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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

INVENTIO AG,

Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) )

C. A. No.1 :08-cv-00874-ER

Plaintiff,

v.

THYSSENKRUPP ELEVATOR AMERICAS CORPORATION, THYSSENKRUPP ELEVATOR CORPORATION, and THYSSENKRUPPELEVATOR

MANUF ACTURING INCORPORATED,

Donald. E. Reid, Esquire, Morris, Nichols, Arsht& Tunnell, LLP; and Pierre R. Yanney, Esquire and Stephen Underwood, Esquire, Stroock & Stroock & Lavan LLP, Attorneys for Plaintiff Inventio AG

James Michael Lennon, Esquire, Womble Carlyle Sandridge & Rice PLLC, and David E. Schmit, Esquire, and Judith A. Cothorn, Esquire, Frost Brown Todd LLC, Attorneys for Defendants

DECISION ON DEFENDANTS' OBJECTIONS TO PLAINTIFF'S INSTRUCTIONS NOT TO ANSWER QUESTIONS AT DEPOSITION OF PLAINTIFF'S RULE 30(B)(6) WITNESS

Collins J. Seitz, Jr., Special Master

On November 21, 2008, Inventio AG filed suit against ThyssenKrupp Elevator Americas Corporation, ThyssenKrupp Elevator Corporation and ThyssenKrupp Elevator Manufacturing Incorporated (collectively "ThyssenKrupp") for infringement of United States Patents Nos. 6,892,861 and 6,935,465. The patents claim methods and devices relating to modernization of elevator installation. The District Court appointed me Special Master to supervise the remaining discovery in this case and to resolve any disputes. I held a telephonic hearing on April 22, 2010, to address many of the discovery issues raised by ThyssenKrupp. All but four of the issues were

addressed at that hearing. This is my decision on the remaining four issues, identified by number according to Defendants' Issues Appendix B 1-B3.

Issue No. 14

During the March 4, 2010 deposition of Dr. Andreas Gaussmann, Inventio's Rule 30(b )(6) witness, counsel for Inventio instructed Dr. Gaussmann not to answer a question directed to him regarding communications between Dr. Gaussmann and Mr. John Karnash, a U.S. attorney employed as General Counsel of Schindler Elevator Corporation ("SEC"). In particular, Dr. Gaussmann was instructed not to answer the following question:

Q.

Did you speak with M. Karnash personally?

MR. YANNEY:

Again, so we can protect the attorney/client privilege, he is just asking for a yes or no. Nothing beyond that.

A.

Yes.

Q.

What did you say to Mr. Karnash and what did he say to you?

(Gaussmann transcript at 32:9-17). (Dfts. Appendix at B260).

Inventio argues that the instruction was proper because communications between those two individuals were attorney-client communications. See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 2. Inventio further argues that "the communications concerned legal matters, i.e., the collection of documents for this litigation," and Mr. Karnash is a licensed U.S. attorney and general counsel for SEC, a sister entity of Inventio. Id. Inventio cites as authority In re: Teleglobe Communications Corp., 493 F.3d 345, 369 (3d Cir. 2007) ("sharing of information among corporate affiliates" does not destroy privilege) and Union Pacific Resources Group, Inc. v. Pennzoil Co., 1997 U.S. Dist. LEXIS 24216, *7 (D. Del. Sept. 2, 1997) ("[a]s a general rule, a parent corporation and its wholly owned subsidiary are treated as a single entity for the purposes of applying the attorney client privilege to inter-corporate communications.") In the alternative, Inventio argues that the communications were protected from disclosure under the community of interest privilege.

ThyssenKrupp objects to the instruction on the grounds that: (i) there is no attorney-client relationship between Dr. Gaussmann, an employee of Inventio, and Mr. Karnash, an attorney for an entity not related to Inventio; (ii) the allegedly privileged communications at issue are not described with sufficient particularity by Inventio to meet its burden under Fed. R. Civ. P. 26 (b )(5)(A)(ii); and (iii) there is no community of interest privilege here because this is not a direct parent-subsidiary situation and the communications were not between lawyers. See Letter dated May 7,2010 from DavidE. Schmit to Special Master at 1-3.

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To qualify for protection from disclosure under the attorney-client privilege, there "must be: (1) a communication; (2) made between privileged persons; (3) in confidence; and (4) for the purpose of obtaining or providing legal assistance for the client." In re: Teleglobe Communications Corp., 493 F.3d 345,359 (3d Cir. 2007) (citing the Restatement (Third) of the Law Governing Lawyers § 68 (2000). The burden of establishing the basis of the privilege rests with the party asserting the privilege, Inventio. Tulip Computers International BV v. Dell Computer Corporation, 210 F.R.D. 100,104 (D. Del. 2002).

The issue is whether the communication between Dr. Gaussmann and Mr. Karnash was made between "privileged persons." According to the court in Teleglobe, '''privileged persons' include the client, the attorney(s), and any of their agents that help facilitate attorney-client communications or the legal representation." In Re: Teleglobe Communications Corp., 493 F. 3d at 359. Dr. Gaussmann is an employee of Inventio who could help facilitate attorney-client communications or legal representation although there is scant evidence of that in the record. While Mr. Karnash is an attorney, he is not an attorney for Inventio (he is counsel for a sistersubsidiary of Inventio). On the facts as presented, there is no stand alone attorney-client relationship.

However, Inventio has argued an alternative theory which may close the gap. IfInventio can show that it and its sister subsidiary, SEC, can be treated as a single entity with a "common interest" for purposes of applying the attorney-client privilege, Mr. Karnash and Dr. Gaussmann could be privileged persons entitled to protection under the attorney-client privilege with respect to Inventio. Inventio invokes the "community of interest" privilege which has been recognized by the Third Circuit Court of Appeals and the District of Delaware. See, e.g., Teleglobe Communications, 493 F.3d at 364; Constar Int'l Inc. v. Continental Pet Techs., Inc., 2003 U.S. Dist. LEXIS 21132, *4 (D. Del. Nov. 19,2003). In addressing this topic, the court in Teleglobe cited Glidden Co. v. Jandernor, 173 F.R.D. 459, 472-3 (WD. Mich. 1997) for the following proposition:

The universal rule of law, expressed in a variety of contexts, is that the parent and subsidiary share a community of interest, such that the parent (as well as the subsidiary) is the "client" for purposes of the attorney-client privilege. See Crabb v. KFC Nat 'I Management Co., No. 91-5474, 1992 WL 1321 (6th Cir. Jan.6, 1992) ('''The cases clearly hold that a corporate 'client' includes not only the corporation by whom the attorney is employed or retained, but also parent, subsidiary and affiliate corporations.'" (quoting United States v. AT & T, 86 F.R.D. 603, 616 (D.D.C.1979». Consequently, disclosure of legal advice to a parent or affiliated corporation does not work a waiver of the confidentiality of the document, because of the complete community of interest between parent and subsidiary.

493 F. 3d at 369-70 (emphasis added).

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However, the community of interest privilege only applies when clients are represented by separate counsel, and there is no evidence in this case that Inventio and SEC are represented by separate counsel. Teleglobe, 493 F.Supp. at 365. Moreover, for the community of interest privilege to apply, all members of the community must share a common legal interest in the shared communication and the communication must be between lawyers and not members of the community. Id. at 364. Indeed, sharing the communication at issue with a non-lawyer member of the community may destroy the privilege. Id. Even assuming that there is a shared common legal interest between Inventio and SEC, the challenged communication was not between lawyers but rather, between a lawyer (Mr. Karnash) and a member of the community, Dr. Gaussmann. Thus, Inventio has failed to satisfy the requirements for the common interest privilege.

In addition, Inventio has not made enough of a record to establish that the subject matter of the question directed to Dr. Gaussmann is protected by the attorney-client privilege. Fed. R. Civ. P. 26 (b )(5)(A)(ii) mandates that the nature of the communications be described in such a way as to enable other parties to assess the claim. Inventio has failed to provide such detail. Inventio simply states that the communications at issue "concerned legal matters, i.e., the collection of documents for this litigation .... " See Letter from Pierre Yanney to Special Master dated April 30, 2010 at 2. That is not enough for Inventio to sustain its burden to prove that the communications were "for the purpose of obtaining or providing legal assistance for the client." In addressing the topic of document collection, there are numerous examples of communications that would not involve privileged information, such as discussing: (i) a list of custodians from whom documents were or were not collected; (ii) the format in which the information was collected or should be produced; or (iii) the procedures or timetable for transmitting the information to the defendants. None of these examples involves information that is protected from disclosure under the attorney-client privilege. Moreover, at Dr. Gaussmann's deposition, when Inventio's counsel was asked the basis for the assertion of privilege, counsel for Inventio had an opportunity to provide details but refused to do so. See Gaussmann depo. tr. at 32-33; Defendants' Appendix at B260-61.

As a result, I find that the instruction by Inventio during the deposition of Dr. Gaussmann not to answer a question posed to him regarding his communications with Mr. Karnash was improper. Moreover, while neither party raised this issue, it is important to acknowledge the posture of the dispute. The deponent in question is a corporate witness charged with testifying about the company's knowledge. If Dr. Gaussmann, as Inventio's corporate witness, spoke to Mr. Karnash to gather facts regarding the issues in dispute, those facts cannot be protected from disclosure simply because a lawyer provides that information to a corporate witness. See State Farm Mutual Automobile Insurance Co., et al. v. New Horizont, Inc., 250 F.R.D. 203, 214 (E.D. Pa. 2008) (corporate witness improperly instructed not to disclose facts learned from discussion with counsel in preparation for Rule 30(b )(6) deposition) and F.R.E. 612.

Issue No. 15

This issue involves ThyssenK.rupp's objection to Inventio' s instruction to Dr. Gaussmann not to answer a question concerning conversations between Dr. Gaussmann and an SEC

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employee, Nicole Saloio, also regarding document collection at Inventio. See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 1,3. Specifically, Dr. Gaussmann was instructed not to answer the following question:

Q. Did you speak with Ms. Saloio personally?

A. Yes.

Q. What did you say to her and what did she say to you?

Gaussmann transcript at 33:19-23 (Dfts. Appendix at 261).

Inventio argues that the instruction was proper because Dr. Gaussmann's communications in question with Ms. Saloio were communications "within a corporate context reflecting the advice of Mr. Karnash in connection with legal issues, i.e., the collection of documents for this litigation." See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 3. Furthermore, Inventio argues that Dr. Gaussmann and Ms. Saloio are both "directly concerned with such matters" and needed the information to "carry out their work." Id. Inventio further argues that in a corporate context, privileged communications may be shared by nonattorney employees in order to relay information requested by attorneys and that the privilege is only destroyed in a corporate context when communications are disclosed to an employee who did not need access to them. Citing Smithkline Beecham Corp. v. Teva Pharmaceuticals USA, Inc., 232 F.R.D. 467, 477-78 (E.D. Pa. 2005); WebXchange Inc. v. Dell Inc., 264 F.R.D. 123, 126 (D. Del. Feb. 16, 2010). Inventio concludes by stating "the fact that an attorney was not physically involved in a communication involving two non-attorney employees does not destroy privilege." See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 3.

ThyssenKrupp argues that the instruction was improper because: (i) there is no attorneyclient relationship between Inventio and Mr. Karnash; (ii) there is no record evidence that the conversation(s) Dr. Gaussmann had with Ms. Saloio involved a lawyer, or reflected legal advice provided by a lawyer; and (iii) the only record evidence indicates a communication between a non-lawyer employee ofInventio and a non-lawyer employee of SEC.

I find that Inventio' s instruction was improper. As noted above, a bald assertion that the communications reflected the advice of an attorney regarding the collection of documents for litigation is not specific enough to support a claim of privilege. See Fed. R. Civ. P. 26(b )(5)(A)(ii). While there might be a basis to support a claim of privilege between Inventio and SEC, there is no evidence that the conversation between Dr. Gaussmann and Ms. Saloio involved a lawyer or reflected legal advice provided by a lawyer; there is only argument by counsel in their letter to the Special Master. See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 3. Inventio has failed to show that any attorneys from SEC were involved in collecting documents for Inventio in this litigation. While legal advice provided by Mr. Karnash, as counsel to SEC, to Ms. Saloio as an employee of SEC might be privileged in the right circumstances, there is no evidence in the record that Ms. Saloio was transmitting privileged information to Dr. Gaussmann. Facts and logistical information about what Ms. Saloio did with respect to collecting documents are not privileged; why she did what she did may

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be privileged, but not the mechanics of collection. Indeed, the deposition transcript of Dr. Gaussmann reveals that he asked Ms. Saloio and Mr. Karnesh for documents although counsel for Inventio would not permit Dr. Gaussmann to testify as to how he knew to ask Ms. Saloio and Dr. Gaussmann for documents. Dfts. Appendix at B260, 31:15-17, B261, 33:13-34:17. The facts about what Ms. Saloio and/or Mr. Karnash did with respect to the collection of documents are discoverable facts and they cannot be protected from disclosure when it comes to a Rule 3 O(b)( 6) witness. In order for Dr. Gaussmann to testify fully as a corporate witness for Inventio as to what Inventio did to collect documents, he must disclose what Mr. Karnash and Ms. Saloio did. As a result, they need to provide that information to him and he must disclose it when asked at his deposition.

Based on the record before me, I find that Inventio' s instruction to Dr. Gaussmann not to answer questions regarding communications with Ms. Saloio and document collection as described in Issue No. 15 was improper.

Issue No. 20

This issue involves ThyssenKrupp' s obj ection to Inventio' s instruction to Dr.

Gaussmann not to answer questions pertaining to communications between Dr. Gaussmann and Dr. Patrick Kohler, a Swiss attorney-at-law who is employed as in-house counsel by Inventio. See Gaussmann transcript at 60: 13-17 (Dfts. Appendix at B267). Specifically, Dr. Gaussmann was instructed not to answer the following question:

Q. Did you speak with Dr. Kohler in order to educate yourself in connection with this deposition with respect to the Exhibit 71 license agreement?

A. Yes.

Q. And what did you say to Dr. Kohler and what did he say to you?

(Gaussmann transcript at 60:6-12) (Dfts. Appendix at B267).

Inventio argues that the instruction was proper because Dr. Kohler is a licensed attorneyat-law in Switzerland, and the communications at issue "touch base" with the United States so they are protected under the attorney-client privilege. See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 2. Inventio cites as authority the District of Delaware's decision in Tulip Computers where the court adopted the "touch base" test to determine whether the privilege law of the United States, or that of a foreign jurisdiction, applies to communications involving foreign attorneys. Id. See also Tulip Computers Int'l v. Dell Computer Co., 210 F.R.D. 100, 104 (D. Del. 2002) (citing Willemijin Houdstermaatschaapij BV v. Apollo Computer, Inc., 707 F. Supp. 1429, 1444-5 (D. Del. 1989)). "Under the 'touch base' test, communications that relate to activity in a foreign country are governed by that country's privilege law, while communications that 'touch base' with the United States are controlled by United States privilege law." Tulip Computers, 210 F.R.D. at 104.

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Inventio also argues that because courts have equated the "touch base" test to a traditional choice-of-law "contacts" or "predominant interest" analysis, and the District of Delaware has found that a traditional choice of law analysis should also be used to determine which privilege law applies to communications involving foreign in-house counsel, this court should consider which jurisdiction has the predominant or most significant relationship to the issue. See Astra Aktiebolag v. Andrx Pharms., Inc., 208 F.R.D. 92, 98 (SD .N. Y. 2002) (equating the "comity," "touching base" and "contacts" analyses); VLT Corp. v. Unitrode Corp., 194 F.RD. 8, 15-16 (D. Mass. 2000) (equating "touching base" with a "traditional choice of law analysis.") See Renfield Corp. v. E. Remy Martin & Co., S.A., 98 F.R.D. 442, 444-5 (D. Del. 1982) (applying a "most significant relationship" analysis to determine that US. privilege law governed communications with French in-house counsel). See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 2-3.

Finally, Inventio argues that the communications between Dr. Gaussmann and Dr. Kohler were to help Inventio's US. lawyers prepare Dr. Gaussmann for his deposition as a corporate designee in this litigation. Id. According to Inventio, the "most significant relationship" test would tip in favor of the United States and the application of its privilege law to these communications. As an extension of that argument, Inventio claims that Switzerland would have very little interest in applying its privilege law. Accordingly, Inventio concludes that the KohlerGaussmann communications "touch base" with the United States, and US. privilege law applies. Id.

ThyssenKrupp argues that Inventio has not carried its burden to show the existence of an attorney-client privilege justifying the instruction not to answer the subject question. See Letter dated May 7, 2010 from David E. Schmit to Special Master at 1-2; and Tulip Computers International BV v. Dell Computer Corporation, 210 F.R.D. 100, 104 (D. Del. 2002). ThyssenKrupp also argues that the "deposition question at issue related to conversations between Swiss in-house counsel Kohler and an employee, Dr. Gaussmann, concerning what Gaussmann did to educate himself in connection with the Exhibit 71 license agreement." See Dfts. Appendix at B267; 60:6-12. Because Dr. Kohler is a Swiss in-house lawyer and there is no attorney-client privilege for in-house counsel in Switzerland, Thyssenkrupp argues that Swiss law applies and the information is not privileged. See In Re Rivastigmine patent litigation, 239 F.R.D. 351, 359- 60 (S.D.N.Y. 2006) ("[u]nder Swiss law, communications of Swiss in-house counsel are not protected by a privilege comparable to attorney-client privilege"); see also ThyssenKrupp Appendix at B400-B401.

Based upon the above, I find not only that the Gaussmann-Kohler communications "touch base" with the United States, but that the United States also has the "most significant relationship" to the issue as well. According to the Apollo court, the following examples are activities that did not "touch base" with the United States: (i) communications regarding licensing and enforcement policies for a European patent and providing advice on a possible infringement; (ii) communications that address matters of foreign patent law; and (iii) communications produced by or on behalf of a foreign patent agent related solely to matters outside the United States. 707 F. Supp. 1429, 1445 - 46. In the present case, there were a number of activities that related solely to matters within the US. Indeed, as a result of the pending litigation in this district, US. attorneys for Inventio are compelled to search for and

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produce relevant non-privileged information irrespective of the source regarding Inventio's U. S. patents being litigated in a U.S. court. It was this search for information that formed the basis for the communications between Drs. Kohler and Gaussmann. Moreover, the purpose of the communication was to gather facts and educate Dr. Gaussmann in order for him to testify to knowledge known by Inventio. The alleged conversation between Drs. Kohler and Gaussmann concerned the gathering of documents in the possession of the Swiss company for the litigation in Delaware. That conversation would not have taken place but for the need to provide that information to Inventio's United States' lawyers. As a result, I find that the United States has the most significant relationship to the communications and under the "touch base" test, the United States privilege law applies.

Having found that the privilege applies, however, I find that Inventio counsel's blanket instruction to Dr. Gaussmann not to answer the question about conversations with Dr. Kohler were improper. Dr. Gaussmann, as a Rule 30(b )(6) witness, is speaking on behalf of Inventio and is required to provide the corporate knowledge of Inventio on a particular topic. The fact that Dr. Gaussmann learns facts or information from a lawyer -- whether it is a Swiss lawyer or a U. S. lawyer -- does not protect those facts from disclosure at a deposition of the company's corporate representative. See State Farm Mutual Automobile Insurance Co., et al. v. New Horizont, Inc., 250 F.R.D. 203, 214 (E.D. Pa. 2008) (corporate witness improperly instructed not to disclose facts learned from discussion with counsel in preparation for Rule 3 O(b)( 6) deposition) and F.R.E. 612. A party cannot use the assertion or attorney-client privilege as a sword and a shield. If Dr. Gaussmann gathered factual information from Dr. Kohler to help Dr. Gaussmann testify as Inventio's corporate witness, then that information is discoverable by ThyssennKrupp. Thus, the blanket instruction by counsel for Inventio to Dr. Gaussmann not to answer a question regarding speaking with Dr. Kohler as part of Dr. Gaussmann's preparation for the deposition was improper.

Issue No. 23

This issue involves an objection by ThyssennKrupp to counsel for Inventio's instruction to Dr. Gaussmann not to answer a question relating to Dr. Gaussmann's preparation to testify about Inventio' s asserted reasonable royalty. Specifically, Dr. Gaussmann was instructed not to answer the following question:

Q. Did you do anything in connection with your preparation for this deposition to educate yourself about what Inventio asserts is a reasonable royalty for the use of

the '465 and '861 patents in this lawsuit?

A. No.

Q. Were you asked to do that?

(Gaussmann transcript at 81 :22-82:4; Dfts. Appendix at B273) (emphasis added).

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Inventio argues that the instruction was proper because the question "essentially asked Dr.

Gaussmann to divulge whether his attorneys asked him to prepare himself to testify about Inventio's asserted reasonable royalty" as well as "the substance of confidential, legal communications between Dr. Gaussmann and his attorneys." See Letter dated April 30, 2010 from Pierre Yanney to Special Master at 3. ThyssenKrupp argues that the question did not invoke a response which would disclose privileged information or any type of privileged communication. See Letter dated May 7, 2010 from David E. Schmit to Special Master at 3. I agree with ThyssenKrupp. The question as phrased involved a yes or no response and would not reveal any allegedly privileged communication. As a result, counsel for Inventio's instruction not to answer that question was improper.

CONCLUSION

For the reasons set forth above, I find that Inventio' s instructions during the deposition of Inventio's Rule 30(b)(6) witness, Dr. Gaussmann, to not answer questions posed to him regarding his communications with Mr. Karnash, Ms. Saloio and Dr. Kohler as described in Issue Nos. 14, 15 and 20 were improper. I also find improper Inventio's instruction to Dr. Gaussmann not to answer a question regarding whether in preparation for his deposition as Inv enti 0 , s corporate witness, he was ever asked to educate himself about what Inventio asserts is a reasonable royalty for the use of the' 465 and' 861 patents in this lawsuit.

Mindful that this case is at the end of its discovery cycle, and the remedy for discovery infractions should be proportional to the beneficial effect corrective action has on advancing the merits of the case, I determine that Inventio must serve on defendants within five days of the date of this Order a verified interrogatory response:

1. Describing in detail conversations between Dr. Gaussmann and Mr. Karnash

relating to (i) custodians from whom documents were collected; (ii) how the documents were physically collected and reviewed for responsiveness; and (iii) the procedures or timetable for transmitting the information to the defendants.

2. Describing in detail conversations between Dr. Gaussmann and Ms. Saloio

relating to (i) custodians from whom documents were collected; (ii) how the documents were physically collected and reviewed for responsiveness; and (iii) the procedures or timetable for transmitting the information to the defendants.

3. Describing in detail all factual information obtained by Dr. Gaussmann from Dr.

Patrick Kohler relating to Exhibit 71 to the license agreement.

4. Answering the question whether Dr. Gaussmann was asked before his deposition

to educate himself about what Inventio asserts is a reasonable royalty for the use of the' 465 and '861 patents?

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Finally, in compliance with the Special Master appointment order, Inventio will be responsible for the Special Master's fees and expenses in resolving this discrete dispute.

Dated: June 3,2010

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