working on a document designed for public consumption (like a business plan or a patent application) and that document becomes the subject of a dispute, privilege issues can be particularly challenging.

In the Second Circuit, implied waiver of attorney-client privilege may be found where the privilege holder places a privileged communication at issue, for example by asserting a claim or defense based on that communication. See In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir. 2000). The classic example of this is the "advice of counsel" defense, in which a party relies on otherwise privileged communications to assert that it acted in good faith with the blessing of a lawyer. Under those circumstances, courts often find a limited waiver of the attorney-client privilege as to the underlying communications, holding that all communications on that subject must be disclosed and the privilege cannot be selectively applied. The privilege cannot be used as both a "sword" and a "shield."

While waiver is perhaps most familiar to attorneys as it relates to the "advice of counsel" defense, it extends to other areas as well. A recent decision from the Eastern District of New York, NYU Winthrop Hosp. v. Microbion, 17-CV-6114 (LDH)(PK), 2019 WL 4535570 (E.D.N.Y. Sept. 19, 2019), looks at the issue in the context of a patent dispute. The decision is helpful, because it examines privilege issues relating to the role of an attorney in the preparation of public documents and provides good guidance as to the limits of privilege for lawyers providing that kind of advice.

Background Facts

According to the complaint in NYU Winthrop, non-party Dr. Philip Domenico was a former employee of plaintiff NYU Winthrop (Winthrop). Domenico worked at Winthrop for nearly two decades and was a named inventor on various antimicrobial patents. Domenico assigned those patents to Winthrop over the course of his employment, and Winthrop then licensed the patents to Defendant Microbion. After leaving Winthrop, Domenico was hired by Microbion, specifically for his expertise in antimicrobial technology, and Winthrop provided Domenico's notebooks to Microbion at Microbion's request.

Thereafter, Microbion sought to patent a number of its own antimicrobial technologies, using the same novel antimicrobial agents that Domenico had worked with at Winthrop. But Microbion named its CEO, Dr. Brett Baker, as sole inventor. Winthrop sued, alleging that the claims of the Microbion patents encompassed subject matter first invented by Domenico while he was an employee of Winthrop, and seeking to have Domenico listed as an inventor on the patents. NYU Winthrop Hosp. v. Microbion, 17-CV-6114(JMA)(GRB), 2019 WL 1114931, at *2 (E.D.N.Y. March 11, 2019) (Magistrate's Report).

Microbion's Privilege Claims

During the course of discovery, Winthrop moved to compel production of various materials relating to the prosecution of the Microbion patents—primarily drafts of the documents Microbion had submitted to the U.S. Patent and Trademark Office in trying to secure its patents. Microbion claimed that those drafts, and the correspondence relating to them, were protected from discovery by the attorney-client privilege. Two different Magistrate Judges granted separate portions of Winthrop's motion, holding that Microbion had put those materials at issue and implicitly waived the privilege by, among other things, admitting in its answer that Domenico was involved in the drafting of some early patent applications that were subsequently revised by counsel.

The District Court upheld this finding, holding that Microbion had implicitly waived privilege by selectively relying on the draft patent applications in its pleadings. Microbion had thus waived any privileged that might otherwise protect the drafts based on the work its counsel had preformed in preparing them. The court, quoting Aiossa v. Bank of Am., N.A., No. 10-CV-01275, 2011 WL 4026902, at *4 (E.D.N.Y. Sept. 12, 2011) and In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir. 2000), held that Microbion had put the otherwise privileged material at issue by selectively disclosing favorable, privileged communications and withholding unfavorable material. It rejected Microbion's attempt to use the privilege as "both 'a shield and a sword.'"

This kind of broad waiver of the privilege relating to a particular area of communication that the privilege-holder has placed at issue is called "subject matter" waiver. The court noted that Microbion had, in its own filings, pleaded facts relating to Domenico's work on the draft patent applications that were later revised by counsel, thereby placing the draft applications at issue. Having done so, Microbion could not attempt to shield those draft applications simply on the basis that its counsel had also contributed to them. The court also conducted an in camera examination of certain specific documents identified by Microbion and found either that they did not contain legal advice, or that any minor references to legal advice in the documents could be redacted prior to production.

Where Is the Line?

It is worth noting, in the NYU Winthrop case, that Microbion's loss of the privilege was based on its defense, not simply on Winthrop's allegations. Winthrop alleged in its complaint that Domenico participated in the patent prosecution (that is, the preparation of the patent application documents), but the finding of waiver was not based on that allegation. It was based on Microbion's defense that Domenico's participation had been minimal. Thus, the actual amount of communication between Domenico and Microbion's attorneys became a central issue in the case, and the attendant privilege issues became particularly difficult. The privilege may no longer apply where the communication itself is placed at issue.

In a more typical case, attorney drafts and other work product materials are much less likely to present complex privilege issues. It is extremely unlikely, for example, that a court would compel discovery of privileged draft documents reflecting attorney work product to a third party, even if the documents referred to or related to some issue in dispute. Such an order would only be appropriate if the attorney's actual work product or advice had itself been made an issue in the case. However, as seen in NYU Winthrop, once the legal drafting process itself becomes part of the litigated issue, the privilege is subject to much closer scrutiny.

In the narrow case of patent prosecution, these issues are of particular concern. It is in the nature of the patent process that lawyers are likely to be involved in drafting the various iterations of the patent application and supporting documentation. Specific changes among those drafts—and the question of who was responsible for what change—can be of legal significance. By way of analogy, in a non-patent dispute over authorship of a book, a court could justifiably require production of every draft of the manuscript to determine how much each party had contributed and when. If the manuscripts had been submitted to counsel for some reason (say, to make sure the content was not defamatory), the lawyer's comments—and even edits—would presumably not be relevant, and could be excluded from production.

Where possible, attorneys working on patent prosecution or in other similar roles should try to be aware of these potential pitfalls. Legal advice should be provided in a manner that does not "infect" the public-facing product; technical or business advice should (where possible) be provided separately so that it does not create a risk of inadvertent waiver if a dispute arises. In NYU Winthrop, Magistrate Judge Kuo discussed this line at oral argument, noting that a nuanced privilege analysis might be necessary: a document that consists entirely of a lawyer giving specific legal advice might be subject to privilege and could be withheld; but a document that includes discussion between the lawyers and the inventors about the role of the inventors in the process would be central to the disputed facts and would have to be produced as a matter of fairness.

The Takeaway

The privilege analysis presented in NYU Winthrop v. Microbion is the epitome of a fact-based inquiry. It required in camera examination of the subject documents by two different Magistrate Judges and a District Court Judge, and it was highly dependent on the specific context: a dispute over the proper inventor designation on a patent. This particular factual context is relatively rare. While disputes over authorship are common enough, they rarely involve documents drafted in whole or in part by counsel, and even in patent cases it is unusual to see a case that specifically turns on counsel's role in drafting the application.

But clients turn to their lawyers for a wide range of advice, and sometimes that advice specifically relates to how the client should communicate to the public. The guidance from NYU Winthrop and similar cases is that attorneys involved in that kind of practice must be careful to avoid inadvertent waiver of the privilege. Wherever possible, if a lawyer is wearing multiple hats, legal advice should be segregated from non-legal work (either of the attorney or of others) so that the distinction can be maintained in the event of a dispute. A lawyer's edits to a draft of a public communication are privileged, because they represent attorney work product and the provision of legal advice; but if that lawyer is also acting as a business or technical advisor she should try to separate her communications in that capacity where possible, to avoid waiver issues.

Of course, that kind of segregation of practice can be inconvenient or—in case such as patent prosecution—even impracticable, but it minimizes the risk of inadvertent waiver of the privilege. Until some additional guidance emerges from the courts, it is up to counsel and clients to be aware of the potential issues and to maintain the clearest lines possible in each case.

Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex commercial and intellectual property litigation. Mark Brodt, a registered patent agent employed with the firm, provided substantial assistance with the preparation of this article.