to demonstrate Interlogix relied upon the advice of its attorneys in allegedly infringing the patents,
not Chamberlain’s conduct.

Videojet found a waiver of attorney-client privilege because the defendant asserted an
affirmative defense of laches, not equitable estoppel. Laches does not require proof of detrimental
reliance. Dentsply Int'l Inc. v. Sybron Corp., No. 82 C 3822, 1986 WL 5757, at *3 (N.D. Ill. May
12, 1996). Instead, the laches defense assesses whether a defendant suffered harm because of the
plaintiff's delay in filing suit. Thus, a defendant’s state of mind is not relevant to a laches defense.
See Advertising to Women, Inc. v. Gianni Versace, No. 98 C 1553, 1999 WL 608711, at *6 (N.D.
I. Aug. 4, 1999) (the assertion of a laches defense does not waive attorney-client privilege because
it does not require an inquiry into defendant’s state of mind). As a result, a defendant’s advice of
counsel is irrelevant. Videojet’s analysis is unpersuasive.

THX America held a defendant’s pleading of an equitable estoppel defense waived the
attorney-client privilege on attorney opinions to prove detrimental reliance. THX America, 157
F.R.D. at 650. The court primarily relied on Southwire, which did not hold a defendant’s mere
assertion of equitable estoppel waives attorney-client privilege. See Pittway Corp. v. Maple Chase
Co., No. 91 C 3582, 1992 WL 392584, at * 6 (N.D. Ill. Dec. 16, 1992) (noting that Southwire did
not support waiver of attorney-client privilege based on the pleading of an estoppel defense);
Defendants Beware: Raising the Defense of Estoppel May Waive the Attorney-Client Privilege, 7
Fed. Cir. B.J. 55, 66 (1997) (noting that THX America significantly expanded the implicit waiver
doctrine in patent actions). Further, the court stated “evidence of reliance on an opinion of counsel
that a particular patent is invalid or not infringed is relevant to the question of estoppel.” /d. On that

basis, the court ordered production of attorney-client communications. /d. However, the court failed


Ill. Sequencing of Discovery

Chamberlain objects to the magistrate judge’s sequencing of discovery. In resolving the
parties’ cross-motions to compel, the magistrate judge ordered Interlogix to provide Chamberlain
with technical and model number information regarding its products; Chamberlain to produce a
claim chart; and Interlogix to respond to Chamberlain’s interrogatories no. 5 and 6 after its claim
chart was completed. Chamberlain’s interrogatories no. 5 and 6 request the basis for Interlogix’s
non-infringement argument.

Chamberlain complains discovery will be delayed by allowing Interlogix to answer
interrogatories no. 5 and 6 at a later date. However, Chamberlain may bring a motion to compel if
Interlogix delays providing basic technical information in accordance with the magistrate judge’s
order. Chamberlain must then submit a claim chart before Interlogix is required to respond to
interrogatories no. 5 and 6. Thus, Chamberlain will eventually control the speed at which Interlogix
responds to its discovery request. Further, the magistrate judge properly managed the discovery
dispute between the parties by sequencing discovery. The court may order discovery in a specified
sequence "for the convenience of the parties and witnesses and in the interest of justice." Fed. R. Civ.
P. 26(d). In interrogatories no. 5 and 6, Chamberlain asked Interlogix to state the manner in which
its products do not infringe Chamberlain’s patents. The magistrate judge correctly noted: “Interlogix
should not have to guess how Chamberlain believes its patents are infringed.” Chamberlain Gp.,
2002 WL 265174, at *1; see also Anotonious v. Spalding & Evenflo Co., Inc., 275 F.3d 1072, 1073-
74 (Fed. Cir. 2002) (noting a plaintiff's pre-filing obligations to construe claims). Chamberlain fails
to address the magistrate judge’s finding. Finally, Chamberlain will not be prejudiced by submitting

aclaim chart before Interlogix answers interrogatories no. 5 and 6 because it is obligated to amend


attempts to prove that claim or defense by disclosing or describing an attorney-client
communication.” Rhone-Poulenc expressly rejected an automatic waiver of privilege when an
attorney’s opinion is relevant to a claim or defense. The court used a patent case as an example,
noting the advice of the defendant’s lawyer may be “relevant to the question of whether the infringer
acted with a willful state of mind.” However, the court recognized “the advice of an infringer’s
counsel is not placed in issue, and the privilege is not waived, unless the infringer seeks to limit its
liability by describing that advice and by asserting that he relied on that advice.” Rhone-Poulenc, 32
F.3d at 863; see also Garcia, 58 F.3d at 1175 n.1(citing Rhone-Poulenc).

Rhone-Poulenc and Beneficial Franchise are persuasive. Chamberlain seeks discovery of
Interlogix’s attorney-client communications because those opinions could be relevant to refute
Interlogix’s equitable estoppel defense. Advice of counsel is not “in issue” because it is relevant.
Rhone-Poulenc, 32 F.3d at 863. Interlogix does not assert advice of counsel as a defense, and it has
not used attorney-client communications to prove a claim or defense. Consequently, Interlogix has
not waived the attorney-client privilege, and its attorney opinions on Chamberlain’s patents are not
discoverable. See also Pittway, 1992 WL 392584, at *6 (the attorney-client privilege is not waived
unless defendant intends to rely on those communications); Figgie Int'l Inc. v. Wilson Sporting
Goods Co., No. 86 C 5757, 1987 WL 5235, at *2 (N.D. Ill. Jan. 8, 1987) (where record evidence
suggested reliance on counsel’s opinion was a genuine fact issue, court allowed discovery of
confidential communications).

This approach is consistent with the narrow construction of the implicit waiver rule in non-
patent cases. See e.g. Baker v. General Motors Corp., 209 F.3d 1051, 1055 (8th Cir. 2000) (at-issue

waiver applies “when a client uses reliance on legal advice as a defense or when a client brings a


to recognize the attorney-client privilege protects confidential communications from disclosure even
where those communications are relevant. Relevancy is not the test for an implicit waiver of
attorney-client privilege. See United States v. Zolin, 491 U.S. 554, 562-63 (1989) (the attorney-client
privilege protects relevant, confidential communications). The implicit waiver rule applies “when
the client asserts claims or defenses that put his attorney’s advice at issue in the litigation.” Garcia
v. Zenith Elect. Corp., 58 F.3d 1171, 1175 n.1 (7th Cir. 1995). A party must affirmatively use
privileged communications to defend itself or attack its opponent in the action before the implicit
waiver rule is applicable. Dawson v. New York Life Insurance Co.,901 F.Supp. 1362 (N.D. Ill. 1995)
(finding waiver where defendant made representations about the advice of counsel to establish a
qualified immunity defense). For example, an assertion of a good faith defense on the advice of
counsel in response to a willful infringement claim directly places defendant’s advice of counsel at
issue and waives privilege. See Soloman v. Kimberly-Clark Corp., No. 98 C 7598, 1999 WL 89570,
at *1 (ND. IIL. Feb. 12, 1999). In contrast, the crux of THX America’s holding does not rest on
defendant’s express reliance on the advice of its counsel. Put another way, defendants did not inject
its advice of counsel into contention but merely pled an equitable estoppel defense. THX America
relied only on the relevancy of the attorney-client communications to the equitable estoppel defense
in finding an implicit waiver of attorney-client privilege.

In Beneficial Franchise, the court held the pleading of equitable estoppel did not waive the
privilege in a patent action. Instead, the court determined the privilege is waived only when “a party
chooses to utilize the information to advance a claim or defense.” Beneficial Franchise, 205 F.R.D.
at 217. In Rhone-Poulenc Rorer, Inc. v. Home Indemnity Co., 32 F.3d 851, 864 (3d Cir. 1994), the

court held “[t]he advice of counsel is placed in issue where the client asserts a claim or defense, and


affirmatively utilize confidential communications. Indeed, “any party asserting a claim or defense
on which it bears the burden of proof would be stripped of its privilege and left with the draconian
choice of abandoning its claim and/or defense or pursuing or protecting its privilege.” Beneficial
Franchise, 205. F.R.D. at 217. Various affirmative claims and defenses require proof of a
defendant’s state of mind, including fraudulent inducement claims. Southwire was concerned only
with situations where a party selectively disclosed privileged information to its advantage but
concealed the rest. Those concerns are not present when a defendant pleads an affirmative defense
but does not rely on privileged attorney-client communications to prove that defense. Waiving
privilege because attorney-client communications are relevant hinders “full and frank
communication between attorneys and their clients.” Upjohn Co. v. United States, 49 U.S. 383, 389
(1981). A broad waiver rule also discourages clients from seeking legal advice by removing the
assurance of confidentiality.

Relying on Videojet and Southwire, the magistrate judge reasoned Interlogix’s attorney-client
communications were necessary to determine whether it was Interlogix’s advice of counsel, not
Chamberlain’s failure to enforce the patents, that led Interlogix to purportedly infringe the patents.
Chamberlain Gp. Ine. v. Interlogix, Inc., 2002 WL 265174, at *1-2 (N.D. Ill. Feb. 21, 2002). The
mere assertion of equitable estoppel and laches defenses is insufficient to waive the attorney-client
privilege. Accordingly, Interlogix’s objection to the magistrate judge’s memorandum opinion and
order granting Chamberlain’s motion to compel answers to interrogatory no. 11 and request to
produce no. 4 is sustained to the extent the ruling requires disclosure of Interlogix’s privileged

attorney-client communications.


__ Minute Order Fort (06/97)

United States District Court, Northern District of Illinois

©

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Suzanne B. Conlon than Assigned Judge
CASE NUMBER 01 C 6157 DATE 3/26/2002
CASE CHAMBERLAIN GROUP vs. INTERLOGIX
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.}
DOCKET ENTRY:
qd) oO Filed motion of [ use listing in “Motion” box above.]
(2) oO Brief in support of motion due
(3) oO Answer brief to motion due. . Reply to answer brief due.
(4) Oo Ruling/Hearing on set for at
(S) QO Status hearing{held/continued to] [set for/re-set for] on set for at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at .
(7) Oo Trial[set for/re-set for] on at
(8) a [Bench/Jury trial] [Hearing] held/continued to at
(9) Qo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OFRCP4(m) [General Rule21 OFRCP41(a)(1) [1 FRCP41(a)(2).
(io) «i [Other docket entry] The court adopts the magistrate judge’s memorandum opinion and order of
February 21,2002 [41-1] in part. Interlogix’s objection [59-1] is sustained. Chamberlain’s objection [64-
1] is overruled. ENTER MEMORANDUM OPINION AND ORDER.
al) [For further detail see order attached to the original minute order.]
No notices required, advised in open court. Document
. . Number
No notices required. sumer of notices
oY | Notices mailed by judge’s staff. nang :
i MAR 27 909
Notified counsel by telephone, "Yate doakelea © ' .
Docketing to mail notices.
Mail AO 450 form. Rellring depurpsaitals
Y | Copy to magistrate judge. ssnone
date mailed notice
courtroom
cB deputy’s ca?
initials
Date/time received in,
central Clelies Difite sing dep inka



its claim chart to include new information. Chamberlain Gp., 2002 WL 265174, at *1-2.
Chamberlain fails to demonstrate the magistrate judge’s order was clearly erroneous. Accordingly,
Chamberlain’s objection is overruled.
CONCLUSION

The court adopts the magistrate judge’s memorandum opinion and order of Feburary 21,
2002 in part. Interlogix’s objection to the magistrate judge’s order granting Chamberlain’s motion
to compel answers to interrogatories no. 11 and request to produce no. 4 is sustained to the extent
the ruling requires disclosure of privileged attorney-client communications. Chamberlain’s objection

to the sequencing of discovery is overruled.

March 26, 2002 ENTER:

a

uzanyeé B. Conlon
United States District Judge

10


legal malpractice action”); Trustmark Ins. Co. v. General & Cologne, No. 00 C 1926, 2000 WL
1898518, at *7 (N.D. Ill. Dec. 20, 2000) (no waiver of the attorney-client privilege because the
plaintiff did not affirmatively rely on advice of counsel); Hucklo v. City of Oak Forest, 185 F.R.D.
526, 529 (N.D. Ill. 1999) (physician-psychotherapist privilege was not waived when it was not
affirmatively placed into issue); Harter v. University of Indianapolis, 5 F Supp.2d 657, 665 (S.D.
Ind. 1998) (recognizing that “when a client files a lawsuit in which his or her state of mind... may
be relevant, the client does not implicitly waive the attorney-client privilege . . . unless the client
relies specifically on advice of counsel to support a claim or defense”); Makula v. Sanwa Business
Corp., No. 96 C 7138, 1997 WL 460935, at *2 (N.D. Ill. Aug. 8, 1997) (assertion of an advice of
counsel defense waives attorney-client privilege); Johnson v. Rauland-Borg Corp., 961 F.Supp. 208,
211 (N.D. II. 1997) (attorney-client privilege waived in a Title VII case where the employer intended
to rely on the advice of its counsel); Haworth, Inc. v. Herman Miller, Inc., No. 97 C 877, 1995 WL
1312674, at *4 (W.D. Mich. Jan. 17, 1995) (assertion of the advice of counsel defense waives
attorney-client privilege).

A narrow construction of the implicit waiver rule comports with the basic principles of the
attorney-client privilege. When the privilege is waived, it is often because confidential
communications are the only source of evidence on the disputed issue. See Pippenger v. Gruppe, 883
F.Supp. 1201, 1204 (S.D. Ind. 1994). However, Chamberlain may dispute equitable estoppel by
contesting the remaining three prongs of the affirmative defense. /d. (attorney-client communications
are not the only source of relevant information; plaintiff could question defendant on the extent of
its reliance on plaintiff’s conduct). Furthermore, the choice between pleading an equitable estoppel

defense and preserving the attorney-client privilege is unduly harsh when a defendant does not


examination of confidential communications. Lorenz v. Valley Forge Ins. Co., 815 F.2d 1095, 1098
(7th Cir, 1987). In support of the magistrate judge’s holding, Chamberlain advances Southwire,
Videojet, and THX America. In Southwire, the court held the assertion of equitable estoppel
“coupled with defendant’s use of its patent counsel’s opinions” to defeat a claim of willful
infringement waived attorney-client privilege. Southwire, 570 F. Supp. at 649. The court determined
the defendant’s use of attorney opinions required disclosure of those communications for the plaintiff
to refute the equitable estoppel defense. /d. Significantly, Southwire did not hold the pleading of an
equitable estoppel defense alone waived the attorney-client privilege.

In Videojet, the court found a waiver of privilege because the defendant relied upon the
advice of counsel defense to contest willful infringement. Videojet, 1997 WL 138008, at *4. Relying
on Southwire, the court further stated attorney opinions were necessary for the plaintiff to assess the
strength of defendant’s reliance on the laches defense. Jd. Chamberlain contends Interlogix’s
invocation of the equitable estoppel and laches defenses waives attorney-client privilege. Notably,
Interlogix does not advance attorney opinions to defeat a claim of willful infringement. Instead,
Chamberlain argues Interlogix’s assertion of equitable estoppel and laches involves an inquiry into
Interlogix’s state of mind — whether Interlogix relied on Chamberlain’s conduct in not pursuing an
infringement action, or on the advice of its counsel on invalidity, unenforceability, and
noninfringement of Chamberlain’s patents. To establish equitable estoppel, Interlogix must
demonstrate: (1) unreasonable and unexcused delay by Chamberlain; (2) prejudice to Interlogix; (3)
affirmative conduct induced Interlogix to believe Chamberlain abandoned its claim; and (4)
detrimental reliance. A.C. Aukerman Co. v. Miller Formless, Co., 693 F.2d 697, 701 (7th Cir. 1982).

To defeat that affirmative defense, Chamberlain argues attorney-client communications are relevant


470 U.S. 564, 573 (1985). A magistrate judge’s conclusions of law are reviewed de novo.
Rajaratnam y. Moyer, 47 F.3d 922, 924 (7th Cir. 1995). When procedural issues in a patent case are
not unique to patent law, courts "apply the law of the circuit in which the district court sits." Jn re
Spalding Sports Worldwide, Inc., 203 F.3d 800, 802 (Fed. Cir. 2000); McCook Metals L.L.C. v.
Alcoa, Inc., 192 F.R.D. 242, 251 (N.D. Il. 2000).
I. Implicit Waiver of Attorney-Client Privilege

The magistrate judge held Interlogix’s assertion of equitable estoppel and laches defenses
waived the attorney-client privilege on Interlogix’s attorney opinions on invalidity, unenforceablility,
and non-infringement. Interlogix objects to the magistrate judge’s order compelling it to produce
privileged attorney-client communications.

The Seventh and Federal Circuit Courts of Appeals have not had occasion to address whether
the pleading of equitable estoppel and laches defenses constitutes an implicit waiver of attorney-
client privilege. In patent cases, judges of this court have reached differing conclusions on whether
the assertion of equitable estoppel and laches defenses waives the privilege. See Videojet Sys. Int’l,
Inc. v. Inkjet, Inc., No. 95 C 7016, 1997 WL 138008, at *4 (N.D. Ill. Mar. 19, 1997) (Coar, J.)
(finding waiver of attorney-client privilege); THK America Inc. v. NSK Co. Ltd., 157 F.R.D. 637,
650 (N.D. Ill. 1993) (Norgle, J.) (same); see also Southwire v. Essex Group, Inc., 570 F. Supp. 643,
645 (N.D. Ill. 1983) (Marshall, J.); of Pittway Corp v. Maple Chase Co., No. 91 C 3582, 1992 WL
392584, at *6 (N.D. I. Dec. 16, 1992) (Zagel, J.) (attorney-client privilege not waived); Beneficial
Franchise, Inc. v. Bank One, 205 F.R.D. 212, 216 (N.D. Ill. May 8, 2001) (Schenkier, M.J.) (same).

Implicit waiver of attorney-client privilege occurs when the holder of the privilege partially

discloses a confidential communication or relies on a legal claim or defense that requires


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CHAMBERLAIN GROUP )
Plaintiff, } No. 01 C 6157
Vv. ) Suzanne B. Conlon, Judge
INTERLOGIX, INC. }
Defendant. }

MEMORANDUM OPINION AND ORDER

The Chamberlain Group, Inc. (“Chamberlain”) sues Interlogix, Inc. (“Interlogix”) for patent
infringement under 35 U.S.C. § 271 ef seq. Interlogix counterclaims for a declaratory judgment of
non-infringement, invalidity, and unenforceability. Chamberlain and Interlogix object to the
magistrate judge’s February 21, 2002 memorandum opinion and order granting in part and denying
in part the parties’ cross-motions to compel discovery.

DISCUSSION

I. Standard of Review

When the magistrate judge issues a report and recommendation on a nondispositive pretrial
matter, the district court must apply a deferential standard of review. The Federal Rules of Civil
Procedure provide: "[t]he district judge to whom the case is assigned shall consider such objections
and shall modify or set aside any portion of the magistrate judge's order found to be clearly erroneous
or contrary to law." Fed. R. Civ. P. 72(a). A finding is clearly erroneous when the court is left with

the definite and firm conviction that a mistake has been committed. Anderson v. City of Bessemer,

\