## Facts

- Kimberly-Clark Worldwide, Inc. and related entities (Kimberly-Clark) owned patents covering disposable absorbent products, including diapers and training pants.
- Kimberly-Clark previously accused Procter & Gamble (P&G) of infringing certain Kimberly-Clark patents.
- To manage those disputes, Kimberly-Clark and P&G entered into multiple written agreements creating a multi-step dispute-resolution process.
- The agreements required submission of disputes to a non-binding arbitration process governed by federal law.
- The process included an evidentiary hearing and required the arbitration panel to issue a written decision containing findings of fact and conclusions of law.
- The agreements allowed litigation-style activity, including discovery and depositions, briefing, and an internal appeal procedure.
- Ex parte communications with the arbitrators were prohibited, and the losing party was responsible for paying the arbitrators’ fees.
- The agreements also provided a mechanism by which P&G could stop the accused activity within a specified period after an adverse outcome, which could prevent a follow-on infringement suit by Kimberly-Clark.
- Kimberly-Clark and P&G ultimately settled their disputes.
- Later, Kimberly-Clark sued First Quality Baby Products LLC and related entities (First Quality) in the Eastern District of Wisconsin for infringing Kimberly-Clark patents, including patents that had been part of the earlier P&G disputes.
- After learning about the Kimberly-Clark/P&G agreements and the related proceedings, First Quality sought discovery of the agreements and materials from the dispute-resolution process.
- The parties did not dispute that the requested information was relevant to issues in the patent litigation, but Kimberly-Clark refused to produce it, asserting that the materials were protected by a mediation privilege (under Wisconsin law and/or federal law).
- The district court rejected Kimberly-Clark’s privilege claim and entered an order compelling production.
- Kimberly-Clark appealed the discovery order to the Federal Circuit.

## Issues

1. Whether the Kimberly-Clark/P&G dispute-resolution process qualified as “mediation” such that a mediation privilege or mediation-confidentiality protection barred discovery of the agreements and related materials.
2. Whether federal common law recognizes a mediation privilege that applied to these materials in a federal patent infringement case.
3. Whether the district court erred in compelling discovery where relevance was undisputed and the only objection was a claimed mediation-based privilege.

## Decision

- The Federal Circuit affirmed the district court’s order compelling discovery.
- The court agreed that the Kimberly-Clark/P&G process was not a mediation-type procedure for privilege purposes because it operated like an arbitration with adjudicative features (e.g., evidentiary hearing, written findings and conclusions, discovery, and appeal).
- The court held that Kimberly-Clark did not carry its burden to show that any applicable mediation privilege—state or federal—shielded the requested materials from discovery in this case.

## Legal Principles

- In a federal-question case, privilege questions are governed by federal common law under Federal Rule of Evidence 501.
- The party asserting a privilege bears the burden to establish that the privilege exists and that it covers the communications or documents at issue.
- Courts look to the substance of a dispute-resolution procedure, not the label used by the contracting parties, when deciding whether mediation-related confidentiality protections apply.
- A procedure that includes formal discovery, evidentiary presentation, a written decision with findings of fact and conclusions of law, and a structured appeal mechanism is arbitration-like and generally outside the core features associated with mediation confidentiality.
- When requested discovery is relevant and no valid privilege applies, the materials are subject to production under the federal discovery rules.

## Conclusion

The Federal Circuit held that Kimberly-Clark could not withhold documents and communications from its earlier P&G dispute-resolution proceedings on a mediation-privilege theory, because the process was structured as non-binding arbitration with adjudicative safeguards rather than mediation, and Kimberly-Clark failed to establish any applicable federal (or state) mediation privilege barring discovery; the order compelling production was affirmed.


Kimberly-Clark Worldwide, Inc. v. First Quality Baby Products LLC, 447 F. App’x 217 (2011)