Profil Institut fur Stoffwechselforschung GmbH v. Prosciento, Inc.

Filing 73

ORDER Re: Proposed Protective Order [ECF No. #64 ]. Signed by Magistrate Judge Barbara Lynn Major on 7/3/2017. (Attachments: #1 Exhibit A, #2 Exhibit B) (jjg)

Steffin Azod LLP
Attorneys at Law

1801 Century Park East, 24th Floor
Los Angeles, California 90067
Telephone: [phone]
[e-mail]

June 13, 2017

Via Email
Hon. Barbara L. Major
11th Floor (Carter/Keep)
Suite 1110
333 West Broadway
San Diego, CA 92101
Profil v. ProSciento – 3:16-cv-01549

Dear Judge Major:
This email sets forth Profil’s position regarding the proposed Protective Order.
The Parties are in the process of negotiating a Protective Order and have reached an impasse on
several disputed issues, including whether the Protective Order should foreclose the possibility
of an international comity analysis. This issue is of great importance to Profil, a German
company, that must comply with EU and German data privacy laws.

The Parties also have encountered difficulties agreeing to the format and timing for a joint
motion for entry of a Protective Order. For example, ProSciento insists on opening the brief with
a one-sided introduction that does not include Profil’s position, and ProSciento has not agreed to
reasonable page-limits for each side. Moreover, because of the foreign law issues involved,
Profil requires time to prepare appropriate declarations to present its case.

Steffin Azod LLP
Attorneys at Law

Accordingly, Profil respectfully requests the Court to set a briefing schedule for the Parties to
fully explain their positions, with opening briefs due on Thursday, June 22, 2017 and reply briefs
due on Friday, July 7, 2017.

A Motion to Dismiss is Still Pending before the Court
On June 9, 2017, Profil moved to dismiss ProSciento’s Fourth Counterclaim for Intentional
Interference with Contractual Relations. A hearing on Profil’s motion is set for July 31, 2017.
Accordingly, the parties' initial pleadings will not be complete until at least July 31 at the
earliest. Notably, Profil’s motion to dismiss may result in the joinder of a now third-party, MTB
Zier GmbH (“MTB”), which also will need to agree to comply with any Protective Order entered
here. Although Profil does not wish to delay the start of discovery in this case, to conserve
judicial resources, the Court may wish to stay resolution of the parties' Protective Order disputes
until the pleadings are settled and all parties are joined.

Proposed Protective Order – Disputed Issues
To the best of Profil’s knowledge, the central disputes regarding the Protective Order are as
follows: (1) whether the Protective Order should foreclose the possibility of an international
comity analysis on issues relating to EU privacy laws; (2) whether trade secrets alleged to have
been misappropriated may be designated “HIGHLY CONFIDENTIAL – OUTSIDE
COUNSEL’S EYES ONLY” (hereinafter “OCEO”); (3) the scope of information that may be
designated as OCEO, (4) whether Protected Personal Data may be designated as OCEO; (5)
whether the parties must identify employees and in-house counsel given access to confidential
information; and (6) whether a party may designate its own employees as an expert or consultant
with access to highly-confidential and trade-secret information.

However, as of this morning, ProSciento had not provided an updated version of its proposed
Protective Order and there is still some ambiguity as to what issues are disputed. Therefore,
Profil reserves the right to supplement or otherwise modify this list as necessary to fully address
its positions.

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Steffin Azod LLP
Attorneys at Law

Paragraphs 1.g, 21.f, and 21.g – Application of Supreme Court’s “Comity Analysis”
The parties have several disputes concerning the application of European and German data
protection laws to discovery in this action. European data privacy laws create strict guidelines for
the collection and transfer of personal data outside of the European Union, where “personal data”
is broadly defined as “any information relating to an identified or identifiable natural person.”
See, e.g., Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995.
Failure to comply with these laws can result in serious liability, up to and including criminal
penalties.

In particular, Profil proposes the following language for the Protective Order:
1.g. The term “Protected Personal Data” means information that a Party or non-party believes in
good faith to be protected from disclosure by data privacy laws of the European Union.
Examples of such data protection laws include but are not limited to Directive 95/46/EC of the
European Parliament and of the Council of 24 October 1995 on the Protection of Individuals
with Regard to the Processing of Personal Data and on the Free Movement of Such Data, 1995
O.J. (L281/31) (European Union personal information); and the German Federal Data Protection
Act (Germany personal information).

21.f. Modification by Court. This Order is subject to further court order based upon public
policy or other considerations, and the Court may modify this Order sua sponte in the interests of
justice. The United States District Court for the Southern District of California is responsible for
the interpretation and enforcement of this Order. All disputes concerning Protected Material,
however designated, produced under the protection of this Order shall be resolved by the United
States District Court for the Southern District of California.

21.g. Rules Remain Unchanged. Nothing herein shall alter or change in any way the discovery
provisions of the Federal Rules of Civil Procedure, the Local Rules for the United States District
Court for the Southern District of California, or the Court’s own orders. Identification of any
individual pursuant to this Protective Order does not make that individual available for
deposition or any other form of discovery outside of the restrictions and procedures of the

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Steffin Azod LLP
Attorneys at Law

Federal Rules of Civil Procedure, the Local Rules for the United States District Court for the
Southern District of California, or the Court’s own orders.

In contrast, ProSciento proposes adding language to paragraph 1.g. stating that foreign data
privacy laws “shall not be asserted as[] grounds to deny or refuse to search for or produce any
relevant discovery in these Actions, as the parties’ discovery obligations shall be governed by the
United States Federal Rules of Civil Procedure.” In addition, ProSciento’ proposes adding
paragraph 21.f., which would require that all disputes regarding the order “be governed by
California law, without regard to California choice-of-law provisions,” and adding paragraph
21.g., which would require that the Federal Rules of Civil Procedure “govern the Actions.” Profil
is concerned that such language could be used to foreclose an international comity analysis,
which may be required later in this litigation, and believes that this language should be left out of
the Protective Order.

Federal Rule of Civil Procedure 26 grants the Court discretion to limit discovery on several
grounds, including international comity. See In re Rubber Chems. Antitrust Litig., 486 F. Supp.
2d 1078, 1081 (N.D. Cal. 2007) (citing Societe Nationale Industrielle Aerospatiale v. U.S. Dist.
Court for S. Dist. of Iowa, 482 U.S. 522, 544 (1987)). Comity “is the recognition which one
nation allows within its territory to the legislative, executive or judicial acts of another nation,
having due regard both to the international duty and convenience, and to the rights of its own
citizens or of other persons who are under the protection of its laws.” Aerospatiale, 482 U.S. at
544 n.27 (internal citation omitted).

In undertaking a comity analysis, a court must balance several factors related to the specific
request and information at issue, including inter alia the importance of the documents to the
litigation and the degree of specificity of the request. See Société Internationale Pour
Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 204–06 (1958)
(adopting a balancing “comity analysis” to determine application of foreign law to U.S.
disputes). It is premature for the Court to undergo such an analysis now, when there is no actual
request at issue. In accordance with the Supreme Court’s decision in Société Internationale,

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Steffin Azod LLP
Attorneys at Law

Profil believes that such disputes should be considered on a case-by-case bases as the need
arises.

Proposed Protective Order Paragraphs 9.a – Scope of Information that May Be Designated
as “Highly Confidential – Outside Counsel’s Eyes Only”
Profil proposes the following language for paragraph 9.a. of the Protective order:
A Producing Party may designate Discovery Material as “HIGHLY CONFIDENTIAL –
OUTSIDE COUNSEL’S EYES ONLY” if the Producing Party believes in good faith that it
contains or reflects trade secret(s), as defined in the Uniform Trade Secrets Act and California
Civil Code 3426-3426.11, or that it contains or reflects information that is extremely sensitive
and disclosure of which would create a substantial risk of serious harm that could not be avoided
by less restrictive means.

ProSciento, in contrast, proposes a narrower definition of “HIGHLY CONFIDENTIAL –
OUTSIDE COUNSEL’S EYES ONLY” information (hereinafter “OCEO”) as limited to “trade
secret(s), as defined in the Uniform Trade Secrets Act and California Civil Code 3426-3426.11”
that have not been alleged to have been misappropriated by the other Party. ProSciento’s
proposal is inappropriately narrow and would expose Profil to competitive harm if it were forced
to disclose extremely sensitive information to its direct competitor. See Nutratech, Inc. v.
Syntech (SSPF) Intern., Inc., 242 F.R.D. 552, 555 (C.D. Cal. 2007) (“Courts commonly issue
protective orders limiting access to sensitive information to counsel and their experts.”).
Indeed, Profil’s proposed language is reasonable and tracks this Court’s model Protective Order
for patent cases, which states the following:

The Court should adopt similar language here to protect the Parties against competitive harm,
while explicitly acknowledging that trade secret information presumptively falls into this
category.

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Steffin Azod LLP
Attorneys at Law

Proposed Protective Order Paragraph 9.a – Access to Profil’s Trade Secrets by ProSciento
Employees
ProSciento proposes adding the following language to paragraph 9.a. of the Protective Order:
To resolve any doubt: information that a party alleges was misappropriated will, if designated at
all, be designated as ‘Confidential,’ or ‘Highly Confidential,’ but may not be designated ‘Highly
Confidential—Outside Counsel’s Eyes Only.

Profil and ProSciento are direct competitors. Courts recognize the danger of sharing trade secret
information with employees of a direct competitor. See Nutratech, Inc. v. Syntech (SSPF) Intern.,
Inc., 242 F.R.D. 552, 555 (C.D. Cal. 2007) (“Courts commonly issue protective orders limiting
access to sensitive information to counsel and their experts.”); ViaSat, Inc. v. Acacia Commc'ns,
Inc., 2017 WL 840876, at *2 (S.D. Cal. Mar. 2, 2017) (“The disclosure of confidential
information on an ‘attorneys’ eyes only’ basis is a routine feature of civil litigation involving
trade secrets.”).

ProSciento’s proposed language would allow its employees—including competitive decisionmakers at ProSciento—access to many of Profil’s trade secrets. These trade secrets are extremely
valuable and provide Profil with a competitive advantage in the marketplace. Although Profil
alleges that ProSciento has misappropriated many of its trade secrets, it may be that ProSciento
no longer has some of those trade secrets in its possession. If Profil were required to provide
ProSciento’s in-house counsel and employees with access to trade secrets not already in
ProSciento’s possession, that would be very harmful to Profil; there would be nothing to prevent
ProSciento from misusing those trade secrets to compete directly against Profil.
Notably, Profil’s proposed order would not restrict ProSciento’s access to information already in
ProSciento’s possession—it would only restrict access to documents produced by Profil under
the appropriate designation. Thus, to the extent ProSciento already has the alleged trade secrets
in its possession, ProSciento’s employees would be able to review that information in assisting
with the defense.

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Steffin Azod LLP
Attorneys at Law

Proposed Protective Order Paragraph 9.b – Designation of “Protected Personal Data” as
Outside Counsel’s Eyes Only and Compliance with EU Data Privacy Laws
The parties dispute whether the Protective Order should allow the parties to designate protected
personal information as OCEO. In particular, Profil proposes the following language in
paragraph 9.b:
Because Protected Personal Data constitutes highly sensitive materials requiring special
protection, to the extent production of such Protected Personal Data becomes necessary to the
prosecution or defense of the case, a Producing Party may designate such Protected Personal
Data as “HIGHLY CONFIDENTIAL – OUTSIDE COUNSEL’S EYES ONLY.” To facilitate
the production of such Protected Personal Data, and ensure each Party’s compliance with
European data privacy laws, prior to the production of Protected Personal Data, each Party will
agree to be bound by, and execute a copy of, the European Commission’s “Standard contractual
clauses for the transfer of personal data from the Community to third countries (controller to
controller transfers)” attached hereto as Exhibit B.

In contrast, ProSciento proposes striking this language altogether. The European commission has
created guidelines for the permissible transfer of protected personal data. Profil contends that the
Protective Order should require the parties to follow these guidelines and allow the parties to
designate protected personal information as OCEO. See Paragraph 9.b. Profil intends to submit a
Declaration by German counsel with its brief explaining that the parties can comply with the
relevant EU and German data privacy laws by following these procedures. By contrast,
ProSciento contends that the parties should not have to follow these guidelines and should not be
allowed to designate protected personal information as OCEO.

Proposed Protective Order Paragraph 10 – Identification of Employees and In-House
Counsel with Access to Confidential Information
The parties dispute whether a Receiving Party should provide notice of the employee(s) to whom
it will disclose the Protected Materials pursuant to the notice and right-to-object requirements in
Paragraph 10 of the Protective Order.

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Steffin Azod LLP
Attorneys at Law

In Profil’s PPO, the notice and pre-authorization requirements in paragraph 10 apply to any
disclosure of Protected Materials to a party’s employee(s). The parties have agreed to provide
notice under paragraph 10 before Protected Materials are disclosed to outside consultants and
experts. There is no reason to treat employees of a Receiving Party any differently from outside
experts in this context. Indeed, the danger that Protected Materials could be misused for
competitive advantage is much greater with respect to employees of a direct competitor. Perhaps
in recognition of this danger, the model Protective Order of this Court contemplates that the
parties will identify in-house counsel before they receive protected information; it includes a
blank space for the identification of such individuals, as highlighted below:

The fact that Profil and ProSciento are direct competitors strongly weighs in favor of subjecting
all Receiving Party employees to the notice and right-to-object requirements in Paragraph 10.
Any concerns that imposing such a requirement would impermissibly invade a Receiving Party's
work product or litigation strategy are strongly outweighed by the countervailing concern of
guarding against the misuse of the Protected Materials. See Wreal LLC v. Amazon.com, Inc., No.
14-21385, 2014 WL 7273852, at *3-4 (S.D. Fla. Dec. 19, 2014) (imposing a requirement to
disclose non-testifying experts and consultants before such individuals receive confidential
information, and noting that “several district courts,” including “the Southern District of
California, have similar model orders that require such disclosure”).

Proposed Protective Order Paragraph 20.e. – Designated Experts and Consultants May
Not be Party Employees
The parties dispute whether they may be permitted to designate their own employees as experts
and consultants and provide them with access to Protected Material under the Protective Order.
In particular, Profil proposes adding the following paragraph 20.e., whereas ProSciento would
omit this requirement entirely:
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Steffin Azod LLP
Attorneys at Law

No designated expert or consultant given access to Protected Material under any provision(s) of
this Order may be an employee of a Party.

Profil and ProSciento are direct competitors and permitting such unfettered disclosure to party
employees would create a substantial risk of competitive harm. Indeed, if the parties were
allowed to designate their own employees as experts and consultants this would eviscerate the
provisions of the Protective Order designed to limit access to such confidential information given
to each party’s direct competitor. For example, paragraph 8.b.ii. would limit to three the number
of corporate representatives given access to the other party’s Highly Confidential information;
but that requirement would be meaningless if a party could designate their employees as experts
under paragraph 8.b.iii. And the OCEO designation would be rendered entirely meaningless if
the parties could designate their own employees as experts under paragraph 9.d.ii. This end-run
around the provisions of the Protective Order should not be permitted.

Sincerely,

________________

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