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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE


MERCK SHARP & DOHME CORP.,
Plaintiff,
v.
XELLIA PHARMACEUTICALS ApS
AND XELLIA PHARMACEUTICALS
INC.,
Defendants.

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C.A. No. 14-199-RGA


JURY TRIAL DEMANDED

SPECIAL MASTER ORDER NO. 2


DECISION ON CERTAIN DISCOVERY DISPUTES
Introduction.
Following my appointment as Special Master by the Honorable Judge Andrews, I issued
Special Master Order No. 1 relating to Discovery Dispute Procedures on December 10, 2014.
On January 29, 2015, Plaintiff Merck Sharp & Dohme Corp. (Merck) requested that the
Special Master resolve certain discovery disputes set forth in Mercks request (Mercks
Discovery Request). On February 11, 2015 Merck submitted its Opening Brief in support of
its position on Mercks Discovery Request (Mercks Brief).

On February 17, 2015,

Defendants Xellia Pharmaceuticals ApS and Xellia Pharmaceuticals, Inc. (Xellia) submitted its
response to Mercks Discovery Request (Xellias Brief). On February 19, 2015, a telephonic
hearing was held before the Special Master for over two hours. Mercks Discovery Request
addresses two discovery issues that had been pending before the parties:
1.

Xellias allegedly improper withholding of certain documents logged on

its Second Amended Privilege log that Merck contends are not in fact privileged;

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2.

Xellias alleged failure adequately to prepare and provide testimony by a

witness on certain topics responsive to Mercks Notice of Rule 30(b)(6) deposition (the
Deposition Notice).
The parties briefs on these two discovery issues were thorough and helpful. The briefs
clearly delineated the particular partys arguments on each issue, provided extensive exhibits
relating thereto, and cited relevant case law. At the argument, the parties also fully responded to
the Special Masters questions and explained their respective positions.
Before deciding the two discovery issues, I must address Xellias initial objection to the
Special Masters authority to decide these discovery issues. Xellia asserts that Merck has not
raised the discovery issues in a timely manner. I will first address this contention and then
separately decide each discovery issue.

Has Merck raised these discovery issues in a timely manner?


As noted above, Merck did submit its Discovery Request prior to the close of fact
discovery, as established by the Courts Scheduling Order. However, the Discovery Request was
made on the eve of the discovery cut-off date; thus, not allowing sufficient time for a ruling on
the Discovery Request prior to the fact discovery deadline.
Merck explains in its Brief that the parties diligently worked to resolve the discovery
issues since they were first identified by Merck. Xellia delivered its first Amended Privilege Log
on December 1, 2014. After a conference with the Court on the topic, the parties continued to
meet. Xellia agreed to produce a large number of additional documents subject to a non-waiver
agreement that the parties reached. Xellia made a second Amended Privilege Log (Second
Amended Log) on December 31, 2014, listing 194 entries. Merck continued to have problems

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or objections to certain entries on the Second Amended Log. The parties continued to meet and
confer, including a conference on January 20, 2015. There remains approximately 100 allegedly
deficient entries on Xellias Second Amended Log, according to Merck.
The parties had agreed to commence depositions, including Xellias witnesses, to start on
January 14, 2015. Mercks Deposition Notice resulted in Xellias deposition in a timely manner.
However, Merck contends, as I will discuss later, that Xellias witness was not properly prepared
and could not testify on three topics pursuant to the Deposition Notice.
I find that Mercks Discovery Request has been raised in a timely manner.

In a

December 15, 2014 conference with the Court, Judge Andrews limited the issues that could be
presented to the Special Master to only pending issues. I am persuaded that the parties diligently
worked to amicably resolve these discovery issues. Only after such efforts failed to resolve all
issues did Merck file its Discovery Request. Furthermore, I do not believe that Xellia is being
prejudiced by my promptly ruling on the Discovery Request. I expect that the parties can still
adhere to the case schedule. Furthermore, to deny Mercks Discovery Request on the basis of its
filing date seems unfair in light of the parties good faith and extensive efforts to resolve the
Discovery Request.

Is Xellia withholding relevant documents under improper claims of privilege or work


product?
The approximately 100 documents in question are over half of the documents listed on
Xellias Second Amended Log.

These documents are subject to the following protections

asserted by Xellia: (a) Attorney Client Privilege; (b) Work Product Immunity, and/or (c)
Common Interest or Joint Defense Privilege

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I will address each of these three alleged protections, but beginning with the last one.
Common Interest or Joint Defense Privilege: The documents in dispute to which the
common interest has been asserted are 141, 142 and 173. (Merck Brief; Ex. A). Xellia also
contends that these documents are privileged because they deal with communication with foreign
counsel.
I do not find that Xellias assertion of the common interest privilege is applicable here.
The common interest or joint defense privilege applies where the party asserting that privilege
has a common legal interest in the document or communication with another party, represented
by separate counsel who shares that legal interest in the document. Xellia has not adequately
identified any other party having such common interest, other than an unnamed possible joint
venture.
Attorney Client Privilege: The attorney client privilege has been asserted by Xellia to
almost all the documents still being sought by Merck. (see Merck Brief; Ex. A). Xellia bears the
burden of persuading me that this privilege should apply. Merck argues that this burden cannot
be met for a variety of reasons including: (a) the privilege cannot be automatically asserted by a
foreign attorney; and (b) Xellias Second Amended Log is vague and incomplete.
A legal issue posed by the assertion of the attorney client privilege by Xellia is whether
or not in this Court that privilege should be recognized solely if it involves a foreign attorney.
Merck argues that the attorney client privilege cannot be met by Xellia because of the touch
base test, citing cases from this Court. In short, the touch base test requires me to consider
which country has the most significant relationship with the communications. Furthermore,
according to Merck, the touch base test requires that the legal advice must come from or be
delivered to a United States licensed attorney. Merck points out that most of the entries on

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Xellias Second Amended Log do not identify any United States licensed attorney, but refer only
to foreign patent attorneys.
Xellia responds to these arguments by emphasizing that the documents in question
involve Xellias patent and legal departments which are located in Norway and that Xellias
headquarters are in Denmark. Many of the documents reference Xellias Danish attorney. Xellia
cites authorities in support of Denmarks recognition of the attorney client privilege. I find that
the law in this Court does not recognize the attorney client privilege protection for a foreign
attorney, unless there is the involvement of a United States attorney, where the subject generally
concerns a United States patent. Xellia willingly introduced this patent challenge in the U.S. by
filing its Paragraph IV certification concerning the 300 patent at issue in this lawsuit. Thus,
the touch base test is applicable. Those documents for which the Second Amended Log does
not identify a United States attorney should be produced.
As to those documents or communications involving the advice of a U.S. counsel, Merck
responds that Xellias Second Amended Log does not properly identify the United States
attorney. The Log in a number of instances simply states Outside counsel for Xellia or the
Law Firm of Merchant & Gould. Xellias answer to this argument is that it has tried to
identify particular attorneys but, in a number of instances, has been unable to do so.
The documents on the Log for which a United States attorney or law firm is identified are
also to be produced, but subject to a rigorous reduction right. Zellia may redact from the
produced documents only those clearly legal opinions or advice delivered to or received from the
U.S. attorneys. The nature of the redacted materials should be fully described.
I believe that these rulings permit Mercks right to the documents without preserving
Xellias rights to protect legal opinions on the patent at issue.

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Furthermore, the parties

protective order restricts access to such documents to those persons identified therein. Xeliia
indicated that it could make this production in about a week, so I suggest a February 28, 2015
target date.
Work Product Protection: Merck points out that Xellia has allegedly improperly asserted
the work product privilege for undated documents. Apparently Xellia now concedes that this
protection only applies to documents created after August 23, 2012, the date Xellia alleges it
circulated a document retention memorandum. However, Merck points out that some documents
subsequent to that date for which the work product protection is sought do not have sufficient
description to satisfy the work product protection.
I understand at the hearing that Xellia has or would produce the seven undated documents
for which it asserted work product. The two other documents (or any others) under work product
protection are also treated as entitled to the attorney client privilege. Thus, those documents
should be produced in accordance with my decisions above.

Has Xellia failed properly to prepare and have a witness testify pursuant to Mercks
deposition notice on topics 4, 13 and 16?
As noted above, Mercks Deposition Notice resulted in the 30(b)(6) deposition of
Xellias Anita Mocnik, who Xellia describes as a lead scientist in developing Xellias
casopfungin formulation.

The Deposition Notice identified a number of topics for which

testimony was sought from the designated witness.

Topic 4 is Xellias decision to file a

Paragraph IV certification; Topic 13 involves Xellias attempt to design around the 300 patent;
and Topic 16 is consideration, research analysis or investigations of the 300 patent.

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Xellia objects that since Topic 4 involves the legal decision of Xellia to file a Paragraph
IV certification, it is entitled to the attorney client privilege. Merck responds that it only seeks
the factual bases for such filing. With respect to Topics 13 and 16, Xellia states that in response
to other similar topics for the deposition, Ms. Mocnix gave relevant testimony. Xellia further
states that Mercks objections basically relate to two presentations in 2007, as to which Ms.
Mocnix was unable to give testimony. According to Xellia, these documents are not relevant,
because they are dated prior to the time when Xellias predecessor began working on the
caspofungin product. Furthermore, Xellia explains that Ms. Mocnix spent more than a day in
preparation for her deposition.
I conclude that Ms. Mocnix was properly prepared and gave sufficient testimony in
response to the Deposition Notice. Ms. Mocnix was well qualified to address the topics in the
Deposition Notice. Some of the topics in the Deposition Notice overlap and it appears she gave
extensive testimony relevant to the 300 patent. With respect to Topic 4, testimony need not be
given as to the specific legal advice in connection with the filing of the Paragraph IV
certification. As to the factual basis for this filing, she testified about that under other Topics.
As to Topics 13 and 16, it is not surprising that there would be some documents, particularly
aged documents, as to which Ms. Mocnix would have no knowledge. On balance, I am satisfied
that she was the appropriate witness for the Deposition Notice, made reasonable efforts to
prepare, and gave testimony where she had relevant knowledge. I also take into account the
current stage in the litigation of this case. The parties are currently engaged in the expert
discovery phase. Furthermore, additional testimony from Ms. Mocnix, a Croatian, is not likely
to be fruitful after she has already given an extensive deposition and other factual discovery has
concluded.

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Ive set forth my reasons for my decisions herein, so that the parties can have the benefit
of my thinking, since a court reporter was not available at the time of the hearing. In order not to
delay the case and by agreement of the parties, the hearing was held without a transcript having
been made. Also, if the parties or the Court conclude that I should take further action with
respect to the Discovery Request, hopefully this decision is helpful in that regard too. As a final
note, I find that both parties handled the Discovery Request professionally and, accordingly, my
fee for services should be split evenly between the parties.

Special Master, Allen M. Terrell, Jr.


February 20, 2015

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