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The perils of inadvertently disclosing privileged documents during electronic discovery are playing out in a New Jersey patent case. The plaintiff, Amersham Biosciences Corp., which has been trying to retrieve 579 e-mails it mistakenly disclosed two years ago, took a setback on Wednesday as a federal judge reversed a magistrate judge’s order that 542 of the e-mails should be returned. U.S. Magistrate Judge Ronald Hedges had held last May that Amersham had not waived any privilege because it acted reasonably. But U.S. District Judge Jose Linares found that determination was based on a factual misunderstanding. Hedges mistakenly thought the privileged documents were mined by the other party, PerkinElmer Inc., from metadata embedded in the CDs turned over during discovery. In fact, though, the documents were not hidden but were produced in the same TIFF format as the other documents on the CDs, though they were designated confidential, Linares found. Assuming the documents were hidden, Hedges said, it should have been obvious to PerkinElmer that Amersham did not intend to disclose them. Linares found he could not adequately review the correctness of Hedges’ decisions on whether the documents should be returned and whether additional discovery based on them could be compelled, so he remanded to Hedges. He also affirmed Hedges’ order allowing PerkinElmer to keep the other 37 documents. The slip-up occurred despite precautions Amersham took during discovery to prevent disclosure of confidential information. Hedges’ May 1 opinion described the company’s four-step approach: � First, an in-house paralegal reviewed the documents, using a special laptop computer to segregate them based on type and confidentiality status. � Next, a lawyer reviewed them. � Then, a “practice and support administrator” removed the folders that were not to be disclosed and sent the rest for processing to outside vendor Applied Discovery. � After Applied Discovery returned the data on CDs, spot checks were done by the lawyer and the support person. If something slipped through, there was also a back-up plan: A protective order, signed by Hedges in July 2004, required prompt, written notice to the recipient, who was then obliged to return the material. The recipient was free to contest the privilege claim but was barred from asserting a waiver had occurred. Things apparently went awry due to a quirk of the Lotus Notes software. Though the subfolders with the privileged documents were deleted, copies of those documents remained in the general folder. Those documents were converted to image files and placed on the CDs along with everything else and forwarded to PerkinElmer. A few months later, in April 2005, Amersham realized what happened and contacted PerkinElmer, asking it to return the documents. PerkinElmer has resisted, claiming the documents are not privileged or protected, and that Amersham delayed in telling it which documents were privileged, violating the protective order. PerkinElmer also moved to compel production of additional documents it claims were withheld, under a theory of common-law fraud. That motion is under seal. Hedges decided Amersham should get its documents back because it acted reasonably, in the context of a case where it had produced more than 800,000 documents, rendering the error on 579, or .07 percent, “marginal.” He also relied on the protective order. Hedges denied the motion to compel based on his finding that PerkinElmer’s lawyers violated New Jersey’s Rule of Professional Conduct 4.4(b), which prohibits reading a document that a lawyer reasonably believes was inadvertently sent. The company knew or should have known information obtained from metadata was not meant for disclosure but chose to retrieve, examine and utilize it, said Hedges, adding that it was not necessary to decide whether the documents contained privileged material. Linares, in his opinion, noted the Third U.S. Circuit Court of Appeals has not addressed the circumstances under which an inadvertent disclosure of privileged materials constitutes a waiver of the privilege, though some district courts within the circuit have done so. He cited Ciba-Geigy Corp. v. Sandoz, 916 F. Supp. 404 (D.N.J. 1995), which sets forth five factors to determine whether a waiver existed: reasonableness of the precautions taken; number of the disclosures; their extent; measures taken to rectify the error, including any delay; and the interests of justice. Amendments to the Federal Rules of Civil Procedure that took effect last year, too late to apply here, address what happens when privileged material is mistakenly turned over during electronic discovery. Rule 26(b)(5) now provides that the party responsible for the error can notify the recipient, specifying the basis for the claimed privilege. The recipient must return, sequester or destroy the information and any copies and cannot make use of it until the privilege claim is resolved. The rule is only procedural, leaving it to the court to decide whether waiver did, in fact, occur. Formal ethics opinion 06-442, released by the American Bar Association in November 2006, found no prohibition on the review and use of metadata, only a duty to notify of inadvertently sent information. It suggested lawyers worried about metadata can avoid creating it in the first place, for instance, by not redlining or embedding comments. Also, they can scrub it by printing out hard copy to scan or fax. The ABA also suggested use of a protective order like the one in this case, Amersham Biosciences v. PerkinElmer , 03-4901, with a “pull-back” clause for inadvertantly produced information. Amersham Biosciences, which makes products for pharmaceutical and life sciences companies, is based in Piscataway. Its U.K. parent, Amersham PLC, also a defendant, was acquired by GE Healthcare in 2004. PerkinElmer is a life-sciences company in Waltham, Mass. Amersham’s lawyer, Margaret Minister O’Keefe of Pierce Atwood in Portland, Me., declines comment. The company’s local counsel, Katie Gummer of Newark’s McCarter & English, did not return a call seeking comment. PerkinElmer’s lawyers, Matthew Lowrie, of Lowrie Lando & Anastasi in Cambridge, Massachusetts, and Jay Scott MacNeill, of Roseland’s Post Polak Goodsell MacNeill & Strauchler, decline comment.

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