Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-05429/USCOURTS-cand-4_04-cv-05429-14/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GENENTECH, INC., et al.

Plaintiffs,

v.

INSMED INCORPORATED, et al.

Defendants.

___________________________________/

AND RELATED COUNTERCLAIMS.

___________________________________/

No. C-04-5429 CW (EMC)

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS’

MOTION TO COMPEL DOCUMENTS

FOR IN CAMERA REVIEW

(Docket No. 270)

I. INTRODUCTION

Defendants Insmed Inc., Celtrix Pharmaceutical, Inc., and Insmed Therapeutic Proteins, Inc.

(collectively “Insmed”) have moved to compel Plaintiff Genentech, Inc. (“Genentech”) to produce

documents related to its U.S. Patent No. 5,187,151 (“‘151 patent”), for in camera review and for

production. Defendant Insmed claims that the documents at issue are not protected by the attorneyclient privilege because Plaintiff Genentech has waived the privilege by implied waiver. This Court

heard Insmed’s motion February 8, 2006. Having reviewed and considered the parties’ briefs and

accompanying submissions, as well as the oral argument of counsel, and good cause appearing

therefor, the Court hereby GRANTS IN PART and DENIES IN PART Defendants’ motion to

compel documents for in camera review.

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II. BACKGROUND

Genentech has sued Insmed for patent infringement. As one defense in this action, Insmed

alleges that the ‘151 patent is unenforceable due to inequitable conduct before the U.S. Patent and

Trademark Office (“PTO”). Insmed Supp. Mot. at 1:18. Specifically, Insmed alleges that

Genentech inventors Dr. Ross Clark and Dr. Venkat Mukku, and prosecuting attorney Janet Hasak,

engaged in inequitable conduct by failing to disclose certain abstracts constituting material prior art

to the PTO and that these abstracts contradicted statements made in the specifications of the ‘151

patent or during its prosecution. Insmed Supp. Mot. at 2:20. 

More specifically, Insmed contends that both Dr. Clark and Dr. Mukku, at one point prior to

the issuance of the ‘151 patent, had received a copy of an abstract written by Christopher A. Maack,

entitled, Insulin-Like Growth Factor Binding Protein-3 Potentiates The Effect of IGF-I in Rat and

Pig Wound Healing Models (“the Maack Abstract”) and another abstract written by Andreas

Sommer, entitled, Molecular Genetics and Actions of Recombinant IGFBP-3 (“the Sommer

Abstract”), both of which allegedly contained the description of experiments and data concerning

Biogrowth wound healing experiments. Insmed Supp. Mot. at 3:8, 3:18, 4:1 and 5:1. Insmed also

contends that experiments reported in Growth Regulation were material but not disclosed to the

PTO.

In this motion, Insmed seeks to have the documents in question produced for in camera

review because they allegedly contain information and/or notations that indicate Genentech’s prior

knowledge of the Maack and Sommer Abstracts and the Growth Regulation experiment and that

Genentech has purportedly waived its attorney-client privilege by placing their alleged knowledge of

the prior art at issue through deposition testimony. Specifically, Insmed believes that document GTI

0190023351-52 contains information that proves that Dr. Clark was the source of information

concerning Biogrowth wound healing work found in the specification and that both Dr. Clark and

Dr. Hasak were aware of the materiality of Biogrowth wound healing work not disclosed to the

PTO. Insmed Supp. Mot. at 7:24. Insmed alleges that document GTI 0190023311-23 should be

reviewed in camera because it is a version of the Growth Regulation paper which contains notations

in the margins of the paper at points where experimental results that are pertinent to the inequitable

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conduct defense are discussed. Insmed Supp. Mot. at 8:9. Finally, Insmed requests the production

of documents GTIP 0190009067, GTIP 00190009082, and GTIP 00190009092, on the grounds that

Genentech has identified these documents as correspondence between the inventors Drs. Clark and

Mukku and the attorney prosecuting the ‘151 patent application, Ms. Hasak, before the ‘151 patent

issued. Insmed Supp. Mot. at 11:25.

III. PROCEDURAL BACKGROUND

Both Insmed and Genentech have produced thousands of pages and logged thousands of

privileged documents. Insmed has also deposed Dr. Clark, Dr. Mukku, and Ms. Hasak, questioning

them, in relevant part, on their knowledge of the prior art at issue. It is during these depositions that

Insmed claims Genentech’s witnesses placed their state of mind into this controversy, thereby

waiving the attorney-client privilege for documents that might show their knowledge of the

materiality of the prior art. 

IV. DISCUSSION

Insmed asserts that it is entitled to the documents in question because Dr. Clark placed his

state of mind in question when he denied knowledge of who wrote a paragraph in the specification

that related to Biogrowth wound healing. Insmed Supp. Mot. at 7-8:14. Moreover, Insmed alleges

that Dr. Clark’s testimony where he denies any recollection of the Biogrowth wound healing studies

gives the impression that Genentech will use such testimony to defend against the inequitable

conduct claim. Insmed Supp. Mot. at 10:25. Accordingly, Insmed claims that Genentech should not

be able to present exculpatory testimony about its witnesses’ state of mind without providing

nonprivileged evidence to substantiate its claim or producing the privileged communications as

evidence. Insmed Reply in Supp. at 1:10.

In its defense, Genentech argues that they have protected their attorney-client privileges

scrupulously. Genentech Opp. at 2. More importantly, Genentech contends that their witnesses’

testimony did not constitute the “affirmative acts” necessary for an implied waiver of privilege. 

Genentech Opp. at 9. Genentech does not challenge the fact that its witnesses denied recollection of

certain documents or knowledge at the time of the patent prosecution. Genentech Opp. at 12:8. But

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Genentech maintains that such denials are insufficient to support a claim of waiver. Genentech Opp.

at 12:10.

A. Implied Waiver of the Attorney-Client Privilege

An implied waiver of the privilege occurs if “(1) the party asserting the privilege acts

affirmatively (2) to place the privileged communication in issue between the party seeking discovery

and itself (3) such that denying access to the communication becomes manifestly unfair to the party

seeking discovery.” Laser Industries, LTD v. Reliant Technologies, Inc., 167 F.R.D. 417, 446 (N.D.

Cal. 1996).

The context of the asserted implied waiver in the case at bar differs from the usual paradigm. 

Typically, the holder of the privilege resisting waiver voluntarily injects the content of the privileged

communication into the suit by affirmatively asserting e.g., advice of counsel to establish nonwilfulness. In this context however, the issue of inequitable conduct which is likely to raise the

question of the patentees’ knowledge is asserted by the defendant -- the party asserting, not

resisting, waiver. The danger, if the implied waiver doctrine is not applied cautiously, is that the

party asserting waiver could unilaterally effect that waiver through its pleading strategy. On the

other hand, where there is a basis for the assertion and the patentee disclaims knowledge of the prior

art in answer to the inequitable conduct claim, there is a risk of unfairness to the defendant if the

defendant is denied the means to test the factual basis of that denial.

A number of district courts have addressed the issue in the context of an assertion of

inequitable conduct or fraud on the PTO. The courts appear to be in agreement with the general

proposition that “mere denial of intent, without more, is insufficient to constitute waiver.” Starsight

Telecast, Inc. v. Gemstar Development Corp., 158 F.R.D. 650, 653 (N.D. Cal. 1994); Laser

Industries, 167 F.R.D. at 446. What constitutes the “more” that is sufficient to constitute a waiver is

less clear. In Starsight, the court held “When the state of mind is an issue in a case, a party should

not be permitted to testify about its state of mind at the time alleged privileged communications

occurred, without pointing to nonprivileged evidence to substantiate its claim or allowing the

opposition to discover the privileged communications themselves.” Starsight, 158 F.R.D. at 653,

(citing General Electric Co. v. Hoechst Celanese Corp., 15 U.S.P.Q.2d. (BNA) 1673, 1676 (D. Del.

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1990). In Starsight, the court found that the inventor and his patent attorney made affirmative

representations in their declarations that all prior art about which they were aware had been

disclosed to the PTO. They further testified in deposition that the subject prior art was not material. 

158 F.R.D. at 654. The court concluded that the defendants had “done more than merely deny

Starsight’s charge of inequitable conduct” and thus partially waived their attorney-client privilege

thereby warranting in camera review. Id. 

In General Electric Co., 15 U.S.P.Q.2d. (BNA) at 1673, the court found that GE had

implicitly waived its privilege when GE offered the testimony of an inventor and attorney, both of

whom denied any recollection of the prior art. Id. at 1676. GE’s counsel also volunteered, “Had I

remembered this letter . . . I probably would not have called it to the attention of the Patent Office

because I considered this to be irrelevant to the GE patent during reexamination.” Id. The inventor

also asserted the prior art was different. GE contended this disproved the assertion of fraud on the

PTO. Id. The court concluded: 

Yet GE points to no evidence, other than the allegedly privileged

communications themselves, which would substantiate these claims.

The only way for defendants to refuse these assertions is to

examine the privileged communications themselves. In light of GE’s

affirmative representations regarding Borman and Mufatti’s state of

mind, and in light of the record reflecting contemporaneous

communications between Broman and Mufatti, fairness requires that

defendants be allowed to uncover the foundation for GE’s assertion.

Id. at 1679-80. The court found a limited waiver sufficient to conduct an in camera review. 

In Laser, the defendant asserted the plaintiff perpetrated fraud on the PTO by failing to

disclose one of its own previous patents and prior art. The attorney who prosecuted the patent

submitted a declaration stating he never engaged in fraud or inequitable conduct before the PTO and

had no knowledge of the prior patent or prior art related to it. 167 F.R.D. at 446. Another attorney

submitted a similar declaration. Id. The declarations also contained arguments about the materiality

of the prior art. Id. at 447. The court found no waiver of the privilege. It found the denials did not

purport to disclose the contents of a specific communication nor did they place the contents of any

such communication at issue. Id. It noted courts “are less likely to find waiver when the statements

alleged to constitute waiver do not purport to disclose the contents of a specific communication, and

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when the statements are pre-trial matters, not evidence.” Laser, 167 F.R.D. at 446. Nor, according

to the court, did the plaintiff place the attorney’s state of mind in issue. The court did note, however,

that if the attorneys were to testify at trial about their knowledge of prior art at the time of the patent

prosecution, fairness would require plaintiff to disclose any confidential communications which may

verify or disprove the truth of such statements. Id.

Importantly, the defendant did not seek an in camera review, but rather sought outright

disclosure. The court thus distinguished its analysis from the “less stringent analysis” applicable

under United States v. Zolin, 491 U.S. 554, 572 (1989) wherein the court must: (1) determine

whether the party seeking in camera review has made a threshold showing of a good faith belief that

the impetus may reveal evidence to establish the defense claim, and (2) if such a showing is made,

whether to exercise the court’s discretion to conduct the in camera review based on a number of

factors (including volume of materials, relative importance to the case, and likelihood of establishing

the defense claim). Id. at 420 n.3.

In Derrick Manufacturing Corp. v. Southwestern Wine Cloth, Inc., 934 F. Supp. 813, 816-17

(S.D. Tex. 1996), the accused infringer claimed the plaintiff engaged in fraud on the PTO and

inequitable conduct by failing to disclose prior art. The court refused to find a waiver. It rejected

defendants’ argument that plaintiff had put its representatives’ state of mind at issue when its

principal testified that he had no recollection of any discussion with patent counsel regarding

disclosure of prior art, the duty to disclose it, or the meaning of prior art. Distinguishing Starsight

and General Electric, the court concluded these were mere denials and that there was no affirmative

reliance on counsel’s advice. Significantly, the defendant in Derrick sought disclosure of the patent

attorney’s affidavit, not in camera review. 

At first blush, these cases are difficult to reconciliate. The gist of the testimony in each was

a denial of wrongdoing including denial of knowledge that any prior art was withheld from the PTO. 

In Starsight, General Electric, and Laser, there was some assertion that the prior art was immaterial. 

While there was some reference to the inventor’s communication with patent counsel in Starsight

(declaring he provided all material prior art about which he was aware to counsel), there was no

such testimony in General Electric. The denial of recollection in General Electric were less

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affirmative than the assertions in Starsight, Laser, and Derrick. It is difficult to discern how the

testimony and declarations in Starsight and General Electric placed the patentee’s state of mind or

contents of a specific privileged communication any more at issue than in Laser and Derrick. Yet,

waiver was found in Starsight and General Electric, but not in Laser and Derrick. The line between

what constitutes “a mere denial of intent” (General Electric, 1990 U.S. Dist. LEXIS 14106 at *22)

and a substantiated denial sufficient to constitute an implied waiver appears illusive.

In trying to discern a guidepost from the precedent discussed above, it appears that the key to

these cases lies in the fact that in camera review was sought in General Electric and Starsight but

not in Laser and Derrick. As Judge Brazil pointed out in Laser, where in camera review rather that

outright disclosure is sought, a less stringent standard under Zolin applies. Application of a less

stringent standard is appropriate because in camera review provides a significant procedural

safeguard of the privilege. The privilege is maintained unless the opponent of the privilege makes a

satisfactory threshold showing, and the court concludes in camera review is warranted after

considering a number of factors identified in Zolin. If actual production is ordered following in

camera review, it is narrowly tailored as the waiver is “narrowly construed.” Starsight, 158 F.R.D.

at 655. While the Court still must apply the general principle that no waiver may be found unless

the holder presents something more than a “mere denial of intent” even where in camera review is

sought, the results in Starsight and General Electric suggest that the “more” need not be as

substantial as when outright disclosure is sought.

In the case at bar, Insmed seeks in camera review. Thus a less stringent showing is required.

In the present case, Insmed relies on the following statements of Dr. Clark’s deposition as a basis for

a finding of waiver:

After showing Dr. Clark an abstract book, Insmed’s counsel asked:

Q. But this particular abstract addresses the effect of BP-3 on the effects of IGF-I; is that

correct?

A. This abstract studies wound healing in rats and pigs.

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Q. Yes, and in particular, the effect of BP-3 in potentiating the effect of IGF-I in such

wound healing; correct?

A. But I was not interested in wound healing at this point in my career.

Q. Are you familiar with the Shilling-Hunt rat model . . . 

A. No, I’m not familiar with this model. As I said I have never studied wound healing.

Dr. Clark was then asked a series of questions to determine his understanding of what was

reported in the abstract as to effect of IGF-I alone as compared to a complex of IGF-I and

IGFBP-3 on rat wound healing. In a series of answers, Dr. Clark responded:

A. As I said, I’ve never studied wound healing, so to understand whether this was a real

effect which did affect wound healing, I would have to read many documents and

familiarize myself with wound healing . . . That’s outside my area of expertise. I’m

sorry.

. . .

A. So I’ll answer the question again in that I’m not familiar with wound healing, which

is a completely different field than I’ve worked in . . . I’m sorry. I can’t help you

about -- make any judgment on this document, as I don’t understand the area. 

Shatzer Decl. Ex. 5 at 159-63. Thus, with respect to the abstract, Dr. Clark essentially asserts lack

of knowledge because the abstract was not, in his view, within or material to his expertise.

After showing Dr. Clark the ‘151 patent, Insmed’s counsel asked:

Q. The paragraph that beings at Line 43, do you know who rote [sic] that paragraph in

the specification?

A. No. I’ve got no knowledge of who wrote that. 

Shatzer Decl. Ex. 5 at 194.

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Q. Who else involved with the patent application, other than you, do you believe might

have been the source of this information that’s in this paragraph?

A. Anybody else who had something to do with drafting the application.

Q. Who were the people that might include aside from yourself?

A. Jan Hasak, the patent lawyer who drafted it, and it appears that there were marking on

other copies possibly from a third party, so there could have been multiple people that

had found these documents and included them in the patent. But these ones, they’re

the type of reference that I would be highly unlikely to know about or have asource to

since I believe back in those times, there was no electronic access to patents.

Shatzer Decl. Ex. 5 at 196-97.

On a separate occasion Dr. Clark was asked if he recalled providing Ms. Hasak any

documents prior to the filing of the application for the ‘151 patent. Dr. Clark answered:

A. I don’t recall. It’s 15 years ago. I don’t recall specific incidences of supplying

documents to Janet Hasak, no. 

Shatzer Decl. Ex. 5 at 174. In essence, Dr. Clark testified he had no knowledge as to who was

responsible for the allegedly false specification and could not recall having provided any documents

to patent counsel.

While Dr. Clark does not make an affirmative representation that he provided all material

information to counsel as in Starsight, his testimony as to his lack of recollection of the prior art is

similar in nature to the testimony in General Electric. Although Dr. Clark does not expressly

address materiality of the prior art, his testimony that it concerned a different field seems to imply as

much. Perhaps more to the point Dr. Clark implies that even if the prior art had been in his

possession, he would have disregarded it as outside his field. Arguably, Dr. Clark’s testimony

implies more than a lack of recollection; it suggests something more affirmative about his state of

mind -- the likelihood that if he saw the prior art, he would have ignored it.

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 Genentech asserts the margin notes were those of litigation counsel and have nothing to do

with Dr. Clark’s state of mind at the time of patent prosecution. Genentech may submit under seal a

declaration explaining both these documents and their contexts. The Court will consider any such

evidence in determining whether upon in camera review disclosure is appropriate.

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Dr. Clark’s testimony about his likely state of mind and the fact that he would have

considered the subject prior art irrelevant provides something more specific than mere denial of

intent. It is at least sufficient to trigger an inquiry into the appropriateness of in camera review

under Zolin. Applying the Zolin test, the Court concludes that documents GTI 0190023351-52 and

GTI 0190023311-23 should be produced for in camera review. Insmed has made a threshold

showing there is “‘a factual basis adequate to support a good faith belief by a reasonable person’ that

in camera review of the materials may reveal evidence to establish the claim” of inequitable

conduct. Laser, 167 F.R.D. at 420 n.3 (quoting Zolin). Through inadvertent disclosure, Insmed’s

counsel saw GTI 0190023351-52 and believe it was material to the issue of Dr. Clark’s knowledge

and involvement in drafting the specification at issue. GTI 0190023311-23 contains margin notes

where the alleged prior art is discussed.1

Having found the threshold showing is established, the Court exercises its discretion under

Zolin to review these two documents in camera. The volume of the documents -- two -- is

manageable. The documents could be important; if they contain information probative to Dr.

Clark’s knowledge, they would be relevant to the defense of inequitable conduct, a defense which

could defeat successful prosecution of this case. Given Dr. Clark’s lack of recollection,

contemporaneous or other documentation probative to his state of mind could prove critical to the

case. Although it is too early to tell with any degree of confidence, there is at least a chance that the

defense of inequitable conduct could be established. Thus, the Zolin factors support an in camera

review. Laser, 167 F.R.D. at 420 n.3 (quoting Zolin).

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V. CONCLUSION

For the foregoing reasons, the Court hereby GRANTS IN PART and DENIES IN PART

Defendants’ motion to compel documents for in camera review. The unredacted documents (and

any supporting declaration(s)) should be filed under seal (and a copy lodged with chambers) no later

than February 28, 2006.

IT IS SO ORDERED.

Dated: February 23, 2006

_________________________ EDWARD M. CHEN

United States Magistrate Judge

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