Federal Court of Appeal decision clarifies effects of partial waiver of privilege

April 28, 2009

On January 30, 2009, the Federal Court of Appeal (FCA) clarified the circumstances under which a partial waiver of privileged material can result in an implied complete waiver of privilege. The FCA's decision in Merck & Co. Inc. et al. v. Apotex Inc. et al. (2009 FCA 27) was an interlocutory decision in a patent infringement case.

The issue arose in the context of examination for discovery in respect of the patent dispute, which relates to the manufacture of a drug called lovastatin. This drug is produced by certain micro-organisms, and the production of lovastatin from the Aspergillus terreus micro-organism is covered by a Canadian patent owned by the plaintiff, Merck & Co. Inc. (Merck). Merck had apparently carried out some tests, for the purpose of the litigation, to improve its understanding of the process used by the defendants. As the tests were conducted for the purpose of the litigation, information about the tests qualified for protection under the litigation privilege. The purpose of the litigation privilege is to create a zone of privacy in relation to pending or apprehended litigation, to facilitate investigation and preparation of a case for trial by the adversarial advocate.

At an examination for discovery, Merck's representative answered certain questions relating to these tests. Apotex then asked further questions regarding the tests, which the Merck representative refused to answer, asserting that the information was privileged.

It is clear that before the Merck representative had answered any questions about the tests, the entirety of the information was privileged, and Merck did not have to answer questions about them. However, when Merck answered certain questions about the tests, this privilege was partially waived. When a partial waiver of privilege has occurred, the law requires that the privilege in issue be completely waived if permitting some of the information to remain privileged would lead to inconsistency or unfairness.
This rule exists because the purpose of privilege is to preserve a zone of privacy for certain types of information. Privilege does not exist to enable litigants to unfairly and inconsistently disclose and rely on the favourable elements of these types of information, while maintaining the secrecy of the unfavourable elements. 

In overturning the Federal Court decision, the FCA took issue with the lack of identification of any particular inconsistency or unfairness that might arise if the partial waiver of privilege stood. The FCA noted that the Federal Court decision simply invoked the concepts of consistency and fairness, but did not explain them.

In contrast, the FCA carefully examined possible unfairness to the defendants, and found that no unfairness could result. Merck could not make use if its own partial responses, and the test information itself, if it were to be relied on, would have to be disclosed well in advance of trial. Having found no actual unfairness to the opposing party, the Court of Appeal held that fairness and consistency did not require the complete waiver of privilege. Accordingly, the additional information about the test, sought by Apotex, could remain undisclosed.

The case is a reminder of the care that must be taken when issues of privilege arise. Partially waiving privilege is a significant strategic decision, and the possible ramifications of such a decision must be carefully considered.
 

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