Continental Automotive Systems US, Inc. v. Omron Automotive Electronics Inc.
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Jeffrey Cole on 6/20/2014:Mailed notice(jms, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CONTINENTAL AUTOMOTIVE SYSTEMS,
U.S., INC.,
Plaintiff,
v.
OMRON AUTOMOTIVE ELECTRONICS,
INC.,
Defendant.
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No. 14 C 3731
Judge Edmund Chang
Magistrate Judge Jeffrey Cole
MEMORANDUM OPINION AND ORDER
Continental Automotive Systems US, Inc. (“Continental”) has sued Schrader Electronics,
Inc. in the Eastern District of Michigan for patent infringement. Automotive Systems US, Inc. v.
Schrader Electronics, Inc., et al., No. 2:11-cv-14525 (E.D. Mich.). The patent at issue involves a
sensor manufactured by Schrader that measures tire pressure and sends that information to a receiver
in the vehicle. The receiver is manufactured by Continental, Omron and others. In the wake of the
district court’s Markman ruling, Continental issued a Rule 45 subpoena to Omron, an innocent, nonparty to the patent action. Omron is a direct competitor of Continental.
A.
The information that Continental seeks encompasses a wide variety of technical, proprietary
information – specifically, technical specifications pertaining to how Omron’s receivers process the
information they receive from tire pressure sensors. Simply stated, the subpoena calls for the
production of all “technical documents” “related to all of Omron’s [tire pressure monitoring]
receivers.” (Continental Memorandum at 8) The subpoena also sought a witness to testify at a
deposition regarding the operation of the receivers and the documents to be produced should that
prove to be necessary. Not surprisingly, Omron is unwilling to divulge this information to
Continental, which, according to Omron, is its number one competitor in the industry. Expressing
surprise at Omron’s unwillingness to share its most valuable corporate asset with a competitor,
Continental filed the instant motion to compel.
Continental submits that the information it seeks is “indisputably relevant” to its patent
infringement claim against Schrader because “at least the ‘019 patent contains claims that implicate
functionality which may be executed by the . . . receiver or related components (as opposed to the
sensor itself).” (Continental Memorandum at 5). The Memorandum does not go beyond this ipse
dixit and cites nothing in support of it. Indeed, only one case is cited in the Memorandum, Purzel
Video GmbH v. Does 1-108, 2013 WL 6797364, 9 (N.D.Ill.2013), and that for the general
proposition that the mere burden of finding and producing documents is not considered undue.
(Memorandum at 8). Apart from the fact that “general propositions do not decide concrete cases,”
Lochner v. New York, 198 U.S. 45, 76 (1905)(Holmes, J., dissenting), relevancy, not burden, is the
focus of Omron’s objection to the subpoena.
Omron contends that Judge Murphy’s claim construction ruling “eviscerated” Continental’s
claim for direct patent infringement against Schrader because a tire pressure monitor sensor located
in a car wheel cannot generate an alarm detectable by human beings, as the patent requires.
(Memorandum at 1– 2, 7 et. seq.). Consequently, Omron argues, Schrader could not be a direct
infringer, and
absent direct infringement there cannot be indirect patent infringement.
(Memorandum at 8). Proceeding from this premise, Omron concludes that since the claims against
Schrader “cannot be proven as a matter of law,” the information sought by Continental is simply not
relevant. (Memorandum at 10).
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At the hearing on its motion, Continental disagreed with Omron’s interpretation of Judge
Murphy’s Markman ruling and Omron’s bleak assessment of the continued viability of its patent
infringement claim, which is now based on the theory that everyone who drives a car containing an
Omron receiver and a Schrader tire pressure sensor is a direct infringer and Schrader is a
contributory infringer. Omron’s Memorandum contains an extended discussion of direct and indirect
patent infringement and of the Michigan court’s rulings. It cites a number of patent cases, including
the Supreme Court’s June 2, 2014 decision in Limelight Network is, Inc. v. Akamai Technologies
Inc. (Memorandum, Ex. 10).
Continental conceded, as candor required, that if Omron’s interpretation of patent law was
correct that it would have no case, and any information sought from Omron would obviously then
be irrelevant. And in that setting, the burden of compliance with Continental’s subpoena would
obviously exceed the benefit of production of the material sought. Nw. Mem'l Hosp. v. Ashcroft, 362
F.3d 923, 927 (7th Cir.2004). But Continental had a very different interpretation of Limelight
Network is, Inc. and of the theory of indirect patent infringement.
What the oral argument showed was that a determination of whether Continental is entitled
to the discovery it seeks from Omron – that is, whether it is relevant to a claim or defense in the
Michigan litigation – is inextricably bound up with the merits of that litigation. Cf., Truswal
Systems Corp. v. Hydro-Air Engineering, Inc., 813 F.2d 1207, 1212 (Fed. Cir.1987)( “a
determination of relevance implicates the substantive law of patent validity and infringement.”).
Under Fed.R.Civ.P. 45(f), an enforcing court may transfer a motion to the issuing court if
the enforcing court finds there are “exceptional circumstances.” The Advisory Committee note to
Rule 45(f) provides guidance on what might constitute such circumstances:
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The prime concern should be avoiding burdens on local nonparties subject to
subpoenas, and it should not be assumed that the issuing court is in a superior
position to resolve subpoena-related motions. In some circumstances, however,
transfer may be warranted in order to avoid disrupting the issuing court's
management of the underlying litigation, as when the court has already ruled on
issues presented by the motion or the same issues are likely to rise in discovery in
many districts. Transfer is appropriate only if such interests outweigh the interests
of the nonparty served with the subpoena in obtaining local resolution of the motion.
Delving into the merits of the litigation in the Eastern District of Michigan constitutes
disrupting that court’s management of the underlying litigation. A ruling here may turn out to be
inconsistent with the rulings in the Michigan case. See Wultz v. Bank of China, Ltd., 2014 WL
2257296 (D.D.C. 2014); Chem-Aqua, Inc. v. Nalco Co., 2014 WL 2645999 (N.D.Tex. 2014); FTC
v. A+ Fin. Ctr., LLC, 2013 WL 6388539 (S.D.Ohio 2013). In this case, ordering compliance with
Continental’s subpoena involves far more than merely ordering discovery of matters that are
connected perhaps only loosely to the case, pending elsewhere. Generally, in that context, courts
must be “especially hesitant to pass judgment on what constitutes relevant evidence.” Truswal
Systems Corp. v. Hydro–Air Eng'g, Inc., 813 F.2d 1207, 1212 (Fed.Cir.1987). Rather, it would
involve determining a question that lies at the heart of the Michigan litigation – namely whether
Continental even has a viable patent case against Schrader after the Markman ruling. Accordingly,
this matter is transferred to the issuing court for resolution.
B.
If this issue were not present, I would deny Continental’s motion. Rule 45 contains
important provisions to protect the recipient of a subpoena from undue burden or expense, invasion
of a privilege, or disclosure of protected material. S.E.C. v. Hyatt, 621 F.3d 687, 694 (7th Cir. 2010).
Under Rule 45(d)(3)(A)(iii), a court must quash a subpoena that requires disclosure of protected
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information. One can imagine no more harmful type of disclosure of technical information of the
type sought here than to a direct competitor. It’s a blatantly obvious point. See Am. Standard Inc.
v. Pfizer Inc., 828 F.2d 734, 741 (Fed.Cir. 1987)(courts presume that disclosure to a competitor is
more harmful than disclosure to a non-competitor); Albany Molecular Research, Inc. v. Schloemer,
274 F.R.D. 22, 25 (D.D.C. 2011); In re Vitamins Antitrust Litigation, 267 F.Supp.2d 738, 741-42
(S.D.Ohio 2003); Greater Rockford Energy and Technology Corp. v. Shell Oil Co., 138 F.R.D. 530,
537-538 (C.D.Ill. 1991).1
Moreover, it has become apparent from discussions at the hearing that Continental has other
sources from which it can obtain the information it actually needs for its litigation against Schrader,
namely, from the automobile manufacturers. When questioned about these alternative sources,
Continental’s lawyers argued that only Omron would be able to understand and explain how its
receiver worked in tandem with the Schrader tire pressure monitor. Of course, there is no basis for
this conclusion, and unsupported statements by lawyers whether in briefs, United States v. Stevens,
500 F.3d 625, 62 -629 (7th Cir. 2007); United States ex rel. Feingold v. AdminiStar Federal, Inc.,
324 F.3d 492, 494 (7th Cir. 2003); Credit Corp. v. Aliano Brothers General Contractors, Inc., 437
F.3d 606, 610-611 (7th Cir. 2006), or in oral argument, In re: Payne, 431 F.3d 1055, 1066 (7th Cir.
2005), don’t count.
Common sense and human experience – which always have a role to play, United States v.
Montoya De Hernandez, 473 U.S. 531, 542 (1985); Greenstone v. Cambex Corp., 975 F.2d 22, 26
(1st Cir.1992) (Breyer, C.J.); Cooney v. Rossiter, 583 F.3d 967, 971 (7th Cir.2009); Posner, How
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It is undisputed that the information sought by Continental is proprietary, confidential, and only
distributed on a need to know basis. It is information not disclosed to the public or competitors. See Omron
Memorandum, Ex. 10, Declaration of Brian Sample.
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Judges Think at 116 (Harv. Univ. Press 2008) – strongly suggest that the major automobile
companies who are the purchasers of the Schrader tire pressure monitor and the Omron receiver are
ready sources of the information Continental says it needs to pursue its theory of the case against
Schrader. It is certain that they know whether Omron receivers are combined with Schrader sensors
in the cars they manufacture, and they would have an intimate knowledge of how the two function
and interact. It is more than a reasonable inference that the automobile manufacturers employ skilled
electrical engineers responsible for insuring the safe operation of a system that is an important safety
component of the vehicles in which they are installed. To do so, they must have a detailed
understanding of how the two function together.
Requiring Continental to pursue these alternative sources of information does not merely
shift the burden from one nonparty to another, with no gain to either and equal burdens to both. In
the context of this case, the nonparties are not fungible. The major automobile companies are not
competitors of Continental. They certainly can provide certain of the information being sought and
it is likely that they will be able to provide sufficient information that will satisfy Continental
without requiring the blanket turnover of the core of Omron’s proprietary information.
In the last analysis, the decision of whether to require a nonparty to provide information
pursuant to subpoena, like all discovery disputes, falls within the extraordinarily broad range of
discretion invested in judges by the Federal Rules of Civil Procedure. Cf. Crawford-El v. Britton,
523 U.S. 574, 598 (1998); Semien v. Life Insurance Co. of N.A., 436 F.3d 805, 813 (7th Cir. 2006).
Discretion denotes the absence of a hard and fast rule. Langnes v. Green, 282 U.S. 531, 541 (1931);
Pruitt v. Mote, 2006 WL 3802822 (7th Cir. 2006); Rogers v. Loether, 467 F.2d 1110, 1111-12 (7th
Cir. 1972)(Stevens, J.). Thus, on virtually identical facts, two decision-makers can arrive at opposite
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conclusions, both of which constitute appropriate exercises of discretion. See United States v. Banks,
546 F.3d 507, 508 (7th Cir. 2008); Johnson v. Daley, 339 F.3d 582, 593-594 (7th Cir. 2003)(“the
district judge's substantial discretion...ensures inconsistency.”).
Omron’s overarching interest in protecting its confidential information from its most
significant competitor counsels against an exercise of discretion that would result in the enforcement
of the Continental subpoena. It is not a sufficient answer to say, as Continental does, that it is willing
to enter into an appropriate protective order with an attorney’s eyes only provision that would
preclude disclosure to anyone other than counsel and experts. Where, as here, there is an alternative
source of the information being sought – and in the absence of a clear showing of relevancy – a
competitor ought not be forced to take the risk that there could be of a violation of a protective order.
That risk is one that a party must, of necessity, endure.2 But it is not one that a nonparty
ought to be forced to take where the party seeking the information is its foremost competitor and
there appear to be alternative sources of information. The inescapable reality is that once an expert
– or a lawyer for that matter – learns the confidential information that is being sought, that individual
cannot rid himself of the knowledge he has gained; he cannot perform a prefrontal lobotomy on
himself, as courts in other contexts have recognized. Cf. AMP Inc. v. Fleischhacker, 823 F.2d 1199,
1205 (7th Cir. 1987). See also BASF Corp. v. United States, 321 F.Supp.2d 1373, 1380 (CIT
2004)(“It is very difficult for the human mind to compartmentalize and selectively suppress
information once learned, no matter how well-intentioned the effort may be to do so.”).
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Even in that context, “[w]hen a party is concerned about the competitive misuse of confidential
information and a protective order appears to be insufficient protection, the court must balance the risk of
disclosure to competitors against the risk of damaging the claims or defenses of the party seeking access.”
Isis Pharmaceuticals, Inc. v. Santaris Pharma A/S Corp., 2013 WL 3367575, 3 (S.D.Cal.2013).
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To question the efficacy of a protective order in the context of a case like this is not in any
way to question the integrity of counsel or, indeed, of the experts they plan to employ. Autotech
Technologies Ltd. Partnership v. Automationdirect.com, Inc., 237 F.R.D. 405 (N.D.Ill. 2006) put
it this way:
We begin by crediting fully the sincere assurance that Autotech's in-house counsel
will endeavor to abide by any attorneys-eyes-only protective order that is entered.
But acceptance of that assurance marks the beginning and not the end of analysis.
Brown Bag Software, 960 F.2d at 1471. As the D.C. Circuit said years ago, “the court
does not in any way doubt the faithfulness of house counsel in endeavoring to abide
by the terms of any protective order. The issue concerns not good faith but risk of
inadvertent disclosure.” FTC v. Exxon Corp., 636 F.2d at 1350.FN4 Just as
“[i]nadvertence... is no respecter of its victims,” United States Steel, neither is it a
respecter of the integrity of those who fall prey to it.
Id. at 408
In Litton Industries v. Chesapeake & Ohio Ry., 129 F.R.D. 528, 531 (E.D.Wis.1990), the
court persuasively explained why, in the context of a case like this involving a demand by a
competitor for confidential information, a protective order may not sufficiently eliminate the risk
of real harm:
Once an expert has digested this confidential information, it is unlikely that the
expert will forget. The expert's raison d'etre is to assimilate information in his or her
chosen field and formulate that material into various theories. The information
obtained ... will be added to the expert's repository of other information for possible
future use. Even with stern sanctions for unauthorized disclosure, how does one
practically police a protective order? If the expert is called upon two years after this
litigation to assist a potential competitor in structuring its business, will he really be
able to compartmentalize all he or she has learned and not use any of the information
obtained ...?
“There is a constant danger inherent in disclosure of confidential information
pursuant to a protective order. Therefore, the party requesting disclosure must make
a strong showing of need, especially when confidential information from a nonparty
is sought.”
Id., at 531. Accord U.S. Gypsum Co. v. Lafarge North American, Inc., 2004 WL 816770, *1
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(N.D.Ill. 2004); Greater Rockford Energy and Technology Corp., 138 F.R.D. at 538; Stanley Works
v. Newell Co., 1992 WL 229652, *5 (N.D.Ill. 1992).
There is then a real and appreciable risk either that the lawyers or the experts in this case
will, at some point in the future, be in a situation where the information obtained under Continental’s
proposed protective order could not help but be utilized by them and in a way that could have
significant adverse consequences for Omron’s business. While that risk is inherent in any case, it
is one that ought not to be taken where one competitor seeks the confidential, proprietary
information of another competitor who is not a party to the litigation and the most serious questions
are raised as to the relevancy of the information and there are alternative sources from which the
information sought can be obtained elsewhere.
CONCLUSION
For the reasons discussed in the Memorandum Opinion and Order of 6/20/14, pursuant to
FRCP 45(f), this case should be transferred to Judge Murphy in the Eastern District of Michigan.
To the extent that I do not have jurisdiction to transfer the case, I recommend that Judge Chang do
so. Enter Memorandum Opinion and Order. Alternatively, the motion is denied.
DATE: 6/20/14
ENTERED:
UNITED STATES MAGISTRATE JUDGE
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