It’s a conundrum, for sure. A company receives notice of potential wrongdoing, directs its in-house counsel to investigate the issue, and then must decide how, if at all, to affirmatively use the investigation to defend its conduct. A significant consideration in determining whether to use investigation results is waiver of privilege and work-product protections.
The court’s decision in a trade-secrets case against Nvidia illustrates the potential waiver perils when faced with this issue. Following assertions that a recent hire brought a competitor’s trade secrets to Nvidia, the company’s in-house counsel, and others, investigated the veracity of those allegations. The company then used an in-house lawyer’s affidavit to convince a German court of the non-existence of the competitor’s trade secrets within it system. Let’s see how this decision affected waiver arguments in a U.S. federal court. Valeo Schalter Und Sensoren GmbH v. NVIDIA Corp., No. 23-cv-05721-EKL (VKD), 2025 U.S. Dist. LEXIS 2221 (N.D. Cal. Jan. 6, 2025) (opinion also available here).
Employee Download, Criminal Investigation, and a German Civil Proceeding
Valeo, a German-based company, created source codes and other proprietary information related to its parking-assistance technology. One of its employees allegedly downloaded over 27,000 files and later joined Nvidia, which was also developing parking-assistance technology, and six months later, German officials began a criminal investigation. Two other things occurred: Nvidia began an internal investigation and Valeo initiated civil proceedings against Nvidia in Germany.
As part of the civil proceedings, the German court ordered Nvidia “to perform comprehensive searches for Valeo code files.” What was Nvidia to do?
Nvidia Investigation, Affidavits, and a Disclosure
Nvidia’s head of IT Security, with the assistance of an in-house lawyer, oversaw a detailed search for Valeo source codes across Nvidia’s computers and source code repositories. Another in-house lawyer participated as well by interviewing numerous Nvidia employees and specifically emailing those who worked with the former Valeo employee to ascertain whether they received any of Valeo’s proprietary information.
To show that it complied with the German court’s investigation order, Nvidia filed affidavits from its in-house lawyers, available for review here and here, describing their investigation-related work and their findings that Nvidia systems were free of Valeo’s source codes. These lawyer affidavits included verbatim quotes from their employee communications.
It worked. The German court found Nvidia in compliance with the investigation order and declined to impose any penalties. Valeo withdrew its civil action.
U.S. Trade Secrets Case
That détente didn’t last long as Valeo filed a trade-secrets case against Nvidia in a U.S. federal court and sought production of Nvidia’s investigation materials. Nvidia refused, claiming that the attorney–client privilege and work-product doctrine protected those materials from production.
But did Nvidia waive these protections by filing its in-house lawyers’ affidavits in the German action?
Waiver Law
Let’s quickly review waiver principles for the attorney–client privilege and work-product doctrine—because they are different. As the Valeo court recognized, a privilege holder may waive the attorney–client privilege expressly by disclosing protected information to a third party or otherwise making it public. And the privilege holder need not have intended to waive the privilege—the disclosure alone is usually enough. The privilege holder may also waive the privilege by implication, such as asserting a defense that relies on privileged information.
By contrast, one may expressly waive the work-product doctrine by disclosing protected materials to an adversary in litigation or in a manner that, as the court correctly put it, “substantially increases the opportunities for potential adversaries to obtain the work product.”
Ruling—Work Product Waiver
Applying these legal standards, the court “easily concluded” that Nvidia’s voluntary decision to rely on its in-house lawyers’ affidavits in the German proceeding waived the work-product protection in the U.S. proceeding. Nvidia argued that its in-house counsel disclosure was involuntary because the German tribunal ordered an investigation and wanted to know the results. But the U.S. court noted that the German court did not require Nvidia to “submit affidavits from its attorneys” to show compliance with its investigation order.
And these affidavits disclosed the investigation’s details, identity of employee-witnesses, and content of employee interviews, resulting in the U.S. court concluding this—
In short, Nvidia has made its in-house counsel fact witnesses.
The U.S. court noted, however, that this express waiver extended only to fact work product and did not “automatically extend to opinion work product, which typically includes counsel’s mental impressions, conclusions, opinions, and legal theories.” While a party may certainly waive opinion work product, such as where it affirmatively places its attorneys’ opinions at issue, Nvidia limited its lawyers’ affidavits to the factual part of the investigation without diving into their opinions.
Ruling—Attorney–Client Privilege
As to Nvidia’s privilege objection, the U.S. court, again easily, found that Nvidia waived the privilege over its in-house lawyer’s communications with employees during the investigation because he disclosed those communications in his German affidavit. The court seemed skeptical, too, of Nvidia’s claim that the privilege covered its IT employee’s investigation materials, providing this warning:
The Court reminds Nvidia that a communication is not privileged merely because an attorney is copied on it; nor does the privilege encompass a record that is attached to, linked with, or pasted into a communication seeking advice of counsel, where the record itself is not privileged.
But the court stopped its admonitions and waiver findings there after finding that Nvidia had not, to date, relied on privileged information to defend the U.S. action which would have otherwise warranted an implied-waiver finding.