Zest IP Holdings, LLC et al v. Implant Direct MFG. LLC et al

Filing 77

ORDER Regarding Production of Patent Applications. Plaintiff's request to compel defendants to disclose the two patent applications is granted. On or before November 23, 2011, defendants are ordered to produce unredacted copies of the entire pat ent application in Application No. '637 and Application No. '658 as reflected in Bates Stamp Nos. IDL 003314-003702, as provided to the Court in camera. Signed by Magistrate Judge William V. Gallo on 11/14/11.(All non-registered users served via U.S. Mail Service)(kaj)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ZEST IP HOLDINGS, LLC, et al.,

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Plaintiffs

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v.

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IMPLANT DIRECT MFG., LLC,
et al.,

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Defendants.
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Civil No. 10-0541-LAB(WVG)
ORDER REGARDING PRODUCTION
OF PATENT APPLICATIONS

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On

October

12,

2011,

the

Court

conducted

a

Discovery

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Conference in this case. At the Discovery Conference, the Court

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discussed with counsel the potential production of Defendants’

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patent applications, as sought by Plaintiffs. At the conference, the

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Court ordered Defendants to produce to the Court, for in camera

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review, the patent applications at issue. On October 17, 2011,

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Plaintiffs’ counsel submitted briefing on the issues presented. On

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October 20, 2011, Defendants’ counsel submitted briefing on the

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issues presented, as well as the patent applications. The Court

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received from Defendants two patent applications. The Court has

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reviewed in camera, the patent applications.

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After careful review of Defendants’ in camera submission, the

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pleadings, the parties’ letter briefs, and relevant case law and

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statutory authority, it is plainly obvious to the Court that

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Defendants’ two patent applications1/ fall squarely within the ambit

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of Federal Rule of Civil Procedure 26. Defendants’ two patent

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applications are relevant to the parties’ claims and defenses and/or

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are likely to lead to admissible evidence in this action.

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Defendants object to the disclosure on several grounds: (1)

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relevance; (2) confidentiality; (3) fear that opposing counsel will

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not honor the Protective Order filed in this case; (4) the attorney-

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client

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considered these objections and finds as follows:

privilege;

and

(5)

judicial

privilege.

The

Court

has

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1. Relevance

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The relevance of the patent applications is obvious to the

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Court as both applications make extensive reference to Plaintiffs’

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patents, (the ‘219 and ‘447 patents), which are the subject of this

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action. The Court does not share Defendants’ restrictive view of

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relevance that the only comparison that need be made is between

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Plaintiffs’ patent claims and Defendants’ allegedly infringing

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products. “Many courts have concluded that such applications are

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relevant because they ‘may contain information or admissions that

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clarify, define or interpret the claims of the patent in suit.’”

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Caliper Technologies Corp. v Molecular Devises Corp., 213 F.R.D.

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555, 561 (N.D. Cal. 2003) citing Tristrata Technology, Inc. v.

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1/

One application, ‘658, appears to have been abandoned because
sufficient time has passed without Defendants replying to the U.S.
Patent and Trademark Office’s letter of rejection. The other
application, ‘637, also was recently rejected by the U.S. Patent and
Trademark Office. However, the time for Defendants to reply to the
rejection has not yet expired. Accordingly, it is premature to
conclude that application ‘637 has been abandoned, as well.

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Neoteric Cosmetics, Inc., 35 F. Supp 2d 370, 372 (D. Del. 1998).

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This Court concludes the same. Relevant evidence regarding willful

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infringement, prior art, and equivalency may be present within

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Defendants’ two patent applications.

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2. Confidentiality

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The Court recognizes that Plaintiffs and Defendants are

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“fierce competitors” as Defendants contend. However, this intense

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rivalry does not trump Plaintiffs’ right and access to relevant

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information they need to prosecute their case. The Court has

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approved a two-tier Protective Order (Doc. No. 30) proposed by the

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parties in this action. The Protective Order provides guidelines for

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the classification of information to protect the information’s

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confidentiality. The Protective Order, at paragraph 4, allows the

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party producing a document to designate the document as “Confiden-

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tial” and “Confidential - For Counsel Only.” Moreover, the Protec-

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tive Order, at paragraph 22, allows a party to object to the

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disclosure of information on any ground “other than the mere

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presence of Confidential Information.” Clearly, the parties, and

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especially

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information regarding products which are the life-blood of their

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respective businesses, contemplated the necessity of having to

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release such information to each other and took positive steps to

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propose

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protection provided by the Protective Order, which was jointly

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submitted to the Court, lacks justification.

Defendants,

such

a

in

Protective

a

case

Order.

involving

Defendants’

highly

unease

sensitive

with

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the

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3. Fear That Opposing Counsel May Not Honor

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The Protective Order

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This objection is closely related to the previous objection.

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The basis for Defendants’ fear is that Plaintiffs’ counsel is a

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member of the same law firm that prosecutes Plaintiffs’ patent

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applications. Defendants contend that disclosure to Plaintiffs’

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counsel of the two patent applications at issue may result in

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intentional or even inadvertent disclosure to Plaintiffs’ patent

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prosecutors. Defendants further assert that if that were to occur,

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it

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Although Plaintiffs’ counsel has orally assured Defendants that no

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such disclosure would occur, Defendants nonetheless demand Plain-

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tiffs’ counsel execute a written document that states that the

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patent prosecutors in her law firm will be insulated from any

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disclosure made to her. The Court is uncertain what additional

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protection is afforded Defendants by such a writing that is not

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afforded to it already by counsel’s oral assurances, made in the

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Court’s presence, that no such disclosure will occur. Counsel’s word

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is her bond and this is sufficient for the Court. Moreover, the

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Court assumes, until shown otherwise, that all attorneys practicing

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before it conduct themselves ethically and in accordance with all

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agreements and orders such as the Protective Order entered in this

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case. Defendant has not produced any evidence to the Court which

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would call into question

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ally, Plaintiffs’ counsel is undoubtedly aware of the serious

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consequences

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information.

would

cause

for

irreparable

any

harm

to

their

business

Plaintiffs’ counsel integrity.

unauthorized

disclosure

of

interests.

Addition-

confidential

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4. The Attorney-Client Privilege

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Defendants have not cited any authority to support their

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position that their patent applications, even though submitted to

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the U.S. Patent and Trademark Office pursuant to 35 U.S.C. §122(a),

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(b)(2)(B)(2)(A)(i), fall within the scope of the attorney-client

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privilege. Defendants argue that they submitted the patent applica-

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tions pursuant to § 122 “in absolute secrecy” and to seek the U.S.

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Patent and Trademark Office’s “legal advice” on the patentability of

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its products. However, there is ample case authority, which will be

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addressed in the next section of this Order, that supports a court’s

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authority to order disclosure of patent applications submitted to

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the U.S. Patent and Trademark Office, pursuant to § 122.

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5. Judicial Privilege

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It is unclear to the Court exactly what is meant by “judicial

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privilege.” However, taken in context, it appears that Defendants

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allude to the protection afforded to patent applications submitted

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pursuant to § 122. Defendants correctly cite the holding in Ideal

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Toy Corp v. Tyco Industries, Inc., 478 F. Supp. 1191 (D. Del. 1979)

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that upheld the non-disclosure to Tyco of information contained

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within Ideal’s two abandoned and one pending patent application. In

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Ideal, the court acknowledged, as did Tyco, that § 122's secrecy

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provisions were “not applicable to the United States District

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Court.” Id. at 1193. This statement was conveniently ignored by

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Defendants in their letter brief, as was the Ideal court’s many

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citations to other cases in which disclosure was ordered. The Ideal

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court also acknowledged that disclosure “require[d] a balancing of

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competing policy and litigation interests,” Id. at 1193, and it was

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this balancing, not § 122's purported secrecy provisions, that

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ultimately

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ordered.

convinced

the

court

that

disclosure

should

not

be

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Defendants do not cite any other case law for the proposition

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that disclosure should not be ordered because § 122 provides “safe

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cover” for its confidentiality. That is for good reason. There is

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abundant authority, as cited in Ideal, that § 122 does not prevent

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disclosure. In addition to the many cases cited by the Ideal court,

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see also, Britt Tech Corp v. L&A Products, Inc., 223 F. Supp. 126

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(D. Minn. 1963)(Section 122 “enjoins only the patent office to

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maintain

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Sprinkler

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1995)(“Courts agree that the secrecy of applications should be

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preserved when possible. . .

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is not binding on the courts, it is respected in them.” Disclosure

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was ordered.); Caliper Technologies v. Molecular Devices, 213 F.R.D.

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555,

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applications should be preserved when possible but burden is on

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party seeking confidentiality to establish burden in production.

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Disclosure was ordered.); Crown Machine & Tool Co v. KVP-Sutherland

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Paper Co., 244 F. Supp. 543 (N.D. Cal. 1965) (“[Section] 122 does

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not have the effect of rendering patent applications privileged for

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judicial purposes.” Disclosure was ordered.)

562

the

confidence.”

Co.

(N.D.

v.

Grinnell

Cal.

2003)

Disclosure
Corp.,

was

897

ordered.);

F.Supp

225

Central

(E.D.

Pa.

Although this directive [Section 122]

(Secrecy

of

pending

and

abandoned

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Defendants have offered a compromise solution. While the

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offered compromise is generous, such a solution hardly satisfies

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their obligation to produce relevant and critical information to

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Plaintiffs.

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The Court is mindful of Defendants’ concerns in producing

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highly sensitive and potentially damaging information to their

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competitors. The Court has reviewed and considered the “competing

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policy and litigation interests” attendant to this inquiry. It is

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quite clear to the Court that disclosure must be made and that

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adequate

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interests.

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safeguards

exist

to

protect

Defendants’

proprietary

Plaintiff’s request to compel Defendants to disclose the two

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patent applications is hereby GRANTED.

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2011, Defendants are ordered to produce unredacted copies of the

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entire patent application in Application No. ‘637 and Application

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No. ‘658 as reflected in Bates Stamp Nos. IDL 003314-003702, as

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provided to the Court in camera.

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Production

as

noted

above

is

On or before November 23,

subject

to

the

following

conditions:

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(1) The Court will retain Defendants’ in camera submissions

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until any and all disputes related to their disclosure have been

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resolved;

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(2)

Pursuant

to

the

Protective

Order,

Defendants

shall

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appropriately designate the patent applications prior to producing

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them to Plaintiffs’ counsel;

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(3) Pursuant to the Protective Order, Plaintiffs’ counsel

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shall safeguard the patent applications and shall not share them

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with anyone other than appropriately designated individuals;

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(4) Pursuant to the Protective Order, Plaintiffs’ counsel

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specifically shall not disclose the patent applications, or any of

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the contents of the patent applications, to Plaintiffs or to any

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attorney in her law firm that prosecutes, or has prosecuted patents,

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on behalf of Plaintiffs.

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IT IS SO ORDERED.

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DATED:

November 14, 2011

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Hon. William V. Gallo
U.S. Magistrate Judge

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