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August 25, 1975


The opinion of the court was delivered by: EDELSTEIN


 Edelstein, Chief Judge

 Defendant International Business Machines Corporation (IBM) has applied to this court for an order which in effect embodies the provisions of two proposed orders submitted by the Special Master (Master) appointed in this matter. These proposed orders would require plaintiff Xerox Corporation (Xerox) to search for and to produce certain documents and information.

 On March 25, 1974 the Master submitted a report and recommendation and proposed order (Affidavit of David W. Plant, Exhibit 1, filed July 23, 1975 (hereinafter Plant Affidavit)) dealing with two questions presented to him at a December, 1973 hearing and in three IBM memoranda dated December 19, 1973, December 31, 1973 and January 25, 1974. (hereinafter referred to as IM ' date ') The first issue was whether Xerox had fully complied with IBM's demands for the production of documents concerning its defense of patent unenforceability. Subsumed in that question were questions concerning Xerox' production of documents pertaining to patent acquisition, patent licensing and documents relating to Xerox' patent portfolio and Xerox' patent acquisition, licensing and enforcement practices and policies. The second issue discussed by the Master was whether Xerox had complied completely with IBM's demands relating to prior art and trade secrets. Subsumed in this issue were questions concerning Xerox' production of documents relating to government contracts and contract reports, and documents and information known to Xerox concerning the 'public domain' status of Xerox' trade secrets.

 As to IBM's demand for production of patent misuse documents, the three IBM memoranda addressed numerous instances in which Xerox' production would seem inadequate or incomplete. Xerox retorted, inter alia, that certain patent acquisition requests had no bearing whatsoever upon the patent misuse defense alleged by IBM, that certain documents were easily obtained from the Patent Office, that the search for certain documents was still continuing, and that many of the documents had previously been produced. The complexity of IBM's demands and Xerox' responses prompted the Master to schedule another hearing on the relevance of each outstanding request as to patent misuse documents and to have the parties address themselves to the existence or nonexistence of documents related to those same requests. This recommendation was embodied in paragraph (a) of the March 25th proposed order and was the basis of his later May 16, 1975 report.

 IBM had also demanded documents relating to patents and to patent acquisition, licensing and enforcement practices and policies; for these documents Xerox had limited its search to files within its Patent Department, alleging that only uninformed compilations would exist outside Xerox' Patent Department files. The Master did not find Xerox' limitation well founded, citing Villani v. New York Stock Exchange, Inc., 348 F. Supp. 1185, 1192 (S.D.N.Y. 1972), and recommended that Xerox search for and produce the contested documents. Paragraph (b) embodied this recommendation.

 Paragraph (c) of the proposed order would require Xerox to produce documents relating to Xerox' knowledge of or possession of Government documents relevant to the public availability of Xerox' trade secrets; specifically, this request called for documents relating to Government contract reports relating to xerography. (IM 12/19/73, Tab E, requests 1 & 2). Paragraph (d) directed Xerox to provide IBM with any information as well as any documents relating to the basis for Xerox' representations that bracketed trade secret information in Xerox' 'restricted' documents is in the public domain. (IM 12/19/73 at 24). Paragraph (e) would require Xerox to produce documents relating to Xerox contracts with the Government, Rank Xerox and others.

 Neither party entered any objection to the March 25th report and recommendation or to the proposed order. In its opposition papers submitted in the instant motion, Xerox indicates that it does not object to the entry of an order containing paragraphs (c), (d), (e) and (f) of the March 25th proposed order. However, Xerox does now oppose approval of paragraph (b) of that order. Xerox now indicates that although it is willing to undertake the further investigation and production called for by paragraph (b), it "believes that it would be more productive to defer such investigation until the parties have conferred with the Special Master on August 20, 1975, concerning relevant attorney-client and relevant attorney's work product documents" pursuant to this court's opinion of July 23, 1974 at 13-16. Xerox Memorandum filed July 25, 1975 at 8 (hereinafter Xerox Memorandum). Xerox' recommendation is bottomed upon the allegation that some of the documents IBM seeks are documents to which attorney-client privilege and/or work product attach and that the ultimate resolution by this court as to the discoverability of such documents should "put the matter to rest once and for all." Xerox Memorandum at 9.

 The fact that this court has devised a procedure for the production of and handling of privileged and/or work product documents cannot be employed as a barrier to discovery in the first instance. Therefore, Xerox' request for deferred treatment is denied. Xerox is ordered to comply fully with paragraph (b) of the March 25th proposed order within 30 days of the entry of this opinion. As to any documents produced under this paragraph which Xerox determines to be subject to claims of attorney-client privilege or to claims of attorney's work product, Xerox should be guided by this court's opinion of July 23, 1974 and any subsequent procedures established by the Master pursuant to that opinion or by any further order of this court.

 The court has reviewed the recommendations embodied in paragraphs (c), (d), (e), and (f) of the March 25th proposed order and adopts the Master's recommendations. Xerox is ordered to comply with these paragraphs within 30 days from the date of the entry of this opinion.

 Following the hearing before the Master held pursuant to paragraph (a) of the March 25th proposed order, the Master submitted another report and recommendation accompanied by a proposed order dated May 15, 1974. Plant Affidavit, Exhibit 2. This report dealt with IBM's outstanding request for documents it seeks in furtherance of its patent misuse defense. Specifically, the documents relate to the acquisition of xerography patents by Xerox and relate to licensing of xerography patents by or to Xerox. The Master had determined the issues to be twofold: (1) do each of the IBM demands fall within the bounds of permissible discovery contained within Fed. R. Civ. P. 26(b)(1), and (2) has there been an adequate attempt at production by Xerox of those items Xerox has conceded to be relevant but has not yet produced.

 In IBM's Answer and Counterclaim dated July 21, 1970 (hereinafter Answer [*]), IBM alleged that Xerox had engaged in inequitable and unlawful conduct, was seeking relief with unclean hands, and therefore should be denied relief. Answer para. 73. IBM had pleaded that "Xerox has accumulated by purchase and otherwise, a large number of additional and overlapping patents, including the patents in suit" in order to "perpetuate its monopoly after expiration of its basic patents." Answer para. 56. Further, IBM had pleaded that "Xerox is misusing the patents in suit and its other patents by using them, not to enjoy a monopoly of the specific subject matter to which they relate, but rather to extend beyond its legal term the broad monopoly of plain paper xerographic copiers which Xerox has enjoyed and exhausted under its expired patents." Answer para. 57. IBM's demand for the contested documents is based, inter alia, upon these allegations of patent misuse.

 At the April hearing, Xerox had argued that documents relating to Xerox funded research and patents produced to Xerox from that research were not relevant to a defense of patent misuse because such patent acquisitions are under the law the same as patents acquired from one's own employees and thus not subject to a charge of misuse by attempted or actual monopolization. Transcript of hearing before the Special Master, April 18, 1974 at 10-12, (hereinafter cited as Tr.)

 Before addressing the relevance of IBM's demand to its misuse defense, the Master observed that under Fed. R. Civ. P. 26(b)(1) as read by this court, discovery is relevant where there is any possibility that the information sought may be relevant to the subject matter of the action. Mallinckrodt Chemical Works v. Goldman, Sachs & Co., 58 F.R.D. 348 (S.D.N.Y. 1973). Therefore, the Master reasoned that to find that IBM's demands were outside the bounds of proper discovery he would first be required to find that ...

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