Netflix, Inc. v. Blockbuster, Inc.

Filing 56

Netflix, Inc. v. Blockbuster, Inc.

Doc. 56

Case 3:06-cv-02361-WHA Case 3:06-cv-02361-WHA

Document 56 Document 53

Filed 10/03/2006 Filed 10/04/2006

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1 KEKER & V AN NEST, LLP JEFFREY R. CHANIN - #103649

2 DARALYN J. DUR - #169825 ASHOK RAANI - #200020
3 710 Sansome Street

San Francisco, CA 94111-1704
4 Telephone: [phone]

Facsimile: [phone]
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Attorneys for Plaintiff
6 NETFLIX, INC.
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UNTED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

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NETFLIX, INC., a Delaware corporation,
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Case No. C 062361 WHA

Plaintiff,
v.

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BLOCKBUSTER, INC., a Delaware
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PLAINTIFF NETFLIX'S MISCELLANEOUS ADMINISTRATIVE REQUEST TO FILE A SURRPL Y TO PARTIES' JOINT STATEMENT AND (PROPOSED) ORDER
Complaint fied: April

15 Defendant,
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4, 2006

Date: TBD Time: TBD
Dept: Courtroom A, 15th Floor Judge: Hon. Joseph C. Spero

AN RELATED COUNTERCLAIMS
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. PLAINTIFF'S MISCELLANEOUS ADMINISTRATIVE REQUEST TO FILE A SURRPLY TO PARTIES' JOINT STATEMENT AND (PROPOSED) ORDER CASE NO. C 06 2361 WHA Dockets.Justia.com

Case 3:06-cv-02361-WHA Case 3:06-cv-02361-WHA

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PlaintiffNetflx, Inc. moves the Court, under Civil Local Rule 7-11, to permit Netflx to

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file a sureply-which Netflx has attached-to the Parties' Joint Statement. The Cour "may
permit the filing of a surreply at its discretion," and should permit the filing when "the pary
making the motion would be unable to contest matters presented to the court for the first time in

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the opposing party's reply." Groobert v. President & Dirs. o/Georgetown Coil., 219 F. Supp.
2d 1, 13 (D.D.C. 2002) (citation and internal quotation marks omitted).

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Netflx and Defendant Blockbuster, Inc. ("Blockbuster") agreed to submit a

joint

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submission on the proposed Protective Order, each exchanging initial and reply statements

simultaneously. One ofthe disputed issues is whether in-house counsel should be entitled to

review materials designated "Attorneys Eyes Only"-Neflix says no, Blockbuster says yes. For
the first time on reply, Blockbuster sprang the declaration of its in-house counsel, Bryan P.

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Stevenson, upon Netflix. The declaration purports to explain Stevenson's duties, and why he
should be entitled to review "Attorneys Eyes Only" material (as the sur-reply explains, the
declaration falls short of its aim). Had Blockbuster provided this declaration with its moving
papers as it should have, Netflx could have responded to the declaration in Netflx's reply-just

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as Blockbuster did, in asserting objections to the Declaration of Charlotte Falla, which Netfix
had provided with its moving papers. Because Netflix had no chance to respond, it seeks leave

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to fie a sureply.
Fairness dictates that Netfix have the opportunity to respond to the new material
presented in Blockbuster's reply papers. The Court should grant this Request.

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Dated: October 3,2006

Respectfully submitted,
KEKER & V AN NEST, LLP

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By: Isl Ashok Ramani
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Attorneys For PlaintiffNETFLIX, INc.

PLAINTIFFS' MISCELLANEOUS ADMINISTRATIVE REQUEST TO FILE A SURRPL Y TO PARTIES' JOINT STATEMENT & (PROPOSED) ORDER

CASE NO. C 06 2361 WH

Case 3:06-cv-02361-WHA Case 3:06-cv-02361-WHA

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1 The Court finds that Netflix, Inc. should be permitted to file a surreply to respond to the
2 purported new evidence that Blockbuster submitted for the first time on reply. Thus, it is

3 ORDERED that Netflix may fie the sureply attached as Exhibit A to Netfix's
4 miscellaneous administrative request..
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UNIT ED

6 Dated:

October 4, 2006

S

S DISTRICT TE C TA

By:

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F D IS T IC T O R

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2 PLAINTIFFS' MISCELLANEOUS ADMINISTRATIVE REQUEST TO FILE A SURRPL Y TO PARTIES' JOIN STATEMENT & (PROPOSED) ORDER CASE NO. C 06 2361 WHA

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THE HON. JOSEPH C. SPERO . Spero UNITED STATEShMAGISTRATE JUGE Josep C

Judge

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Case 3:06-cv-02361-WHA Case 3:06-cv-02361-WHA

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EXHIBIT A

Case 3:06-cv-02361-WHA Case 3:06-cv-02361-WHA

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2 DARLYN J. DUR - #169825
ASHOK RAANI - #200020
3 710 Sansome Street

1 KEKER & V AN NEST, LLP JEFFREY R. CHANIN - #103649

San Francisco, CA 94111-1704
4 Telephone: [phone]

Facsimile: [phone]
5

Attorneys for Plaintiff
6 NETFLIX, INC.
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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NETFLIX, INC., a Delaware corporation,
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Case No. C 06 2361 WHA

Plaintiff,
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NETFLIX'S SUR-REPLY STATEMENT TO PARTIES' JOINT STATEMENT
Complaint fied: April 4, 2006

v.
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BLOCKBUSTER, INC., a Delaware
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Defendant.

Date: TBD Time: TBD

Dept: Courtoom A, 15th Floor
Judge: Hon. Joseph C. Spero

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AND RELATED COUNTERCLAIMS
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NETFLIX'S SUR-REPLY STATEMENT TO PARTIES' JOINT STATEMENT CASE NO. C 06 2361 WHA

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1 INTRODUCTION
2 Netflx and Blockbuster agreed to make a

joint submission on disputed Protective Order

3 terms, each exchanging initial and reply statements simultaneously. But, at 12:05 am on
4 Tuesday, September 12, 2006, after Netflix gave Blockbuster its reply, Blockbuster sprung a
5 declaration of its in-house counsel, Bryan P. Stevenson,

upon Netflix. The declaration was not

6 provided with Blockbuster's opening papers as evidentiary materials should have been, but with
7 Blockbuster's reply, when Netfix would have no chance to respond. Netflx thus submits this

9 ARGUMENT
8 Sur-reply.

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Blockbuster Fails to Articulate a Need for its In-House Counsel Mr. Stevenson to Have Access to Netflx's Most Sensitive Information.
Mr. Stevenson's vague and general statements, purorting to describe his distance from

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competitive decision making at Blockbuster, only heighten Netflx's concern that Mr.
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Stevenson's and his staffs access to and possession ofNetflx's most sensitive, attorneys-eyes14

only competitive information presents Netflx with an unacceptable risk of inadvertent disclosure
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or possible misuse. This concern is of course heightened because Blockbuster is Netflx's key,
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direct competitor.
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Mr. Stevenson thrce repeats in his declaration "it is important" for him to review
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Netflx's highly-sensitive documents, but with no explanation whatsoever why his access to
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Netflx's most sensitive information is so "important." Stevenson Decl. ir 4, at 2:23, :26, :28;
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3:1. At the same time, Mr. Stevenson concedes that he has no need to see "most" ofNetflix's
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Attorney's-Eyes-Only documents, but again with no explanation as to what AEO documents he
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claims he must see. Stevenson Decl. ir 3. It is hardly justified to open Netflix's vault to a
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competitor's employee based on such a conclusory explanation.
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B.
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Blockbuster Fails to Demonstrate that Mr. Stevenson is Not Involved In

Competitive Decision Making at Blockbuster.
Stevenson's alleged need were properly identified (which it is not),

27 this Cour would need far more concrete assurances that Mr. Stevenson does not engage or

28 collaborate in competitive decision making for Blockbuster. Stevenson, however, carefully
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NETFLIX'S SUR-REPLY STATEMENT TO PARTIES' JOINT STATEMENT

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1 declares only that he is "not responsible for designing products, setting prices, conceiving

2 marketing campaigns, or making (non-legal) hiring decisions," not that he never engages in such
3 things, and never collaborates with or counsels those who do. Id. ir 2. Notably, Stevenson/ails
4 to declare that he is never "responsible for" making decisions about business transactions and

5 intellectual-property issues. Nor does he foreswear involvement in the host of other possible

6 competitive activities in which Blockbuster's in-house counsel might engage-for example,
7 paricipating in standard setting or industry groups where information about trends or practices

8 may be shared, or structuring settlements with third parties such as the movie studios and ISP's
9 Blockbuster has subpoenaed for whose business Netflix and Blockbuster compete. Nor does

10 Stevenson commit to refrain from involvement in competitive-decision-making activities in the
11 future. In short, even if Stevenson had declared a compelling need to see Netflx's AEO

12 information, he has failed to provide the necessar assurances to reward him with such access,
13 required by Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1471 (9th Cir. 1992), Us.
14 Steel Corp. v. United States, 730 F.2d 1465, 1468

(Fed. Cir. 1984), and Carpenter Techn. Corp.

15 v. Armco, Inc., 132 F.R.D. 24 (RD. Pa. 1990).

16 In Carpenter, the Court considered a dispute over a proposed protective order identical to
17 the one at issue here; Carpenter wanted to provide two of its in-house counsel with its

18 competitor's confidential information, and Arco did not. Id. at 26. The Court considered the
19 job responsibilities and declarations of each in-house attorney to determine if either could safely
20 access Arco's confidential information. The Cour hewed to the analysis prescribed in Us.
21 Steel, 730 F.2d, at 1469, that denial of

access to an in-house attorney must be made "on the basis

22 of each individual counsel's actual activity and relationship with the party represented." Id. at 27

23 (quoting US. Steel, 730 F.2d at 1469).

24 One of the attorneys, Welty, declared he only had "authority to initiate and settle

25 litigation as well as execute written contracts and agreements on behalf of the corporation." Id.
26 at 28 (emphasis added). Welty further declared:

27 I have no direct responsibility or authority over competitive decisions. .
28 the pricing of

Specifically, I have no direct responsibility or authority over decisions regarding products or services sold by Carenter. Nor do I have direct
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1 responsibility or authority over decisions regarding product design or production.

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Id. (emphasis in original). Finding Welty's declaration of

no "direct responsibility"

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indeterminate, the Court denied Mr. Welty access to Arco's confidential information. Id.
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Welty did not declare that he was never involved with activities other than the ones he described,
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nor that the areas of

his authority did not ever involve competitive decision-making.

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In contrast to Welty's declaration, the second in-house attorney, Mr. Pretz declared:
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I have absolutely no involvement in decisions regarding pricing of products or services sold by Carenter, nor do I participate in marketing decisions. I also
have absolutely no involvement in decisions made by Carpenter regarding product

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design or production.

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Id. at 27-28 (emphasis added).
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Mr. Stevenson's carefully-worded declaration shares much in common with Welty's, and

little with Pretz's. Mr. Stevenson declares that he handles "a heavy caseload" that includes
complex business disputes (Stevenson Decl. ir 2) and, like Welty, he presumably has authority to

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initiate and settle cases, and to execute related written contracts and agreements. Like Welty,
Mr. Stevenson also states: "I am not responsible for designing products, setting prices,
conceiving marketing campaigns, or making hiring decisions outside the Legal Department," but

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notably, he does not declare that he has "no responsibility" as regards other kinds of competitive
matters, including the business transactions and "intellectual property prosecution" matters, as to

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which Stevenson declares that "others are assigned."i What Mr. Stevenson means to include
within the phrase "intellectual prop"erty prosecution" is indeterminate, though presumably he "

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means patent prosecution. But, the description plainly does not encompass other kinds of
competitive and strategic decisions about intellectual property, such as enforcement decisions,

or

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the licensing or acquisition of

patents that might be asserted against Netflix. Id. Moreover, even

as to the specific activities as to which Stevenson declares he is "not responsible," he does not

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declare that he has no involvement in, does not paricipate in, and does not consult with his
1Mr. Stevenson does not declare that other in-house attorneys are assigned the sole responsibility for these matters.
3 NETFLIX'S SUR-REPLY STATEMENT TO PARTIES' JOINT STATEMENT CASE NO. C 06 2361 WHA

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1 colleagues about them. Pretz, by contrast, declared he had "absolutely no involvement" in such

2 activities. Nor does Stevenson commit not to engage in these activities in the future.
3 Stevenson's inability to declare that he is, or will be, walled off from the decision makers or the
4 decision-making process with respect to all of

Blockbuster's competitive decision-making

5 activities suggests that he is in fact not walled off from them, but in any event provides

6 absolutely no assurances that he is.

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Mr. Stevenson Does Not Possess Specialized Knowledge Helpful to Outside Counsel in This Case
In further contrast to Mr. Stevenson, the Cour in Carpenter noted that Mr. Peltz had

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specialized knowledge of a technical nature that would be helpful to outside counseL. Id. at 28.
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Mr. Stevenson makes no claim to have any technical or other specialized knowledge that his
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outside counsel require, let alone knowledge that will "be essential to the proper handling" of
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this case. !d.
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Carte-Blanche Access for Mr. Stevenson to Netflx's Most Competitively Sensitive Information Is Inappropriate

15 Finally, Mr. Stevenson argues, without further basis, that "a blanet prohibition" against
16 his access to Attorney's Eyes Only documents "would be highly detrimental" to his ability to
17 cary out his duties. But he has failed to identify any category of

Netflx AEO information that it

18 is essential for him to see, or that would cause great detriment to Blockbuster's case ifhe did not

19 see it. The answer to concerns about a "blanet prohibition" cannot be "blanket access."

20 N etflx' s Proposed Protective Order allows for modification to permit access by
21 Blockbuster's in-house counsel to specific AEO information, if and when such a need should

22 arise. But to allow Blockbuster's in-house counsel "blanket access" to everyhing from the

23 outset, when he admits he does not need to see everything, when he canot even ariculate what
24 it is he needs to review, or why, and without any employment walls to safeguard against
25 inadvertent disclosure or misuse is entirely antithetical to the Ninth Circuit and the Federal

26 Circuit's decisions in Brown Bag and US. Steel, respectively.
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1 CONCLUSION
2 This Cour's application of

the Brown Bag balancing test to Mr. Stevenson's declaration

3 should tip strongly in favor of entering a proposed protective order that protects Netflx from the
4 risk of inadvertent disclosure or misuse of its highly confidential materials by Mr. Stevenson or

5 his in-house personnel by restricting Netflix's confidential AEO information to access and use

6 by Netflx's outside counsel, and by safeguarding such Netfix information from being brought
7 into its competitor's house-where it canot be controlled.

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Dated: October 3,2006

Respectfully submitted,
KEKER & VANNEST, LLP

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By: Isl Ashok Ramani
Attorneys For PlaintiffNETFLIX, INC.

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NETFLIX'S SUR-REPLY STATEMENT TO

PARTIES' JOINT STATEMENT

CASE NO. C 06 2361 WH