Opposition Brief — Genentech, Inc. v. Regents of the University of California

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IN THE

_ Supreme Court of the Huited States

OcTOBER TERM, 1996

GENENTECH, INC.,

Petitioner,

v.

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

BRIEF IN OPPOSITION

Of Counsel: GERALD P. DoDSON

P. MARTIN SIMPSON, JR. Counsel of Record

THE UNIVERSITY RICHARD L. STANLEY

OF CALIFORNIA OFFICE OF EMILY A. EVANS

TECHNOLOGY TRANSFER ARNOLD, WHITE & DURKEE

1320 Harbor Bay Pkwy. 155 Linfield Drive

Suite 150 Menlo Park, CA 94025

Alameda, CA 34501 (415) 614-4500

(510) 748-6600 Counsel for Respondent

The Regents of the

March 17, 1997 University of California

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 2000!

QUESTION PRESENTED

1) Whether the Federal Circuit correctly decided that

otherwise privileged communications between a patent

applicant and attorneys employed by its exclusive optionee

concerning the optioned patent applications, and any re-

lated attorney work product, are protected by the “com-

munity of interest” doctrine from being waived when they

are shared with the optionee where (a) the patent owner

and the optionee had an “identical legal interest” with

respect to the subject patent applications, (b) the optionee

controlled the prosecution of the subject patent applica-

tions, and (c) the optionee’s in-house counsel functioned

as attorneys for the patent applicant with respect to the

prosecution of the patent applications?

(i)

ii

LIST OF PARTIES AND RULE 29.6 STATEMENT

The parties to the proceeding in the United States Court

of Appeals for the Federal Circuit were petitioner Genen-

tech, Inc. and respondent The Regents of the University

of California. For purposes of S. Ct. R. 29.6, the respond-

ent states that it has no parent companies or nonwholly-

owned subsidiaries.

TABLE OF CONTENTS

Page

QUESTION PRESENTED __. EAT RE i

LIST OF PARTIES AND RULE 29.6 STATE-

I ee ii

TABLE OF AUTHORITIES... iv

PemewewanvOEN Me 2

STATEMENTOFTHECASE...... 2

A. The Relationship Between UC And RC 2

B. An Overview Of The Present Litigation... =» = 3

C. The District Court’sOrder... st 6

D. The Federal Circuit’s Writ Of Mandamus....____. 7

REASONS FOR DENYING THE WRIT... 8

I. THE FEDERAL CIRCUIT’S DECISION IS

Famine COMMECT. 9

A. Genentech’s Attempt To Manufacture A Con-

flict Between The Federal And Seventh Cir-

cuits Is Baseless...... + ee 9

B. The Federal Circuit Correctly Concluded

That A Patentee And Its Optionee Have An

Identical Legal Interest To Obtain Strong

And Enforceable Patents... *™” 11

C. Genentech Has No Basis For Its Assertion

That The Federal Circuit Ignored The “In

Anticipation Of Litigation” Requirement... . 13

Il. THE FEDERAL CIRCUIT CORRECTLY

GRANTED A WRIT OF MANDAMUS TO

OVERTURN THE DISTRICT COURT’S

ORDERING PRODUCTION OF UC’S PRIVI-

LEGEDINFORMATION...... 15

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TABLE OF AUTHORITIES

Cases

Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33

PSII ic caschsectsicin atisdaiekacn bone ecbatec beehadaaesaaecaioidees

Baxter Travenol Laboratories, Inc. v. Abbott

Labs., 1987 WL 12919 (N.D. Ill. 1987) ...................

BV Engineering v. University of California, Los

Angeles, 858 F.2d 1394 (9th Cir. 1988), cert.

denied, 489 U.S. 1090 (1989) ..............00.-2-0.--- eee

In re Cordis Corp., 769 F.2d 733 (Fed. Cir.),

cert. denied, 474 U.S. 851 (1985) ............2.-.-000...-...-

Genentech, Inc. v. Eli Lilly and Company, 998

F.2d 931 (Fed. Cir. 1993), cert. denied, 510 U.S.

I iit ia

Genentech, Inc. v. Regents of the Univ. of Cal.,

939 F. Supp. 639 (S.D. Ind. 1996) ..........................

Graco Children’s Products, Inc. v. Dressler, Gold-

smith, Shore & Milnamow, Ltd., 1996 WL

RG Re hs Ra ee eed Cee

Harper & Row Publishers, Inc. v. Decker, 423

F.2d 487 (7th Cir. 1970), aff’d per curiam, 400

me cs

Hybritech, Inc. v. Abbott Labs., 849 F.2d 1446

NE I i

Polymer Technologies, Inc. v. Bridwell, 103 F.3d

Dee Cr Fale BE csencdeidi deceit tes

In re Recombinant DNA Technology Patent and

Contract Litigation, 874 F. Supp. 904 (S.D. Ind.

TG as nicestiicttiniec tu te has

In re the Regents of the University of California,

101 F.3d 1886 (Fed. Cir. 1996) ................................

Regents of the University of California v. Doe,

No. 95-1694 (U.S. Feb. 19, 1997) ........-.......-............

SCM Corp. v. Xerox Corp., 70 F.R.D. 508 (D.

Conn.), appeal dism’d, 534 F.2d 1031 (2d Cir.

I <ioistecstieclainsdentneadasdsaccagabiea ues ansannene caer det

Seminole Tribe v. Florida, 116 S. Ct. 1114 (1996)...

Statutes and Rules

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Page

In THE

Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-1289

GENENTECH, INC.,

” Petitioner,

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

BRIEF IN OPPOSITION

Respondent, The Regents of the University of California

(“UC”), respectfully requests that this Court deny the

petition for a writ of certiorari seeking review of the

Federal Circuit’s decision in this case. The Federal Cir-

cuit’s opinion reversing the district court’s order compel-

ling deposition testimony of three attorneys employed by

UC’s exclusive optionee, Eli Lilly and Company (“Lilly”),

who were involved in the prosecution of UC’s US. Patent

No. 4,363,877 (“the ’877 patent”) is reported at In re

the Regents of the University of California, 101 F.3d

1386 (Fed. Cir. 1996), and is found at Petitioner’s Ap-

pendix (“Pet. App.”) A-1 to A-12. The district court’s

opinion, which had granted Genentech’s motion to com-

pel such testimony and overruled UC’s objections based

on the community of interest doctrine, and which was

reversed by the Federal Circuit’s writ of mandamus at

2

issue, is unreported and is found at Pet. App. A-13 to

A-21.

STATUTE INVOLVED

As stated at Pet. 2, there are no constitutional provi-

sions or federal statutes implicated by the present petition,

which only involves a case-specific application of the

common law doctrine of attorney-client privilege.

STATEMENT OF THE CASE

As an initial matter, UC believes a clarification of the

record citation format is necessary. In the underlying

petition for a writ of mandamus to the Court of Appeals,

UC was the petitioner and Genentech was the respondent.

Because that writ was granted, the parties’ roles are now

reversed before this Court yet Genentech has opted to cite

to its exhibits below by their original designations; thus,

Genentech’s exhibits are cited in the petition to this Court

as “Resp. Ex.” even though Genentech is now the Peti-

tioner. See Pet. 3 n.1. While that choice likely stems from

Genentech’s incorporation of its unsuccessful briefing below

into its current petition, UC feels such designations may

be confusing. Therefore, UC will instead refer to its ex-

hibits below as “UC Ex.” and to Genentech’s exhibits as

“Genen. Ex.” UC’s references to the opinions attached

to the petition before this Court will be to “Pet. App.

A—.”

A. The Relationship Between UC and Lilly

As noted, UC is the owner of the ’877 patent and of

other United States and foreign patents relating to recom-

binant DNA technology. Although Genentech relies heav-

ily on the agreements between UC and Lilly related to that

technology, Genentech merely cites to them without pro-

viding them to the Court with the petition. Nevertheless,

for purposes of the present petition, it is only pertinent

that Lilly obtained “the exclusive right to obtain a license”

under UC’s pertinent United States and foreign patents.

UC Ex. 6, at § 3.1; UC Ex. 7, at 93.1. As a result of giv-

mr

3

ing Lilly an exclusive option to obtain such a license, UC

contractually gave up its ability to enter into any other

agreements with other companies granting them the right

to obtain licenses.

In returi: for its option for an exclusive license, Lilly

agreed to “underwrite the cost for the Preparation, filing

and prosecution, with the cooperation of Regents, by

patent counsel mutually acceptable to Lilly and Regents

of all foreign patent applications on behalf of Regents...

and the cost of maintaining all resultant applications.”

UC Ex. 6, at § 2.1; UC Ex. 7, at { 2.2 (also applies to

U.S. applications). In short, Lilly agreed to assist UC in

obtaining patent protection in the field of the agreements.

At all times, prosecution of UC’s patent applications was

handled by outside counsel acceptable to both Lilly and

UC, and under the direction and guidance of Lilly’s in-

house attorneys, or by Lilly’s in-house attorneys them-

selves.

B. An Overview Of The Present Litigation !

On August 6, 1990, Genentech filed a declaratory judg-

ment action in the United States District Court for the

Southern District of Indiana against UC and Lilly, seeking

a declaration that the ’877 patent was invalid, unenforce-

able, and not infringed (“the Indiana action”). The next

day, UC filed a lawsuit in the United States District Court

for the Northern District of California charging Genentech

with infringement of the ’877 patent (“the California ac-

tion”). The California action was a “mirror image” of the

Indiana action, which Genentech had amended to include

various antitrust and pendent state law claims.

On February 4, 1991, the Indiana court dismissed Gen-

entech’s declaratory judgment action, holding, inter alia,

1 Much of the history in this section is not needed to resolve

the issues raised by the petition, but is provided by UC as back-

ground for the Court and to provide context within the litigation

for the issues that are raised.

4

that Congress had not abrogated UC’s Eleventh Amend-

ment immunity when enacting the patent laws, and that

UC had not abrogated its immunity by owning a patent.’

During Genentech’s appeal of that dismissal, Congress

added 35 U.S.C. § 271(h) and 35 U.S.C § 296 to the pat-

ent laws. As a result, Genentech’s declaratory judgment

action was held to fall within the statutory abrogation of

Eleventh Amendment immunity and was thus the Indiana

action was reinstated. Genentech, Inc. v. Eli Lilly and

Company, 998 F.2d 931 (Fed. Cir. 1993), cert. denied,

510 U.S. 1140 (1994). After dismissing one of Genen-

tech’s antitrust claims, the Federal Circuit instructed the

district court on remand to determine which of Genentech’s

other claims met the criteria of being defenses and com-

pulsory counterclaims to the charge of patent infringement.

Id. at 948-49.

On February 19, 1992, the Indiana action, the Califor-

nia action, and several other lawsuits in California and

Indiana involving UC, Genentech, and Lilly had been con-

solidated in the Southern District of Indiana for pretrial

proceedings by the multidistrict panel. Following the re-

mand of the declaratory judgment action from the Federal

Circuit, the Indiana court stayed the California action in

favor of the “mirror-image” Indiana action. On Decem-

ber 22, 1994, Lilly and Genentech entered into a Settle- |

ment Agreement which resolved all claims between those |

two parties, so that Lilly is no longer a party to any of

the underlying actions.

On November 18, 1994, the Indiana court denied Gen- |

entech’s motion to amend its complaint and granted UC’s |

2UC is an instrumentality of the State of California for

Eleventh Amendment purposes, and actions by UC are entitled

to the protection of the Eleventh Amendment. See, e.g., Regents

of the University of California v. Doe, No. 95-1694 (U.S. Feb. 19,

1997); BV Engineering v. University of California, Los Angeles,

858 F.2d 1394, 1895 (9th Cir. 1988), cert. denied, 489 U.S. 1090

(1989).

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5

motion to dismiss all of the non-patent counts of Genen-

tech’s complaint with the exception of one aspect of Count

V related to Genentech’s third-party beneficiary claims. Jn

re Recombinant DNA Technology Patent and Contract

Litigation, 874 F. Supp. 904 (S.D. Ind. 1994). During the

same period of time, UC moved for relief from the protec-

tive order in the case in order to be able to rely on certain

materials obtained during discovery to file additional fed-

eral antitrust and state law claims against Genentech in

California. Over two years later, the district court held

in April 1996 that UC’s new proposed claims were com-

pulsory counterclaims to the present litigation on grounds

that UC’s proposed claims were logically related to one of

UC’s defenses to Genentech’s third-party beneficiary claim.

As a result, the district court enjoined UC from filing

its proposed claims in other courts.

UC filed an interlocutory appeal from that injunction to

the Federal Circuit pursuant to 28 U.S.C. § 1292(c)(1).

During the pendency of that appeal, the distinct court

granted UC’s renewed motion to dismiss Genentech’s de-

claratory judgment action on Eleventh Amendment

grounds in light of this Court’s intervening decision in

Seminole Tribe v. Florida, 116 S. Ct. 1114 (1996). That

motion was granted on grounds that the district court

lacked jurisdiction over a patent declaratory judgment ac-

tion brought against a State’s patent. See Genentech, Inc.

v. Regents of the Univ. of Cal., 939 F. Supp. 639 (S.D.

Ind. 1996). In addition, the Indiana court granted UC’s

motion for summary judgment on the sole remaining as-

pect of Genentech’s third-party beneficiary claims, ruling

that Genentech had not relied on its alleged third party

rights before they were validly rescinded by UC and Lilly.®

*In light of the intervening rulings by the Indiana court, the

Federal Circuit decided to stay UC’s pending appeal of the

district court’s injunction and to consolidate that appeal with

Genentech’s later-filed appeal from the subsequent dismissal of

its declaratory judgment action. As of the filing of this opposition,

6

On the same day that the Indiana court dismissed Gen-

entech’s declaratory judgment action, that court also lifted

the stay of the California action and informed the multi-

district panel that “[i]nasmuch as [the California action]

must be tried in California, and the discovery is essentially

complete, I request that it be remanded to the Northern

District of California.” After Genentech’s objections were

overruled. the California action was remanded on Janu-

ary 30, 1997, to the Northern District of California.

Hence, the California action—UC’s infringement suit

against Genentech—is the only pending case between the

parties. Needless to say, it has not yet been tried.

C. The District Court’s Order

As noted, discovery in the several separate litigations

between UC, Lilly, and Genentech was consolidated pur-

suant to an order of the judicial panel on multidistrict liti-

gation. In September 1994, pursuant to a request from

UC, the district court temporarily excluded Genentech

from portions of certain depositions of Lilly attorneys as

to which UC claimed a community of interest privilege

with Lilly, and directed that Genentech would receive re-

dacted versions of the transcripts. UC Ex. 8, at 9 n.4.

For the portions of the depositions at which Genentech

was present, UC also objected to testimony, based on the

attorney-client privilege and the community of interest

doctrine. UC Ex. 2.

In March 1996, Genentech filed a motion to overrule

UC’s objection to discovery based on the community of

interest doctrine, to continue the depositions of the Lilly

attorneys, to obtain unredacted transcripts, and to instruct

UC that attorney work product relating to the prosecution

of UC patent applications, which was the subject of the

depositions, is not immune from discovery. On July 2,

the briefing in the latter appeal is still ongoing before the Federal

Circuit.

7

1996, the district court granted Genentech’s motion. Pet.

App. A-13 to A-19.

In its order, the district court held that “the UC-Lilly

relationship arising from the option agreement created no

need for a common defense” because “[t]he entities were

prosecuting patents, and at that point, apparently were

bound only by the prospect of financial gain and height-

ened reputation.” Pet. App. A-18. Thus the district court

held: “UC may not invoke the community of interest doc-

trine to protect communications between it and Lilly be-

tween 1978 and 1989.” Pet. App. A-19. Faced with

the impending disclosure of its privileged information, UC

sought a writ of mandamus from the Federal Circuit.

D. The Federal Circuit’s Writ Of Mandamus

The Federal Circuit’s opinion granting UC’s writ of

mandamus is found at Pet. App. A-1 to A-12. However,

the substance of the Federal Circuit’s opinion granting

UC’s request for a writ of mandamus receives scant sub-

Stantive discussion in Genentech’s petition. Nevertheless,

even a basic reading of that decision reveals that the Fed-

eral Circuit correctly held that the “community of interest”

doctrine applied to the privileged communications shared

between UC (as the owner of the rights in the inventions )

and Lilly (as the holder of the exclusive option to obtain

a license under the inventions) with respect to the prosecu-

tion of UC’s patents that were to be licensed to Lilly. As

discussed further in the argument section below, there is

no reason for this Court to grant a petition for writ of

certiorari to review that decision.

Simply put, the Federal Circuit’s analysis does not con-

tain any of the legal errors attributed to it by Genentech,

nor does that court’s opinion or result reflect a departure

from established law in any regard. Indeed, the most

direct rebuttal to Genentech’s petition to this Court is

provided by the Federal Circuit’s opinion itself. That is

8

not surprising because Genentech’s petition merely recycles

the same arguments that were considered and rejected by

the Federal Circuit. More importantly, as an application

of the existing law to the specific fact pattern of a joint

effort to procure patent protection undertaken by a

licensor-inventor and its exclusive optionee—a matter im-

plicating substantive patent law falling within the Federal

Circuit’s particular expertise—that court’s opinion is in-

sightful, instructive, and correct.

REASONS FOR DENYING THE WRIT

On its face, Genentech’s petition merely complains of

an interlocutory legal determination reached by the Fed-

eral Circuit, a result which is virtually compelled by a

proper application of long-established attorney-client privi-

lege law and the community of interest doctrine. There

is nothing remarkable about the Federal Circuit’s conclu-

sion that the “community of interest” rule protects privi-

leged communications shared between a patent applicant

and a company having an exclusive option to obtain a

license under the resulting patents. Thus, there is no

reason for this Court to grant certiorari to review the

propriety of that decision, which is plainly correct and

which only affects the parties to this litigation.

The Federal Circuit properly utilized the remedy of

mandamus to prevent the improper disclosure of UC’s

privileged information to Genentech. In any event, even

if the Federal Circuit’s action in protecting UC’s privi-

leged information were somehow erroneous (which it is

not) and even if that nondisclosure later has a substantive

effect on the outcome of the trial (which is wholly specu-

lative), Genentech could still attempt to bring that issue

to this Court following final judgment. For each of these

reasons, Genentech’s present petition should be denied.

9

I. THE FEDERAL CIRCUIT'S DECISION IS PLAINLY

CORRECT

By its own admission at Pet. 11 & 12, the basis for

Genentech’s current petition reduces to a two-pronged

premise: (1) that the Federal Circuit allegedly modified

the Seventh Circuit’s “identical legal interest” doctrine to

create a more flexibile and impermissible “substantially

identical legal interest doctrine,” and (2) that the Federal

Circuit allegedly ignored the traditional “in anticipation

of litigation” condition that is required for a valid com-

munity of interest exception to a waiver of an attorney-

client communication. However, Genentech’s attempt to

manufacture a conflict among the circuits is illusory.

Moreover, its assertions of error have no basis in the

record, in the Court of Appeals’ opinion, or in the law.

A. Genentech’s Attempt To Manufacture A Conflict

Between The Federal And Seventh Circuits Is

Baseless

Genentech attempts to justify a writ of certiorari as

warranted by fabricating a “circuit conflict” that does not

exist, and by asserting that the Federal Circuit somehow

violated Seventh Circuit law in reaching its decision. Of

course, even if the Federal Circuit had actually misapplied

Or misunderstood Seventh Circuit law, that would not

create a situation that warrants review by this Court. To

the extent that the Federal Circuit’s decision did implicate

Seventh Circuit law, any pronouncements by the Federal

Circuit could not change the Seventh Circuit’s law so that

any conflict or error would be limited to this case. On

the other hand, to the extent that the Federal Circuit’s

decision implicates substantive patent law issues within its

exclusive jurisdiction, the Federal Circuit was not bound

by any prior or contrary Seventh Circuit law. In any

event, the Federal Circuit’s announcement and application

of the law was entirely proper.

The Federal Circuit stated that it was following Seventh

Circuit law with respect to the issue of the scope of the

10

attorney-client privilege. Pet. App. A-10 & n.2. However,

whether patent prosecution is appropriate for the attorney-

client privilege to attach or whether the prosecution process

creates a need for a common defense privilege between a

patent owner and an exclusive optionee are more properly

viewed as being matters to be decided under Federal Cir-

cuit law.

Consultation with counsel during patent prosecution

meets the criteria of compliance with the law and

meeting legal requirements, thereby reducing or

avoiding litigation, and is within the scope of the

subject matter that is subject to the attorney-client

privilege.

We conclude that the joint client doctrine and the

community of interest doctrine apply to and protect

legal advice and communications between the patent

applicant or patentee and attorneys of its optionee/

licensee.

Pet. App. A-11-12. However, even to the extent that the

Federal Circuit followed or considered Seventh Circuit

law in reaching its conclusions, the Federal Circuit did

not deviate from or conflict with existing Seventh Circuit

law.

At Pet. 11, Genentech provides a string of citations to

Seventh Circuit district court decisions, but fails to ex-

plain what rule of law set forth by those cases is supposed

to be in conflict with the Federal Circuit’s decision. As

characterized by Genentech, those cases require that the

underlying communications themselves be privileged, that

the parties have an identical legal interest with respect to

the subject of the communications, and that such interest

arise out of impending or anticipated litigation or a joint

effort to avoid litigation. Jd. However, contrary to Genen-

tech’s allegations, the Federal Circuit’s decision is fully

consistent with the community of interest doctrine applied

by the district courts in the Seventh Circuit.

11

B. The Federal Circuit Correctly Concluded That A

Patentee And Its Optionee Have An Identical Legal

Interest To Obtain Strong And Enforceable Patents

As to Genentech’s premise that the Federal Circuit

restated and misapplied the governing “identical legal in-

terest” test, even a brief reading of the Federal Circuit’s

Opinion exposes the lack of merit to Genentech’s claim.

It is readily apparent that Genentech is attempting to

transform a single inclusion of the word “substantially” in

the Federal Circuit’s opinion into a legal error of sufficient

proportion to justify a writ of certiorari to review an

interlocutory order that may affect only this case at some

point in the future. Not only does Genentech emphasize

that single word out of context, but its entire argument to

the contrary is nothing more than baseless semantics.

Although Genentech seizes upon the one occasion when

the Federal Circuit described the legal interests of UC and

Lilly as being “substantially identical,” Pet. App. A-10,

the court was not creating a new and more relaxed stand-

ard for applying the “community of interest” test. In the

next sentence of its opinion, the Federal Circuit stated

that “[bJoth parties had the same interest in obtaining

strong and enforceable patents.” Jd. (emphasis added).

In the sentence following immediately after that one, the

Court of Appeals expressly stated that the district court

had “erred in concluding that Lilly and UC did not have

an identical legal interest in the ’877 patent.” Id. Viewed

in the context of the Federal Circuit’s full opinion, the

entire premise of Genentech’s petition that is based on the

single use of the term “substantially” simply evaporates.

Furthermore, the Federal Circuit’s holding that an

“identical legal interest” sufficient to preserve confiden-

tiality of attorney-client communications arises between

parties like UC and Lilly involved in joint efforts to prose-

cute patents is fully consistent with other cases—even in

the Seventh Circuit.

A community of interest may arise between parties

jointly developing patents because they have a com-

12

mon interest in developing the patents to (1) obtain

the greatest protection of the patents, and (2) in

exploiting the patents.

Graco Children’s Products, Inc. v. Dressler, Goldsmith,

Shore & Milnamow, Ltd., 1996 WL 360590 at *5 (N.D.

Ill. 1995). Moreover, another Seventh Circuit district

court had previously reached the same conclusion as the

Federal Circuit, holding that the community of interest

rule protects communications shared between the patent

applicant and a company having an option to obtain an

exclusive license under the patent. See Baxter Travenol

Laboratories, Inc. v. Abbott Labs., 1987 WL 12919 at

*2 (N.D. Ill. 1987) (determining that an identical legal

interest existed even where “Baxter had the option to

acquire an exclusive world-wide license on any inventions,

improvements, ideas, developments, patent applications,

and patents”).

Genentech condemns the Federal Circuit for an alleged

“monumental factual blunder” for holding that “Lilly was

more than a non-exclusive licensee.” Pet. 13. However,

the record demonstrates that conclusion is entirely correct.

Through its agreements with UC, Lilly obtained “the

exclusive right to acquire a license.” UC Ex. 6, at 4 3.1;

UC Ex. 7, at 9 3.1. Under those provisions, Lilly was the

exclusive optionee—UC gave up the ability to enter into

any other agreements with other companies granting them

the right to obtain licenses. In fact, Lilly later exercised

its option and became the exclusive licensee under the

UC patenis. Pet. App. A-10- Because Lilly was UC’s

exclusive optionee, the Federal Circuit correctly concluded

that “Lilly was more than a non-exclusive licensee.” Id.

Without doubt, UC and Lilly had an identical legal

interest with respect to the subject patent applications at

issue. That is all that matters. That there may not have

been complete identity between UC’s and Lilly’s legal

interests with respect to other technology, other agree-

ments, other parties, or even Genentech has no bearing

13

on the proper legal inquiry. Hence, Genentech’s lengthy

dissertation regarding allegedly overlapping interests shared

by Lilly and Genentech has no bearing on whether UC

and Lilly shared identical interests with respect to UC’s

subject patents. Thus, the Federal Circuit correctly re-

jected the district court’s view that UC’s and Lilly’s shared

interests were only proprietary rather than legal. Pet. App.

A-10-11.

The Federal Circuit thus also correctly determined that

the District Court erred as a matter of law in determining

that the option agreement did not create an “identical

legal interest” between UC and Lilly with respect to the

prosecution of the patent applications. Jd. at A-10. The

District Court’s contrary decision conflicted with the other

Seventh Circuit district court cases that agreed that joint

prosecution results in the parties having an identical legal

interest with respect to the subject patents. Moreover, the

District Court’s decision squarely conflicted with the Baxter

Travenol decision, which held that an identical legal in-

teerst could arise between the patent owner and the op-

tionee of an exclusive license. Not only was there no

conflict created by the Federal Circuit’s decision in this

case, but no other legal conclusion was proper.

C. Genentech Has No Basis For Its Assertion That

The Federal Circuit Ignored The “In Anticipation

Of Litigation” Requirement

Genentech’s asserted “circuit conflict” as to the “an-

ticipation of litigation” element is likewise illusory. The

Federal Circuit’s decision does not do away with a require-

ment that the identical legal interest arise out of impend-

ing or anticipated litigation or a joint effort to avoid

litigation. The Federal Circuit simply affirmed the rule,

accepted even in other Seventh Circuit cases, that the

communications in question need not take place when

litigation is immediately imminent—i.e., “in the shadow

of litigation” as the Federal Circuit stated. Pet. App. A-11.

14

That holding is consistent with the applicable case law,

including those of other district courts from the Seventh

Circuit, holding that joint efforts in prosecuting patents

create identical legal interests in anticipation of litigation

or in avoiding litigation. As one district court stated:

Although a community of legal interests usually

arises between parties engaged in or anticipating im-

minent litigation, litigation or impending litigation

is not a prerequisite for the existence of a community

of legal interests; corporations seek legal advice in

order to plan their conduct and avoid litigation as

well as to deal with present or impending litigation,

and a community of legal interest may arise in the

former situation as well as the latter.

Baxter Travenol, 1987 WL 12919 at *1 (citing SCM

Corp. v. Xerox Corp., 70 F.R.D. 508, 513 (D. Conn.),

appeal dism’d, 534 F.2d 1031 (2d Cir. 1976). The

Baxter Travenol court further determined, consistent with

the Federal Circuit’s decision in this case, that patent

prosecution efforts result in identical legal interests as to

impending litigation:

A community of legal interest may arise between

parties jointly developing patents; they have a com-

mon legal interest in developing patents to obtain

greatest protection and in exploiting the patents.

Baxter Travenol, 1987 WL 12919 at *1; see Pet. App.

A-11 (also citing SCM Corp. and Baxter Travenol cases).

Genentech’s argument ignores that the community of

interest doctrine applies not only to communications made

in anticipation of litigation, but also to joint efforts to

avoid litigation. See, e.g., Pet. 11. Contrary to Genen-

tech’s assertions, joint efforts designed to obtain valid

patent protection qualify on both prongs because the pri-

mary value of a patent stems from the enforcement or

marketing of the statutory right to exclude others from

15

practicing the claimed invention.* A patent can be used

offensively to exclude others, which necessarily must occur

through litigation, i.e., by filing and pursuing an infringe-

ment suit. See 35 U.S.C. § 154(a)(1). Alternatively, a

patent can be used defensively by being licensed or cross-

licensed to others so as to enable the owner to avoid

litigation. Thus, any joint effort designed to obtain valid

patent protection necessarily is undertaken either in an-

ticipation of potential litigation or to create the means by

which to avoid such litigation.

Il. THE FEDERAL CIRCUIT CORRECTLY GRANTED

A WRIT OF MANDAMUS TO OVERTURN THE

DISTRICT COURT’S ORDERING PRODUCTION OF

UC’S PRIVILEGED INFORMATION

From the outset of its opinion, the Federal Circuit

acknowledged that a writ of mandamus is an extraordi-

nary remedy to be exercised only where the right to the

desired relief is clear and where there is no other adequate

means by which to obtain such relief. Pet. App. A-4.

However, the court also appreciated that a writ is an

appropriate mechanism by which to prevent the wrongful

exposure of privileged communications because an appeal

after the disclosure of the communications is an inade-

quate remedy. /d. (and cases cited).

As the court of appeals responsible for administering

the patent laws, the Federal Circuit realized that an im-

mediate review of the district court’s ruling that the at-

torney-client privilege did not apply when Lilly attorneys

provided legal advice and services to UC about obtaining

valid patent protection for UC’s inventions “would avoid

the development of doctrine that would undermine the

privilege” in that particular area of substantive law. Pet.

4 See, e.g., Polymer Technologies, Inc. v. Bridwell, 108 F.3d 970,

975 (Fed. Cir. 1996); Hybritech, Inc. v. Abbott Labs., 849 F.2d

1446, 1456 (Fed. Cir. 1988) (stating that “the principal value of

a patent is its statutory right to exclude’”’).

16

App. A-5 (citation omitted). As that is a proper exercise

of mandamus power, Genentech has no grounds to sup-

port its assertion that the decision in this case will cause

an increase in the number or decrease in the merit of

future mandamus petitions in the appellate courts.

Although Genentech still suggests that the Federal Cir-

cuit erred in granting the extraordinary remedy of writ

of mandamus, the cases cited by Genentech are inapposite.

In Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33

(1980), this Court reversed a writ of mandamus directing

the district court to vacate an order for a new trial. As

the Court observed, any error committed by the district

court in granting a motion for new trial is freely review-

able on appeal after the new trial. Jd. at 36. In In re

Cordis Corp., 769 F.2d 733 (Fed. Cir.), cert. denied, 474

U.S. 851 (1985), the Federal Circuit declined to issue a

writ of mandamus ordering a district court to dismiss a

case for improper venue. Like an order for a new trial,

a decision not to dismiss for improper venue would be

freely reviewable from a final judgment.

In contrast, the Federal Circuit in this case correctly

recognized that the district court’s order for UC to pro-

duce its privileged information does not represent either

a routine discovery dispute nor one that should be allowed

to await final judgment. Pet. App. A-4.

[B]ecause maintenance of the attorney-client privilege

up to its proper limits has substantial importance to

the administration of justice, and because an appeal

after disclosure of the privileged communication is

an inadequate remedy, the extraordinary remedy of

mandamus is appropriate.

Id. (quoting Harper & Row Publishers, Inc. v. Decker,

423 F.2d 487, 492 (7th Cir. 1970), aff'd per curiam,

400 U.S. 348 (1971)). Thus, the Federal Circuit prop-

erly considered and granted a writ of mandamus in order

to correct the clear legal error committed by the District

iii i

17

Court in ordering UC to produce its privileged documents

to Genentech.

Having done so, however, the corresponding need for

interlocutory review of the Federal Circuit’s decision by

this Court is far less compelling. Unlike an order requir-

ing production of privileged material, an order denying

production of such material can be reviewed following

final judgment. To the extent that Genentech might find

itself in a position to need review from this Court follow-

ing any appeals from any final judgment entered in the

California action, Genentech will be able to include this

issue in a petition at that time. Despite this litigation

having been pending for nearly six years already, there

has not even been a trial. At this point, whether the

absence of the requested discovery from three Lilly attor-

neys will have a bearing on the outcome of that trial and

any subsequent appeals is entirely speculative. Thus,

there is no reason for this Court to waste its limited re-

sources deciding an interlocutory issue that might not

even be pursued by Genentech in the future.

CONCLUSION

For the reasons set forth above, the petition for writ of

certiorari should be denied.

Respectfully submitted,

Of Counsel: GERALD P. DoDSON

P. MARTIN SIMPSON, JR. Counsel of Record

THE UNIVERSITY RICHARD L. STANLEY

OF CALIFORNIA OFFICE OF EMILY A. EVANS

TECHNOLOGY TRANSFER ARNOLD, WHITE & DURKEE

1820 Harbor Bay Pkwy. 155 Linfield Drive

Suite 150 Menlo Park, CA 94025

Alameda, CA 94501 (415) 614-4500

(510) 748-6600 Counsel for Respondent

The Regents of the

' March 17, 1997 University of California