Acacia Documents Shared With Patent Seller Pre-Purchase Not Privileged in Later Lawsuit

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By Tony Dutra

Nov. 20 — Prominent patent assertion entity Acacia Research Corp.'s patent acquisition procedures require it to disclose documents normally protected by attorney-client privilege, the U.S. District Court for the Southern District of New York ruled Nov. 17.

Judge Paul A. Crotty granted Microsoft Corp.'s request for discovery of claim charts, pre-lawsuit analyses and other documents that Acacia shares with third-party patent owners prior to completing the patent purchases.

Crotty rejected Acacia's argument that it shares a common legal interest with each third party, an exception to the waiver of privilege that normally applies after such disclosure.

Case Arises From Contract Dispute

Microsoft agreed to license multiple patents from Acacia's web of subsidiary companies, and the contract provided a mechanism for disputes over whether Microsoft infringed a particular patent so as to require royalty payments.

After Acacia concluded that Microsoft was not paying fees for 18 allegedly infringed patents, the subsidiaries filed a series of lawsuits. See, e.g., Innovative Display Techs. LLC v. Microsoft Corp., No. 2:13-cv-783 (E.D. Tex. Dec. 9, 2013), involving seven patents on light-emitting panel assemblies allegedly infringed by Microsoft’s Surface RT and other products, and Intercarrier Comm. LLC v. Microsoft Corp., No. 1:13-cv-1639 (D. Del. Oct. 1, 2013), involving inter-carrier messaging allegedly infringed by Microsoft’s GroupMe messaging service.

Microsoft then filed the instant case, with a petition under seal. Its July request to file a motion to compel states: “Microsoft’s complaint alleges that ARC orchestrated the filing of multiple, baseless patent infringement claims against Microsoft and breached a licensing Contract between the parties in various ways.”

Timing of Disclosures Matters

Acacia's acquisition practice is to identify patents it would like to purchase; receive information from the patent owner, including identification about possible infringers; sign a contingent “patent purchasing contract” expressing interest; conduct due diligence on the desired patents; and, assuming a continued desire to purchase, sign a final sale agreement.

During the due diligence, Acacia shares documents prepared by its legal team with the prospective seller. Microsoft sought to discover those documents and Acacia refused, asserting the common interest privilege.

The timing doomed Acacia's argument.

The court noted that Acacia had no obligations to make payments under the patent purchasing contract, which was automatically terminated at the end of the due diligence period. The privilege waiver exception, if available at all, would only accrue upon the final sale agreement, according to the court.

The court said, “a common legal interest could only exist after the disclosures were made because that is when the parties' agreement took effect in reality.”

The court directed Acacia to comply with Microsoft's discovery request.

Andrew J. Levander of Dechert LLP, New York, represents Microsoft. Marc J. Schneider of Stradling Yocca Carlson & Rauth, Newport Beach, Calif., represents Acacia.

To contact the reporter on this story: Tony Dutra in Washington at

To contact the editor responsible for this story: Tom P. Taylor at

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