Entangled Media, LLC v. Dropbox, Inc.

Background

Entangled Media received and continued to receive litigation funding from non-party LIT-US Chisum 22-B LLC for this litigation. Entangled Media had produced a Patent Security Agreement (PSA) but resisted Dropbox’s requests for additional information about a related Security Agreement, negotiations and communications with Chisum, the relationship with Chisum, and valuations prepared in connection with the funding.

Entangled Media’s privilege log listed 585 withheld documents. Dropbox identified 162 documents, including the Security Agreement, that it said were likely responsive to its discovery requests. Entangled Media argued that the documents were not relevant and, even if relevant, were protected by the attorney work product doctrine or the common-interest doctrine.

The court had previously reviewed an unredacted copy of the Security Agreement. It observed that Chisum had more than a passive security interest in the asserted patents, had a financial interest in the litigation’s outcome, and had some contractual rights connected to that interest. The court also observed that the Security Agreement could indicate how the parties valued this and other potential patent litigation, but did not contain a valuation of the asserted patents themselves.

Legal standards

Under Federal Rule of Civil Procedure 26(b)(1), discovery may cover information relevant to a claim or defense and proportional to the needs of the case. The attorney work product doctrine generally protects documents prepared by or for a party or its representative because of the prospect of litigation. Protection can be waived by disclosure that substantially increases an adversary’s opportunity to obtain the material, by putting the material at issue, or in some circumstances when the opposing party shows substantial need and cannot obtain the equivalent without undue hardship.

The common-interest doctrine is an exception to ordinary waiver rules when separately represented parties communicate confidentially about a shared legal interest. It does not create protection by itself and does not generally cover communications about only a shared business interest.

Relevance of the funding materials

The court held that the PSA incorporated the Security Agreement in its entirety. The PSA defined some terms by reference to the Security Agreement and stated that the Security Agreement’s terms and provisions were incorporated as if fully set forth in the PSA. Applying Delaware law, the court concluded that the Security Agreement was likely to contain information relevant to a claim or defense, particularly information about the nature of Chisum’s security interest.

The court found that other litigation-funding documents and communications with Chisum were generally not shown to be relevant. However, documents that assessed the value of the asserted patents or the merits of the claims and defenses could be relevant. The court declined to review all 162 documents in camera and instructed the parties to treat such documents as relevant if they contained those assessments. The court found no indication, apart from the work-product objections, that producing the relevant materials would be unduly burdensome or disproportionate.

Work product and common interest

The court found that many privilege-log entries lacked important information, including document dates and the names of people who sent, received, or viewed the documents. But it did not find that these deficiencies alone forfeited Entangled Media’s ability to assert work-product protection. Based on Entangled Media’s representations and cited testimony, the court found a preliminary showing that the disputed materials had been prepared by Entangled Media or its attorneys in anticipation of this or possibly other litigation. Dropbox did not dispute that point, although it argued that the Security Agreement might have had both a funding purpose and a business-operations purpose.

The court rejected Entangled Media’s reliance on the common-interest doctrine. Entangled Media had not shown that Chisum or another recipient had a common legal interest in the litigation. The court noted that Chisum’s interest was financial, while Entangled Media maintained that it alone owned the asserted patents. The court therefore considered whether work-product protection had been waived on other grounds.

Ruling on the Security Agreement

The court agreed that incorporating the Security Agreement into the publicly filed PSA could be inconsistent with keeping the Security Agreement confidential. But the court also found that Entangled Media had not actually publicly disclosed any portion of the Security Agreement or otherwise increased the likelihood that potential adversaries could obtain it. Dropbox had not shown a substantial need for portions unrelated to the security interest.

The court therefore ordered Entangled Media to produce the Security Agreement and its attachment to Dropbox, with permission to redact sections 2, 3, 4, 5.1, 5.2, 5.4, 5.5, 5.6, 5.7, 5.8, and appendices D, E, G, and H. The court did not require production of unrelated portions that could be readily separated from the relevant material.

Ruling on the other materials and disposition

The court stated that relevant documents assessing patent value or the merits of the claims and defenses could be discoverable. It was not clear from the deficient privilege log and the parties’ briefing whether such documents existed or whether they had been disclosed in circumstances that waived work-product protection. The court found no implied waiver because no one had placed those documents at issue, and Dropbox had not shown substantial need for them.

Entangled Media had offered to produce the analysis identified as Entry 29 on the condition that doing so would not create a broader waiver of work-product protection. The court allowed Entangled Media to produce that analysis under the proposed condition. If Entangled Media did not produce it, the court required Entangled Media to amend its privilege log with the available information required for the disputed entries and prohibited redacting names from the amended log.

The court granted, in part, Dropbox’s motion to compel. It required production of the Security Agreement by April 11, 2025, subject to the permitted redactions. Entangled Media could also produce Entry 29 by that date without creating a broader work-product waiver. If those productions did not resolve the dispute, the amended privilege log had to be served no later than April 28, 2025.