Saturday, February 13, 2010

Privilege extended to American patent attorneys

Here is an article I recently published on Lexology (about a motion I argued).

There is apparently a rule against the word "silly" appearing in a legal publication; however, the present Canadian situation on privilege and Canadian patent prosecution is silly (for the reasons I cleverly describe as "odd" and "startling" ;) ). Just to be clear: the court reached the correct decision in DataTreasury, but the overall situation for Canadian patent agents and patent agent/lawyers is, err, less than ideal.

The Canadian Federal Court recently held that in appropriate circumstances, communications between an inventor and an American patent attorney regarding drafting a patent application and prosecution are privileged. It provides important lessons for American and other foreign patentees who wish to assert privilege in Canada.

In DataTreasury v. Royal Bank of Canada et al. (decision dated November 6, 2009, as yet unreported), a Canadian patent case, the defendants sought to compel the patentee DataTreasury to produce documents from the files of the U.S. lawyers who drafted, filed and prosecuted the corresponding U.S. application. These documents included drawings prepared by the inventor to explain his invention to his lawyers, drafts of the patent application, and correspondence. The defendants argued that such documents were relevant to identifying the true inventors of the DTC patent and the possibility of inequitable conduct in patent prosecution.

Instead, the court ruled that such documents were privileged, relying on common law privilege principles as well as the doctrine of comity. This article explains the decision, and outlines how foreign patentees can position themselves to claim privilege over communications with their patent professionals. The lessons from DataTreasury are particularly relevant to American patentees, who often wish to assert their Canadian patent in the context of North American litigation.

Background: Privilege in the Domestic Canadian Context

In Canada, lawyers (who are licensed to practice law) and patent agents (who are licensed to practice in the Canadian patent office) are separate professions. Client communications with lawyers related to legal matters are covered by solicitor-client privilege, and cannot be disclosed in litigation without the permission of the client. However, following old United Kingdom case law (such as Moseley v. Victoria Rubber Co. (1886) 3 R.P.C. 351 (High Court of Justice, Chancery Division)), the Federal Court of Appeal has held that communications between Canadian clients and Canadian patent agents are not covered by solicitor-client privilege, notwithstanding that many legitimate activities of patent agents may involve giving legal advice:

It is clear that, in this country, the professional legal privilege does not extend to patent agents. The sole reason for that, however, is that patent agents as such are not members of the legal profession. That is why communications between them and their clients are not privileged even if those communications are made for the purpose of or giving legal advice or assistance.

This has left Canadian courts, when considering privilege for communications regarding patent drafting and prosecution between clients and professionals who are both lawyers and patent agents, in a difficult position. Case-law states that courts should assess whether the professional was acting as a patent agent or lawyer before deciding whether the communication is privileged. Given the almost indistinguishable difference between “patent agent work” and “legal advice or assistance”, it is unsurprising that courts have reached a confusing mix of decisions. It is generally difficult to predict whether privilege will apply to communications regarding patent drafting and prosecution with Canadian patent lawyers.

Foreign Patent Agents and Lawyers

An additional layer of complexity exists when Canadian Courts consider privilege for foreign patent professionals. Foreign companies and lawyers are often surprised to learn that the simple fact that such communications are protected by privilege under the law in their home country may not be sufficient to have equivalent protection granted by a Canadian court.

For example, in the 2006 Lilly Icos LLC v. Pfizer Ireland Pharmaceuticals case, privilege for communications in the United Kingdom between an inventor and his U.K. Patent Agents was considered by the Federal Court of Canada. Under U.K. law, communications between a person and his patent agent are “privileged from disclosure in legal proceedings in England, Wales, or Northern Ireland in the same way as communications between a person and his solicitor…”.

Nevertheless, the Court held that such communications were not privileged under Canadian law and were required to be produced in the Canadian litigation. Ominously for foreign patentees, Phelan J. of the Federal Court wrote:

The law in this country does not recognize this [the U.K.] patent agent-client privilege and there is no reason to create such a privilege on an ad hoc basis. Judicial comity between countries does not require Canada to recognize a privilege not established in Canada. This is so particularly for a privilege which has been advocated for but never adopted by legislation.

Pfizer chose to market their products in Canada and therefore take both the benefits and burdens of the Canadian legal regime when they sue or are sued in this country.

This case was settled prior to the hearing of an appeal.

Nevertheless, the Lilly Icos case left open the possibility of privilege being extended to communications between inventors and foreign patent agents if such communications qualify for common law privilege under the Canadian application of the doctrine. This issue, and others, were considered in the recent DataTreasury decision.

The DataTreasury Case – Wigmore and Comity

In DataTreasury, Claudio Ballard, the inventor of the patent at issue and a resident of the United States, engaged the American law firm of Pennie & Edmonds LLP to draft, file and prosecute his patent application. The professionals who dealt with the inventor were patent attorneys: lawyers also called to the U.S. Patent Bar as “patent agents”. The defendants, in litigation involving the corresponding Canadian patent, demanded production of communications between the inventor and the Pennie & Edmonds “patent agents” regarding the drafting and filing of the initial U.S. patent application. They argued that under Canadian law the Pennie & Edmonds professionals were clearly acting as patent agents, not lawyers, and under the Lilly Icos case communications with patent agents, domestic or foreign, were not privileged.

Prothonotary Aalto instead ruled that the communications were privileged, under both the common law “Wigmore” test, and as a matter of comity.

Wigmore’s four part test

Under common-law principles, communications are held as confidential on a case-by-case basis if they satisfy the following four “Wigmore” criteria:

(1) The communications must originate in a confidence that they will not be disclosed;

(2) This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties;

(3) The relation must be one which in the opinion of the community ought to be sedulously fostered; and

(4) The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit there by gained for the correct disposal of litigation.

DataTreasury was able to satisfy Prothonotary Aalto that these four criteria were met.

Critically, DataTreasury was able to point to testimony taken during discovery from the inventor that he was careful not to disclose his invention, that he approached Pennie & Edmonds because they were lawyers and he wanted to obtain confidential, and legal, advice. This satisfied the first criteria. Based upon this, the Court was able to find that the relationship in this particular case was an attorney-client relationship. In turn, this cemented the relevance of related U.S. cases on attorney-client privilege, such as Spalding Sports Worldwide and Knogo. This factual finding underpins the other three Wigmore criteria.

Unlike in the Lilly Icos case, in DataTreasury the foreign patent professionals were lawyers as opposed to patent agents. As a result, the relation between the client and professional was an American attorney-client relationship. Canadian courts are quite familiar with the American concept of attorney-client privilege and its basis in ensuring full and frank communication between clients and attorneys, satisfying the second Wigmore criteria.

Attorney-client or solicitor-client privilege is one which both American and Canadian legal systems believe should be sedulously fostered, satisfying the third Wigmore criteria.

The fourth Wigmore criteria was not explicitly dis-cussed in the decision, although implicit in the recognition of attorney-client privilege is the notion that great injury would inure to the client/attorney relationship if confidentiality is breached.


Prothonotary Aalto also grounded his decision in the notion of comity. He noted that comity – Canadian courts recognizing the laws of another jurisdiction – is grounded in a concern to be fair to a party that operates and arranges their affairs in accord with a foreign system:

In this case, comity also requires that this Court consider and give effect to the established expectation in the U.S. regarding privilege. The Knogo case, supra, supports the proposition that privilege attaches to communications between inventors and their counsel who are also patent agents. Here, the communications between Mr. Ballard and his U.S. lawyers originate in the confidence that they will not be disclosed. That is supported by the questions and answers referred to on the examination of Mr. Ballard. In the U.S. litigation, this information would not be compelled to be disclosed and, in my view, the same position should obtain in the Canadian litigation.

This last point - “in the U.S. litigation, this informa-tion would not be compelled to be disclosed and, in my view, the same position should obtain in the Ca-nadian litigation” - may be the most interesting part of the DataTreasury decision. While the court in Lilly Icos was hostile to the notion that Canadian courts should take into account foreign laws when making privilege decisions (stating that if patentees want to enforce patents in Canada, they need to play by Canada’s rules), the DataTreasury decision instead reflects a willingness to consider whether a particular privilege ruling is fair to foreign parties before the Canadian court.

The Canadian Position after DataTreasury

Oddly, the DataTreasury decision leaves Canadian patent agents, and Canadian patent agent/lawyers, at a disadvantage under Canadian law compared to foreign patent agents and foreign patent agent/lawyers. A Canadian patentee who uses Canadian patent professionals to draft and file a priority application may be unable to claim privilege under Canadian law, depending on whether a court judges the communication to fall under a “patent agent” purpose. Meanwhile, a foreign patentee who uses foreign patent professionals may be able to claim privilege under Canadian law as a matter of comity or common-law privilege.

While this is entirely consistent with international economic law, where countries typically reserve the privilege of treating their own nationals less favourably than foreign entities, it is startling to see this arise in an industrialized country in an area as important as patent law. The DataTreasury decision may give an impetus to Canadian efforts to change this situation.

Lessons to Draw from the DataTreasury Decision

The DataTreasury decision lays out a roadmap to be followed in future motions by patentees who wish to keep their discussions with their foreign patent professionals privileged. Success on the motion will be determined by the quality of evidence on the following points:

a) Was the inventor seeking “legal advice” when approaching the foreign patent professional?

b) Did the inventor regard the confidence of communications with the foreign patent professional as important when establishing the relationship or making the communication?

c) Are communications between the patent professional and inventor covered by privilege in the foreign jurisdiction?

d) What is the reasoning behind granting the privilege? Would denying privilege in Canada frustrate the reasoning behind granting the privilege in the foreign country?

e) Can the privilege in the foreign jurisdiction be characterized as attorney-client or solicitor-client privilege?

These points will generally be easier to establish for communications between an American patentee and professional than for communications in other countries. Most importantly, communications between a U.S. inventor and a U.S. lawyer/patent agent are formally covered by attorney-client privilege as opposed to some other privilege, which has a clear and highly protected counterpart under Canadian law. The U.S. inventor can thus usually sidestep the thorny issue of whether a particular communication was to the U.S. patent attorney as agent or lawyer.

The general familiarity Canadian courts have with American law and decisions make it easier to prove to a Canadian court that American attorney-client privilege applies to the specific communications at issue. Canadian courts will be more comfortable reading American cases such as Florida Bar v. Sperry, Spalding Sports Worldwide and Knogo than foreign legislation or cases establishing privilege for patent agents. The similarity of professional desig-nations between Canada and the U.S. – where professionals are separately qualified as a lawyer and to practice before the patent office – also assists in making the Court comfortable with ruling on privilege.

The difference between the successful patentee in DataTreasury and the unsuccessful patentee in Lilly Icos largely circles around the superior evidence in DataTreasury on these critical points. Even in the case of communications with an American patent attorney, it seems that evidence from the inventor as to who they sought advice from and his/her expectations is central to the success of asserting privilege. When conducting litigation in Canada, it would be prudent for a foreign patentee to consider how to prove these points at an early point in the litigation and lay the evidentiary groundwork for success in a privilege motion. From a broader and earlier point of view, inventors (particularly repeat patentees) should consider always consulting “lawyers” for patent drafting and prosecution advice to enhance the likelihood that such communications will be considered privileged in foreign litigation.

Please note that Gilbert’s LLP represented Data-Treasury in the decision discussed in this article. This article should not be taken as the views of DataTreasury or of Gilbert’s LLP.

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