Taro Pharmaceuticals USA Inc. et al v. Perrigo Israel Pharmaceuticals Ltd.

Filing 111

MEMORANDUM ORDER Granting MOTION to Quash Subpoenas (D.I. 83 ) and Denying Cross MOTION to Compel Production of Documents and Testimony From Non-Party Hill Dermaceuticals, Inc. (D.I. 89 ). Signed by Judge Richard G. Andrews on 11/30/2015. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

TARO PHARMACEUTICALS U.S.A., INC.,
and TARO PHARMACEUTICALS NORTH
AMERICA, INC.,
Plaintiffs;

v.

Civil Action No. 1:14-cv-989-RGA

PERRIGO ISRAEL PHARMACEUTICALS
LTD.,
Defendant.

MEMORANDUM ORDER

Presently before the Court is non-party Hill Dermaceuticals, Inc.' s Motion to Quash
Subpoenas (D.I. 83) and Perrigo Israel Pharmaceuticals Ltd.'s Cross Motion to Compel
Production of Documents and Testimony. (D.I. 89). Hill seeks to quash the subpoenas pursuant
to Fed. R. Civ. P. 45(d)(3)(B). Perrigo seeks to compel discovery pursuant to Fed. R. Civ. P. 37.
The issues have been fully briefed. (D.I. 83, 90, 92, 94). For the reasons set forth herein, Hill's
motion to quash is GRANTED and Perrigo's motion to compel is DENIED.
On July 28, 2014, Taro Pharmaceuticals, U.S.A., Inc. and Taro Pharmaceuticals North
America, Inc. filed a patent infringement action against Perrigo. (D.I. 1). The action arose out
of Perrigo's filing of an Abbreviated New Drug Application to market a generic version of
Taro's Topicort nasal spray. (D.1. 1 at 1). On September 14, 2015, Perrigo served a deposition
subpoena and a document subpoena on non-party Hill, requesting information pertaining to
Hill's "Derma-Smoothe" products. (D.I. 83, Ex. 1). Perrigo alleges that Derma-Smoothe may
be relevant prior art for its invalidity defense of obviousness. (D.I. 90 at pp. 9-10). Hill argues

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that disclosure of the subpoenaed information would require Hill "to place its trade secrets and
other highly confidential information in the hands of its direct competitor." (D.I. 83 at 2).
When seeking court protection from a subpoena, a non-party may do so through "the
overlapping and interrelated provisions of both Rules 26 and 45." Mannington Mills, Inc. v.
Armstrong World Indus., 206 F.R.D. 525, 529 (D. Del. 2002). Trade secrets are not "absolutely
privileged from discovery in litigation." Coca-Cola Bottling Co. ofShreveport, Inc. v. CocaCola Co., 107 F.R.D. 288, 292 (D. Del. 1985). In resisting the discovery of a trade secret, a
party must first demonstrate that the information sought "is a trade secret and that disclosure of
the secret might be harmful." Id. Information may be deemed a trade secret if it"[ d]erives
independent economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain economic value
from its disclosure and use [and] [i]s the subject of efforts ... to maintain its secrecy." DEL.
CODE.ANN. tit. 6, § 2001(4)(a), (b).
If such a showing is made, the burden shifts to the party seeking discovery to show that
the disclosure of the trade secret is both relevant and necessary. Am. Standard Inc. v. Pfizer Inc.,
828 F.2d 734, 741 (Fed. Cir. 1987); see also Mannington Mills, 206 F.R.D. at 528. To satisfy
relevance, the movant "must show that the material sought is relevant to the subject matter of the
lawsuit." Coca-Cola Bottling, 107 F.R.D. at 293. In order to satisfy the necessity requirement,
the movant must "establish that [the information sought] is reasonably necessary for a fair
opportunity to develop and prepare the case for trial." Am. Standard, 828 F.2d at 743; see also
Coca-Cola Bottling, 107 F.R.D. at 293.
After the moving party has shown relevancy and need, the court "must balance the need
for the information against the injury that would ensue if disclosure is ordered." Coca-Cola

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Bottling, 107 F.R.D. at 293. The court must consider "not the injury that would be caused by
public disclosure, but the injury that would result from disclosure under an appropriate protective
order." Id. at 293. Courts generally presume that "disclosure to a competitor is more harmful
that disclosure to a noncompetitor." Mannington Mills, 206 F.R.D. at 531. Also, courts may
consider a subpoenaed party's status as a non-party in the analysis. Am. Standard, 828 F.2d at
739.
I must first determine whether the information sought is protected as a trade secret and
whether disclosure may be harmful. For purposes of this motion, Perrigo does not appear to
dispute that the requested information may constitute a trade secret. (D.I. 90 at 12-14, 18-19).
Perrigo instead devotes most of its attention to arguing that the information requested is both
relevant and necessary. Hill, on the other hand, has produced considerable evidence regarding
the requested information's trade secret status and the harm that may result from disclosure to a
competitor. (D.I. 83 at 3-4; D.I. 83, Ex. 2). Therefore, I find that there has been sufficient
evidence advanced by Hill to conclude that the requested information constitutes a trade secret
and that harm may result from its disclosure.
Since the subpoenaed information constitutes a trade secret for purposes of this motion,
Perrigo first bears the burden of showing that the subpoenaed information is relevant. The
relevance requirement is drawn broadly. Coca-Cola Bottling, 107 F.R.D. at 293; see also Cash
Today of Texas, Inc. v. Greenberg, 2002 WL 31414138, at *1 (D. Del. Oct. 23, 2002). Here,
Perrigo argues that Hill's Derma-Smoothe product is relevant to its invalidity defense. More
specifically, Perrigo contends that Derma-Smoothe, while not anticipating Taro's patented
invention under 35 U.S.C. § 102, may render it obvious under 35 U.S.C. § 103. In response, Hill
argues that Derma-Smoothe cannot possibly constitute invalidating prior art, as its formulation

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was-and still is-secret, and therefore could not be "known to someone of ordinary skill in the
art." (D.I. 83 at 8-9).
The secret nature ofDerma-Smoothe does not foreclose its relevance to the§ 103
inquiry. Whether in connection with § 102(b) or § 103, "[i]f a device was in public use or on
sale before the critical date, then that device becomes a reference under section 103 against the
claimed invention." TorPharm, Inc. v. Ranbaxy Pharms., Inc., 336 F.3d 1322, 1327 (Fed. Cir.
2003) (quoting Baker Oil Tools, Inc. v. Geo Vann, Inc., 828 F.2d 1558, 1563 (Fed. Cir. 1987)).
A court must then determine "whether the claimed invention would have been obvious from the
on-sale device in conjunction with the prior art." Id. (quotation marks omitted). Further, in
regards to § 102(g) prior art, the Federal Circuit has concluded that "the term 'prior art' as it is
used in 35 U.S.C. § 103 should include all inventions which were made in this country before an
applicant or patentee made his invention, regardless of when those inventions are made public ..
. so long as those inventions are not found to have been abandoned, suppressed, or concealed."

E.I du Pont de Nemours & Co. v. Phillips Petroleum Co., 849 F.2d 1430, 1437 (Fed. Cir. 1988)
(quoting Application ofBass, 474 F.2d 1276, 1292 (C.C.P.A. 1973) (Baldwin, J., concurring)).
These cases make clear that the underlying "secret" nature of a prior art reference does not
render it irrelevant to an obviousness determination. It is not disputed that Derma-Smoothe was
on sale prior to the critical date. (D.I. 90 at pp. 1-2; D.I. 83 at 4). Additionally, Perrigo has
adequately shown that Derma-Smoothe may be relevant to its obviousness argument. (D.I. 90 at
p. 2). Hill's argument that Derma-Smoothe may not anticipate Taro's invention under§ 102
does not belie its relevance to an obviousness inquiry under§ 103. (See D.I. 83, Ex 3).
Therefore, I find that the requested information is relevant.

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While Perrigo has carried its burden of showing that the requested information is
relevant, it must also show that it is necessary. Am. Standard Inc. v. Pfizer Inc., 828 F.2d 734,
741 (Fed. Cir. 1987). Perrigo must demonstrate that the information sought is "reasonably
necessary for a fair opportunity to develop and prepare the case for trial." Id. at 743. Perrigo
argues that Hill is the "best source of information" for information about Derma-Smoothe. (D.I.
90 at p. 15). Perrigo may be correct that detailed information about the Derma-Smoothe prior art
reference may be uniquely available from Hill. That does not mean, however, that Hill is
uniquely positioned to provide Perrigo with information relevant to its obviousness defense. See
Mannington Mills, Inc. v. Armstrong World Indus., 206 F.R.D. 525, 532 (D. Del. 2002)

("Although the [non-party's] financial, marketing and sales data ... is 'unique' in the sense that
it is information about [the non-party], financial, marketing and sales information is not uniquely
available from [the non-party].").
Perrigo has listed twenty-two prior art references in its Invalidity Contentions, most of
which are printed publications or patents. (D.I. 90, Ex. 1 at p. 6). Perrigo has made no showing
as to how Hill's Derma-Smoothe, among these, is uniquely necessary to proving its invalidity
case. See 8A Charles Alan Wright et al., Federal Practice and Procedure§ 2043 (3d ed. 2015)
(The determination of whether the information is sufficiently relevant and necessary "should
include consideration of all pertinent circumstances, including dangers of abuse, good faith, and
availability of other means ofproof" (emphasis added)). The possibility of obtaining relevant

information from alternative sources weighs against a finding of need. See, e.g., Echostar
Commc'ns Corp. v. News Corp., 180 F.R.D. 391, 395 (D. Colo. 1998) ("Until Echostar has

exhausted its efforts to seek production of these types of materials from News Corp, ... and ...
completed some depositions, it cannot even begin to argue that it has a substantial need to obtain

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the materials from the non-parties."); Spal·tanburg Reg'! Healthcare Sys. v. Hillenbrand Indus.,
2005 WL 2045818, at *5 (W.D. Mich. Aug. 24, 2005) (holding that the defendant's failure to
make "any attempt to obtain the requested information from any source other than [the nonparty] significantly undermine[ d] its claim of need"). This case, however, presents a scenario
where the alternative sources of proof are far less hypothetical than in Spartanburg and
Echostar. Perrigo has in its possession numerous sources relevant to proving the same legal
theory. That Perrigo seeks only to supplement its theory with Hill's trade secrets cuts against a
finding that the requested information is "reasonably necessary for a fair opportunity to develop
and prepare the case for trial." Am. Standard Inc. v. Pfizer Inc., 828 F.2d 734, 743 (Fed. Cir.
1987). Since Perrigo has failed to show any specific need for this particular method of proving
its legal theory, the potential harm to Hill, a non-party, cannot be justified. I conclude that
Perrigo has failed to meet its burden of proving the information sought is necessary.
Since Perrigo has failed to show that the information sought is both relevant and
necessary, I need not "balance the need for the information against the injury that would ensue if
disclosure is ordered." Coca-Cola Bottling Co. ofShreveport, Inc. v. Coca-Cola Co., 107 F.R.D.
288, 293 (D. Del. 1985).
For the reasons stated above, Hill's motion to quash (D.1. 83) is GRANTED and
Perrigo's motion to compel (D.I. 89) is DENIED.

It is SO ORDERED thisj) day of November, 2015.

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