THK America, Inc. v. NSK, LTD., 90 C 6049.

• Decision Date: 17 January 1996
• Docket Number: No. 90 C 6049.,90 C 6049.
• Citation: 917 F. Supp. 563
• Parties: THK AMERICA, INC., Plaintiff, v. NSK, LTD. and NSK Corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

917 F. Supp. 563

THK AMERICA, INC., Plaintiff, v. NSK, LTD. and NSK Corporation, Defendants.

No. 90 C 6049.

United States District Court, N.D. Illinois, Eastern Division.

January 10, 1996.

As Amended January 17, 1996.

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Robert E. Wagner, James J. Jagoda, Wallenstein & Wagner, Chicago, IL, John E. Kidd, John E. Daniel, Michael A. O'Shea, Neil G. Cohen, Marni J. Beck, Rogers & Wells, New York City, James E. Armstrong, III, Ken-Ichi Hattori, Armstrong, Westerman, Hattori, McLeland & Naughton, Washington, DC, for Plaintiff.

Edward M. O'Toole, Allen H. Gerstein, Kevin D. Hogg, Anthony Nimmo, Marshall, O'Toole, Gerstein, Murray & Borun, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

ASHMAN, United States Magistrate Judge.

This case was brought by Plaintiff, THK America, Inc. ("THK"), charging Defendants, NSK, Ltd. and NSK Corporation (collectively, "NSK"), with willful infringement of U.S. Patents 4,040,679 ("'679 Patent") and 4,253,709 ("'709 Patent"). NSK has counterclaimed that THK's patents are invalid, unenforceable and/or not infringed. The alleged infringing devices are linear grids — devices which facilitate linear movement of an item along a fixed rail.

Discovery has been closed and in preparation for submission of final pretrial order materials, the parties have submitted Motions in Limine — five on behalf of THK and six on behalf of NSK. This Court has disposed of THK's first Motion in Limine by means of a Report and Recommendation. This Memorandum Opinion and Order will cover the subject of all of the balance of THK's Motions in Limine and of NSK's Motions in Limine.

THK's Motions In Limine

THK's Second Motion In Limine: To preclude NSK from mentioning THK's non-production of its patent opinions and from asking the jury to draw a negative inference from THK's non-production of its patent opinions.

Prior to commencing this action, THK obtained certain patent infringement opinions from its patent lawyers. Those opinions are, without question, privileged attorney-client communications. NSK argues that the privilege will be eviscerated if NSK is allowed to ask the jury to draw an adverse inference from the fact that THK chose to withhold production of the opinions of its counsel in order to preserve their privileged status. NSK intends to present evidence of these withholdings to the jury as being relevant to the issues of enforceability; willfulness; and bad faith litigation.

It has long been established that attorneys' patent opinions rendered by attorneys to their clients are protected by the attorney-client privilege. As part of this protection, adverse inferences against parties who refuse to disclose attorney opinions are disallowed. Parker v. Prudential Insurance Company of America, 900 F.2d 772 (4th Cir. 1990); A.B. Dick Co. v. Marr, 95 F.Supp. 83, 101 (S.D.N.Y.1950), appealed dismissed by, 197 F.2d 498 (2d Cir.1952), cert. denied, 344 U.S. 878, 73 S.Ct. 169, 97 L.Ed. 680 (1952). Disallowing adverse inferences is a logical extension of the attorney-client privilege since allowing a negative inference would in many cases oblige the client to produce the privileged materials.

In patent cases, negative inferences resulting from failure to produce patent legal opinions have been allowed in situations where potential infringers actually put the advice of counsel directly at issue in the case. For example, where a potential infringer charged with willful infringement defends against the charge by citing its reliance on the advice of counsel, it is clear that such advice should be produced or a negative inference concerning those opinions should be drawn. Fromson v. Western Litho Plate and Supply Co., 853 F.2d 1568 (Fed.Cir.1988), aff'd, 909 F.2d 1495 (Fed.Cir.1990), cert. denied, 499 U.S. 907, 111 S.Ct. 1109, 113 L.Ed.2d 218 (1991); Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed.Cir.1983). Another example of where an alleged infringer put the advice of counsel in issue is by asserting the affirmative defense of estoppel and using his patent counsel's opinion to prove reliance, a situation not applicable to THK in this case. Southwire Co. v. Essex Group, Inc., 570 F.Supp. 643, 650 (N.D.Ill.1983).

NSK argues that it intends to prove that THK unreasonably and inexcusably slept on its rights after it knew or should have known of NSK's U.S. sales activities, since THK did not bother to get any opinions of U.S. patent counsel about its patents relative to NSK until years after its knowledge. Thus, argues NSK, the opinions are relevant. However, this Court does not agree that relevance is the issue in this motion. Rather, the issue in this motion is whether THK has placed its lawyers' opinion in issue in the case, thereby waiving the privilege. In other words, the attorney-client privilege applies even when attorneys' opinions are relevant. The exception to the privilege arises when the party asserting the privilege has decided to rely on those opinions or has otherwise placed the opinions in issue, thus waiving the privilege. In this case, THK's failure to consult an attorney for years regarding the patents, cannot be construed in any way as a reliance on the contents of those opinions which were ultimately received nor a waiver of the privilege, since THK is not the alleged infringer. THK simply has not placed those opinions in issue.¹

NSK also argues that since the Fifth Amendment privilege against self-incrimination, being of constitutional dimension, does not forbid a civil litigant from drawing negative inferences from an opponent's assertion of the attorney-client privilege, see Baxter v. Palmigiano, 425 U.S. 308, 96 S.Ct. 1551, 47 L.Ed.2d 810 (1976), the same logic pertains or ought to pertain regarding the attorney-client privilege which is not of constitutional dimension. This Court does not agree. The policy behind the Fifth Amendment privilege, by its own terms, relates to criminal law. The concern is that allowing a negative inference in a criminal action would allow the government to load up on a defendant or tilt the scales too far against a defendant. These policies have no application in civil law. The attorney-client privilege, to the contrary, applies both to criminal and civil law, it being a policy enacted to allow effective legal representation in any context. Thus, the Supreme Court's pronouncements in Baxter, have no applicability to the attorney-client privilege.

NSK also cites Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565, 1579 (Fed.Cir. 1986), cert. denied, 479 U.S. 1034, 107 S.Ct. 882, 93 L.Ed.2d 836 (1987), for the proposition that a negative inference can be drawn even where the withholding party places no reliance on the privileged communications. This Court disagrees. The court indicated in Kloster that the alleged infringer had a duty to obtain a patent legal opinion. Thus, a negative inference could be drawn from their failure to produce such an opinion. In the instant case, THK has no such corresponding legal duty to obtain legal counsel or legal opinions prior to the filing of a suit. Thus, Kloster has no applicability here.

For the above reasons, this Court grants THK's Motion in Limine. NSK is precluded from making any mention of the fact that THK has refused to disclose its attorney patent opinions and is precluded from arguing to the jury that a negative inference can be drawn based thereon.

THK's Third Motion In Limine: To preclude NSK from presenting evidence or arguments relating to NSK's rejected antitrust counterclaims or the subject matter of the counterclaims.

In 1988, Hiroshi Teramachi wrote two letters addressed to the Japanese bearing industry. The subjects of the letters were prices and competition in the bearing industry in Japan. NSK intends to introduce these letters into evidence as being relevant to the issues of laches and estoppel.

A presumption of laches exists where a delay in filing suit extends for six years from when the patentee knew or should have known of the infringement, and a suit may be entirely barred by the defense of estoppel if the patentee has misled the alleged infringer into believing it would not be sued and the alleged infringer relies on that misleading conduct to its detriment. A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed.Cir.1992). THK has indicated that it intends to defend against the laches charge by showing that it had justification for the six-year delay and that it should not be estopped from asserting its patents because its delay could not have misled NSK. As evidence that its inaction could not have misled NSK, THK intends to bring evidence of oral discussions regarding the patent controversy in 1988 between the top management of THK and NSK.

In response to THK's evidence, NSK intends to offer evidence that the 1988 meetings were preceded by Mr. Teramachi's two letters to NSK having to do with price cooperation in the bearing industry. Therefore, argues NSK, the 1988 meetings had to do with price cooperation and did not have anything to do with resolving patent disputes.

It appears to this Court that the letters in question may very well be marginally relevant to the issues discussed above, since they may provide some context to the discussions. Obviously, the actual discussions at these meetings are much more important than the preceding letters. However, despite this marginal relevance, this Court decides that THK's Motion in Limine to preclude introduction of these letters should be granted, for the reasons which follow.

It appears that the first time NSK asserted that it intended to use price fixing as a part of its laches and estoppel defenses (and thereby use or seek to use these documents in support of the price fixing scenario) was orally on December 8, 1994 and in writing as part of a Proposed Final Pretrial Order on March 31, 1995; both dates being long after fact...