THEODORE KATZ, Magistrate Judge
This patent infringement action has been referred to this Court for general pretrial supervision and reports and recommendations on various dispositive motions. This Opinion and Order addresses a motion brought by two of the Defendants to stay pretrial discovery with respect to a possible advice-of-counsel defense to Plaintiff's claim of willful infringement, until pretrial discovery on all other issues is completed and dispositive motions relating to the validity of Plaintiff's patent and Plaintiff's claim of infringement have been resolved. For the reasons that follow, Defendants' motion is granted.
Defendants' motion also seeks a bifurcation of the trial on issues of liability and damages, with issues relating to the alleged willfulness of Defendants' infringement of Plaintiff's patent deferred to the damages portion of the trial. This portion of the motion is not addressed, as it rests within the discretion of the trial judge — the Honorable Barbara S. Jones.
BACKGROUND
Plaintiff, Plasmanet, Inc. ("Plasmanet"), alleges willful infringement of its patent — a lottery gaming system and the method of conducting that system in a computer network environment — by Defendants Traffix Inc. ("Traffix) and Jeffrey L. Schwartz ("Schwartz") (hereinafter referred to collectively as "Traffix"). Traffix has brought counterclaims, seeking a declaratory judgment that the patent-in-suit is not infringed, is invalid, and is unenforceable. Prior to the initiation of this suit, Traffix sought and was provided with a legal written opinion ("the Opinion") from its patent attorneys, as to whether the Traffix GroupLotto website infringes Plaintiff's patent. Traffix may rely on an advice-of-counsel defense to rebut Plaintiff's allegation of willful infringement. However, Traffix seeks to defer its assertion of the advice-of-counsel defense since to do so now would require the complete disclosure of its attorney's Opinion, thus resulting in the waiver of the attorney-client privilege as to its contents. Without staged discovery, in order to avoid disclosing the Opinion and waiving the privilege, Traffix would be required to forego its advice-of-counsel defense.
There are pendent state law claims for trade secret misappropriation against all of the Defendants, and for breach of contract only against the Defendants other than Traffix and Schwartz.
To avoid this Hobson's choice, Traffix seeks an order which would first allow for the completion of pretrial discovery on all issues relating to both liability and damages, staying discovery solely on the issue of Traffix's reliance on the Opinion as a defense to willfulness. Traffix intends to then file a motion for summary judgment seeking dismissal of Plaintiff's claims of patent infringement. If that motion is denied, and the case is to proceed to trial, the remaining discovery relating to the Opinion would be conducted in advance of trial. In this way, Traffix would not be required to disclose privileged communications that would reveal its litigation strategies and the opinions of its counsel on issues of liability, which will be the subject of the summary judgment motion.
Plaintiff opposes the motion, arguing that the proposed procedures would be inefficient and would unnecessarily complicate discovery.
DISCUSSION
This Court need not address much of Plaintiff's opposition to the motion because, as discussed, the issue of bifurcation of the trial will be addressed separately by Judge Jones, if necessary. Moreover, the thrust of Plaintiff's objections to the proposed discovery plan is based upon a misunderstanding of Traffix's motion. Traffix is not proposing to stay all discovery on damages and willfulness. It is proposing the deferral of only that discovery which relates to the Opinion.
Because the Court addresses only that portion of the motion relating to discovery, the Court treats Traffix's motion as one for a protective order, pursuant to Rule 26(c) of the Federal Rules of Civil Procedure. Thus, the Court balances on the one hand, whether the deferral of discovery with respect to the Opinion serves the interests of justice by protecting Traffix from undue oppression or burden, and, on the other hand, whether by deferring the discovery Plaintiff will be prejudiced in any way, or whether undue expense, inefficiency, or delay would result.
By contrast, Traffix's motion to bifurcate the trial is governed by Fed.R.Civ.P. 42(b).
The interests Traffix seeks to protect are the work product of their counsel and the attorney-client privilege with respect to communications in and about the Opinion. While acknowledging that invocation of the defense of advice-of-counsel places in issue privileged communications between Traffix and its counsel, Traffix relies on a line of cases which recognizes that patent cases are particularly amenable to bifurcation on issues of liability and damages, and that such a course is often advisable in order to avoid the prejudice of requiring a defendant to make a choice, early in the litigation, about whether to invoke advice-of-counsel as a defense to willfulness or to waive the attorney-client privilege. The seminal case on this subject is Quantum Corp. v. Tandon Corp., 940 F.2d 641 (Fed. Cir. 1991). In theQuantum case, the Federal Circuit stated:
An accused infringer . . . should not, without the trial courts's careful consideration, be forced to choose between waiving the privilege in order to protect itself from a willfulness finding, in which case it may risk prejudicing itself on the question of liability, and maintaining the privilege, in which case it may risk being found to be a willful infringer if liability is found. Trial courts should thus give serious consideration to a separate trial on willfulness whenever the particular attorney-client communications, once inspected by the court,
in camera, reveal that the defendant is indeed confronted with this dilemma.
Id. at 1762.
Consistent with the Quantum court's recommendation, this Court has conducted an in camera review of the Opinion and concludes that Defendants are indeed confronted with a so-calledQuantum dilemma. Disclosure of the Opinion would prejudice Traffix with respect to the issue of liability by revealing its attorney's thinking, strategy and opinions.
Contrary to Plaintiff's counsel's contention, the submission of the Opinion for in camera review is not an improper ex parte disclosure of facts and argument to the Court regarding the issue of infringement. First, this Court will be not be deciding the merits of any claims of infringement and does not rely on the substantive views expressed in the Opinion for resolution of the instant motion. Moreover, courts regularly review privileged communications in camera in order to assess whether the privilege has been properly invoked. To require disclosure of such communications to opposing counsel would result in a waiver of the privilege. Finally, in camera review where a Quantum issue is presented is routine.See, e.g., Valois of America, Inc. v. Risdon Corp., No. 3:95 CV 1850, 1998 WL 1661397, at *4 (D. Conn. 1998) ("It is clear from Quantum and its progeny, that before bifurcation, the Court must conduct an in camera review of the privileged attorney-client communications."); Neorx Corp. v. Immunomedics, Inc., 28 U.S.P.Q.2d 1395, 1396 (D.N.J. 1993); Robotic Vision Sys., Inc. v. View Engineering, Inc., No. CV 96-2288, 1997 WL 809679, at *3 (C.D. Cal. 1997).
Moreover, the Court cannot discern any prejudice to Plaintiff by deferring discovery relating to the Opinion. Contrary to Plaintiff's concern, Traffix is not proposing to stay all discovery on the issue of damages and willfulness. It merely seek to defer discovery relating to reliance on the Opinion. Therefore, Plaintiff's concern that great inefficiency would result because witnesses would have to be deposed twice in order to explore facts relevant to various issues, is misplaced. For example, Plaintiff contends that Defendant Schwartz will be deposed on issues relating to liability, invalidity, and damages, as well as whether he copied a confidential business roadmap that he obtained from Plaintiff. It contends that this willful act is central to the claim of trade secret misappropriation. Such copying can also be evidence of non-obviousness and commercial success, matters relevant to the validity of the patent. Plaintiff fears that it would be required to depose Schwartz twice, sorting out issues of liability, damages and willfulness, and that the subject of each deposition would become a "complete tangle," because these subjects are relevant to various issues in the case, not just damages. See Plasmanet's Opposition to the Traffix Defendants' Motions to Bifurcate ("Pl.'s Opp."), at 2-3. However, there is no reason for such concern. Traffix has no objection to discovery proceeding on these topics. It merely seeks to postpone discovery on its reliance on the Opinion, as a defense to an allegation of willful patent infringement.
Under Traffix's proposal, discovery relating to the liability issues — patent infringement, invalidity, and theft of trade secrets — will be conducted concurrently with discovery relating to damages. It is then Traffix's intention to move for summary judgment on the issues of infringement and validity. Should its motion be granted, there will be no need for further discovery on the Opinion, and therefore no need to waive the attorney-client privilege. Should the motion be denied, only a very limited additional amount of discovery will be required for the case to be ready for trial. Although there may be the need for a second deposition of a representative of Traffix to address the issue of reliance on the advice of counsel, the Court anticipates that such a deposition would be focused and relatively brief.
Under these circumstances, the Court concludes that the prejudice to Traffix by being required to disclose the Opinion far outweighs any prejudice to Plaintiff by deferring discovery on reliance on the Opinion. Moreover, deferring discovery on this limited issue until after resolution of Traffix's summary judgment motion will not result in any substantial delay or inefficiency. Accordingly, Traffix's motion to stay discovery on its reliance on the Opinion until after the resolution of dispositive motions is granted.
Contrary to Plaintiff's suggestion, Traffix has not waived the attorney-client privilege by simply articulating its dilemma or by submitting the Opinion for in camera review. The whole purpose of the review is to determine whether Traffix will be permitted to preserve the attorney-client privilege by deferring invocation of the advice-of-counsel defense and disclosure of the advice. See Neorx, 1993 WL 592531, at *2 ("If defendant chose to assert the advice-of-counsel defense, plaintiff would be entitled to timely discovery of the attorney-client communications. Otherwise, the attorney-client privilege would be preserved.") There has been no disclosure of the actual privileged communication, only notification of its existence.
SO ORDERED.