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THK AMERICA, INC. v. NSK

January 9, 1996

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



The opinion of the court was delivered by: ASHMAN

 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 (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, 113 L. Ed. 2d 218, 111 S. Ct. 1109 (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. *fn1"

 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, 47 L. Ed. 2d 810, 96 S. Ct. 1551 (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 anti-trust 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 that NSK has asserted that it seeks to introduce these documents for the reason that they are relevant to laches and estoppel defenses was in the response to the instant Motion in Limine. Despite numerous opportunities to do so, NSK made no reference to these documents as being relevant to those issues during numerous and lengthy depositions of Mr. Teramachi and at other times. Most important, THK propounded contention interrogatories to NSK to explain the bases for NSK's laches and estoppel defenses. The documents were not disclosed in answers to these interrogatories. Discovery in this case has been closed for many months. To allow this new contention into evidence would greatly prejudice THK in that it has had no opportunity to explore their ramifications by its own discovery.

 NSK argues that it did reveal its intentions in an answer to a notice to admit; however, this answer to the notice to admit was done in the context of a then pending attempt by NSK to file a counterclaim based upon alleged anti-trust violations relating to price fixing. The answer to the notice to admit was given during the pendency of the motion for leave to file the counterclaim and fit in with the theory of the counterclaim. Leave to file the counterclaim was ultimately denied. Therefore, the answer to the notice to admit gave no reason for the reader to assume that these letters had anything to do with laches or estoppel.

 Furthermore, courts have recognized that insinuations of price fixing in the context of a patent trial may be inflammatory. Walker Process Equipment, Inc. v. Food Machine and Chemical Corp., 382 U.S. 172, 15 L. Ed. 2d 247, 86 S. Ct. 347 (1965); Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, cert. denied, 444 U.S. 1025, 62 L. Ed. 2d 659, 100 S. Ct. 688, 100 S. Ct. 689 (1980). Here, as the Court has noted above, relevance of the documents is marginal. The potential unfair prejudice is great. Under the balancing act required under FED. R. CIV. P. 403, this Court finds that the danger of unfair prejudice overwhelms any probative value of this evidence.

 The Court therefore grants THK's Motion in Limine on this subject and accordingly the letters in question are hereby excluded and no argument nor mention may be made of the same during the trial. However, this Order should not be construed as barring any of the contents of the discussions of the 1988 meetings. These are admissible because THK intends to rely on part of those discussions, thus opening the door.

 THK's Fourth Motion in Limine: To prevent introduction of evidence of a foreign conviction, more than 12 years old of Hiroshi Teramachi.

 In 1983, Hiroshi Teramachi was convicted in Japan for filing false corporate income tax statements for the fiscal years 1979 and 1980. He was fined and sentenced to a two-year prison term with a four-year stay of execution of the imprisonment. Mr. Teramachi paid the fine and was never required to serve any time of imprisonment. NSK intends to use evidence of this conviction at trial.

 Rule 609(b) of the FEDERAL RULES OF EVIDENCE excludes such prior conviction evidence if ten years have passed "since the date of the conviction or of the release of the witness from the confinement imposed for that conviction, whichever is the later date. . . ." NSK argues that the ten-year clock of Rule 609(b) starts with the date of "release of the witness from the confinement imposed" and argues that since Mr. Teramachi was not released from the sentence of confinement imposed until 1987, the ten-year period will not expire until 1987. NSK argues that the release date of the sentence governs and cites Trindle v. Sonat Marine, Inc., 697 F. Supp. 879, 881 n.4 (E.D. Pa. 1988), as its sole authority.

 This Court does not agree. First, the plain words of the rule which uses the word "confinement" must mean that the ten-year period starts when the witness leaves actual imprisonment. Indeed, BLACK'S LAW DICTIONARY defines confinement as "state of being confined; shut in; imprisoned; detention in penal institution." Secondly, the only case relied upon by NSK - Trindle - a District Court opinion - has been criticized by appellate authority, the Fifth Circuit, in United States v. Daniel, 957 F.2d 162, 168 (5th Cir. 1992), as mistaken dicta.

 Finally, good authority exists for the proposition that the ten-year clock commences from the date of conviction in cases where a defendant is given probation. United States v. Lopez, 979 F.2d 1024, 1033 (5th Cir. 1992), cert. denied, 124 L. Ed. 2d 258, 113 S. Ct. 2349 (1993); United States v. Daniel, 957 F.2d 162, 168 (5th Cir. 1992). The court in Daniel stated its reasoning succinctly:

 
The historical note to Rule 609 shows that, prior to 1972, the rule contemplated that the ten-year period should run from "the expiration of the period of his parole, probation, or sentence." This section was amended in 1972, however, and now states that a conviction is not admissible if more than ten years have elapsed since "release from confinement." The change in the language of the rule forecloses the interpretation urged by the ...

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