Case Name: Backflip Software, Inc. v. Cisco Systems, Inc., et al.
Case No.: 1-13-CV-242234
Date: August 4, 2015
Time: 9:00 a.m.
Dept.: 8

This is an action for breach of contract and trade secret misappropriation. Plaintiff Backflip Software, Inc. (“Backflip”) “developed and sold a novel ‘middleware’ technology platform for integrating diverse business applications, such as instant messaging and e-mails and voicemail across various devices ….” (Second Amended Complaint, ¶ 1.) Backflip and defendant Cisco Systems, Inc. (“Cisco”) entered into a Software License Agreement (“License Agreement”), which provided that Backflip would license its software and related documentation to Cisco, Backflip and Cisco would jointly host a technology platform, and Backflip and Cisco would split the royalties equally. The License Agreement included a Software Escrow Agreement (“Escrow Agreement”), which provided that the parties would establish an escrow account for the deposit of the software and related documentation that was licensed under the License Agreement (“Escrow Materials”).

In January 2011, Backflip lost its funding and its Chief Executive Officer, Gil Perez (“Mr. Perez”), represented that he would meet with Cisco in order to persuade Cisco to buy or invest in Backflip. However, at the meeting with Cisco, Mr. Perez did not attempt to persuade Cisco to buy or invest in Backflip; instead, he allegedly negotiated his future employment with Cisco and conspired with Cisco to place the Escrow Materials into the escrow account so Cisco could obtain and use the Escrow Materials for free. Mr. Perez and Cisco allegedly concealed their dealings from Backflip and successfully secured the release of the Escrow Materials from the escrow account. Backflip alleges that the release of the Escrow Materials was fraudulently obtained. Backflip further alleges that Cisco has taken full ownership of its source code; embedded the source code in Cisco’s own platforms as an “organic Cisco product;” substantially revised the source code; republished its user and administrative guides as Cisco documents; improperly taken its customers, business, and personnel; and wrongfully interfered with its discussions with another company regarding the possible acquisition of Backflip.

On May 11, 2015, Backflip filed the operative second amended complaint against Cisco, alleging causes of action for breach of contract, misappropriation of trade secrets, intentional interference with prospective economic relations, negligent interference with prospective economic relations, intentional interference with contractual relations, conversion, fraud, and conspiracy.

Currently before the Court is the motion by Backflip for: (1) an order compelling an in camera review of documents listed in Cisco’s privilege log in order to determine whether the documents are within Cisco’s waiver of the attorney-client privilege; and (2) an order compelling Cisco to produce to Backflip any documents that the Court determines to be within the scope of the waiver.

I. Discovery Dispute

During the course of this litigation, Cisco inadvertently produced and subsequently clawed back several privileged documents. On December 30, 2013, Cisco prepared a privilege log listing the clawed-back documents (the “December 2013 Log”). (Hosie Dec., ¶ 2, Ex. A.)

At his February 19, 2015 deposition, Cisco’s person most knowledgeable, Rob Filby (“Mr. Filby”), raised an advice-of-counsel defense. (Hosie Dec., ¶ 3, Ex. B.) Mr. Filby generally testified as to the advice Cisco received from counsel regarding its invocation of escrow under the License Agreement. (Hosie Dec., ¶ 3, Ex. B.) Mr. Filby also testified that Cisco later engaged in discussions with counsel regarding what it could and could not do under the terms of the License Agreement with the source code that was obtained from the escrow account. (Ibid.) Furthermore, at the deposition, Cisco’s counsel—David Bloch (“Mr. Bloch”)—stated on the record that questions regarding legal advice that was provided by counsel to Cisco prior to 2012, concerning the scope of the License Agreement, were “inbounds;” however, Mr. Bloch stated that “[o]nce we get into 2012 and the first round of Back[f]lip litigation, we will take a different view.” (Hosie Dec., ¶ 3, Ex. B, p. 120:4-6.)

In light of Mr. Filby’s deposition testimony and Mr. Bloch’s statements, Backflip asserted that Cisco waived the attorney-client privilege and demanded that Cisco produce the privileged documents that it previously clawed back during discovery. (Hosie Dec., ¶ 4.) Cisco confirmed that the attorney-client privilege had been waived to some extent and permitted its transactional counsel—Geoff Vickers—to testify about the escrow and restrictions under the License Agreement during his April 30, 2015 deposition. (Hosie Dec., ¶ 5.) On May 7, 2015, Cisco voluntarily reproduced 30 privileged documents that it previously clawed back and provided a new privilege log (the “May 2015 Log”) to Backflip. (Hosie Dec., ¶ 6, Ex. D.) Cisco withheld from production 43 items listed in the May 2015 Log. (Hosie Dec., ¶ 7.)

At the May 13, 2015 deposition of Cisco’s counsel, Susan Lewis (“Ms. Lewis”), Mr. Bloch stated on the record that Cisco’s waiver of the attorney-client privilege “concerns the deposit of source code in escrow through the [re]lease of source code from escrow and, following that, [counsel’s] advice to the persons who acquired the source code from Cisco as to what they could and couldn’t do with that source code in the period after it was released.” (Hosie Dec., Ex. C, p. 19:4-9.) Mr. Bloch further stated that the “waiver does not extend to [counsel’s] general advice to Cisco,” “[counsel’s] advice not surrounding the deposit into or release from escrow,” “[counsel’s] work in other matters,” “or [counsel’s] work generally for Cisco.” (Hosie Dec., Ex. C, p. 19:10-15 [emphasis added].)

Given the scope of the Cisco’s waiver, Backflip asserted that it was entitled to production of Item Nos. 1-43 listed in the May 2015 Log. The parties met and conferred at length regarding the issue. (See Hosie Dec., ¶ 9; see also Enns Dec., ¶ 3.) Backflip’s counsel declares that the parties were unable to resolve the dispute (Hosie Dec., ¶ 9), but Cisco’s counsel declares that she agreed to “revisit each privilege log entry and either produce non-privileged documents, or update [the] privilege descriptions to clarify that the documents Backflip’s counsel inquired about were outside the scope of the waiver.” (Enns Dec., ¶ 4.)

Backflip now moves for an order compelling Cisco to produce Item Nos. 1-43 to the Court for an in camera review to determine whether the documents are within Cisco’s waiver of the attorney-client privilege. Backflip also requests an order compelling Cisco to produce any documents that the Court determines to be within the scope of the waiver.

II. Legal Standard

Evidence Code section 915 states that a court may not require disclosure of information claimed to be protected by the attorney-client privilege in order to rule on the claim of privilege. (Evid. Code, § 915, subd. (a).) Thus, the statute prohibits courts from ordering an in camera review of purportedly privileged documents if the party invoking the privilege asserts facts sufficient to establish a prima facie claim of privilege. (Costco Wholesale Corp. v. Super. Ct. (2009) 47 Cal.4th 725, 733-737 (“Costco”).) However, courts have recognized that a trial court may conduct an in camera hearing notwithstanding Evidence Code section 915 if necessary to determine whether the privilege is waived or an exception applies. (Costco, supra, 47 Cal. 4th at p. 740; Cornish v. Super. Ct. (Capital Bond & Insurance Co., et al.) (1989) 209 Cal.App.3d 467, 480; People v. Manago (1990) 220 Cal.App.3d 982, 990, fn. 4 [“Generally, in camera hearings should be limited to a determination whether there is an exception to, or waiver of, the privilege …. [Citation.]”].)

III. Request for In Camera Review and Production of Documents that Fall Within the Scope of Cisco’s Waiver of the Attorney-Client Privilege

Backflip argues that the Court should conduct an in camera review of Item Nos. 1-43 listed in the May 2015 Log to determine if they fall within the scope of Cisco’s waiver of the attorney-client privilege. Backflip contends Item Nos. 1-43 fall within Cisco’s waiver of the attorney-client privilege because they are similar to documents and/or information that were previously disclosed by Cisco and waiver of a privilege with respect to one communication extends to all other communications that relate to the same subject.

In opposition, Cisco states that since Backflip filed the instant motion it produced Item Nos. 1-2, 5-7, 10-11, 15-25, 27-28, 30, 34-39, and 41-42 to Backflip, in their entirety. (Enns Dec., ¶ 5, Exs. B, C.) Additionally, Cisco states that it produced Item Nos. 3-4, 29, and 43 to Backflip, with redactions. (Ibid.) Cisco further states that it provided Backflip with a revised privilege log on July 20, 2015 (the “July 2015 Log”), which sets forth descriptions for the ten documents that were withheld on the basis of privilege (Item Nos. 8-9, 12-14, 26, 31-33, and 40), as well as a redaction log for the four redacted documents that were produced. (Enns Dec., ¶ 5, Exs. B, C.)

A. Item Nos. 1-2, 5-7, 10-11, 15-25, 27-28, 30, 34-39, and 41-42

Given that Cisco has now produced Item Nos. 1-2, 5-7, 10-11, 15-25, 27-28, 30, 34-39, and 41-42 to Backflip, in their entirety, the motion is clearly moot with respect to those documents.

Accordingly, the motion as to Nos. 1-2, 5-7, 10-11, 15-25, 27-28, 30, 34-39, and 41-42 is DENIED as moot.

B. Item Nos. 3-4, 29, and 43

With respect to Item Nos. 3-4, 29, and 43, Cisco has now produced those documents and provided an amended privilege log describing any redactions that were made. In its reply, Backflip indicates that Cisco’s document production and the July 2015 Log fully resolved its concerns as to Item Nos. 29 and 43 and the only remaining dispute pertains to the redactions made to Item Nos. 3-4. Since the gravamen of the motion has been resolved and the appropriateness of the redactions made by Cisco to Item Nos. 3-4 is not properly before the Court at this time, the motion as to Item Nos. 3-4, 29, and 43 is moot.

Accordingly, the motion as to Item Nos. 3-4, 29, and 43 is DENIED as moot. The parties are encouraged to meet and confer regarding any disputes that may exist regarding the redactions in order to avoid further Court intervention.

C. Item Nos. 8-9, 12-14, 26, 31-33, and 40

The remaining documents at issue are Item Nos. 8-9, 12-14, 26, 31-33, and 40.

In its moving papers, Backflip contends that Item Nos. 8-9, 12-14, 26, and 40 fall within Cisco’s waiver of the attorney-client privilege because: the May 2015 Log indicates that the documents contain legal advice regarding legal contracts, an escrow audit, an internal presentation, and licensing; and the timing of the communications—February 23, 2011, March 10, 2011, May 12, 2011, and May 7, 2012—suggests that the documents fall within the scope of the waiver. Backflip further contends that Item Nos. 31-33 fall within Cisco’s waiver of the attorney-client privilege because: the May 2015 Log indicates that the documents contain legal advice regarding Backflip and the “Backflip litigation”; and the timing of the communications—January 9, 2012—suggests that the documents fall within the scope of the waiver.

In its opposition, Cisco points out that it provided new privilege descriptions for these documents in the July 2015 Log, which set forth facts demonstrating that the documents do not fall within its waiver of the attorney-client privilege. Cisco states that: Item Nos. 8-9 (which are listed as Item Nos. 1-2 in the July 2015 Log) are emails in which Cisco requests that its in-house counsel review two vendor contracts for VOXEO and Openmarket; Item Nos. 12, 14, and 26 (which are listed as Item Nos. 3, 5, and 6, respectively, in the July 2015 Log) are emails and an attachment seeking input and advice from in-house counsel regarding a Cisco compilation and audit of external software licenses; Item No. 13 (which is listed as Item No. 4 in the July 2015 Log) is an email containing legal advice from in-house counsel regarding an internal presentation on Cisco’s licensing portfolio and pipeline; Item No. 33 (which is listed as Item No. 7 in the July 2015 Log) is a January 9, 2012 email between Ms. Lewis and Cisco employees regarding a subpoena that Backflip served on Cisco is the case of Perez v. Backflip Software, Inc. (Santa Clara County Superior Court, Case No. 1-11-CV-207075) (the “Perez litigation”); Item Nos. 31-32 (which are listed as Item Nos. 8-9, respectively, in the July 2015 Log) are merely emails where Cisco employee Murray Bookman forwarded the January 9, 2012 email string to himself; and Item No. 40 (which is listed as Item No. 10 in the July 2015 Log) is an email and attachment transmitting information to in-house counsel for use in legal discussions regarding Cisco’s services framework.

In its reply, Backflip states that the only document that remains at issue is Item No. 33. Backflip contends that Item No. 33 must be produced even though the email at issues concerns Cisco’s response to a subpoena served on it in related litigation because it contains discussion about Cisco’s use of Backflip’s source code. Consequently, the only remaining document at issue is Item No. 33 and the motion is moot as to Item Nos. 8-9, 12-14, 26, 31-32, and 40.

Upon review of the July 2015 Log, it appears that Item No. 33 does not fall within the scope of Cisco’s waiver of the attorney-client privilege. As indicated above, Cisco’s waiver of the attorney-client privilege concerns legal advice provided about “the deposit of source code in escrow through the [re]lease of source code from escrow and, following that, [counsel’s] advice to the persons who acquired the source code from Cisco as to what they could and couldn’t do with that source code in the period after it was released.” (Hosie Dec., Ex. C, p. 19:4-9.) Additionally, Cisco’s counsel clearly indicated that the scope of the waiver did not include advice given regarding “the first round of Back[f]lip litigation.” (Hosie Dec., ¶ 3, Ex. B, p. 120:4-6.) The July 2015 privilege log states that Item No. 33 contains communications that arise out of Cisco’s response to Backflip’s subpoena in the Perez litigation. Thus, Item No. 33 involves communications regarding the conduct of the Perez ligation which are not included in the waiver of the attorney-client privilege regarding Cisco’s handling of the deposit of Backflip’s source code in escrow, the release of Backflip’s source code from escrow, and what persons whom acquired the source code could or could not do with that source code. (See Transamerica Title Ins. Co. v. Super. Ct. (1987) 188 Cal.App.3d 1047, 1052 [“The scope of either a statutory or implied waiver is narrowly defined and the information required to be disclosed must fit strictly within the confines of the waiver.”].) Therefore, it is not necessary for the Court to conduct an in camera review of Item No. 33 to determine whether it falls within the scope of Cisco’s waiver of the attorney-client privilege.

Accordingly, the motion as to Item Nos. 8-9, 12-14, 26, 31-32, and 40 is DENIED as moot. The motion as to Item No. 33 is DENIED on the merits.