During IP license negotiations, prudent negotiators will often avoid sharing privileged information about the IP to avoid waiving the attorney-client privilege. But in a recent District of Massachusetts case, the court upheld a claim of privilege to patent prosecution strategy communications between parties who were in the process of negotiating an exclusive license.

In 2002, plaintiff Crane entered discussions with a company called Nanoventions about the possibility of using Nanoventions’ technology for detecting counterfeit currency. At the time, Nanoventions had not patented the technology. During the course of negotiations, it became clear that patent protection was very important to Crane, and the parties began exchanging legal advice about obtaining patents. Crane eventually obtained an exclusive license to the patents in a narrow field and, a few years later, purchased the patents outright. 

In the litigation, Crane asserted that its pre license communications with Nanoventions contained legal advice that is protected by the attorney-client privilege. Defendant Rolling Optics challenged Crane’s privilege claims, arguing that Crane waived privilege by sharing that advice with Nanoventions, a third party.

The court reviewed the withheld documents and ultimately held that they were all privileged under the “common interest” doctrine. Although disclosing privileged information to a third party will typically result in a waiver of the privilege, the “common interest” doctrine provides an exception where the disclosures are made to further an identical legal interest shared by the parties.

In this case, the court found that, because Crane and Nanoventions were negotiating an exclusive license, they had an identical legal interest in successfully prosecuting Nanoventions’ patent applications. Because the communications were made pursuant to a confidentiality agreement and in furtherance of their shared legal interest, the court upheld Crane’s claim of privilege.

Parties who wish to rely on this decision should proceed with caution: the common interest analysis can be highly fact-specific, and other courts evaluating similar facts have reached different results. See, e.g., Corning Inc. v. SRU Biosystems, LLC, 223 F.R.D. 189, 190 (D. Del. 2004) (rejecting a claim of privilege because, in the court’s view, the communications “were made not in an effort to formulate a joint defense but rather to persuade BD to invest in SRU.”).

Crane Security Techs, Inc. v. Rolling Optics, AB, Case No. 14-12428-LTS (D. Mass. Feb. 3, 2017).