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New Pacer--DEFENDANTS’ OPPOSITION TO ACER’S MOTION TO ENTER PROTECTIVE ORDER AND ALLOW ACER TO DISCLOSE PATENT L.R. 3-1 EXCHANGE
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
ACER, INC., ACER AMERICA CORPORATION and GATEWAY, INC., Acer,
v.
TECHNOLOGY PROPERTIES LIMITED, PATRIOT SCIENTIFIC CORPORATION, and ALLIACENSE LIMITED,
Defendants.
DEFENDANTS’ OPPOSITION TO ACER’S MOTION TO ENTER PROTECTIVE
ORDER AND ALLOW ACER TO DISCLOSE PATENT L.R. 3-1 EXCHANGE
Date: April 14, 2009
Time: 10:00 a.m.
Dept.: Courtroom 2, 5th Floor
Before: The Honorable Howard Lloyd
I. INTRODUCTION
Defendants Technology Properties Limited (“TPL”), Patriot Scientific Corporation, and Alliacense Limited (collectively “Defendants”) and Plaintiffs Acer, Inc., Acer America Corp., and Gateway Inc. (collectively “Acer”) require the Court’s assistance in connection with two provisions of a proposed stipulated protective order in this action. First, Acer has moved for the insertion of a proposed paragraph 7.5 entitled “Treatment of Party or Third-Party’s Own Information or Analyses of Own Information.” See Mar Decl. In Support of Defendants’ Motion for a Protective Order, Docket No. 106, Ex. B at 7.5. Nothing remotely resembling such a provision is included in the Northern District model protective order. This proposed provision would give Acer an unfettered ability to disseminate to undisclosed third parties any TPL-designated confidential documents simply because Acer perceives these documents to be derivatives, analyses, or summaries of Acer’s confidential documents. This proposal would also circumvent procedures already in place in the model protective order for challenging confidentiality designations, whereby the parties must first meet and confer to resolve these disputes and seek judicial intervention, if necessary. See id., Ex. A, at 6.1-6.3. Indeed, although Acer claims in its Motion to Enter Protective Order and Allow Plaintiffs to Disclose Patent L.R. 3-1 Exchange, Docket No. 102 (“Acer’s Motion”), that the information it intends to disseminate pursuant to paragraph 7.5 relates to Defendants’ infringement contentions, the actual proposed language goes far beyond that. The proposed provision is so ambiguous and overbroad that it sweeps in another party’s work product (“nothing herein shall restrict a party from having access to portions of any derivatives, … reports, analyses, summaries [or] characterizations … that refer to the designated materials that the party has produced in discovery”). Acer’s provision would also give the parties full discretion (not subject to any restrictions or safeguards) to share with any “third party” information that “appears to be from or belong to that third-party or any derivatives, abstracts, briefs, memoranda, reports, analyses, summaries, characterizations or testimony that refer to that third-party’s information.” Docket No. 106, Ex. B at 7.5. Notably, there are no restrictions whatsoever on what these “third parties” can do once they have received the documents from Acer, so it is likely that this information would become publicly available. Acer’s contention that it needs to disclose claim charts to unspecified “third parties” because it does not know how its own products work is wholly unsupported and, if true, casts doubt on Acer’s good faith in bringing this declaratory relief action in the first place. Presumably, Acer had a good faith basis to assert that it does not infringe any valid claims of the patents-in-suit when it filed the declaratory judgment complaint in this case, and TPL is entitled to know Acer’s contentions in this regard.1 More fundamentally, Acer is free to communicate with its manufacturers to develop its defenses – it simply cannot share TPL’s confidentia
information with third parties in doing so. Accordingly, the Court should refuse to adopt Acer’s proposed paragraph 7.5. The second dispute deals with Defendants’ request to include language that modifies Section 7.3(b) in the model protective order to allow two Alliacense engineers—Divya Madhyasta and Torsten Partsch—access to Acer’s highly confidential materials. Madhyasta and Partsch are primarily responsible for conducting the necessary technical analysis in support of this patent litigation and working with Defendants’ outside counsel in connection with this litigation. Madhyasta and Partsch have unique technical expertise based on their years of experience with the field of technology described in the patents-in-suit. These engineers must have access to Acer’s highly confidential materials to lend their knowledge and skills to the technical analysis necessary to the efficient management and resolution of this case. While Acer’s proposed paragraph 7.5 does not include any obligation to preserve the Defendants’ confidential information or even identify the potential recipients of the infringement contentions, Defendants have specifically identified the two Alliacense engineers who request access to Acer’s highly confidential information and who have volunteered to execute strict acknowledgments of the protective order that prohibit their ability to use, share or communicate the substance of Acer’s highly confidential materials with anyone who prosecutes patents or 1 Defendants have served interrogatories on the Plaintiffs seeking the bases for their noninfringement and invalidity contentions set forth in the First Amended Complaint for Declaratory Judgment. develops products. See Docket No. 106, Ex. A at Ex. B [Acknowledgment and Agreement to be Bound re: Employees of Alliacense]. Precluding Madhyasta and Partsch from having access to Acer’s highly confidential materials would severely prejudice Defendants’ ability to efficiently prosecute their case. In contrast, there is minimal risk that there would be any inadvertent disclosure of confidential information, particularly in light of the strict acknowledgments the engineers are willing to make under oath. They do not participate in the development of products or prosecution of new patents, and they are not competitive decision makers under the Ninth Circuit precedent in Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992). Accordingly, the Court should adopt Defendants’ proposed protective order (attached as Ex. A to Docket No. 106), which includes the slightly modified paragraph 7.3(b) and the Acknowledgment to be Bound re: Employees of Alliacense.
II. ARGUMENT
A. Acer’s Proposed Paragraph 7.5 Would Improperly Allow Acer to Unilaterally Determine Whether Information Is Confidential and to Share Defendants’ Competitively Sensitive, Proprietary Information With Third Parties. 1. Acer’s Proposed Provision Creates Unnecessary Risks that Confidential Information Would Be Disclosed. During the meet-and-confer process, the parties agreed to most of the terms found in the Northern District model Protective Order, including paragraphs 6.1-6.3, which sets forth a meet and confer process followed by judicial intervention, if necessary, for a party to challenge the confidentiality designations of the other party. Acer has, nonetheless, proposed paragraph 7.5 entitled “Treatment of Party or Third-Party’s Own Information Or Analyses of Own Information,” which circumvents the procedural safeguards agreed upon by the parties and, instead, gives Acer unfettered discretion to determine whether information produced by TPL could be disseminated to other companies or even made available publicly. Acer’s proposed paragraph 7.5 states that “Nothing herein shall restrict a party with respect to the treatment and handling of its own information of any derivatives, abstracts, briefs, memoranda, reports, analyses, summaries, characterizations or testimony that refer to a party’s own information.” Id. at 7.5. This provision would allow Acer to unilaterally determine,
without ever notifying TPL, if a document “refer[s] to [its] own information,” and would give Acer free reign to then distribute any document that it so determines as being derivative of its own information. Acer’s proposal leaves TPL without recourse to intervene or object if Acer decides to share a TPL-designated confidential document with a third party. Moreover, Acer’s proposed section 7.5 creates substantial risk of TPL’s confidential and proprietary information being disclosed to other companies not involved in this litigation with no obligation whatsoever to maintain the information as confidential. Acer’s request to disclose Defendants’ Preliminary Infringement Contentions to “third parties” exemplifies the risk associated with Acer’s proposed addition. The Preliminary Infringement Contentions contain Product Charts that were first developed by Alliacense engineers prior to the commencement of this litigation. The Product Charts, prepared a part of Alliacense’s licensing program, include proprietary, confidential technical analysis and reverse engineering results compiled by Alliacense engineers. Acer’s proposed provision would allow Acer to independently decide that the infringement contentions only contain its own confidential information and that Acer could share the document with whomever it pleases without ever consulting with TPL. If the Product Charts found in Preliminary Infringement Contentions are disseminated to companies other than Acer and Gateway, many of these companies, which include prospective licensees, will use this confidential information to delay their licensing negotiations with Alliacense, demand lower royalty rates, or refuse to enter into a licensing agreement at all. The risk of competitive harm to Alliacense’s licensing program justifies the need for the parties to keep this information confidential. 2. Disclosure of the Preliminary Infringement Contentions to Third Parties Would Competitively Harm Alliacense’s Licensing Program. As Acer acknowledges, Federal Rule 26(c) and the Northern District model protective order contemplate confidentiality of trade secrets and other confidential commercial information. Fed. R. Civ. P. 26(c) (emphasis added).2 Additionally, courts have granted 2 Contrary to Acer’s unsupported assertion, Defendants have never claimed that their infringement contentions constituted a trade secret. protective orders protecting information that would harm a party’s competitive standing or put a party at a competitive disadvantage were the information to become public. In In Re Adobe Systems, Inc. Securities Litigation, the Northern District of California entered a protective order which covered “analysis of competitors.” 141 F.R.D. 155, 161 (N.D. Cal. 1992). There, the
Court granted a protective order keeping information about competitors confidential when the “information would, if revealed to a competitor, put a company at a competitive disadvantage.” Id. at 161 (citing In Re Reporters’ Committee, 773 F.2d 1325, 1333 (D.C. Cir. 1985) (“Courts have refused to permit their files to serve . . . as sources of business information that might harm a litigant’s competitive standing.”)). The information at issue in Adobe included “information about NEC’s evaluation of its competitor’s products vis-a-vis NEC products.” Id. at 162. Similarly, in Sorenson v. Riffo, 2008 U.S. Dist. Lexis 57866, at *25 (D. Utah July 30, 2008), the court agreed to amend a stipulated protective order to include a clause making “competitive technical information, including technical analyses or comparisons of competitor’s products” “CONFIDENTIAL INFORMATION – ATTORNEYS’ EYES ONLY.” Here, Acer’s request to disclose the Preliminary Infringement Contentions to undisclosed “third parties” would harm Defendant Alliacense’s licensing program. Alliacense is responsible for the licensing and enforcement of the patents-in-suit. See Leckrone Decl. at 2. Alliacense offers a “tiered” pricing structure for its licenses to the Moore microprocessor patent (“MMP”) portfolio, which includes the patents-in-suit. Id. at 3. This pricing structure rewards early movers with lower royalty rates. Id. These licenses typically exclude third parties such as component vendors and other indirectly related third parties. Id. To date, over 50 companies have executed license agreements with Alliacense for the MMP portfolio. Id. at 2. Currently, Alliacense is involved in ongoing discussions with companies in various industries, including companies known to supply components to Acer or partner with Acer, about licensing the MMP portfolio. Id. at 3 & 7. To help facilitate these discussions, Alliacense prepares and provides detailed “Product Charts” to prospective licensees to demonstrate how strategically significant product lines practice the inventions in the MMP portfolio. Id. at 4. These Product Reports, prepared outside the context of litigation and as part of Alliacense’s licensing efforts, depict the technical analysis, including significant reverse engineering work, conducted by Alliacense engineers that is `confidential and proprietary. Id. They include competitively sensitive, proprietary information such as the business analysis and selection of strategically significant products, the compilation of technical references and data used to support the analytical work, and the reverse engineering purchased by and/or conducted by Alliacense engineers. Id. at 6. Alliacense invests significant financial and human resources in the long sales cycles associated with this licensing business model. Id. The companies to which Acer seeks to share these Product Charts would pay substantial consideration to develop or purchase comparable information. Id. at 7. The Product Reports are a critical component of Alliacense’s licensing model, and prospective licensees
frequently compliment the detail, breadth, and organization of the Product Charts during the licensing negotiations. Id. at 4. Many of the prospective licensees operate in highly competitive industries. Id. at 3. As a result, the licensing discussions with prospective licensees must be conducted on a confidential
basis to prevent Alliacense’s competitively sensitive information from being disseminated to other prospective licensees or indirectly related third parties who supply components or partner with prospective licensees. Id. The Product Charts are stamped with “confidential” on every page to ensure that the information is treated as confidential by the recipients of the information. Id. at 5. In connection with its Preliminary Infringement Contentions in this action, Defendants attached Product Charts created by Alliacense that cover Acer and Gateway product lines. If Acer was suddenly free to share the content of the Product Reports with unidentified vendors or partners of its own choosing, some of whom are prospective licensees or companies known to be supporting the negotiating efforts of other potential licensees, these companies would use the content of the Product Charts to coordinate their responses and strategies in an effort to block and harm Alliacense’s licensing program in a coordinated refusal to deal. Id. at 7. Instead of analyzing whether its products need a license to the MMP portfolio, prospective licensees would be able to “compare notes” concerning the technical analysis found in the Product Charts. Disclosing the infringement contentions would permit potential licensees to prolong licensing negotiations by allowing prospective licensees to circulate Alliacense’s work product and facilitate endless debates concerning the details of Alliacense’s infringement analysis, the scope of another company’s potential license, and non-infringement arguments related to another company’s products. Id. at 6. This information could even wind up on the Internet. Id. at 7. Prospective licensees will leverage these negotiation tactics to try and avoid Alliacense’s tiered pricing structure and seek lower royalty rates. Id. at 6. In addition, if Acer is allowed to disseminate the Product Charts to “third parties,” the cost of enforcing and licensing the MMP portfolio will exponentially rise as Alliacense representatives will have to litigate the merits of its infringement contentions with every prospective licensee. This very notion—that information is competitively valuable by virtue of it being confidential without being a trade secret and that a company can be harmed if this information is used by unintended recipients—has been recognized by the Ninth Circuit in City Solutions, Inc. v. Clear Communications, Inc., which upheld a finding of unfair competition against a company who accessed and misused the
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III. CONCLUSION
For the reasons set forth above, Defendants respectfully request that the Court preclude Acer from inserting its proposed paragraph 7.5 into the parties’ protective order. Defendants also respectfully request that the Court enter the Defendants’ protective order that allows for disclosure, subject to a strict acknowledgement, of Acer’s highly confidential materials to Alliacense in-house engineers Partsch and Madhyasta.
Dated: March 24, 2009
I represent that concurrence in the filing of this document has been obtained from each of the other signatories which shall serve in lieu of their signatures on this document.
FARELLA BRAUN & MARTEL LLP
By: /s/ John L. Cooper
John L. Cooper
Attorneys for Defendants
TECHNOLOGY PROPERTIES LIMITED and ALLIACENSE LIMITED
Dated: March 24, 2009
KIRBY NOONAN LANCE & HOGE, LLP
By: /s/ Charles T. Hoge
Charles T. Hoge
Attorneys for Defendant
PATRIOT SCIENTIFIC CORPORATION
Die Anwälte sind aktiv.
New Pacer--DEFENDANTS’ OPPOSITION TO ACER’S MOTION TO ENTER PROTECTIVE ORDER AND ALLOW ACER TO DISCLOSE PATENT L.R. 3-1 EXCHANGE
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
ACER, INC., ACER AMERICA CORPORATION and GATEWAY, INC., Acer,
v.
TECHNOLOGY PROPERTIES LIMITED, PATRIOT SCIENTIFIC CORPORATION, and ALLIACENSE LIMITED,
Defendants.
DEFENDANTS’ OPPOSITION TO ACER’S MOTION TO ENTER PROTECTIVE
ORDER AND ALLOW ACER TO DISCLOSE PATENT L.R. 3-1 EXCHANGE
Date: April 14, 2009
Time: 10:00 a.m.
Dept.: Courtroom 2, 5th Floor
Before: The Honorable Howard Lloyd
I. INTRODUCTION
Defendants Technology Properties Limited (“TPL”), Patriot Scientific Corporation, and Alliacense Limited (collectively “Defendants”) and Plaintiffs Acer, Inc., Acer America Corp., and Gateway Inc. (collectively “Acer”) require the Court’s assistance in connection with two provisions of a proposed stipulated protective order in this action. First, Acer has moved for the insertion of a proposed paragraph 7.5 entitled “Treatment of Party or Third-Party’s Own Information or Analyses of Own Information.” See Mar Decl. In Support of Defendants’ Motion for a Protective Order, Docket No. 106, Ex. B at 7.5. Nothing remotely resembling such a provision is included in the Northern District model protective order. This proposed provision would give Acer an unfettered ability to disseminate to undisclosed third parties any TPL-designated confidential documents simply because Acer perceives these documents to be derivatives, analyses, or summaries of Acer’s confidential documents. This proposal would also circumvent procedures already in place in the model protective order for challenging confidentiality designations, whereby the parties must first meet and confer to resolve these disputes and seek judicial intervention, if necessary. See id., Ex. A, at 6.1-6.3. Indeed, although Acer claims in its Motion to Enter Protective Order and Allow Plaintiffs to Disclose Patent L.R. 3-1 Exchange, Docket No. 102 (“Acer’s Motion”), that the information it intends to disseminate pursuant to paragraph 7.5 relates to Defendants’ infringement contentions, the actual proposed language goes far beyond that. The proposed provision is so ambiguous and overbroad that it sweeps in another party’s work product (“nothing herein shall restrict a party from having access to portions of any derivatives, … reports, analyses, summaries [or] characterizations … that refer to the designated materials that the party has produced in discovery”). Acer’s provision would also give the parties full discretion (not subject to any restrictions or safeguards) to share with any “third party” information that “appears to be from or belong to that third-party or any derivatives, abstracts, briefs, memoranda, reports, analyses, summaries, characterizations or testimony that refer to that third-party’s information.” Docket No. 106, Ex. B at 7.5. Notably, there are no restrictions whatsoever on what these “third parties” can do once they have received the documents from Acer, so it is likely that this information would become publicly available. Acer’s contention that it needs to disclose claim charts to unspecified “third parties” because it does not know how its own products work is wholly unsupported and, if true, casts doubt on Acer’s good faith in bringing this declaratory relief action in the first place. Presumably, Acer had a good faith basis to assert that it does not infringe any valid claims of the patents-in-suit when it filed the declaratory judgment complaint in this case, and TPL is entitled to know Acer’s contentions in this regard.1 More fundamentally, Acer is free to communicate with its manufacturers to develop its defenses – it simply cannot share TPL’s confidentia
information with third parties in doing so. Accordingly, the Court should refuse to adopt Acer’s proposed paragraph 7.5. The second dispute deals with Defendants’ request to include language that modifies Section 7.3(b) in the model protective order to allow two Alliacense engineers—Divya Madhyasta and Torsten Partsch—access to Acer’s highly confidential materials. Madhyasta and Partsch are primarily responsible for conducting the necessary technical analysis in support of this patent litigation and working with Defendants’ outside counsel in connection with this litigation. Madhyasta and Partsch have unique technical expertise based on their years of experience with the field of technology described in the patents-in-suit. These engineers must have access to Acer’s highly confidential materials to lend their knowledge and skills to the technical analysis necessary to the efficient management and resolution of this case. While Acer’s proposed paragraph 7.5 does not include any obligation to preserve the Defendants’ confidential information or even identify the potential recipients of the infringement contentions, Defendants have specifically identified the two Alliacense engineers who request access to Acer’s highly confidential information and who have volunteered to execute strict acknowledgments of the protective order that prohibit their ability to use, share or communicate the substance of Acer’s highly confidential materials with anyone who prosecutes patents or 1 Defendants have served interrogatories on the Plaintiffs seeking the bases for their noninfringement and invalidity contentions set forth in the First Amended Complaint for Declaratory Judgment. develops products. See Docket No. 106, Ex. A at Ex. B [Acknowledgment and Agreement to be Bound re: Employees of Alliacense]. Precluding Madhyasta and Partsch from having access to Acer’s highly confidential materials would severely prejudice Defendants’ ability to efficiently prosecute their case. In contrast, there is minimal risk that there would be any inadvertent disclosure of confidential information, particularly in light of the strict acknowledgments the engineers are willing to make under oath. They do not participate in the development of products or prosecution of new patents, and they are not competitive decision makers under the Ninth Circuit precedent in Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992). Accordingly, the Court should adopt Defendants’ proposed protective order (attached as Ex. A to Docket No. 106), which includes the slightly modified paragraph 7.3(b) and the Acknowledgment to be Bound re: Employees of Alliacense.
II. ARGUMENT
A. Acer’s Proposed Paragraph 7.5 Would Improperly Allow Acer to Unilaterally Determine Whether Information Is Confidential and to Share Defendants’ Competitively Sensitive, Proprietary Information With Third Parties. 1. Acer’s Proposed Provision Creates Unnecessary Risks that Confidential Information Would Be Disclosed. During the meet-and-confer process, the parties agreed to most of the terms found in the Northern District model Protective Order, including paragraphs 6.1-6.3, which sets forth a meet and confer process followed by judicial intervention, if necessary, for a party to challenge the confidentiality designations of the other party. Acer has, nonetheless, proposed paragraph 7.5 entitled “Treatment of Party or Third-Party’s Own Information Or Analyses of Own Information,” which circumvents the procedural safeguards agreed upon by the parties and, instead, gives Acer unfettered discretion to determine whether information produced by TPL could be disseminated to other companies or even made available publicly. Acer’s proposed paragraph 7.5 states that “Nothing herein shall restrict a party with respect to the treatment and handling of its own information of any derivatives, abstracts, briefs, memoranda, reports, analyses, summaries, characterizations or testimony that refer to a party’s own information.” Id. at 7.5. This provision would allow Acer to unilaterally determine,
without ever notifying TPL, if a document “refer[s] to [its] own information,” and would give Acer free reign to then distribute any document that it so determines as being derivative of its own information. Acer’s proposal leaves TPL without recourse to intervene or object if Acer decides to share a TPL-designated confidential document with a third party. Moreover, Acer’s proposed section 7.5 creates substantial risk of TPL’s confidential and proprietary information being disclosed to other companies not involved in this litigation with no obligation whatsoever to maintain the information as confidential. Acer’s request to disclose Defendants’ Preliminary Infringement Contentions to “third parties” exemplifies the risk associated with Acer’s proposed addition. The Preliminary Infringement Contentions contain Product Charts that were first developed by Alliacense engineers prior to the commencement of this litigation. The Product Charts, prepared a part of Alliacense’s licensing program, include proprietary, confidential technical analysis and reverse engineering results compiled by Alliacense engineers. Acer’s proposed provision would allow Acer to independently decide that the infringement contentions only contain its own confidential information and that Acer could share the document with whomever it pleases without ever consulting with TPL. If the Product Charts found in Preliminary Infringement Contentions are disseminated to companies other than Acer and Gateway, many of these companies, which include prospective licensees, will use this confidential information to delay their licensing negotiations with Alliacense, demand lower royalty rates, or refuse to enter into a licensing agreement at all. The risk of competitive harm to Alliacense’s licensing program justifies the need for the parties to keep this information confidential. 2. Disclosure of the Preliminary Infringement Contentions to Third Parties Would Competitively Harm Alliacense’s Licensing Program. As Acer acknowledges, Federal Rule 26(c) and the Northern District model protective order contemplate confidentiality of trade secrets and other confidential commercial information. Fed. R. Civ. P. 26(c) (emphasis added).2 Additionally, courts have granted 2 Contrary to Acer’s unsupported assertion, Defendants have never claimed that their infringement contentions constituted a trade secret. protective orders protecting information that would harm a party’s competitive standing or put a party at a competitive disadvantage were the information to become public. In In Re Adobe Systems, Inc. Securities Litigation, the Northern District of California entered a protective order which covered “analysis of competitors.” 141 F.R.D. 155, 161 (N.D. Cal. 1992). There, the
Court granted a protective order keeping information about competitors confidential when the “information would, if revealed to a competitor, put a company at a competitive disadvantage.” Id. at 161 (citing In Re Reporters’ Committee, 773 F.2d 1325, 1333 (D.C. Cir. 1985) (“Courts have refused to permit their files to serve . . . as sources of business information that might harm a litigant’s competitive standing.”)). The information at issue in Adobe included “information about NEC’s evaluation of its competitor’s products vis-a-vis NEC products.” Id. at 162. Similarly, in Sorenson v. Riffo, 2008 U.S. Dist. Lexis 57866, at *25 (D. Utah July 30, 2008), the court agreed to amend a stipulated protective order to include a clause making “competitive technical information, including technical analyses or comparisons of competitor’s products” “CONFIDENTIAL INFORMATION – ATTORNEYS’ EYES ONLY.” Here, Acer’s request to disclose the Preliminary Infringement Contentions to undisclosed “third parties” would harm Defendant Alliacense’s licensing program. Alliacense is responsible for the licensing and enforcement of the patents-in-suit. See Leckrone Decl. at 2. Alliacense offers a “tiered” pricing structure for its licenses to the Moore microprocessor patent (“MMP”) portfolio, which includes the patents-in-suit. Id. at 3. This pricing structure rewards early movers with lower royalty rates. Id. These licenses typically exclude third parties such as component vendors and other indirectly related third parties. Id. To date, over 50 companies have executed license agreements with Alliacense for the MMP portfolio. Id. at 2. Currently, Alliacense is involved in ongoing discussions with companies in various industries, including companies known to supply components to Acer or partner with Acer, about licensing the MMP portfolio. Id. at 3 & 7. To help facilitate these discussions, Alliacense prepares and provides detailed “Product Charts” to prospective licensees to demonstrate how strategically significant product lines practice the inventions in the MMP portfolio. Id. at 4. These Product Reports, prepared outside the context of litigation and as part of Alliacense’s licensing efforts, depict the technical analysis, including significant reverse engineering work, conducted by Alliacense engineers that is `confidential and proprietary. Id. They include competitively sensitive, proprietary information such as the business analysis and selection of strategically significant products, the compilation of technical references and data used to support the analytical work, and the reverse engineering purchased by and/or conducted by Alliacense engineers. Id. at 6. Alliacense invests significant financial and human resources in the long sales cycles associated with this licensing business model. Id. The companies to which Acer seeks to share these Product Charts would pay substantial consideration to develop or purchase comparable information. Id. at 7. The Product Reports are a critical component of Alliacense’s licensing model, and prospective licensees
frequently compliment the detail, breadth, and organization of the Product Charts during the licensing negotiations. Id. at 4. Many of the prospective licensees operate in highly competitive industries. Id. at 3. As a result, the licensing discussions with prospective licensees must be conducted on a confidential
basis to prevent Alliacense’s competitively sensitive information from being disseminated to other prospective licensees or indirectly related third parties who supply components or partner with prospective licensees. Id. The Product Charts are stamped with “confidential” on every page to ensure that the information is treated as confidential by the recipients of the information. Id. at 5. In connection with its Preliminary Infringement Contentions in this action, Defendants attached Product Charts created by Alliacense that cover Acer and Gateway product lines. If Acer was suddenly free to share the content of the Product Reports with unidentified vendors or partners of its own choosing, some of whom are prospective licensees or companies known to be supporting the negotiating efforts of other potential licensees, these companies would use the content of the Product Charts to coordinate their responses and strategies in an effort to block and harm Alliacense’s licensing program in a coordinated refusal to deal. Id. at 7. Instead of analyzing whether its products need a license to the MMP portfolio, prospective licensees would be able to “compare notes” concerning the technical analysis found in the Product Charts. Disclosing the infringement contentions would permit potential licensees to prolong licensing negotiations by allowing prospective licensees to circulate Alliacense’s work product and facilitate endless debates concerning the details of Alliacense’s infringement analysis, the scope of another company’s potential license, and non-infringement arguments related to another company’s products. Id. at 6. This information could even wind up on the Internet. Id. at 7. Prospective licensees will leverage these negotiation tactics to try and avoid Alliacense’s tiered pricing structure and seek lower royalty rates. Id. at 6. In addition, if Acer is allowed to disseminate the Product Charts to “third parties,” the cost of enforcing and licensing the MMP portfolio will exponentially rise as Alliacense representatives will have to litigate the merits of its infringement contentions with every prospective licensee. This very notion—that information is competitively valuable by virtue of it being confidential without being a trade secret and that a company can be harmed if this information is used by unintended recipients—has been recognized by the Ninth Circuit in City Solutions, Inc. v. Clear Communications, Inc., which upheld a finding of unfair competition against a company who accessed and misused the
der Text ist zu lang!!
III. CONCLUSION
For the reasons set forth above, Defendants respectfully request that the Court preclude Acer from inserting its proposed paragraph 7.5 into the parties’ protective order. Defendants also respectfully request that the Court enter the Defendants’ protective order that allows for disclosure, subject to a strict acknowledgement, of Acer’s highly confidential materials to Alliacense in-house engineers Partsch and Madhyasta.
Dated: March 24, 2009
I represent that concurrence in the filing of this document has been obtained from each of the other signatories which shall serve in lieu of their signatures on this document.
FARELLA BRAUN & MARTEL LLP
By: /s/ John L. Cooper
John L. Cooper
Attorneys for Defendants
TECHNOLOGY PROPERTIES LIMITED and ALLIACENSE LIMITED
Dated: March 24, 2009
KIRBY NOONAN LANCE & HOGE, LLP
By: /s/ Charles T. Hoge
Charles T. Hoge
Attorneys for Defendant
PATRIOT SCIENTIFIC CORPORATION
