Novartis Pharma AG v. Incyte Corporation

Background

Novartis sued Incyte for allegedly breaching a November 24, 2009 agreement concerning royalty payments on a pharmaceutical product. The underlying dispute involved the meaning of a contract provision allowing Incyte to stop making royalty payments when specified conditions occurred. The district court had previously denied both parties’ motions for summary judgment, finding that the relevant contract language was ambiguous and that the available outside evidence supported more than one reasonable interpretation.

During summary-judgment briefing, Novartis submitted a declaration from A. Peter Harwich, an attorney who had represented Novartis in connection with the agreement. The declaration described Harwich’s understanding of several contract provisions and stated Novartis’s understanding and intent concerning two provisions. Novartis later listed Harwich as a trial witness.

Motions and governing law

Incyte moved to compel production of documents that Novartis had withheld as protected by attorney-client privilege. Incyte argued that Harwich’s declaration placed Novartis’s understanding and intent “at issue,” creating an implied waiver of the privilege. Novartis opposed the motion and filed a cross-motion to compel Incyte to produce similar documents, arguing that testimony from Incyte witnesses had likewise waived Incyte’s privilege.

The court applied New York law to the attorney-client privilege because the case was based on diversity jurisdiction and involved a New York-law contract claim. Under the “at issue” waiver doctrine, privilege may be waived when a party presents a factual assertion while withholding privileged material that could rebut that assertion, creating unfairness to the opposing party. The court emphasized that any waiver must be limited to the material needed to address that unfairness.

Timeliness

The court rejected Novartis’s argument that Incyte’s motion was untimely. Although fact discovery had closed before the motion was filed, the alleged waiver arose after the discovery deadline, and the court found good cause for considering the motion. The court noted that Incyte could not have filed the motion before the alleged waiver occurred, that no clear deadline governed this type of motion, and that Incyte acted promptly after Novartis listed Harwich as a trial witness.

Whether Novartis waived privilege

The court divided Harwich’s statements into two groups. It found that statements describing Harwich’s own understanding of the contract did not establish an implied waiver. The record did not show that those understandings depended on confidential communications with Novartis; an attorney could develop an understanding of contract language through negotiations and other nonprivileged sources.

The court reached a different conclusion about statements describing Novartis’s understanding and intent. It reasoned that Harwich could have learned Novartis’s own intent and understanding only through communications from Novartis. Novartis did not support its contrary factual assertions with a statement from Harwich, and it did not argue that documents contradicting those statements were irrelevant. The court therefore found an implied waiver as to those two specific factual assertions.

Scope of the waiver

The court limited the waiver to documents potentially capable of rebutting the two statements about Novartis’s understanding and intent: first, that Novartis understood Incyte, as patent holder, would pay royalties to Novartis as the non-patent holder; and second, that Novartis did not intend the term “Licensed Patent Rights” to have a different meaning or effect from “Licensed IP.” The court rejected Incyte’s request for a broader production concerning all documents about Novartis’s intent and interpretation of the contract.

Novartis’s cross-motion

The court denied Novartis’s request to compel Incyte to produce documents based on alleged waivers by Incyte witnesses. The court found that Stephen D. Singer’s testimony concerned his own understanding or present analysis of the agreement and did not show reliance on privileged client communications. The court likewise found that the cited testimony from Keith Mikkelson and Daniel Maravei did not establish a waiver. Novartis had not made the required initial showing that those witnesses relied on privileged communications.

Effect of limiting Harwich’s testimony

The court concluded that Novartis could avoid enforcement of the waiver by agreeing not to offer Harwich’s testimony about Novartis’s intent and understanding of the agreement. Because the earlier summary-judgment ruling had already been decided, the court found that the past use of the declaration would no longer affect the jury trial if that testimony were excluded. In that circumstance, requiring production would not address a continuing unfairness.

Disposition

The court denied Novartis’s motion to compel. It granted Incyte’s motion to compel, except that Novartis would not have to produce documents if it filed, by April 21, 2025, a letter agreeing to limit Harwich’s testimony as described in the opinion. If Novartis did not file that letter, the court ordered production by April 24, 2025. The opinion was issued by Gabriel W. Gorenstein, United States Magistrate Judge.