New Pacer--PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION FOR ENTRY OF A PROTECTIVE ORDER
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
ACER, INC., ACER AMERICA CORPORATION and GATEWAY, INC.,
Plaintiffs,
v.
TECHNOLOGY PROPERTIES LIMITED, PATRIOT SCIENTIFIC CORPORATION, and ALLIACENSE LIMITED,
Defendants.
PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION FOR ENTRY OF A PROTECTIVE ORDER
Date: April 14, 2009
Time: 10:00 a.m.
Dept: Courtroom 2, 5th Floor
Before: Honorable Judge Howard Lloyd
I. INTRODUCTION
There should not be secret patent claims. See e.g. Tafas v. Doll, Case No. 2008-1352, 2009 U.S. App. LEXIS 5806, *32-33 (Fed. Cir. March 20, 2009) (“The Patent Act demonstrates that applicants are expected to be forthright about their inventions.”). Defendants disagree, and believe that they should be permitted to conceal their representations and contentions as to the scope of their asserted patents from the public for the sole reason that potential alleged infringers would realize that Defendants’ infringement claims are meritless. See Fisher Decl., [Dkt. No. 113] 4 (“In addition, the public dissemination of the infringement contentions may encourage companies to collectively refuse to deal with TPL.”). Because Defendants refuse to allow publication of their Rule 3-1 Disclosures to the very entities that make the alleged Accused Instrumentalities, and Defendants’ version of the protective order would allow Defendants to game the system to encourage secret patent claims, Acer Inc., Acer America Corporation and Gateway Inc. (collectively “Plaintiffs”) oppose the entry of the form of protective order proposed by Defendants.2 Plaintiffs also oppose Defendants’ motion because their version would permit any employee (not just the two identified for the first time in their opening brief) to review Plaintiffs’ most valuable information including competitive business practices, financial details, and highly confidential technical material such as source code, schematics, and other trade secret information concerning the design and operation of their products. 1 Cross motions concerning the protective order were filed after Defendants refused to agree to a joint motion procedure or a schedule whereby Plaintiffs (who initially raised the issue) would file the motion first. Davis Declaration in Opposition to Defendants’ Motion for Protective Order (“Davis Decl.”)3,4, Ex. A (3/6/09 e-mail at p.1 and 3/3/09 email at p. 7). 2 Regrettably, Defendants have chosen to misrepresent to the Court that Plaintiffs “repeatedly declined to meet-andconfer telephonically. . ..” Defs.’ Mot., [Dkt. No. 105] at 6:18-21. Although Plaintiffs believe that it is not relevant to the merits of the instant motion, it should be noted for the record that such a statement is false as Plaintiffs repeatedly reaffirmed their willingness to conduct telephonic meet-and-confers and did, in fact, have a telephonic meet and confer at approximately 3:10 P.M. on March 6. Davis Decl. 2-6 and Exhibit A [3/3/09 e-mail at p. 7 (“I had proposed a further meet and confer on the section 7.3 issue”); 3/6/09 e-mail at p.4 (“Your claim is just flat out false. I have never refused to meet and confer. I have only asked that you put your proposal in writing before we talk.”); 3/6/09 e-mail at p. 3 (“After you do so, I’ll be happy to have a call with you all and discuss the issues further”); 3/6/09 e-mail at p. 2 (“I’ll call you today . . .. Are you available to talk at 2”); 3/6/09 e-mail at p. 1] and Ex. B [3/6/09 e-mail at p. 1 (“I'll give you a call now.”)].
II. LEGAL ARGUMENT
A. Defendants’ Proposed Section 7.3 Fails to Adequately Protect Plaintiffs’ Trade Secrets and Highly Confidential Information Defendants claim that they need to modify Section 7.3 of the Northern District of California’s standard form of protective order to allow at least two non-lawyer engineers employed by Defendant Alliacense Limited (“Alliacense”) access to Plaintiffs’ most sensitive information. Defendants’ position, however, is disingenuous as the actual language in Defendants’ proposed protective order does not limit the disclosure of Plaintiffs’ highly confidential information to the two employees described in Defendants’ Motion. Instead, Defendants’ proposed language broadly permits a Receiving Party to disclose highly confidential information to: [T]he employees of the Receiving Party (as defined in this Order) to whom disclosure is reasonably necessary for this litigation and who have signed the “Agreement to Be Bound By Protective Order” (Exhibit A); and in addition, the employees of Alliacense who have access under this provision and have signed the “Acknowledgement and Agreement to be Bound re: Employee of Alliacense” (Exhibit B) Defendants’ Proposed Protective Order, [Dkt. No.106-2] 7.3. There is nothing in Defendants’ version of the protective order that would preclude them from giving Plaintiffs’ most valuable information to, for example, Mac Leckrone – the son of TPL’s chairman – and an individual identified by Defendants as an intended recipient of Plaintiffs’ trade secret information. See Davis Decl., Ex. A at p. 3 (proposing Mac Leckrone as a recipient of Plaintiffs’ trade secret information).3 Section 7.3 in the standard form of protective order approved by the Northern District of California clearly establishes that this District does not generally permit employees of a party to the lawsuit access to discovery responses designated for protection under the protective order. At most, it provides for an optional provision that allows in-house attorneys, who are bound by professional ethical obligations, to review trade secret material in certain limited circumstances. The basic problem with permitting any non-lawyer employee of a party access to designated 3 This is precisely why Plaintiffs requested that Defendants put their proposal in writing before a telephone call; namely so that Defendants could not later run from what their intentions were regarding the handling of Plaintiffs’ trade secret information. See supra note 2 and Davis Decl. 2-6. Defendants’ failure to mention their intended disclosure of information to Mac Leckrone’s in their motion to the Court confirms Plaintiffs’ concern in this regard. confidential or highly confidential materials is that the employee may be exposed to pressure to improperly disclose or use the designated materials t an an outside expert or outside counsel who may more easily resist. The employee presumably relies on his employment as his sole means of support and has no loyalties to persons outside his employer. Outside experts and outside counsel, in contrast, generally have other means of support (from other clients, for example) and are selfinterested in maintaining their reputation for independence and integrity which motivates them to adhere to the restrictions set by the protective order. The employee may also accidentally or unintentionally disclose such confidential information due to his or her work on subsequent, similar projects. This is not just a theory; it is a likelihood in this case. As admitted by Defendants’ counsel, the two purported recipients are actively involved in evaluating competitors of Plaintiffs for Defendants’ onerous “licensing program.” These engineers could, and likely inevitably would, use the information that they learned about Acer/Gateway products to unfairly leverage and enable Defendants to have a competitive advantage when analyzing those third parties and potential targets of Defendants’ licensing programs. This is reason enough to reject Defendants’ proposed version of Section 7.3. See tailored Lighting, Inc. v. Osram Sylvania Prods., 236 F.R.D. 146, 147-48 (W.D.N.Y. 2006) (holding that: a) it was unreasonable to expect patent holder’s chief patent inventor to be able to avoid the subconscious use of confidential information revealed through discovery that was relevant to those interests; b) the patent holder’s designee was not uniquely qualified over other outside experts to assist in the prosecution of the patent holder’s claim; and c) the cost burden to the patent holder of hiring an outside expert did not outweigh the substantial risk of competitive injury to the corporation of disclosure of its trade secret information to the patent holder’s president and chief patent inventor.); Safe Flight Instrument Corp. v. Sundstrand Data Control Inc., 682 F. Supp. 20, 21-22 (D. Del. 1988) (prohibiting plaintiff’s president, a preeminent aeronautic engineer of “great moral fiber” who had received numerous patents, from reviewing defendant’s confidential information because he was a working scientist of the instrument corporation and because there was no assurance he would curtail future research). Defendants’ assurances that the designated “employees” will sign “strict acknowledgements” of the protective order are insufficient. Whatever a “strict acknowledgement” is, it can carry no more legal weight than a mere “acknowledgement,” and everyone who receives designated materials must promise to obey the protective order, irrespective of how the acknowledgement is titled. Further, Defendants’ characterization of Plaintiffs’ concerns as “unsubstantiated and speculative fear” proves too much: the perceived need for any protective order that limits access at all can be characterized as arising from an “unsubstantiated and speculative fear” that the receiving party will inappropriately use or disclose the designated materials. In fact, Defendants have raised these same concerns in arguing against the inclusion of Plaintiffs’ proposed Section 7.5. Defendants’ Motion, [Dkt. No. 105] at p.2-3. Specifically, Defendants highlight that they would have no knowledge of the distribution of their sensitive information to third parties. Id. Similarly, Plaintiffs would have no idea if their highly confidential information was shared with Defendants’ directors, officers or other employees. In a perfect world, protective orders are not necessary at all. But courts recognize the world is imperfect, and the use of protective orders is too wide-spread to interpret exclusion from access as a personal attack on anyone’s integrity. Conversely, it takes more than protestations that “I am honest” to qualify someone to receive designated materials. As a practical matter, compliance with the terms of a protective order is a matter of trust. The proposed protective order does not include any independent “policeman” actively guarding the disclosure and use of designated information. Instead, those persons authorized to receive the designated information are trusted to limit access and use of that information as stated in the protective order. The protective order strikes a balance between the “unsubstantiated and speculative fear” of inappropriate disclosure or use of designated information and the practical needs of litigants to argue their positions. Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992). For the reasons set forth above, outside lawyers and outside experts are considered sufficiently independent to be trusted to obey the protective order; party employees and family members are considered too dependent on their affiliated par y to be similarly trusted. Absent a showing of need that goes beyond mere convenience and a showing of independence that goes beyond a mere “I promise to be good,” employees of the parties and family members of top executives should not be permitted access to “highly confidential-attorneys’ eyes only” materials. Tailored Lighting, Inc., 236 F.R.D. at 147-48; Safe Flight Instrument, 682 F. Supp. at 21-22. Defendants cite no cases from this District to support granting access to non-lawyer employees. This district has on occasion ordered that designated in-house counsel be permitted access, apparently on the theory that ethical obligations and the availability of professional sanctions provides in-house counsel sufficient independence to be trusted. In support of their position, Defendants cite Pharmachemie, B.V. v. Pharmacia, Inc., 1998 U.S. Dist. LEXIS 2192, *7-8 (D. Mass. Jan. 30, 1998). The ruling in Pharmachemie is factually distinguishable from this case because the Pharmachemie court only addressed the disclosure of confidential information to a party’s technical employees. Id. Plaintiffs have already agreed to let Defendants’ officers, directors and employees have access to Plaintiff’s confidential information to the extent that it is reasonably necessary for this litigation. Plaintiffs’ Proposed Protective Order, [Dkt. No.103-3] 7.2. Here, Defendants are going one step further by asking that persons who are not acting as in-house counsel receive permission to review “highly confidential-attorneys’ eyes only” information. The Pharmachemie decision does not support such a broad mandate. Defendants also cite MGP Ingredients, Inc. v. Mars, Inc., 245 F.R.D. 497, 500 (D. Kan.
2007). However, unlike the defendants in MGP Ingredients, Plaintiffs have demonstrated the concrete harm that will result from the disclosure of their highly confidential information. As stated above, the language in Section 7.3 of Defendants’ proposed protective order goes beyond the two named engineers, and that the engineers’ access to Plaintiffs’ confidential information can and likely will be used to Defendants’ competitive advantage. The “highly confidential-attorneys’ eyes only” information will also go beyond technical details of interest to the two named engineers. Defendants have proposed to Plaintiffs that other “employees” also have access to “highly confidential-attorneys eyes only” information. During a meet-and-confer, Plaintiffs nominated Mac Leckrone—the son of TPL’s CEO—to receive “highly confidential-attorneys’ eyes only” information. See supra. As explained in Plaintiffs’ Motion, that family relationship is too close to allow Mr. Leckrone access to Plaintiffs’ most sensitive information. Business information, including confidential licensing agreements and financial information, will also be exchanged between the parties, and a licensing executive, such as Mr. Leckrone, cannot be allowed access to that information. Mr. Leckrone’s familial relationship combined with his knowledge of Plaintiffs’ business strategies, the highly confidential terms of various business relationships and Plaintiffs’ technology create an unacceptable risk of and opportunity for the inadvertent disclosure of confidential information. Autotech Techs. Ltd. P'ship v. AutomationDirect.com, Inc., 237 F.R.D. 405, 408 (N.D. Ill. 2006) (“In the end, proper analysis requires a careful and comprehensive inquiry into in-house counsel’s actual (not nominal) role in the affairs of the company, his association in
relationship with those in the corporate hierarchy who are competitive decision makers, and any other factor that enhances the risk of inadvertent disclosure.”). Though Defendants emphasize that the two engineers are only employed by Alliacense and are not competitive decision makers, there are, however, shared interests between the Defendants that permeate any such distinction. The facts are clear: Alliacense is the licensing and enforcement branch of TPL’s patent portfolio, and Defendants explicitly acknowledge that the engineers would “assist with the evaluation and development of litigation strategy at a technical level.” Defendants’ Motion, [Dkt. No. 105] at p.8. Despite Defendants’ contention that Brown Bag Software v. Symantec Corp., supports their position, further examination of the case provides strong support for excluding access to Plaintiffs’ “highly confidential-attorneys’ eyes only” information. 960 F.2d 1465, 1470 (9th Cir. 1992). Specifically, the Brown Bag court rejected Brown Bag’s access to the opposing party’s confidential information because “Brown Bag’s counsel’s employment would necessarily entail advising his employer in areas relating to [the opposing party]’s trade secrets.” Id. at 471. The circumstances here are no different. It would be naive to believe that the information gathered and absorbed by the two engineers relating to licensing and enforcement would not be communicated in one form or another to directors, officers or employees of the other Defendants. This is especially true in light of Defendants’ express acknowledgement that these engineers would participate in the evaluation and development of Defendants’ litigation strategy. Simply put, Plaintiffs have no assurance that their highly confidential information will be protected. Finally, Defendants will not be prejudiced if their employees do not have access to highly
confidential Plaintiff information. Defendants may still hire outside consultants and/or experts to review such material. They will likely hire such a consultant in any event in order to offer opinion testimony to the jury. Thus, the only issue is a matter of cost. Defendants, without support, claim that it would be “substantial cost” savings to have internal engineers review Plaintiffs’ highly confidential material. This is a cost born in every patent infringement case in which the patent holders must rely on an accused infringer’s highly confidential information to support this case. See Tailored Lighting, Inc. v. Osram Sylvania Prods., 236 F.R.D. 146, 147-48 (the cost burden to the patent holder of hiring an outside expert did not outweigh the substantial risk of competitive injury to the corporation of disclosure of its trade secret information to the patent holder's president and chief patent inventor). This Court has seen dozens, if not hundreds, of cases just as complex as this one where patent holders relied solely upon outside expert witnesses to prove their infringement case. Because Defendants have not demonstrated that this cost would be so substantial as to be prohibitive in this case – let alone establish any sort of material prejudice – their motion on this provision should be denied. B. Plaintiffs’ Proposed Section 7.5 Properly Allows Plaintiffs to Disclose Information with the Manufacturers and Providers of the Accused Products Ironically, after arguing that non-attorney employees of Defendants should simply be trusted not to misuse the most sensitive materials Plaintiffs produce, Defendants argue that Plaintiffs’ outside counsel cannot be trusted to accurately identify summaries and analyses received from Defendants and limit access of such summaries and analyses to parties whose information is being summarized or analyzed. There is no great trick to spotting a summary or analysis under Section 7.5 and distinguishing other information not subject to Section 7.5. Defendants’ infringement contentions are an obvious
example of a summary and analysis of technical information belonging to Plaintiffs and their vendors. Legal memoranda and expert declarations filed with the court during motion practice, responses to contention interrogatories, expert reports, proposed demonstrative exhibits, and any exhibit that comes into evidence as a purported summary of underlying evidence are all easily recognized and distinguished from any designated materials that are “original source” evidence (a defendant’s own financial reports, for example). Of course, under the proposed Section 7.5, any summary or analysis of Defendants’ own information (e.g., quarterly revenue figures) could only be shared with defendants (as the source of the summarized information). Nor will it be difficult to determine who, under Section 7.5, can be shown a summary or analysis. Generally, the summaries and analyses will on their face identify the source of the underlying information. Summaries and analyses of “anonymous” source information are unlikely to come into evidence due to a lack of foundation, and Plaintiffs will generally have the opportunity to pursue identification of the source if necessary (e.g., summaries that do not break out information from multiple sources). As a practical matter, Section 7.5 will most likely apply to Defendants’ various infringement and damages contentions, whether in the form of a rule disclosure, an interrogatory response, a document produced that includes an infringement or damages contention, an expert report or declaration, or a legal brief submitted to the court. Under Section 7.5, Plaintiffs’ counsel will be able to consult with the source of the information being analyzed—for example, the manufacturer of the part being analyzed or Plaintiffs’ employees with knowledge—to determine the accuracy of the analysis without going through a laborious de-designation procedure. Time may be of the essence, especially during motion practice or during the exchange of expert reports. Further, it would be a misuse of judicial resources to require Plaintiffs to seek this Court’s approval for every disputed document. Defendants have not and cannot articulate any legitimate reason to make such summaries and analyses confidential as to the source of the information being summarized or analyzed. To the extent Defendants have even tried to articulate any reason, the impropriety of that reason is apparent. For example, Docket No. 113 is a declaration by one of Defendants’ counsel, Jeff Fisher, to support filing an excerpt of Defendants’ infringement contentions under seal. Fisher Declaration, [Dkt. No. 113]. In paragraph 4 of his declaration, Mr. Fisher tellingly admits that one purpose for keeping the infringement contentions secret is to avoid “competitive harm to its licensing program.” Id. at 4. There can be no legitimate advantage to be gained in licensing negotiations by keeping infringement contentions secret. A basic premise of the patent system is public patents having public claims that put the public on notice of the protected subject matter. Bates v. Coe, 98 U.S. 31, 39 (1878); see also In re Vamco Machine and Tool, Inc., 752 F.2d 1564, 1577 (Fed. Cir. 1985) (“claims are not technical descriptions of the disclosed inventions but are legal documents like the descriptions of lands by metes and bounds in a deed which define the area conveyed”); Panduit Corp. v. Dennison Mfg. Co., 810 F.2d 1561, 1572 (Fed. Cir. 1987) (“The constitutional purpose [of the patent system] is to encourage disclosure of patentable contributions to “progress in the useful arts” . . .). Indeed, the “bargain” between the inventor and the public is that, in return for the limited patent monopoly, the inventor discloses the invention to the public. Id. Paragraph 4 of Mr. Fisher’s declaration is an admission that Defendants seek to misuse the protective order to make the asserted scope of the claims a secret, in direct contravention of the public notice function of patent claims. Contrary to Defendants’ apparent intent, anyone making microprocessors is entitled to know the scope of the asserted claims, including the scope that the patent holder asserts. Defendants’ position is even weaker as to the manufacturers of the very parts that are accused in this action. In principle, infringement contentions may include confidential information belonging to those who manufacture the accused part, thereby justifying confidentiality vis-à-vis the public at large. But Defendants have no basis for precluding the access provided by Plaintiffs’ proposed Section 7.5—which merely allows the very parties whose products stand accused of infringement to see the infringement contentions asserted against their products. In relation to parties accused of infringement, paragraph 5 of Mr. Fish r’s declaration is particularly inapt. In paragraph 5, Mr. Fisher asserts a confidentiality interest in Defendants “reverse engineering and technical analyses comparing Plaintiffs’ accused products to the patents in suit”. Fisher Declaration, [Dkt. No. 113] 5. Obviously, the party who “engineered” the accused product in the first place already knows whatever Defendants purportedly gleaned from “reverse engineering,” and Plaintiffs counsel should have the opportunity to check the accuracy of Defendants’ reverse engineering conclusions. And again, given the public notice function of patent claims, there can be no legitimate confidentiality interest in the “technical analyses comparing Plaintiffs’ accused products to the patents in suit” as to the manufacturers of the accused products. In re Vamco, 752 F.2d at 1577. Defendants’ have failed to present any compelling reason for limiting a party’s right to review analyses and summaries of that party’s technology and products.
III. CONCLUSION
Defendants’ arguments are wholly unsupported by the law and/or facts. There is no reasonable justification for Defendants’ attempt to hinder and delay Plaintiffs’ ability to defend itself in this lawsuit. Defendants’ actions have unnecessarily multiplied the number of filings and the litigation burden on Plaintiffs. Thus, for the foregoing reasons, Plaintiffs respectfully request that this Court deny Defendants’ Motion.
Dated: March 24, 2009 K&L GATES LLP
By: /s/ Harold H. Davis /s/
Timothy P. Walker
Harold H. Davis, Jr.
Jas S. Dhillon
K&L GATES LLP
Attorneys for Plaintiffs ACER, INC., ACER AMERICA CORPORATION and GATEWAY, INC.
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