Protecting Your Internal Intellectual Property Investigation: Privilege and Work Product Under California and Federal Law
As California begins preparing to ease shelter-in-place restrictions, the state’s technology industry is facing the most challenging economic circumstances in recent memory. The state’s technology companies may place new demands on in-house intellectual property legal teams to minimize outside counsel costs, including by leading internal IP investigations. This may require, for example:
- working with technical, non-attorney employees or consultants to understand accused products;
- identifying and synthesizing conflicting factual accounts;
- creating photos, videos, or other records, such as tearing down and photographing components of a product or process or interviewing witnesses; and
- collecting and excerpting key company documents and facts pertinent to the claims.
Investigations like these are sensitive and may carry significant exposure. In-house counsel should therefore take steps to maximize the chances that all aspects of the investigation will be protected by the attorney-client privilege or work product doctrine. Unfortunately, there are very few cases that have substantively addressed the scope of privilege or work product protection over IP investigations in particular. But coupling these with California and federal cases in the insurance, employment, white collar, and product liability fields offers guidelines that can be applied to internal IP investigations.
Attorney-Client Privilege and Work Product: California and Federal Approaches
As a starting point, in-house counsel should keep in mind the fundamental rules of attorney-client privilege and work product protection. Thankfully, California and federal court approaches are similar on these topics.
In California, the attorney-client privilege acts “‘to safeguard the confidential relationship between clients and their attorneys.’”[i] The purpose of the relationship between the attorney and the client is key to establishing privilege.[ii] Federal law, governed by Federal Rule of Evidence 501, is similar but instead focuses on whether the predominant purpose of a particular communication is to seek legal advice.[iii] Generally speaking, federal courts find that attorney-client privilege applies to communications “where legal advice of any kind is sought.”[iv] As to internal investigations in particular, the privilege will normally attach as long as obtaining or providing legal advice was one of the “significant purposes of the internal investigation,” even if there were also “other purposes.”[v]
The work product doctrine also provides a powerful tool for protecting internal IP investigations. Under California law, there are two categories of work product: absolute and qualified.[vi] Absolute work product protects any writing that contains “an attorney’s impressions, conclusions, opinions, or legal research or theories,” and it is “not discoverable under any circumstances,” unless there is waiver.[vii] Even qualified work product (which is any attorney work product that does not contain attorney opinions, theories, etc.) is still strongly protected. It may be discovered only if denying the discovery would “unfairly prejudice the party seeking” it or “result in an injustice.”[viii] Federal law, governed by Federal Rule of Civil Procedure 26(b)(3), is similar. Like California, federal courts distinguish between “opinion work product” that contains an attorney’s theories, opinions, and strategy, and other “fact” or “ordinary” work product discoverable subject to showing “substantial need” under Rule 26.[ix]
Working with Non-Attorneys: Counsel Should Document the Investigation’s “Dominant Purpose”
Internal IP investigations often involve help from technical, non-attorney employees. The privilege should apply to their work under California law if the “dominant purpose” for an employee’s report to in-house counsel is to further the attorney-client relationship “for the purpose of anticipated litigation” or seeking legal advice.[x] In these circumstances, the employee stands “in the shoes” of the employer, and makes “a confidential communication to his attorney in the course of professional employment.”[xi] But there likely is no privilege where an employee gathers information and makes a regular report strictly for business purposes, even if the report is ultimately shared with counsel.
In one federal case, the court found that the privilege applied where a company conducted an investigation both to comply with government regulations and to obtain legal advice.[xii] Cases in the insurance coverage arena also provide useful benchmarks for distinguishing between a business and legal purpose. An investigation conducted by an insurance claims adjuster often is not privileged because it is part of the company’s core business function. But where an employee gave a policy to an attorney and requested a legal interpretation and investigation of the events giving rise to the claim, the communications were privileged.[xiii]
Thus, it is important to document the purpose of involving non-attorneys in internal investigations and to clarify that their activities are outside their normal job duties, such as for compliance.
Involve Attorneys in Fact Finding and Synthesis
Contrary to a common misconception, the privilege can apply even to factual aspects of an internal investigation report communicated between in-house attorneys and the company. Communications made in the course of a relationship that is predominantly attorney-client, “including any reports of factual material, would be privileged, even though the factual material might be discoverable by other means.”[xiv] One California federal case involving trade secret claims came to a similar conclusion, finding that documents discovered during an internal investigation were discoverable while the investigation materials themselves were privileged.[xv]
Illustrating the breadth of this reasoning, one California court held that a purely factual investigation of employment claims was privileged because the outside counsel’s engagement letter stated that she was retained in part because her legal training would help her identify key facts and determine what happened.[xvi] Thus, involving attorneys in fact finding and specifying that their legal training is relevant to identifying and synthesizing the facts at issue can be a powerful tool.
Photographs and Records: Direct the Work of Consultants and Non-Attorneys
Internal IP investigations may frequently involve assistance from non-attorneys and third-party consultants, who may, for example, photograph accused products, interview witnesses, or make records of production methods. These materials may qualify for work product protection.
In one case, two non-attorney investigators, acting at counsel’s direction, created audio recordings of witness interviews. The California Supreme Court held that the recordings were entitled to at least qualified work product protection, and perhaps absolute protection if the interviews revealed the attorney’s thinking.[xvii] That could occur if the witness’s statements were “inextricably intertwined” with the attorney’s thinking or if they would reveal “the questions that the attorney has chosen to ask (or not ask)[.]”[xviii]
Federal courts have also found that accident scene photographs taken by non-attorneys in anticipation of litigation are at least “ordinary” work product and usually not discoverable.[xix]
In these cases, the fact that the consultants were working at counsel’s direction and in anticipation of litigation were key factors that led the courts to find that factual records like recordings and photographs could reveal an attorney’s thinking. Thus, when working with consultants, in-house IP counsel should take care to direct their activities and document any litigation purpose.
Intertwine Factual Aspects of Reports with Legal Analysis
Internal IP investigations may also frequently require in-house counsel to sift through large volumes of documents, identify key information, and even arrange or excerpt documents so they can be presented to internal clients. The work product doctrine may protect this type of factual organization from discovery.
For example, one court found that a “briefing document” prepared by outside counsel for a company’s board of directors regarding potential product liability litigation was protected as both privileged and work product.[xx] The company did not need to produce any part of the document, even though it included factual “clinical summaries” that would otherwise be discoverable.[xxi]
Similarly, the Fourth Circuit held that a compilation of certain employment records constituted opinion work product because the attorney’s selection “of these particular documents reveals her thought processes and theories regarding this litigation.”[xxii] And one federal court found that an attorney’s “comments upon technical information” in preparation for patent prosecution was protected work product.[xxiii]
In these cases, the result turned largely on the fact that legal thinking was based on and inextricably intertwined with factual information. In-house counsel should therefore be clear to base legal opinions and advice contained in internal IP investigation reports on incorporated factual information, and also consider making clear that other factual information was omitted because it was not pertinent to the legal conclusions in the report.
Involve Outside Counsel If In Doubt
When in doubt, it can be beneficial to involve outside counsel in internal investigations, even if only peripherally. The use of outside counsel can be a persuasive factor in finding whether the attorney-client privilege applies because it strongly suggests that the investigation’s purpose is a legal one.[xxiv]
For in-house IP counsel who are now tasked with managing or conducting internal investigations, California and federal cases in non-IP contexts provide significant guidance for how best to protect investigation materials with the attorney-client privilege or work product doctrine. Caw law suggests that in-house counsel should document the purpose of an investigation, involve attorneys in fact investigation and synthesis, closely direct and supervise the work of non-attorneys and consultants (particularly if they will generate new evidence like photographs, recordings, or videos), and intertwine legal conclusions and factual materials. In addition, involving outside counsel even to a small extent may be wise.
With these and other steps and careful planning, counsel may be able to protect their internal IP investigations and reports, including even purely factual information .
[i] Costco Wholesale Corp. v. Superior Court, 47 Cal. 4th 725, 732 (2009) (citations omitted).
[ii] Id. at 740; see also City of Petaluma v. Superior Court, 248 Cal. App. 4th 1023, 1032 (2016) (citation omitted).
[iii] In re Cty. of Erie,473 F.3d 413, 420 (2d Cir. 2007) (emphasis added); see also In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir., 2014).
[iv] Reed v. Baxter, 134 F.3d 351, 355 (6th Cir. 1998).
[v] In re Kellogg, 756 F.3d at 758-59; see also Cty. of Erie, 473 F.3d at 419.
[vi] Cal. Code Civ. P. § 2018.030.
[vii] Id. § 2018.030(a).
[ix] See, e.g., In re Grand Jury Subpoena, 870 F.3d 312, 316 (4th Cir. 2017); In re Murphy, 560 F.2d 326, 336 (8th Cir. 1977); U.S. ex rel. Burroughs v. DeNardi Corp., 167 F.R.D. 680, 683 (S.D. Cal. 1996).
[x] Suezaki v. Superior Court, 58 Cal. 2d 166, 174–75 (1962); Wellpoint Health Networks, Inc. v. Superior Court, 59 Cal. App. 4th 110, 120 (1997).
[xi] Suezaki, 58 Cal.2d at 174–75. Note, however, that “documents prepared independently by a party, including witness statements, do not become privileged communications or work product merely because they are turned over to counsel.” Wellpoint, 59 Cal. App. 4th at 119.
[xii] In re Kellogg, 756 F.3d at 758-59.
[xiii] Aetna Casualty & Surety Co. v. Superior Court, 153 Cal. App. 3d 467, 475-76 (1984) (distinguishing cases).
[xiv] Costco, 47 Cal. 4th at 740; see also Clark v. Superior Court, 196 Cal. App. 4th 37, 52 (2011).
[xv] Mattel, Inc. v. MGA Entertainment, Inc., 2010 WL 11463909, at *5 (C.D.Cal., 2010) (limiting discovery to “responsive documents uncovered during or in connection with the purported internal investigations”).
[xvi] City of Petaluma, 248 Cal. App. 4th at 1029.
[xvii] Coito v. Superior Court, 54 Cal. 4th 480, 495 (2012).
[xix] See Carnes v. Crete Carrier Corp., 244 F.R.D. 694, 699 (N.D. Ga. 2007); Laws v. Stevens Transp., Inc., 2013 WL 608046, at *2 (S.D. Ohio Feb. 19, 2013); see also Pittman v. Frazer, 129 F.3d 983, 988 (8th Cir. 1997).
[xx] In re Smith & Nephew Birmingham Hip Resurfacing Hip Implant Prod. Liab. Litig., 2019 WL 2330863 (D. Md. May 31, 2019).
[xxi] Id. at *3. The court noted, however, that the factual portions might be discoverable through other means, just not as part of the briefing document. Id. at * 3 n.4.
[xxii] In re Allen, 106 F.3d 582, 608 (4th Cir. 1997); see also Shelton v. Am. Motors Corp., 805 F.2d 1323, 1329 (8th Cir. 1986); Sporck v. Peil, 759 F.2d 312, 316 (3d Cir.1985).
[xxiii] Burlington Industries v. Exxon Corp., 65 F.R.D. 26, 41–42 (D. Md. 1974)
[xxiv] Parneros v. Barnes & Noble, Inc., 332 F.R.D. 482, 494 (S.D.N.Y. 2019).