Sprint Communications Company L.P. v. Big River Telephone Company, LLC

Filing 52

ORDER granting 29 Motion for Protective Order. Signed by Magistrate Judge James P. O'Hara on 9/16/08. (ct)

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF KANSAS S P R IN T COMMUNICATIONS COMPANY L .P ., ) ) ) P l a in tif f , ) ) v. ) ) B IG RIVER TELEPHONE COMPANY, LLC, ) ) D e f e n d a n t. ) ORDER

C a s e No. 08-2046-JWL

This patent infringement case comes before the court on the motion of the plaintiff,
S p rin t Communications Company L.P., for entry of a protective order governing discovery th a t includes an in-house counsel provision and that specifically allows Sprint's in-house c o u n se l, Lee Lauridsen, access to the confidential information of the defendant, Big River T ele p h o n e Company, LLC (doc. 29). Defendant has filed a response (doc. 33), and plaintiff h as filed a reply (doc. 34). T h e parties agree that a protective order is warranted to restrict the use and disclosure o f certain information. They have agreed to all of the language set forth in their proposed p ro te c tiv e order,1 except for one provision. The parties' proposed protective order classifies p ro te c te d information into two tiers: "confidential" and "highly confidential­attorneys' eyes o n ly." Paragraph 2.3 defines confidential information as information not generally available

1

Doc. 29, ex. A.

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o r known to the public constituting or relating to trade secrets, commercial information, f in a n c ia l information, business relationship information, technical information, information p e rta in in g to products and product development efforts, concepts or plans, and patent p ro s e c u tio n information. Highly confidential information is defined in paragraph 2.4 as e x tre m e ly sensitive confidential information "whose disclosure to another Party or nonparty w o u ld create a substantial risk of serious injury to the business or competitive interests of the P ro d u c in g Party that could not be avoided by less restrictive means." P a ra g ra p h 7.3 of the proposed protective order sets forth to whom highly confidential inf o rm atio n may be disclosed and includes outside counsel of record, experts, the court, court re p o rte rs , the author or source of the information, and professional vendors. Paragraph 7 .3 (b ) allows highly confidential information to be disclosed to: th e Receiving Party's House Counsel (1) to whom disclosure is re a so n a b ly necessary for this litigation, (2) who has signed the " A g re e m e n t to Be Bound by Protective Order" (Exhibit A), (3) w h o has been approved by the Designating Party, and (4) who is not involved in any competitive decision-making of the party. P la in tif f seeks the inclusion of paragraph 7.3(b) in the protective order, while defendant m aintains it is neither necessary nor appropriate. Plaintiff also seeks the court's

d e ter m in a tio n that one of its in-house attorneys, Lee Lauridsen, is an individual entitled to ac ce ss highly confidential information pursuant to paragraph 7.3(b). In itia lly, the court notes that there is no absolute privilege for trade secrets and similar

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c o n f id e n tia l information.2 Fed. R. Civ. P. 26(c)(1) provides that a "court may, for good c a u se , issue an order to protect a party or person from annoyance, embarrassment, o p p re ss io n , or undue burden or expense, including . . . requiring that a trade secret or other c o n f id e n tia l research, development, or commercial information not be revealed or be re v e a le d only in a specified way." A party seeking to resist disclosure under Rule 26(c)(7)3 must f irs t establish that the information sought is a trade secret or o th e r confidential research, development, or commercial in f o rm a tio n and then demonstrate that its disclosure might be h a rm f u l. Centurion Indus., 665 F.2d at 325-26. If these re q u ire m e n ts are met, the burden then shifts to the party seeking d isc o v e ry to establish that the disclosure of trade secrets is re le v a n t and necessary to the action. Id. Finally, the court must b a la n c e the need of the party seeking discovery of the trade sec re ts and confidential information against the opposing party's c la im of injury resulting from the disclosure. Id.4 D e f en d a n t, as the party resisting disclosure, has the burden to show a probability that p la in tif f 's disclosure to in-house counsel would cause competitive harm.5 Categorical a r g u m e n t s that a party will be harmed by the disclosure are insufficient.6 Defendant must

2

Centurion Indus., Inc. v. Warren Steurer & Assocs., 665 F.2d 323, 325 (10th Cir.

19 81 ). Due to an amendment effective December 1, 2007, the provision previously contained in Fed. R. Civ. P. 26(c)(7) is now contained in Fed. R. Civ. P. 26(c)(1)(G).
4 3

MGP Ingredients, Inc. v. Mars, Inc., 245 F.R.D. 497, 501 (D. Kan. 2007). See id.

5

See id.; In re Indep. Serv. Orgs. Antitrust Litig., No. MDL 1021, 1995 WL 151739, at *1-*2 (D. Kan. Mar. 9, 1995).
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" m a k e `a particular and specific demonstration of fact, as distinguished from stereotyped and co n clus o ry statements.'" 7 In some circumstances, certain sensitive information should not be disclosed to an inh o u se attorney involved in competitive decision-making.8 Courts look at whether disclosure o f the information to a competitor would allow disclosure to a competitive decision-maker w h o would be virtually unable to compartmentalize the information and not use it to seek to g a i n an unfair competitive advantage.9 The appropriate inquiry is whether there is an u n a c ce p ta b le risk of or opportunity for inadvertent disclosure of confidential information.1 0 A determination of whether an unacceptable opportunity for inadvertent disclosure e x ists should not be based solely on an attorney's status as in-house or retained and should in s te a d be made in light of the particular counsel's activities and relationship with the party.1 1 A court should consider whether a particular attorney is involved in competitive decisionm a k in g , which includes advising or participating in pricing, product design, marketing or

MGP Ingredients, Inc., 245 F.R.D. at 501 (quoting Gulf Oil Co. v. Bernard, 452 U.S. 89, 102 n.16 (1981)).
8

7

U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468 (Fed. Cir. 1984). MGP Ingredients, Inc., 245 F.R.D. at 501 (citing cases).

9

Autotech Techs. Ltd. P'ship v. Automationdirect.com, Inc., 237 F.R.D. 405, 407 (N.D. Ill. 2006).
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10

U.S. Steel Corp., 730 F.2d at 1468. 4

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o th e r decisions "made in light of similar or corresponding information about a competitor." 1 2 D efen d an t argues that given the proposed protective order's definitions of confidential a n d highly confidential information, the information plaintiff is seeking the ability to disclose to its in-house counsel qualifies for protection under Fed. R. Civ. P. 26(c)(1)(G). Plaintiff d o e s not oppose defendant's argument in its reply. The court therefore finds that defendant h a s established that highly confidential information constitutes a trade secret or other c o n f id e n tia l research, development, or commercial information. D e f en d a n t now must meet the rest of its burden by establishing that the disclosure of h ig h ly confidential information to plaintiff's in-house counsel might be harmful. Defendant se e m s to suggest that it has met this burden because, by definition, the disclosure of highly c o n f id e n tia l information creates a substantial risk of serious injury to its business or c o m p e titiv e interests. Defendant has, however, agreed highly confidential information may b e disclosed to persons other than in-house counsel. To meet its burden, defendant must set f o rth a particular and specific demonstration of fact regarding the likelihood of harm. The c o u rt finds defendant's reliance on the definition of highly confidential information is in su f f icie n t to meet its burden. Rather, defendant must show that the disclosure of highly c o n f id e n tia l information specifically to plaintiff's in-house counsel will likely cause harm. D e f en d a n t argues that Mr. Lauridsen is a competitive decision-maker and that d is c lo s u re of highly confidential information to him will create an unacceptable risk of

12

Id. at 1468 n.3; In re Indep. Serv. Orgs. Antitrust Litig., 1995 WL 151739, at *1. 5

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in a d v e r te n t disclosure.

The court first must determine whether Mr. Lauridsen is a

c o m p e titiv e decision-maker. Plaintiff filed a declaration by Mr. Lauridsen regarding his re sp o n s ib ilitie s for plaintiff generally and in this case (doc. 29-3). Mr. Lauridsen, Senior C o u n s e l for plaintiff, works exclusively in plaintiff's litigation department and states he does n o t engage in any competitive decision-making activities. Specifically, Mr. Lauridsen states th a t he plays no role in plaintiff's decisions relating to pricing, product design, marketing, sa les efforts, or general corporate strategic decision-making. Mr. Lauridsen plays no role in a c q u irin g patents or prosecuting patent applications. Mr. Lauridsen's main responsibility is to manage plaintiff's litigation matters, including by supervising outside counsel's activities r e la tin g to various cases. A s to this case, Mr. Lauridsen is an active participant in the trial team, supervising d a y-to -d a y activities of outside counsel, participating in strategy decisions, and evaluating d is c o v e ry, pleadings, and any settlement offers. Mr. Lauridsen also advises upper level m a n a g e m e n t of the status of this case. Mr. Lauridsen was granted access to highly

c o n f id e n tia l information in several other cases, and no allegations were made that he misused o r revealed that confidential information. D ef en d an t argues that Mr. Lauridsen's responsibility for evaluating settlement offers is itself a type of competitive decision-making because any settlement offer in this case is lik e ly to include a form of patent license. Defendant relies on Intel Corp. v. VIA

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T e c h n o lo g ie s, Inc.1 3 to support its proposition that evaluating licensing agreements co n stitutes competitive decision-making. Defendant contends Mr. Lauridsen's

re sp o n sib ilities of making strategy decisions and evaluating settlement offers is identical to th e in-house attorney who was denied access to confidential information in Intel Corp. P la in t if f argues they do not have identical responsibilities. T h e court in Intel Corp. noted that the risk of potential injury from inadvertent d is c lo s u re was increased because the defendant was the only unlicensed competitor of p l a in t if f in the highly competitive chipset market.1 4 The court also noted that the in-house a tto rn e y had not litigated cases for at least five years and found her involvement in licensing th ro u g h litigation constituted competitive decision-making. She was actively involved in n e g o tia tin g the terms of licensing agreements as part of settling lawsuits. The court found th a t disclosure of confidential information to the in-house attorney would put her in the u n te n a b le position of having either to refuse to offer crucial legal advice at times or risk d is c lo s in g protected information.1 5 The court also concluded that confidential information d isc lo se d to the in-house attorney may provide the plaintiff a competitive advantage in n e g o tia tin g related licenses in the future.1 6

13

198 F.R.D. 525 (N.D. Cal. 2000). Id. at 531. Id. at 530. Id . 7

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15

16

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H ere , plaintiff notes that there is no evidence Mr. Lauridsen advises managers re g a rd in g licensing agreements in settling litigation for plaintiff, unlike the in-house attorney in Intel Corp. "Unrebutted statements made by counsel asserting that he does not participate in competitive decisionmaking, which the court has no reason to doubt, form a reasonable b a s is to conclude that counsel is isolated from competitive decisionmaking." 1 7 An

e v id e n tia ry hearing in Intel Corp. shed light on the in-house attorney's competitive decisionm a k in g . This court, however, has no reason to doubt Mr. Lauridsen's declaration that he is n o t involved in competitive decision-making, especially when defendant has merely set forth u n s u p p o r te d contentions that Mr. Lauridsen advises managers on licensing agreements. P lain tiff further argues that there is no indication Mr. Lauridsen's involvement in s e ttle m e n t negotiations affects plaintiff's competitiveness. The court agrees with plaintiff th a t defendant has failed to show disclosure to Mr. Lauridsen would present a risk of c o m p e titiv e harm to defendant similar to the harm shown in Intel Corp. Defendant also a rg u e s that because Mr. Lauridsen will be evaluating settlement offers in this case and in the re la te d patent litigation between plaintiff and three other companies, the risk of inadvertent d is c lo s u re is even more severe. As plaintiff argues, the court finds that defendant has failed to show what potential harm it would suffer from Mr. Lauridsen's involvement in settlement e f f o r ts in the related patent cases. D e f en d a n t next argues that Mr. Lauridsen advises competitive decision-makers about

17

Id. at 529. 8

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this case, which would make inadvertent disclosure more likely. Defendant argues that Mr. L a u rid se n will inevitably and perhaps inadvertently incorporate knowledge of highly co n fid en tia l information into the advice he gives to upper level management, who are in v o lv e d in decisions and activities, both related and unrelated to this case, that could n e g a tiv e ly impact defendant. Defendant relies on language in a case decided prior to U.S. S te e l that suggests in-house counsel should be denied access to confidential information so lely on the basis of their status as in-house.1 8 This proposition, however, was clearly re je c te d in U.S. Steel.1 9 W h e th e r an in-house attorney has regular contact with upper-level management who a re involved in competitive decision-making is largely irrelevant.2 0 The inquiry is not regular c o n ta c t with corporate officials who make competitive decisions, but rather whether the inh o u s e counsel engages in advice and participation in competitive decision-making.2 1 D e n yin g in-house counsel access to confidential information merely because they have r e g u la r contact with competitive decision-makers would disqualify almost all in-house c o u n se l and would effectively constitute the very per se rule rejected in U.S. Steel.2 2 The

18

See FTC v. Exxon Corp., 636 F.2d 1336, 1350 (D.C. Cir. 1980). U.S. Steel Corp., 730 F.2d at 1469.

19

Matsushita Elec. Indus. Co., Ltd. v. United States, 929 F.2d 1577, 1580 (Fed. Cir. 1991).
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20

Id . Id . 9

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c o u rt finds that Mr. Lauridsen's contacts with competitive decision-makers does not make in a d v e rte n t disclosure more likely. D e f en d a n t argues Mr. Lauridsen will have "every incentive" to disclose as much inf o rm atio n as possible to his superiors. In-house counsel, like retained counsel, are officers o f the court, are bound by the same code of professional responsibility, and are subject to the s a m e sanctions.2 3 Further, before he receives highly confidential information, Mr. Lauridsen m u s t sign the parties' agreement to be bound by protective order,2 4 which subjects him to s a n c tio n s and punishment in the nature of contempt for failing to comply with the protective o rd e r. Mr. Lauridsen has never been accused of improperly using confidential information h e received. Because defendant has not shown otherwise, the court presumes Mr. Lauridsen w ill behave in an ethical manner and comply with the terms of the protective order. T h e court finds defendant has not met its burden to show disclosure of highly c o n f id e n tia l information to plaintiff's in-house counsel will likely cause harm. Because the b u rd e n never shifted to plaintiff, the court will not address whether plaintiff has established th a t the disclosure is relevant and necessary to the action. The court also never reaches the f in a l step of balancing plaintiff's need for disclosure to its in-house counsel against d e f en d a n t's claim of injury resulting from the disclosure. D ef en d an t has failed to show that disclosure of highly confidential information to Mr.

23

U.S. Steel Corp., 730 F.2d at 1468. Doc. 29, ex. A, at 18. 10

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L a u rid s e n would present an unacceptable risk of or opportunity for inadvertent disclosure of c o n f id e n tia l information or that Mr. Lauridsen is a competitive decision-maker. Although th e burden never shifted to plaintiff to show disclosure to Mr. Lauridsen is relevant and n e c e ss a ry to the action, the court will briefly address whether disclosure to him is " r e a so n a b l y necessary for this litigation," as required by paragraph 7.3(b) of the parties' p ro p o s e d protective order. Mr. Lauridsen advises upper-level management of the status of th is case, and he therefore needs access to all materials to give them an accurate assessment o f the case. Mr. Lauridsen also needs access to highly confidential information to effectively ad v ise plaintiff in evaluating and responding to motions and settlement offers. The court th e re f o re finds that, provided he sign the parties' agreement to be bound by the protective o rd e r, Mr. Lauridsen is an in-house attorney who should have access to highly confidential in f o r m a tio n . In consideration of the foregoing, IT IS HEREBY ORDERED: 1. P la in tif f 's motion for entry of a protective order governing discovery that

in c lu d e s an in-house counsel provision and that specifically allows Sprint's in-house counsel, M r. Lauridsen, access to defendant's confidential information (doc. 29) is granted. The court sim u ltan eo u sly enters the parties' proposed protective order with paragraph 7.3(b). 2. M r . Lauridsen is hereby deemed an in-house attorney with access to highly

co n fid en tia l information, pursuant to paragraph 7.3(b) of the court's protective order.

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IT IS SO ORDERED.
D a te d this 16th day of September, 2008, at Kansas City, Kansas.

s/James P. O'Hara James P. O'Hara U .S . Magistrate Judge

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