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1Pursuant to the privileged and protected nature of the documents in question, the Court will not cite any
specific provisions from the documents submitted for in camerareview.
1
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
FRACTUS, S.A.,
Plaintiff,
vs. CIVIL ACTION No. 6:09cv00203
SAMSUNG ELECTRONICS CO., LTD.;
et. al.
Defendants,
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants Joint Motion to Compel Production of Fractus Non-
Privileged Business Plan (Doc. No. 512, MOTION). The matter is fully briefed. (Doc. Nos. 520,
OPP.; 543, REPLY; 558, SURREPLY). Additionally, Fractus submitted the documents in
question for in camera review. The Court held a hearing on January 11, 2011 and the parties
presented oral argument. After careful consideration of the parties submissions, the documents
submitted in camera and oral argument, the Court finds that Defendants motion should be
DENIED.
BACKGROUND1
In September 2004, Fractus entered a Licensing Business Plan Development and
Implementation Agreement (Development Agreement) with the law firm of McKool Smith
(McKool). OPP. at 2. Pursuant to this agreement, McKool, in conjunction with Fractus former
counsel and consultant Ipotential, conducted extensive research and analysis which was finalized
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2The parties disagree whether the Licensing Program was shared with two other parties, Techquity Capital
Management and Altitude Capital. MOTIONat 5; OPP. at 8-9.
2
on March 16, 2005, and presented to Fractus in the Business Plan Of An IPR Licensing Program
For the Cellular Phone Market. (Licensing Program) Id. at 2-3. Subsequently, McKool and
Fractus entered into a second agreement styled as an Implemental Agreement. Id.at 1.
In 2008, Fractus sought investors or considered selling its patent portfolio. MOTIONat 4;
OPP. at 8. In line with those goals, Fractus entered negotiations with Charles River Ventures as a
potential investor or buyer of the Fractus patent portfolio. Id. Pursuant to these negotiations, Mr.
Ruben Bonet, Fractus CEO, sent an email to an executive at Charles River Ventures attaching the
Implementation Agreement and Licensing Program.2Id.
Subsequently, Fractus filed suit against the current Defendants for patent infringement (Doc.
No. 1). Fractus inadvertently produced the Licensing Program to Defendants during the course of
this litigation. Defendants attempted to use the Licensing Program during the deposition of a
Fractus employee and Fractus, pursuant to the protective order entered in this case, clawed back
the document as privileged. Defendants immediately challenged the privileged nature of the
document, which led to a hotline call to the Court. The Court allowed Fractus to claw-back the
document, but without prejudice to further challenge and in camerareview. Defendants renewed
their challenge via this motion and Fractus has submitted the documents in question for in camera
review.
APPLICABLE LAW
Attorney-client privilege protects particular communications between attorney and client.
U.S. v. Kelly, 569 F.2d 928, 938 (5thCir. 1978). To invoke the attorney-client privilege the claimaint
must demonstrate: (1) the asserted holder of the privilege is or sought to become a client; (2) the
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person to whom the communication was made is a member of a bar or court, or his subordinate and
in connection with this communication is acting as a lawyer; (3) the communication related to a fact
of which the attorney was informed by this client without the presence of strangers for the purpose
of securing primarily either an opinion on law or legal services or assistance in some legal
proceedings and not for the purpose of committing a crime or tort; and (4) the privilege has been
claimed and not waived by the client. Id. However, [w]hen a [privileged] communication is
relayed to a third party that is not rendering legal services on the clients behalf, a communication
is no longer confidential, and thus it falls outside of the reach of the privilege. Nguyen v. Excel
Corp., 197 F.3d 200, 207 (5th
Cir. 1999).
A party asserting work-product protection over particular materials must demonstrate: (1)
the materials sought are tangible things; (2) the materials sought were prepared in anticipation of
litigation or trial; (3) the materials were prepared by or for a partys representative. SEC v. Brady,
238 F.R.D. 429, 441 (N.D. Tex. 2009). To qualify as opinion work product, the materials must
contain the mental impressions, conclusions, opinions or legal theories of an attorney or other
representative. Id. The work-product doctrine protects materials prepared in anticipation of
litigation. Reedhycalog UK, Ltd. v. Baker Hughes Oilfield Operations, Inc., 242 F.R.D. 357, 360
(E.D. Tex. 2007) (Davis, J.). While litigation need not be imminent to shield particular materials
from discovery as work product, the primary motivating purpose behind creation of the materials
must be to aid possible future litigation. Id.at 360-61 (quoting United States v. Davis, 636 F.2d
1028, 1039 (1981)).
Work product protection is narrower than attorney-client privilege, as is waiver of the
protection. Id.;Ferko v. National Assn For Stock Car Auto Racing, Inc., 219 F.R.D. 396, 400-01
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(E.D. Tex 2003). Work-product protection is not automatically waived by disclosure to a third
party. Ferko, 219 F.R.D. at 400 (citations omitted). Disclosure of work-product waives work-
product protection only if work-product is given to adversaries or treated in a manner that
substantially increases the likelihood that an adversary will come into possession of the material.
Id.at 400-01. The party asserting waiver has the burden of demonstrating as much. SEC v. Brady,
238 F.R.D. 429, 444 (N.D. Tex. 2009).
DISCUSSION
Attorney-Client Privilege
After in camerareview of the materials in question, the Court finds that they are indeed
subject to the attorney-client privilege. Nonetheless, Defendants contend that Fractus has waived
the privilege due to the disclosure to Charles River Ventures. MOTIONat 4-5. In the interest of
brevity, the Court does not find necessary an analysis of waiver of the attorney-client privilege
because the materials in question are also protected by the work-product doctrine and not subject
to waiver.
Work-Product Doctrine
The crux of the parties disagreement regarding work product is whether these documents
were prepared in anticipation of litigation. REPLYat 3-4; SURREPLYat 1-3. Defendants contend that
the Licensing Program is a memorialization of Fractus licensing strategy and was not created in
anticipation of litigation. REPLY at 3-4. Plaintiff, on the other hand, argues that the Licensing
Program was created in anticipation of litigation. SURREPLYat 1-3. Moreover, Plaintiff contends
that even if litigation was not anticipated in 2004, the primary motivating purpose of creating the
Licensing Program was for licensing and litigating Fractus patents. Id.
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After in camerareview of the Development and Implementation Agreements, the Court finds
that Fractus indeed engaged McKool for the primary motivating purpose of developing a licensing
strategy that involved identifying potential infringers of Fractus patents with the clear goal of filing
suit against the alleged infringers, if necessary. Indeed, after review of the Licensing Program, the
end-game of the analysis contained in the document is evident. McKool provided Fractus with an
in-depth legal analysis to inform Fractus of the strengths, weaknesses and mitigation strategies to
move forward with a licensing plan that was clearly focused on the filing of lawsuits against
potential infringers if they refused licenses. Fractus was clearly anticipating litigationand even if
they were notthe primary motivating purpose of this document was to aid in future litigation. In
fact, numerous portions of the Licensing Program would serve no other purpose than to aid in future
litigation.
Defendants also contend that Fractus is claiming privilege over the Licensing Program to
hide evidence that contradicts testimony provided in this case. REPLYat 4. Specifically, Defendants
contend that Fractus CEO, Mr. Bonet, testified that Fractus did not plan litigation against
Defendants until 2006 or thereafter, contradicting Fractus position that the Licensing Program
demonstrates it anticipated litigation in 2004. Id. at 5. Initially, Fractus has conceded that it
anticipated litigation by at least the Fall of 2004 when it engaged McKool to create the Licencing
Program. SURREPLY at 1. The Licensing Program itself shows as much. While Mr. Bonets
testimony to the contrary does not strip the Licensing Program of work-product protection, how the
parties choose to proceed regarding Mr. Bonets testimony will be closely watched by the Court as
this case moves forward.
While Defendants do not specifically contend that Fractus has waived work-product
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3 Defendants contend that Fractus also disclosed the Licensing Program to other entities. MOTIONat 5;
REPLYat 2. The Court does not find persuasive the documents submitted by Defendants purporting to demonstrate
that Fractus indeed disclosed the Licensing Program to the identified entities. Even if they did, those disclosures
would not waive work-product protection because the third-parties are neither adversaries nor likely to pass on the
information to adversaries.
6
protectionbecause of the disclosure of the materials in question to third-parties, for the sake of
completeness on this issue, the Court agrees with Fractus that work-product protection was not
waived. While the materials in question do appear to have been disclosed to at least one third party,
Charles River Ventures, there is no indication that Charles River Ventures was an adversary or that
the disclosure substantially increas[ed] the likelihood that an adversary would gain possession of
the materials. Ferko, 219 F.R.D. at 400-01. Indeed, Fractus has submitted for in camerareview a
Mutual Confidentiality Agreement between Fractus and Charles River Ventures intended to
prevent disclosure of the materials to third parties. As such, the Court finds that the work-product
protection over these materials was not waived as a result of this third-party disclosure.3
CONCLUSION
Based on the foregoing, the Court finds the materials in question are work-product, therefore,
Defendants motion is DENIED.
___________________________________
JOHN D.LOVE
UNITED STATES MAGISTRATE JUDGE
So ORDERED and SIGNED this 20th day of January, 2011.
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