BrightEdge Technologies, Inc. v. Searchmetrics, GmbH. et al

Filing 118

ORDER by Judge Maria-Elena James granting 112 Motion to Modify Protective Order (cdnS, COURT STAFF) (Filed on 1/13/2015)

1
2
3

UNITED STATES DISTRICT COURT

4

NORTHERN DISTRICT OF CALIFORNIA

5
6

BRIGHTEDGE TECHNOLOGIES, INC.,

Case No. 14-cv-01009-WHO (MEJ)

Plaintiff,
7

ORDER RE: MOTION TO MODIFY
THE STIPULATED PROTECTIVE
ORDER

v.
8
9

SEARCHMETRICS, GMBH., et al.,

Re: Dkt. No. 112

Defendants.
10

United States District Court
Northern District of California

11
12

INTRODUCTION

13

In this patent infringement case, the parties previously entered into a stipulated protective

14

order regarding the disclosure and use of discovery materials (the “Protective Order”). Dkt. No.

15

58. Plaintiff BrightEdge Technologies, Inc. (“BrightEdge”) now seeks to modify the Protective

16

Order to allow use of confidential documents in collateral litigation. Dkt. No. 112. Defendants

17

Searchmetrics GmbH and Searchmetrics, Inc. (“Searchmetrics”) have filed an Opposition (Dkt.

18

No. 115) and BrightEdge filed a Reply (Dkt. No. 116). The Court finds this matter suitable for

19

disposition without oral argument and VACATES the January 22, 2015 hearing. See Fed. R. Civ.

20

P. 78(b); Civil L.R. 7-1(b). Having considered the parties’ positions, relevant legal authority, and

21

the record in this case, the Court issues the following order.

22

BACKGROUND

23

BrightEdge provides customers with search engine optimization (“SEO”) and analytical

24

tools. Sec. Am. Compl. ¶ 4, Dkt. No. 19. It accuses Searchmetrics, a competitor in the field of

25

SEO technology, of directly infringing certain BrightEdge patents related to SEO technology. Id.

26

¶¶ 5-43. On September 3, 2014, the Court issued the Protective Order, which states, “A Receiving

27

Party may use Protected Material that is disclosed or produced by another Party or by a Non-Party

28

in connection with this case only for prosecuting, defending, or attempting to settle this litigation.”

1

Protective Order at 9.
On November 21, 2014, the presiding judge in this matter, the Honorable William H.

2
3

Orrick, stayed the case until June 1, 2015. Order Staying Case Pursuant to the Parties’ Partial

4

Agreement (“Stay Order”), Dkt. No. 109. As part of the Stay Order, the Court provided a

5

procedure by which the parties may seek to use documents produced in this action in any other

6

proceeding. Id. at 3-4. The Stay Order provides as follows:

7

If a receiving party seeks to use information or documents produced
in this action as Protected Material under the Stipulated Protective
Order in any other proceeding, including any Trial proceeding
brought by Searchmetrics before the Patent Trial and Appeal Board
or in any state court action, the receiving party must first disclose in
writing to the producing party the specific information or documents
sought to be used and the purpose of the use of the information or
documents. The parties will meet and confer within 14 days of
receipt of the receiving party’s written request. The producing party
may either (1) agree to use of the information or documents in the
other proceeding or (2) refuse use of the information or documents
in the other proceeding. If the producing party refuses use, the
receiving party must then file a motion before Magistrate Judge
James to seek permission to modify the Stipulated Protective Order
to allow the use of the specifically identified information or
documents in the other proceeding. This procedure must be followed
each time a party seeks to use information or documents, which
were produced in this action by another party as Protected Material
under the Stipulated Protective Order, in any other proceeding.

8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17

Id.

18

Pursuant to the procedure in the Stay Order, on November 27, 2014, counsel for

19

BrightEdge sent counsel for Searchmetrics a list of 46 documents that it sought to use in

20

BrightEdge Techs., Inc. v. Gabriel Martinez, 113-CV-256794 (Cal. Sup. Ct. Santa Clara) (the

21

“Martinez case”). Swenson Decl., Ex. C at 5-8, Dkt. No. 112-1. Gabriel Martinez is a former

22

BrightEdge employee who now works at Searchmetrics. Mot. at 6. In the Martinez case, filed

23

November 26, 2013, BrightEdge alleges misappropriation of trade secrets and breach of contract.

24

Opp’n at 1. BrightEdge has not yet brought any claims against Searchmetrics in that case. Id.

25

For each document in its request, BrightEdge stated its “Purpose of Use in Other

26

Proceeding” as follows: “Evidence that Searchmetrics and its employees misappropriated and used

27

BrightEdge’s confidential and/or trade secret information and committed other related state law

28

violations.” Swenson Decl., Ex. C at 6-8. The parties met and conferred on December 11, 2014,
2

1
2

but were unable to reach an agreement. Id. ¶ 5.
In the present Motion, BrightEdge seeks permission to use 37 documents in the Martinez

3

case that were already produced by Searchmetrics in this case. The documents consist of emails to

4

and/or from: (1) Gabriel Martinez, (2) Searchmetrics employees BrightEdge anticipates naming in

5

the Martinez case, and (3) Searchmetrics’ founder and CEO. Mot. at 6-8. BrightEdge argues the

6

documents are highly relevant to the trade secret misappropriation claim against Martinez, as well

7

as collateral proceedings arising from an amended complaint that it intends to file adding

8

Searchmetrics and its employees as defendants to the Martinez case. Id. at 5.

9
10

LEGAL STANDARD
District courts have broad discretion to decide when a protective order is appropriate and

United States District Court
Northern District of California

11

the degree of protection required. Fed. R. Civ. P. 26(c). A district court also has inherent

12

authority to grant a motion to modify a protective order where good cause is shown. Phillips ex

13

rel. Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1213 (9th Cir. 2002). The party

14

asserting good cause bears the burden of showing that specific prejudice or harm will result if the

15

motion is not granted. Id. at 1210-11.

16

The Ninth Circuit “strongly favors access to discovery materials to meet the needs of

17

parties engaged in collateral litigation.” Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122,

18

1131 (9th Cir. 2003) (citing Beckman Indus. v. Int’l Ins. Co., 966 F.2d 470, 475 (9th Cir. 1992)).

19

While a motion to modify a protective order should not be granted automatically, “where

20

reasonable restrictions on collateral disclosure will continue to protect an affected party’s

21

legitimate interests in privacy, a collateral litigant’s request to the issuing court to modify an

22

otherwise proper protective order so that collateral litigants are not precluded from obtaining

23

relevant material should generally be granted.” Id.

24

In determining whether to grant a motion to modify a protective order, the court must first

25

consider whether the moving party has demonstrated “the relevance of the protected discovery to

26

the collateral proceedings and its general discoverability therein.” Id. This inquiry turns on “the

27

degree of overlap in facts, parties, and issues between the suit covered by the protective order and

28

the collateral proceedings.” Id. (internal citations omitted). The court next weighs the
3

1

“countervailing reliance interest of the party opposing modification against the policy of avoiding

2

duplicative discovery.” Id. at 1133. “Reliance will be less with a blanket [protective] order”

3

because such an order does not require the “good cause” showing required by Rule 26(c) with

4

respect to any particular document. Id. (quoting Beckman, 966 F.2d at 476). Where a blanket

5

protective order is at issue, “any legitimate interest . . . in continued secrecy as against the public

6

at large can be accommodated by placing [the collateral litigants] under the same restrictions on

7

use and disclosure contained in the original protective order.” Id. (quoting United Nuclear Corp.

8

v. Cranford Ins. Co., 905 F.2d 1424, 1428 (10th Cir. 1990)).
DISCUSSION

9
10

A.

Relevance

United States District Court
Northern District of California

11

In its Motion, BrightEdge argues that each of the 37 documents are relevant in the

12

Martinez case because they suggest that Searchmetrics and its employees used improper means to

13

acquire knowledge of BrightEdge’s trade secret information. Mot. at 6. BrightEdge maintains

14

that 23 of the documents are directly relevant to the trade secret claim against Martinez, five

15

documents are relevant to the trade secret misappropriation claims that it intends to bring against

16

Cullen McAlpine (another former BrightEdge employee who is now employed at Searchmetrics),

17

six documents are relevant to the trade secret misappropriation claims that it intends to bring

18

against Shaun Silver (Director of Sales at Searchmetrics), and all 37 documents are relevant to the

19

trade secret misappropriation claims that it intends to bring against Searchmetrics. Id. at 6-8.

20

In response, Searchmetrics maintains that it is unclear where and how BrightEdge intends

21

to use the 37 protected documents, as the proposed modification to the Protective Order would

22

allow it to use the 37 documents in “any actual or potential collateral litigation.” Opp’n at 4-5

23

(quoting Proposed Amended Protective Order, Dkt. No. 112-3). Searchmetrics notes that this

24

proposed revision is in direct conflict with the relief requested by BrightEdge’s Motion, which

25

seeks only to use the documents in the Martinez case. As BrightEdge provides no information

26

regarding other collateral proceedings in which it contemplates using the documents,

27

Searchmetrics contends it is “difficult or impossible to evaluate the relevance of the documents to

28

the ambiguous collateral proceedings.” Id. at 5.
4

To the extent that BrightEdge seeks to use the 37 protected documents only in the Martinez

2

case, Searchmetrics argues that BrightEdge’s own descriptions of certain of these documents show

3

that they have no relevance to Mr. Martinez. Id. (citing Smith Decl., Ex. 2, Dkt. No. 111 (Index to

4

Exhibits), stating that Exs. 4-6, 8-10, 29, and 36-39 are relevant to a “future trade secret case”)).

5

To the extent that BrightEdge intends to use certain documents in potential claims to be filed

6

against Searchmetrics and/or other Searchmetrics employees, there is no current collateral

7

proceeding against Searchmetrics or those other Searchmetrics employees, and thus it is premature

8

to consider use of these documents in a case not yet filed. Id. Searchmetrics also notes that some

9

of the documents are dated well before Mr. Martinez joined Searchmetrics, and BrightEdge has

10

therefore failed to show how these documents could be relevant to the Martinez case. Id. (citing

11
United States District Court
Northern District of California

1

Smith Decl., Exs. 9-10, 23-24, 37-38).
Upon review of the parties’ arguments, the Court finds that BritghtEdge has adequately

12
13

established the relevance of the protected discovery to the Martinez case. Of approximately

14

150,000 documents produced by Searchmetrics in this litigation, BrightEdge seeks to use 37

15

emails to and/or from Searchmetrics employees. BrightEdge intends to use these documents to aid

16

in amending its complaint in the Martinez case, in which it intends to bring trade secret and other

17

state law claims against Searchmetrics and two additional employees. BrightEdge has provided

18

specificity regarding the relevance of each of the 37 documents, which relate to Searchmetrics’

19

alleged direct use of BrightEdge’s trade secret information.1 See Smith Decl., Ex. 2 (Index

20

detailing the relevance of the 37 identified documents). Accordingly, this factor weighs in favor

21

of modification. See CBS Interactive, 257 F.R.D. at 205 (permitting modification of protective

22

order in patent case where plaintiff sought “specific modification of one clause of the protective

23

order to permit it to use discovery information from this litigation for the purposes of initiating

24
1

25
26
27
28

Because the relevant documents are under seal, the Court need not enumerate or specifically
describe the discovery materials herein. CBS Interactive, Inc. v. Etilize, Inc., 257 F.R.D. 195, 205
(N.D. Cal. 2009) (citing United States v. Corbitt, 879 F.2d 224, 228 (7th Cir. 1989) (“While this
Court has recognized that the common law right of access creates a strong presumption in favor of
public access to materials submitted as evidence in open court, this presumption should not apply
to materials properly submitted to the court under seal.”); Phillips, 307 F.3d at 1213 (holding that
the usual presumption of the public’s right of access is rebutted when a party attaches a sealed
discovery document to a non-dispositive motion)).
5

1

collateral litigation.”).

2

B.

Countervailing Interests
The court next weighs the “countervailing reliance interest of the party opposing

3
4

modification against the policy of avoiding duplicative discovery.” Foltz, 331 F.3d at 1133.

5

“Reliance will be less with a blanket [protective] order” because such an order does not require the

6

“good cause” showing required by Rule 26(c) with respect to any particular document. Id.

7

(quoting Beckman, 966 F.2d at 476). Where a blanket protective order is at issue, “any legitimate

8

interest . . . in continued secrecy as against the public at large can be accommodated by placing

9

[the collateral litigants] under the same restrictions on use and disclosure contained in the original

10

protective order.” Id. (quoting United Nuclear, 905 F.2d at 1428).
Here, the disclosure sought is not as broad as full public disclosure; BrightEdge seeks a

United States District Court
Northern District of California

11
12

specific modification of one clause of the Protective Order to permit it to use documents from this

13

litigation in pending collateral litigation. All other clauses and provisions of the Protective Order

14

will stand, including the disclosure restrictions of highly confidential materials to attorneys’ eyes

15

only.

16

Searchmetrics argues it is premature to modify the Protective Order, as there is no pending

17

collateral litigation against it or the two additional Searchmetrics employees BrightEdge intends to

18

add to the Martinez case. The absence of a pending suit against the target party is an important

19

factor in cases denying a motion to modify a protective order. See, e.g., H.L. Hayden Co. of N.Y.

20

v. Siemens Med. Sys., Inc., 106 F.R.D. 551, 555-56 (S.D.N.Y. 1985) (“One explanation for these

21

decisions is that the absence of any pending litigation against the target makes it less likely that

22

modification of the protective order will avoid costly and repetitive discovery.”). However,

23

BrightEdge has already identified the claims it intends to bring and the relevance of the documents

24

to those claims. BrightEdge first notified Searchmetrics and Judge Orrick of its intent to bring

25

these claims on November 12, 2014, when it stated that it would drop them from the proposed

26

amended complaint in this federal action. Swenson Decl., Ex. B (Hr’g Tr. Nov. 12, 2014), Dkt.

27

No. 112-01 (“We are willing to take off all of the state law issues at this time that we’ve requested

28

amendment, and we will proceed in State Court with those claims at this time.”). Because
6

1

BrightEdge has provided the specific claims it intends to bring in the Martinez case, and has

2

identified the relevance of the 37 documents it seeks to use, the Court finds the lack of pending

3

collateral litigation against Searchmetrics and its two employees holds little weight in the analysis.

4

See CBS Interactive, 257 F.R.D. at 205 (granting modification of protective order where there was

5

no pending collateral litigation, but plaintiff asserted it needed the discovery to pursue claims for

6

trade secret misappropriation in state court).

7

Moreover, Searchmetrics previously argued that BrightEdge’s trade secret claims against
Searchmetrics must not be a part of this case but rather must be filed in state court. BrightEdge

9

moved to amend the complaint in this case to bring trade secret misappropriation and other state

10

law claims against Searchmetrics and two of its employees. Dkt. No. 80. Searchmetrics opposed

11
United States District Court
Northern District of California

8

this motion (Dkt. No. 92), arguing that BrightEdge’s trade secret claims must be brought in the

12

Martinez case: “BrightEdge’s proposed state law claims against Searchmetrics are part of the same

13

case or controversy in BrightEdge’s case against Mr. Martinez,” and “[a]llowing BrightEdge’s

14

state law claims against Mr. Martinez and against Searchmetrics to proceed on different tracks in

15

state court and federal court is highly inefficient.” Dkt. No. 92-3 at 11 (emphasis in original).

16

Searchmetrics repeated this in its reply in support of its motion to stay this case:

17
18
19
20

Such state law claims (though they are baseless) are more
appropriately added (if at all) to the pending state trade secret
misappropriation case against Searchmetrics’ employee Gabriel
Martinez, as BrightEdge’s allegations against Searchmetrics arise
from Mr. Martinez’s alleged actions and thus share a common
nucleus of fact with BrightEdge’s claims against Mr. Martinez.

21

Dkt. No. 91 at 12. At the November 12, 2014 hearing, Searchmetrics agreed that BrightEdge

22

should have the option to pursue its trade secret misappropriation and related state law claims

23

either in this action or in State Court. Swenson Decl., Ex. 1 (Tr. Hr’g Nov. 12, 2014) at 18:17-20

24

(“They want to be able to have the option of moving forward here or filing elsewhere, and we

25

think it should be one or the other when a stay is issued.”). Judge Orrick agreed: “I wouldn’t take

26

supplemental jurisdiction on the state law claims because I think they are properly – they are more

27

properly in the State Court case as opposed to this one.” Id. at 24:7-10. Despite previously

28

expressing that BrightEdge should pursue its trade secret claims in state court, and Judge Orrick
7

1

supporting that position by providing a procedure for using documents produced in this case to do

2

so, Searchmetrics now attempts to prohibit BrightEdge from using documents it has already

3

obtained to bring the trade secret claims in state court. Searchmetrics cannot have it both ways.
Searchmetrics next argues that BrightEdge is attempting to enlist this Court’s assistance in

4
5

circumventing a state court order denying BrightEdge’s motion to compel production from

6

Searchmetrics. Opp’n at 6. Specifically, Searchmetrics notes that in the Martinez case,

7

BrightEdge issued a subpoena with 57 requests for document production from Searchmetrics, but

8

that request was denied. Id. at 7. However, while it appears that the state court denied

9

BrightEdge’s motion to compel production from Searchmetrics as a third party, there is nothing
preventing BrightEdge from serving discovery on Searchmetrics as a party to obtain the same

11
United States District Court
Northern District of California

10

information. “Whether a collateral litigant would ultimately obtain access to the discovery

12

materials is not something this court can even determine.” CBS Interactive, 257 F.R.D. at 205-06

13

(citing Foltz, 331 F.3d at 1133; Superior Oil Co. v. Am. Petrofina Co. of Tex., 785 F.2d 130, 130

14

(5th Cir. 1986) (“Questions of the discoverability in the state litigation of the materials discovered

15

in the federal litigation are, of course, for the state courts”)).

16

Searchmetrics also argues that German and European Union privacy laws prohibit

17

disclosure of personal data, and the decision for production of such data in this patent case cannot

18

justify production of and use of the information in other unrelated and unidentified litigation.2

19

Opp’n at 8. Instead, Searchmetrics contends that the court presiding over the collateral litigation

20

would need to perform a case-specific, multi-factor balancing test with respect to the specific

21

collateral litigation to determine whether the information should be produced. Id. However, this

22

Court previously held that the German and European privacy laws do not prohibit disclosure of

23

Searchmetrics’ documents at issue here. Dkt. No. 56 (Aug. 13, 2014 Discovery Order).

24

Searchmetrics has already produced the 37 documents, and it does not identify any personal

25

information in the 37 documents that warrants protection under the privacy laws. Further, the only

26

contemplated defendants are Searchmetrics and its employees. It is unclear how use of the

27
2

28

Searchmetrics GmbH is a German limited liability company with its principal place of business
in Berlin, Germany. SAC ¶ 2.
8

1
2

already-disclosed documents would violate privacy laws.
Finally, Searchmetrics notes that it produced approximately 150,000 documents in reliance

3

on the Protective Order, which specifically states that the protected documents would be used in

4

this case only. Opp’n at 10. As Searchmetrics and BrightEdge are competitors, Searchmetrics

5

maintains that its reliance interest is heightened, thus weighing in favor of the continued protection

6

of Searchmetrics’ information. Id. “Ninth Circuit precedent also looks to the needs of parties

7

engaged in pending litigation and, in particular, the reliance interests on the protective order of the

8

party opposing its modification.” CBS Interactive, 257 F.R.D. at 206 (citing Beckman, 966 F.2d at

9

475; Foltz, 331 F.3d at 1132 (“modification should generally be granted only where reasonable
restrictions on collateral disclosure will continue to protect an affected party’s legitimate interests

11
United States District Court
Northern District of California

10

in privacy.”)). Here, the Court finds that Searchmetrics has not shown that its privacy interests

12

will be affected or harmed by the disclosure of any particular documents produced in discovery in

13

the Martinez case. BrightEdge has already obtained the documents and seeks to use them only

14

against Searchmetrics and its employees. Further, there is no indication that Searchmetrics’

15

information would be exposed to any third parties; the documents would have equally restricted

16

access under the protective order in the Martinez case, and the parties could modify that protective

17

order if needed. “Mere reliance on a blanket protective order does not justify a refusal to modify it

18

when a reasonable request for disclosure has been made.” Id. (citing Beckman, 966 F.2d at 476).
CONCLUSION

19
20

Based on the analysis above, BrightEdge’s Motion to Modify the Stipulated Protective

21

Order is GRANTED. The Protective Order entered on September 3, 2014 will be modified to

22

permit use of the 37 documents solely in the Martinez case. The parties shall meet and confer and

23

file a stipulation as an addendum to the Protective Order.

24
25
26
27

IT IS SO ORDERED.
Dated: January 13, 2015
______________________________________
MARIA-ELENA JAMES
United States Magistrate Judge

28
9