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24 Biotechnology L. Rep. 1 (2005)

handle is hein.journals/bothnl24 and id is 1 raw text is: 24 Biotechnology Law Report 1 Number 1 (February 2005) © Mary Ann Liebert, Inc. The Common-Interest Doctrine and Intellectual Property Due Diligence ERIC K. STEFFE, W. BLAKE COBLENTZ, and JESSICA PAREZO* INTRODUCTION COMPANIES INVOLVED IN INTELLECTUAL PROPERTY due diligence investigations are sometimes faced with situations in which business transactions would be facilitated by disclosing their attorney's le- gal impressions to a potential business partner. In the biotechnology and pharmaceutical industries, for example, vast resources and expertise are required to bring a product to market. Most biotechnology companies are focused on a specific portion of the product chain (e.g., identifying a drug candidate) and rely on numerous external collaborations and alliances with other biotechnology and pharmaceu- tical companies for further product development.1 Prior to entering an intercompany alliance, however, potential business partners need answers to compli- cated legal questions, including (1) whether intel- lectual property owned by third parties exists that may be infringed during the collaborative effort; and (2) whether the other company's own intellectual property sufficiently covers the product intended for commercialization. A potential business partner is faced with the choice of either retaining an attorney to perform due diligence investigations from scratch or, to save time and money, requesting that the other company turn over any relevant legal opinions that have already been prepared for its own use. How- ever, absent applicability of an exception to the waiver rule, sharing legal opinions with another waives the attorney-client privilege. *Mr. Steffe is a Director at Sterne, Kessler, Goldstein & Fox P.L.L.C. Mr. Coblentz was a summer associate and Ms. Parezo a former associate at Sterne, Kessler. The content of this arti- cle reflects the present thoughts of the authors and should not be attributed to Sterne, Kessler or any of its former, current, or future clients. Provided below is a discussion of the attor- ney-client privilege and exceptions to the waiver rule; a review of case law involving the common- interest doctrine in the context of transactions in- volving intellectual property; and considerations and recommendations for companies involved in due diligence investigations. ATTORNEY-CLIENT PRIVILEGE AND EXCEPTIONS TO THE WAIVER RULE The attorney-client privilege protects from dis- closure confidential communications from client to lawyer during professional employment.2 The pro- tection extends to both information provided to the lawyer by the client and professional advice given by an attorney that discloses such information.3 With a few exceptions, discussed below, a client who discloses privileged information to a third party waives the privilege. Generally speaking, the scope of the waiver includes all documents and informa- tion in the client's hands that relate to the waived subject matter.4 Thus, if the privilege is waived- for example, because a company shared with a po- tential collaborator an opinion of counsel relating to 'Lillian Waag0, Factors Related to Acquiring Capital in Young Biotechnology and Biomedical Firms, NCSB 2004 Conference 13th Nordic Conferences on Small Business Research (May 2004); see also D.L. Deeds and C.W.L. Hill, Strategic alliances and the rate of new product development: an empirical study of entrepreneurial biotechnology firms, 7(2) J. Bus. Venturing 41-55 (1996). 2United States v. Schwimmer, 892 F.2d 237, 243 (2d Cir. 1989). 3In re Six Grand Jury Witnesses, 979 F. 2d 939, 944 (2d Cir. 1992). 4Steelcase, Inc. v. Haworth, Inc., 954 F. Supp. 1195, 1198-99, 43 U.S.P.Q.2d 1041, 1043 (W.D. Mich. 1997). 1

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