Protegrity Corp v. Epicor Software Corp
Filing
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RULING granting in large part 25 defendant's Motion for Protective Order. (see attached). On or before September 19, 2014, counsel shall submit a revised Protective Order consistent with this Ruling. Signed by Judge Joan G. Margolis on 8/6/2014. (Watson, M.)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
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PROTEGRITY CORP.
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V.
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EPICOR SOFTWARE CORP.
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3:13 CV 1781 (JBA)
DATE: AUGUST 6, 2014
RULING ON DEFENDANT'S MOTION FOR PROTECTIVE ORDER
On December 2, 2013, plaintiff commenced this patent infringement action (Dkt. #1);
on January 27, 2014, defendant filed its answer, affirmative defenses and counterclaims
(Dkt. #20), as to which plaintiff filed its answer to the counterclaims on February 18, 2014.
(Dkt. #21). Under the electronic scheduling order filed on February 21, 2014 by U.S. District
Judge Janet Bond Arterton, all discovery is to be completed by January 7, 2015 and all
dispositive motions are to be filed by February 7, 2015.
On April 29, 2014, defendant filed the pending Motion for Protective Order (Dkt.
#25),1 as to which plaintiff filed its brief in opposition on May 20, 2014. (Dkt. #27).2
Defendant filed its reply brief eight days later. (Dkt. #28).3 On July 29, 2014, Judge
Arterton referred the pending motion to this Magistrate Judge. (Dkt. #34).
In its motion, defendant represents that an additional protective order is necessary
to maintain the security of the electronic data at issue in this litigation, and that its proposed
Protective Order is identical to two issued in this district by U.S. District Judge Robert N.
1
Attached as Exh. A is defendant’s Proposed Protective Order.
2
Two exhibits are attached: plaintiff’s Proposed Source Code Protective Order (Exh. A); and
a redline comparison of the two Proposed Source Code Protective Orders (Exh. B).
3
None of these briefs contain citations to any case law.
Chatigny in litigation brought by plaintiff, Protegrity Corp. v. Voltage Sec., Inc., No. 10 CV
755 (RNC), Dkt. #103 and Protegrity Corp. v. Ingrian Networks, Inc., No. 08 CV 618 (RNC),
Dkt. #149. (Dkt. #25, at 1-2). In its brief in opposition, plaintiff argues that it opposed
these two protective orders, and that both cases settled prior to completion of trial. (Dkt.
#27, at 1, 4-5; see also Dkt. #28, at 1). As plaintiff points out, there are two substantive
disputes between the parties: (1) a patent prosecution bar, and (2) the logistics of
exchanging source code. (Id. at 2, & Exh. B at 18-19, 11-16).
The Court found five recent decisions on these topics, four of which involve large
high-tech companies whose security concerns certainly are as significant as those at issue
here. A detailed analysis of patent prosecution bars is found in Clayton Corp. v. Momentive
Performance, Materials, Inc., No. 4:12 CV 1349 (AGF), 2013 WL 2099437, at *1 (E.D. Mo.
May 14, 2013), where the parties agreed on all terms of the proposed protective order
except for the inclusion of a two-year patent prosecution bar. The District Judge relied
heavily upon the Federal Circuit’s decision in In re Deutsche Bank Trust Co. Am., 605 F.3d
1373, 1378 (Fed. Cir. 2010), which held that Federal Circuit law applies to “the determination
of whether a protective order should include a patent prosecution bar[,]” which is “an issue
unique to patent law[.]” 2013 WL 2099437, at *1 (citations omitted). As the District Judge
explained:
Protective orders typically include provisions specifying that
designated confidential information may be used only for purposes of the
current litigation, and such provisions are generally accepted as an effective
way of protecting sensitive information while granting trial counsel limited
access to it for purposes of the litigation. There may be circumstances,
however, in which even the most rigorous efforts to preserve confidentiality
in compliance with the provisions of such a protective order may not prevent
inadvertent disclosure.
Id. (citation & footnote omitted). The court continued that the party seeking a patent
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prosecution bar bears the burden of showing good cause for its inclusion in a protective
order, so that
[t]he proponent of the bar must show that counsel’s representation of the
client in matters before the [Patent and Trademark Office ("PTO")] is likely
to implicate competitive decision making related to the subject matter of the
litigation so as to give rise to a risk of inadvertent use of confidential
information learned in litigation. If such a risk exists, a court must weigh it
against the potential injury to the moving party from restrictions imposed on
its choice of litigation and [patent] prosecution counsel.
Id., citing Deutsche Bank, 605 F.3d at 1377, 1381 (internal quotations omitted)(alteration
in original). The Clayton court then defined “competitive decision making” as “counsel’s
activities, association, and relationship with a client that are such as to involve counsel’s
advice and participation in any or all of the client’s decisions (pricing, product design, etc.)
made in light of similar or corresponding information about a competitor.” Id. at *2, quoting
Deutsche Bank, 605 F.3d at 1378 (additional citation & internal quotations omitted). The
court continued, however, that “[e]very patent prosecution or litigation attorney is not
necessarily involved in competitive decision making[,]” but rather
[a]ttorneys [who] are more substantially engaged with prosecution, such as
those making strategic decisions on the type and scope of patent protection
that might be available or worth pursuing and writing, reviewing, or
approving new applications, are more likely to be involved in competitive
decision making, and therefore are more at risk of inadvertent disclosure of
competitive information learned during litigation.
Id. at *2, quoting Deutsche Bank, 605 F.3d at 1379 (internal quotations omitted). The court
emphasized that “each case must be decided based on the specific facts involved therein[,]”
that “[i]t is specific evidence –not an inflexible rule–that supports a finding of competitive
decision making[,]” and that “it is incumbent upon a party seeking a prosecution bar to
provide such evidence.” Id., quoting Deutsche Bank, 605 F.3d at 1380 & other cases
(internal quotations omitted).
3
In Clayton, defendants emphasized that the parties were “direct competitors” and
that the requested discovery related to “highly sensitive research and development and
manufacturing work.” Id. at *2. While the proposed protective order allowed trial counsel
to participate in post-grant proceedings, such as commenting on the prior art, defendants
conceded that “the bar extends to patent prosecution before the PTO, as well as drafting or
amending claims in post-grant proceedings, such as reexamination and reissue.” Id. at *3.
Defendants’ request for a patent prosecution bar was denied, because defendants “offer[ed]
no specific evidence that trial counsel’s activities with respect to patent prosecution
competitive constitute decision making[,]” they failed to “demonstrate[] counsel’s
involvement with the plaintiff’s internal business activities that creates a high risk of
inadvertent disclosure[,]” and they did not provide the court with any affidavits, declarations
or any other form of evidence on any issue related to the proposed prosecution bar, so that
[a]s a result, the [c]ourt ha[d] no evidentiary basis upon which to determine
what relations [p]laintiff’s attorneys have with their client, what the scope of
their representation of [p]laintiff is, who they advise or consult within the
company, or any other ground by which the [c]ourt could gauge the risk of
inadvertent disclosure of confidential information.
Id. at *3-4 (internal quotations & citations omitted). The Clayton court added that “[w]ithout
such evidence, a party has not shown why a court should impose a bar on opposing
counsel’s activities[,]” since “vague statements are not enough to warrant the unnecessary
hardship that would result from the issuance of a patent prosecution bar.” Id. (multiple
citations, internal quotations & alterations omitted). See also Buysafe, Inc. v. Google, Inc.,
Civ. No. 3:13 CV 781 (HEH), 2014 WL 2468553, at *1-3 (E.D. Va. June 2, 2014), citing
Deutsche Bank, 605 F.3d at 1378, 1380-81; PPC Broadband, Inc. v. Times Fiber Comm’s,
Inc., Civ. No. 5:13-CV-460 (GLS/DEP), 2014 WL 859111, at *1-4 (N.D.N.Y. Mar. 5,
4
2014)(same); Helferich Patent Licensing, LLC v. New York Times Co., No. 10 C 4387, 11 C
7395, 11 C 7607, 11 C 7647, 11 C 9143, 2013 WL 3177605, at *1-5 (N.D. Ill. June 21,
2013)(same); EPL Holdings, LLC v. Apple, Inc., No C-12-04306 (JST)(JSC), 2013 WL
2181584, at *1-5 (N.D. Cal. May 20, 2013)(same).
As previously indicated, two aspects of the proposed Protective Order are at issue
here: (1) whether the patent prosecution bar should include post-grant activities; and (2)
what constitutes adequate protection of the parties’ source codes. (Dkt. #27, at 2 & Exh.
B, at 18-19, 11-16). Both of these issues were addressed in last year’s decision in EPL
Holdings, Inc. v. Apple, Inc. As in EPL Holdings, 2013 WL 2181584, at *2, the parties here
do not object to a restriction for patent prosecution that occurs prior to the issuance of the
patent at issue, but rather disagree as to whether the bar should extend to post-grant
review. (Dkt. #27, at 2). In EPL Holdings, plaintiff EPL's proposed provision placed postgrant reviews outside the scope of the prosecution bar, whereas defendant Apple argued
that review and reexamination proceedings allow counsel to be involved in competitive
decision-making, such as limiting the scope of the patent. Id. at *2-3.
The Magistrate Judge in EPL Holdings relied upon two prior decisions against
defendant Apple, in which the court had "allowed litigation counsel a 'limited role' in review
and reexamination proceedings[,]" namely that the "patentee counsel should not be banned
from reexamination proceedings so long as 1) the proceedings are not initiated by the
patentee, and 2) counsel expressly agrees that in the reexamination it will not rely on any
confidential information supplied by the opposing party." Id. at *3 (citations omitted). The
Magistrate Judge in EPL Holdings found that plaintiff's proposal conflicted with the two prior
decisions, and thus held that "EPL's litigation counsel . . . may participate in third-party
initiated review proceedings so long as counsel is prohibited from assisting in any crafting
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or amendment of patent claims." Id. at *4.
This issue also was addressed in PPC Broadband, Inc., in which defendant Times
Fiber sought to preclude any recipient of “Highly Confidential-Prosecution Bar” information
from participating in ex parte examinations or post-grant reviews, while plaintiff PPC sought
to exempt those proceedings from the prosecution bar. 2014 WL 859111, at *2. U.S.
Magistrate Judge David E. Peebles found that defendant Times Fiber “ha[d] not established
good cause to preclude [plaintiff] PPC’s counsel from participating both in litigation and postgrant proceedings before the PTO.
It is not enough to identify a general risk that
confidential information disclosed during litigation may influence counsel’s representation of
a party before the PTO.” Id. at *3, citing Deutsche Bank, 605 F.3d at 1379.
Magistrate
Judge Peebles therefore held that plaintiff’s proposed prosecution bar provision was
appropriate. Id. at *4.
Consistent with the EPL Holdings and PPC Broadband cases, defendant here wants
post-grant proceedings to be included within the prosecution bar, whereas plaintiff requests
that post-grant activities be exempted therefrom. (Dkt. #28, at 3; compare Dkt. #25, Exh,
A, § XXV, at 17-18; Dkt. #27, Exh. A, § X, at 7-8; Dkt. #27, Exh. B, at 18-19). In its reply
brief, defendant argues that plaintiff's trial counsel "are competitive decision-makers[,]" and
that plaintiff has used "several different [law] firms for . . . prosecuting the patents-insuit[,]" which law firms are not involved in the litigation. (Dkt. #28, at 3). This Magistrate
Judge agrees with the well-reasoned decision in EPL Holdings, so that with respect to the
issue of the prosecution bar, the parties will be governed by defendant's draft, as modified
by the decision in EPL Holdings, namely that patentee counsel should not be banned from
reexamination proceedings so long as: (1) the proceedings are not initiated by the patentee;
(2) counsel expressly agrees that in the reexamination it will not rely on any confidential
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information supplied by the opposing party; and (3) litigation counsel may participate in
third-party initiated review proceedings so long as counsel is prohibited from assisting in any
crafting or amendment of patent claims. 2013 WL 2181584, at *3-4 (citations omitted).
The second issue is the scope of protections surrounding the parties’ source codes,
which were described in the Buysafe, Inc. v. Google, Inc. decision as “‘the crown jewels’ of
Google.” 2014 WL 2468553, at *2 (internal citations omitted). The detailed provisions in
defendant's proposal (Dkt. #25, Exh. A, §§ XVI-XXIV, XXVI-XXXVIII, at 9-17, 18-19) in large
respect mirror the detailed instructions regarding Apple's source code in EPL Holdings, 2013
WL 2181584, at *5-7. As pointed out by plaintiff, the issue here is simply "who is in charge
of the secured computer[,]" in that defendant suggests that the secured computer remain
in either outside counsel's offices or, if the producing party agrees, at a third party escrow
facility, whereas plaintiff proposes that the party receiving the source code maintains the
secured computer. (Dkt. #27, at 3-4; see also Dkt. #27, Exh. A, §§ I-IX, XI-XIII, at 1-7, 8;
Exh. B, at 9-16). The EPL Holding decision suggests that the secured computer with Apple's
source code would be in a review room established by defendant Apple, as Apple had
represented in open court that it would set up a land line telephone outside the review room
for the reviewer's use. 2013 WL 2181584, at *5-6. Thus, under the EPL Holding decision,
it would appear that defendant's suggestion is the more appropriate one – that the secure
computer remain in either outside counsel's offices or if the producing party agrees, at a third
party escrow facility.4
4
Defendant's Proposed Protective Order also limited plaintiff to printing up to 150 pages of
source code, unless the parties agree otherwise or seek court permission for a larger number (Dkt.
#25, Exh. A, § XVII(A)(iv), at 12-13; plaintiff objects to this page limitation. (Dkt. #27, at 3). In
EPL Holdings, which concerned Apple's source codes, the printing was limited to fifty pages. 2013
WL 2181584, at *6.
The Magistrate Judge agrees that defendant's proposal is reasonable, in that it allows for
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Accordingly, on or before September 19, 2014, counsel shall submit a revised
Protective Order consistent with this ruling.
This is not a Recommended Ruling, but a ruling on a non-dispositive motion, the
standard of review of which is specified in 28 U.S.C. § 636; FED. R. CIV. P. 6(a), 6(e) & 72;
and Rule 72.2 of the Local Rules for United States Magistrate Judges. As such, it is an order
of the Court unless reversed or modified by the District Judge upon timely made objection.
See 28 U.S.C. § 636(b)(written objections to ruling must be filed within
fourteen calendar days after service of same); FED. R. CIV. P. 6(a), 6(e) & 72; Rule
72.2 of the Local Rules for United States Magistrate Judges, United States District Court for
the District of Connecticut; Small v. Secretary, H&HS, 892 F.2d. 15, 16 (2d Cir. 1989)(failure
to file timely objection to Magistrate Judge’s recommended ruling may preclude further
appeal to Second Circuit).5
Dated at New Haven, Connecticut, this 6th day of August, 2014.
/s/ Joan G. Margolis, USMJ
Joan Glazer Margolis
United States Magistrate Judge
the parties to agree to increase the number of printed pages beyond 150 pages, and in the
absence of agreement, to seek a resolution from the court.
5
If either counsel believes that a settlement conference before this Magistrate Judge could
be productive, he or she should contact Chambers accordingly.
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