The opinion of the court was delivered by: Hon. Maria Valdez United States Magistrate Judge
Magistrate Judge Maria Valdez
MEMORANDUM OPINION AND ORDER
This case involves an allegation that Defendant's software product infringes upon Plaintiff's '169 patent. Before this Court are two interrelated motions: (1) Defendant Mitchell's Motion for Order and Sanctions for CCC's Violation of the Protective Order [Doc. No. 76]; and (2) CCC's Motion to Compel Defendant Mitchell to Produce its Alleged Advice of Counsel Memorandum "In Its Entirety, without Redactions." [Doc. Nos. 80, 85].
This matter concerns disclosure of two redacted paragraphs contained within a legal memorandum relied upon by Defendant Mitchell in its defense against this action for willful infringement. In response to document production requests, Defendant Mitchell produced to the Plaintiff a legal memorandum dated May 8, 2003 from the law firm of Gray Cary. This legal memorandum contained two redacted paragraphs noted by the Defendant as protected by the attorney-client privilege and the work product doctrine. According to the Defendant the paragraphs relate to monetary damages and are not relevant to the issue of willful infringement. The Plaintiff initially challenged the privilege designation in May on relevancy grounds and on the basis of an incomplete privilege log. Defendant countered in June that the designation was correct and provided additional information for the privilege log. No further objection was lodged by the Plaintiff and that appeared to be the end of the dispute.
However, a couple of months later, the Plaintiff issued a third-party subpoena to the law firm of Gray Cary. In response to the subpoena, on August 25, 2006 Gray Cary produced an unredacted version of the legal memorandum at issue. On August 26, 2006, counsel for Defendant Mitchell advised Plaintiff's counsel of the inadvertent disclosure and requested all copies of the un-redacted memorandum returned or destroyed. Plaintiff initially refused to return or destroy all copies but ultimately did return all copies to the Defendant after Defendant filed its motion now before the Court.
As a preliminary matter, it is important to note that a Protective Order was in place during the relevant time period. The Protective Order provides that a party may in good faith designate a document confidential. (Def.'s Mem. in Supp. of its Mot. at Ex. A, ¶1.) The agreed order further provides that a party cannot retain copies of documents after being notified by the producing party that due to inadvertence or mistake the documents were erroneously produced. (Id. at ¶19.) The Plaintiff stated in open court that it has returned all copies of the un-redacted version of the Gray Cary document to the Defendant. Therefore, Defendant's motion, to the extent that it seeks compliance with the Protective Order, is hereby denied as moot. However, the Defendant has also moved for sanctions against the Plaintiff requesting the cost of attorneys' fees for the filing of the instant motion. Before addressing the issue of sanctions, this Court will turn to the related motion filed by the Plaintiff to deem the redacted portions discoverable on two grounds: (1) inadvertent waiver; and (2) subject matter waiver.
A. Plaintiff's Motion to Compel
The attorney-client privilege may be waived by a knowing disclosure of confidential information to a third-party. Beneficial Franchise Co., Inc. v. Bank One, N.A., 205 F.R.D. 212, 216 (N.D.Ill. 2001). The party seeking to assert the privilege bears the burden of showing that the privilege was not waived. See U.S. v. Evans, 113 F.3d 1457, 1461 (7th Cir. 1997); In re Consolidated Litig. Concerning Harvester Disposition of Wis. Steel, 666 F. Supp. 1148, 1157 (N.D.Ill. 1987). And the burden of proving inadvertent disclosure is on the party asserting the privilege. Harmony Gold U.S.A., Inc. v. FASA Corp., 169 F.R.D. 113, 116 (N.D.Ill. 1996).
Inadvertent disclosure can sometimes result in intentional waiver. See Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122, 1127 (7th Cir.1997). The reason for this is to punish the privilege-holder for the mistake of disclosure. Id. at 1127. But the severity of the punishment needs to fit the offense and the punishment should be proportionate to the seriousness of the mistake. Id. The standard for waiver of a privileged document due to inadvertence is a balancing test. Under this balancing test the court weighs: (1) the reasonableness of the precautions taken to prevent the disclosure, (2) the time taken to rectify the error, (3) the scope of the discovery, (4) the extent of the disclosure, and (5) the overriding issue of fairness. Urban Outfitters, Inc. v. DPIC Co., 203 F.R.D. 376, 380 (N.D.Ill.2001).
Here, two paragraphs have been inadvertently disclosed during discovery by a former attorney of the Defendant. In support of its argument that no waiver has occurred, Defendant Mitchell points to the timeliness of the notice of inadvertent disclosure and the protection afforded to the parties through the agreed Protective Order.
This Court does not find that the document sent by Gray Cary waived the standard protections afforded by the attorney-client privilege and work product doctrine invoked in this case. First, the inadvertent disclosure in this case was accomplished by third-party, Gray Cary, not by the holder of the privilege, Defendant Mitchell. Lawrence E. Jaffee Pension Plan v. Household Int'l Inc., 237 F.R.D. 176, 184 (N.D.Ill. 2006) (the client as the holder of the privilege is the one to decide whether to waive the privilege). Second, the Protective Order entered into by the parties specifically states that any inadvertent ...