by Dennis Crouch
In a recent decision, the U.S. Court of Appeals for the Federal Circuit denied a petition for a writ of mandamus filed by Cozy, Inc. seeking to set aside a district court discovery order piercing attorney-client privilege. In re: Cozy, Inc., No. 2023-145 (Fed. Cir. Dec. 4, 2023). The discovery dispute arose out of Cozy’s patent infringement lawsuit against Dorel Juvenile Group, Inc. (“Dorel”) and Dorel’s inequitable conduct counterclaims alleging that Cozy made fraudulent misrepresentations to the PTO. 21-cv-10134-JGD.
After reviewing documents in camera, the district court granted in part Dorel’s motion to compel production of certain Cozy documents listed as privileged on the basis that the crime-fraud exception to attorney-client privilege applied. The court found that Dorel had established a prima facie case that Cozy’s founder, Dr. Arjuna Rajasingham, “manipulated the PTO into recognizing priority dates to which he was not entitled” and “relied on the advice of his counsel to perpetrate a fraud on the PTO.”
The crime-fraud exception provides that attorney-client privilege does not apply to communications between a client and attorney that are made for the purpose of furthering criminal or fraudulent activity. Specifically, the ordinarily strong privilege may be pierced if the party seeking disclosure can show that (1) the client was engaged in or planning criminal or fraudulent activity when the attorney-client communications were made, and (2) the communications were intended in some way to facilitate or conceal the criminal or fraudulent activity. The policy rationale is that the usual protections afforded by attorney-client privilege should not extend to communications made to enable or aid the commission of a crime, fraud, or other misconduct. Because attorney-client privilege is typically so strongly protected by the legal system, the exception is typically narrowly construed.
On mandamus here, Cozy challenged the privilege ruling, arguing that the exception requires a stronger showing of inequitable conduct, which requires both materiality and intent. In particular, the patentee argued that the defendant must provide “a clear showing [of materiality,] that the patent would not have issued but for [the] misrepresentations.” The Federal Circuit, however, denied mandamus relief, finding no “clear and indisputable” right to relief nor a lack of other adequate means to challenge the decision. The court cited Supreme Court precedent stating that “post-judgment appeals generally suffice to protect the rights of litigants and ensure the vitality of the attorney-client privilege.” quoting Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100 (2009).
The Federal Circuit further held that attorney-client communications used to commit fraud on the PTO after a patent has already issued could potentially still fall within the crime-fraud exception.
[I]t is far from clear why “[a] client who consults an attorney for advice that will serve him in the commission of a fraud” on the PTO following patent issuance should get “help from the law” by shielding communications used in commission of that fraud.
Quoting Clark v. United States, 289 U.S. 1 (1933). The court also cited federal statutes associated with fraud against the US: 18 U.S.C. §§ 371 (Conspiracy to commit offense or to defraud United States), 1001 (false statement to US).
The outcome here is that the Federal Circuit denied mandamus, but it left open the possibility that it reconsider the privilege issue after final judgment — assuming that it makes a difference in the actual outcome. In that vein, the appellate panel provided an expectation and a suggestion to the district court: (1) Expectation: “that the communications and related documents will be kept under seal to mitigate the potential harmful effects caused by disclosure.” and (2) Suggestion: “it would be helpful if the district court could indicate separately what findings it would make with and without the documents used as a result of piercing the privilege at issue here.”
While I understand the Federal Circuit’s cautious suggesting to keep the communications secret from the public – just in case the privilege issue was decided wrongly. If this turns out to be a fraud on the PTO, I expect that it will be very useful for the patent bar to see the details of the communication. To be clear, at this point I can’t tell you the particularly details of the communications other than the notion that they involve discussion of issues related to priority dates, patent term, certificates of correction, and prosecution strategy.