Dual-Purpose Communications and Privilege

by Dennis Crouch

The NY IP Law Association (NYIPLA) recently filed an amicus brief in the pending  anonymous Supreme Court case captioned In re Grand Jury, 21-1397 (2022).  The case focuses on the scope of attorney client privilege, especially with regard to dual-purpose communications.

Petitioner is a law firm specializing in international tax and had provided tax law advice to an expatriation client and also prepared individual tax returns for the client.  Later, the US Gov’t began a criminal tax investigation of the client and subpoenaed the law firm to provide Grand Jury testimony and evidence.  The law firm resisted, but both the district court and Ninth Circuit Court of Appeals ordered compliance.  In prior precedent, the courts have ruled that preparation of a tax return is a non-legal function, and thus, communications for that purpose are not privileged.  However, advice regarding tax planning and tax controversies is legal advice and thus communications are privileged. The attorney-client communications in this case thus fall under the category of dual-purpose communications where some aspect of the communications are privileged and other aspects are not privileged.

The lower court approach was two-fold. First, the court concluded that dual-purpose communications are entirely protected only when the primary purpose of the communication involved seeking legal advice.  Using that test, the court found that some of the communications were not privileged because they were primarily associated with tax return prep.  Thus, the law firm was ordered to deliver the documents.  Still, the court did not run entirely roughshod over attorney-client privilege. Rather, the second part of the lower court approach that any portions of the communications that contain attorney-client privileged material can be redacted.  Still, the law firm doesn’t want to disclose the communications at all and suggests that communications should entirely protected when the legal advice was “one of [its] significant purposes.” The Supreme Court recently agreed to hear the case with oral arguments set for January 2023.

Question Presented: Whether a communication involving both legal and non-legal advice is protected by attorney-client privilege where obtaining or providing legal advice was one of the significant purposes behind the communication

[Petition]. In its responsive briefing, the U.S. Government reframed the question as follows:

Whether the district court permissibly denied petitioner’s general claim of attorney-client privilege over communications, related to the preparation of a tax return, that did not have obtaining legal advice as their primary purpose, while instructing that all legal advice contained in the communications be redacted

[Gov’t Opposition].  The “significant purpose” test comes from a 2014 D.C. Circuit decision by Judge Kavanaugh, who is now a member of the Supreme Court. In re Kellogg Brown & Root, 756 F.3d 754 (D.C. Cir. 2014).

In their Amicus Brief, NYIPLA argues that the situation faced by the tax lawyers here is also prevalent for IP attorneys because IP lawyers are often experts in both the law and in the relevant field of the IP. For example, many patent attorneys also hold advanced degrees in a particular technical field and regularly use that knowledge in providing advice.  Likewise, many patent attorneys (especially in-house counsel) develop extensive knowledge of the firm’s business activities and goals and integrates those into their analysis.  According to the briefs, the 9th circuit rule “which requires courts to balance the legal and nonlegal aspects of a communication to determine its predominant purpose, hamstrings IP attorneys and clients.”   Irena Royzman (Kramer Levin) is counsel of record for the NYIPLA brief.

 

 

17 thoughts on “Dual-Purpose Communications and Privilege

  1. 7

    Troublesome, the persistent notion that patents do not really concern “legal” issues, raised especially when someone who owns a patent goes to a court of law to enforce it. Also troublesome are all-or-nothing approaches to such issues. Someone please tell me how the law comes out when this case is done.

  2. 6

    Jazz Pharmaceutical was just ordered by the D. Del (J. Williams) to delist an Orange Book listed patent. I’m sure there was an attorney (or twelve) involved in the decision to list the patent in the first place despite the fact that the claims do no encompass the drug or the use of the drug (the only types of patents that are allowed to be listed). Was it business advice or legal advice to list this patent in the Orange Book? There are significant business and legal issues involved. How would these communications between the lawyers and Jazz Pharma be construed – legal or business? This is definitely an important issue that needs to very clearly and easily defined (if that is possible).

  3. 5

    Lolol Kevin MCarthy is going to war with China. He must have gotten the Presidency while I wasn’t looking. This guy is going to make the Dems so happy.

  4. 4

    Off topic, but since the other thread is so long in the tooth…

    Six, check out:

    link to wsj.com

    1. 4.1

      You are just bouncing the rubble now. Everyone who cares already knows that your earlier point was accurate. You do not need to refute bad faith arguments.

      1. 4.1.1

        I didn’t see anyone else address Six’s comments that:

        “Twitter doesn’t owe debt that was used to purchase itself, Musk and the other people that went in with him, if any, owe that debt. Derp. ”

        and

        ” I doubt that the debt twitter owes has creates a 1 billy req in income to pay the interest just to be profitable. That would be an absurd amount.”

        and these comments didn’t appear to me to be bad faith but rather uninformed. I thought I could quickly and simply correct his misunderstanding.

        But if I missed other discussions, and am now just piling on, I apologize, six.

        1. 4.1.1.1

          It isn’t bad faith, and it isn’t uninformed at all. I know how businesses run, and you and tardozens obv don’t.

    2. 4.2

      “saddle it with hundreds of millions of dollars in interest payable on the more than $25 billion used to fund the leveraged buyout.”

      Derp that just means they’re trying to use the profitability to pay off the loans they took to buy the place. It doesn’t actually “saddle” the company with the debt, the debt remains with Musk et al. The language they’re using is confusing.

      See:

      “Mr. Musk may pay the margin loan out of his own account, or Twitter may use cash from the business to cover the interest expense. ”

      It’s musk that has to see the debt paid, tho he obv can just use internal payment directly from the corp to do so. (that is, it doesn’t have to come to him as “income” etc., and just goes straight to the lenders, skip a taxable step because it’s all just corporate loans taken to run the business, just like every other business).

      1. 4.2.1

        Wow.

        Okay.

        Get back to me when Twitter, not Musk and Co, file for bankruptcy to get rid of this debt.

        1. 4.2.1.1

          “Get back to me when Twitter, not Musk and Co, file for bankruptcy to get rid of this debt.”

          I will. Don’t hold your breath though as that will not be happening for a decade+ if ever. This wasn’t/isn’t a corporate raid, derp.

            1. 4.2.1.1.1.1

              That’s bankruptcy on the existing obligations (1.7 billy or so iirc + operations etc). Jes us h christ you show off even more tar dation with every post. I never said it won’t go bankrupt, I said it won’t go bankrupt because of the supposed “new debt that it was supposedly saddled with” herp derp. There’s a difference if only your small mind could understand corporations n sheet.

  5. 3

    I don’t follow what’s bugging NYIPLA. Preparing a patent application IS engaging in the practice of law – SCOTUS held so in Sperry v Florida nearly 60 years ago, and said that the federal patent statute authorizes agents to engage in the limited practice of law pertaining to the preparation of patent applications. But there was never a question that communications with someone who had been sprinkled with the magic pixie dust of a law degree and state bar admission was engaging in the practice of law when preparing a patent application, and thus such communications would be subject to the same privilege rules as any other attorney-client communications. Dennis didn’t link to the NYIPLA brief, so I can’t see what their concern is.

  6. 2

    It seems to me that there are far more legal/ethical questions and issues in preparing an income tax return than a patent application. The massively greater number of rules and regulations, the direct immediate net income change for tax returns versus patent application content or disclosed versus withheld information, etc. [Just one recent example: is tax-deducting your paying of your comptroller’s apartment rent or not ever the kind of income-impacting decision anyone has to make in preparing a patent application?]

    1. 2.1

      Furthermore, a well tailored narrow discovery request re patent applications, such as merely requesting the identities of the patents and applications found in prior art searchs for that subject matter, does not disclose any legal opinions or client information.

      1. 2.1.1

        Good point Paul, and equally amenable to the tax and/or business side of the fence.

  7. 1

    At first blush, I am not buying the brief’s emphasis that IP is impugned to such a degree that the entirety of any such dual-purpose communications should have the total privilege.

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