Capitol Records, LLC v. Redigi Inc.

Filing 68

MEMORANDUM OF LAW in Support re: 67 MOTION to Seal.. Document filed by Redigi Inc.. (Adelman, Gary)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CAPITOL RECORDS, LLC,
Plaintiff,

Civil Action No.: 12CIV0095
(RJS)

v.
REDIGI INC.,
Defendant.
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MEMORANDUM OF LAW IN SUPPORT OF REDIGI INC’S
MOTION FOR SEALING

MEISTER SEELIG & FEIN LLP
Two Grand Central Tower
140 East 45th Street, 19th Floor
New York, New York 10017
Phone: [phone]
Attorneys for ReDigi Inc.
Gary Adelman, Esq.

PRELIMINARY STATEMENT
Defendant ReDigi Inc. (“ReDigi”) submits this memorandum of law in support of its
motion for the continued sealing of certain information contained in documents filed with the
Court as listed on Exhibit “A” of the Declaration of Larry Rudolph a/k/a Lawrence S. Rogel
dated July 27, 2012 (“Rogel Decl.”) and incorporates by reference those documents contained on
Exhibit “A,” that were redacted for the parties’ filings on ECF.1
Courts frequently recognize that not all information filed in court should be subject to
public disclosure. This is particularly true in connection with documents and information filed
with motions of this nature, which contain highly confidential and sensitive information that is
not generally available to the public, including details concerning the ReDigi's proprietary
software, the internal operations of its service, raising of finances, structure, information
gathered by ReDigi’s service and ReDigi's private interactions with potential partners. See
Rogel Decl., ¶4-5. ReDigi makes significant efforts to protect the confidentiality of its sensitive
and proprietary information. See Rogel Decl., ¶4-6. For the reasons set forth below, ReDigi
respectfully requests that the portions of ReDigi’s confidential information submitted in support
of the parties’ motions for summary judgment which were filed under seal remain under seal.

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Deposition Excerpts of Rudolph Rogel Deposition taken on June 18, 2012, attached to
Plaintiffs Motion. Deposition Excerpts of Rudolph Rogel Deposition taken on June 18, 2012,
attached to ReDigi’s Motion. Deposition Excerpts of Ossenmacher Deposition, taken on June
19, 2012, attached to Plaintiffs Motion. Deposition Excerpts of Ossenmacher Deposition, taken
on June 19, 2012, attached to Redigi’s Motion. Exhibits “K”, “L” and “M” attached to Plaintiffs
Motion. Plaintiff’s 56.1 Statement of Uncontested Facts, attached to Plaintiff’s Motion.
ReDigi’s 56.1 Statement Of Uncontested Facts, attached to ReDigi’s Motion, Plaintiff’s
Memorandum of Law, dated July 20, 2012. ReDigi’s Memorandum of Law, dated July 20,
2012. Declaration of Gary Adelman dated July 20, 2012, in support of ReDigi’s Motion.
Declaration of Larry Rudolph (aka Lawrence S. Rogel), dated July 20, 2012, in support of the
ReDigi Motion. Declaration of Colin Worth, dated July 20, 2012, in support of the ReDigi
Motion. Declaration of Jonathan Lin, dated July 20, 2012, in support of the ReDigi Motion.
(Hereinafter the “Redacted Documents”).
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FACTUAL BACKGROUND
In recognition of the sensitive nature of the information that would be exchanged in this
action the Court entered a Protective Order dated May 14, 2012 (the “Protective Order”). The
Protective Order allowed the parties to exchange certain documents marked, “Confidential” or
“Attorneys Eyes Only”.

In addition, the Court issued an “Addendum To The Order,” dated

May 14, 2012, which stated in part,
“…No document may be filed with the Clerk under seal without further order of
this Court addressing the specific documents to be sealed. Any application to seal
shall be accompanied by an affidavit or affidavits and a memorandum of law,
demonstrating that the standards for sealing have been met and specifically
addressing Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119-120 (2d Cir.
2006) and any other controlling authority.”
To comply with its discovery obligations, ReDigi produced a significant volume of
confidential and sensitive information under the Protective Order in this action. In anticipation
of making their motions for summary judgment, knowing that both parties would be using
documents that had been produced under the confidential designation, the parties submitted a
joint letter to the court dated July 12, 2012.
The July 12, 2012 joint letter requested leave to file certain confidential documents under
seal and that the parties be given one week to submit the instant requests for continued sealing
pursuant to the May 14, 2012 Addendum, which the Court endorsed on July 12, 2012 (the “July
12 Order”). Consistent with the July 12 Order the Parties have filed the Redacted Documents
under seal which contain confidential information about ReDigi’s software, service, business and
financial information. See Rogel Decl., ¶4. This information should remain sealed and/or
redacted to prevent competitive and commercial harm to ReDigi, and maintain the
confidentiality of this information.
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APPLICABLE LAW
The presumption of public access to judicial documents is subject to multiple, wellrecognized exceptions designed to protect precisely the type of information filed under seal in
this matter. See Lugosch, 435 F.3d, 119-20. Under the common law, the Court was instructed to
weigh the presumption of access against factors that outweigh disclosure. See United States v.
Amodeo, 44 F.3d 141, 146 (2d Cir. 1995); Matter of New York Times Co., 828 F.2d 110, 116 (2d
Cir. 1987).
The court may, for good cause shown issue an order to protect any party including
“requiring that a trade secret or other confidential research, development, or commercial
information not be revealed or be revealed only in a specified way.” Fed. R. Civ. P. 26(c)(1)(G).
The presumption of public access, which arises out of the First Amendment, may be overcome
“to preserve higher values” provided “the sealing order is narrowly tailored to achieve that aim.”
Lugosch, 435 F.3d at 124.
ARGUMENT
Well-recognized exceptions to the presumption of public access, including the privacy
interests of parties resisting disclosure, justify the sealing and/or redacting of: (1) the confidential
documents of ReDigi; and (2) ReDigi’s confidential, proprietary business secrets and
information, including but not limited to information concerning ReDigi’s software structure and
operation, the ReDigi system and its internal functionality, confidential information provided to
investors and potential customers, which contain ReDigi company secrets and are protected
under confidentiality agreements. See Rogel Decl., ¶1-15. Sealing and/or redacting documents
containing this information is a narrowly-tailored means of protecting harm to ReDigi due to
disclosure of the information.

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CONFIDENTIAL REDIGI DOCUMENTS SHOULD REMAIN
SEALED AND/OR REDACTED
Both the Plaintiff and ReDigi have filed under seal information that is proprietary
business information of ReDigi, which is not generally available to the public and/or is
information that is subject to confidentiality agreements. See Rogel Decl., ¶1-4, 13. This
information is private, confidential, and the disclosure of this information could leave ReDigi at
a competitive disadvantage. See id. ¶4, 8-11.
The protection of confidential proprietary ReDigi information justifies sealing. See
Standard Inv. Chartered, Inc. v. Fin. Indus. Regulatory Auth., No. 08-4922, 2009 WL 2778447,
at **2 (2d Cir. 2009) (regulatory organization's “’interest in protecting confidential business
information outweighs the qualified First Amendment presumption of public access.’”);
GoSMiLE, Inc. v. Dr. Jonathan Levine, D.M.D. P.C., 769 F. Supp. 2d 630, 649-50 (S.D.N.Y.
2011)(granting motion to seal “highly proprietary material concerning ... marketing strategies,
product development, costs and budgeting.”); Sherwin-Williams Co. v. Spitzer, No. 04-185, 2005
WL 2128938 (N.D.N.Y. Aug. 24, 2005) (ordering the sealing of documents ... regarding
confidential information such as trade secrets, and commercial and proprietary interests); Gelb v.
Am. Tel. & Tel. Co., 813 F. Supp. 1022, 1035 (S.D.N.Y. 1993)(granting motion to seal
documents based upon the “assertion that its competitors who do not now have this information
could use it to do [the party] competitive injury ....”); Dawson v. White & Case, 584 N.Y.S.2d
814 (1st Dep’t 1992) (sealing law “financial information concerning [its] partners and clients”
because it does not “’facilitate public discussion of policy issues” or serve “any legitimate public
concern, as opposed to mere curiosity ... to counter-balance the interest of [its] partners and
clients in keeping their financial arrangements private”) (internal citations omitted); United
States v. Amodeo, 71 F.3d 1044, 1051 (2d Cir. 1995)(“[f]inancial records of a wholly owned
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business ... and similar matters will weigh more heavily against access than conduct affecting a
substantial portion of the public.”).
In D 'Ammour v. Ohrenstein & Brown, LLP, the Court found good cause for sealing
numerous documents containing a law firm's confidential, non-public information. See D
'Ammour v. Ohrenstein & Brown, LLP, No. 06 -601418,17 Misc. 3d 1130(A), 851 N.Y.S.2d 68,
at 2007 WL 4126386 at *21 (Aug. 13, 2007 Sup. Ct.). The court explained that the firm’s interest
in maintaining the privacy of these documents, which included income tax returns, financial
statements and reports, and firm’s agreements and memoranda, outweighed the right of public
access to such documents. The firm “ought not to be required to make their private financial
information public, merely because they have been named as defendants in a lawsuit, where no
substantial public interest would be furthered by public access to that information.” Id.
The Redacted Documents filed in connection with the motions for summary judgment
include proprietary details of ReDigi’s software trade secrets, non-standard protocols that do not
involve making reproductions, specific details concerning how the software functions, investor
business plans, marketing plans, and subscription agreement forms. See Rogel Decl., ¶4, 8-12.
Here the protection of ReDigi's confidential propriety information justifies the sealing
and redaction of documents containing such information. Technology firms like ReDigi closely
safeguard their information as it is the essence of their competitive advantage and the disclosure
of this information would place them at a severe competitive disadvantage and cause irreparable
harm. Id. ¶4-6. The technological services industry is a highly competitive one, and no market
is as competitive as the music market. Moreover, technology firms do not generally share the
type of information that is contained in the Redacted Documents.

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This particularly rings true today in light of the highly competitive technology market,
where patents and trade secrets are an issue and intellectual property litigation is an everyday
occurrence. Having an edge in technology is vital to the success of ReDigi’s business and the
release of these business and technology secrets would have a negative effect on its ability to be
competitive. Id. ¶11. Technology firms like ReDigi must continually develop strategies and
technology’s to keep ahead of not only their competitors, but also hackers whose sole goal is to
defeat a web sites technology. Id. ¶9-10. Publicizing information in the Redacted Documents,
would give ReDigi’s competitors and hackers insight into how ReDigi works. Id. ¶9-11. With
access to ReDigi's confidential and proprietary information, other tech firms and hackers, alike,
would be able to reap the benefits of ReDigi's efforts, time and investment at no cost to them,
and undercut ReDigi’s future business or potential harm the software itself. Id.
Software source code and functionality are among the most highly confidential of trade
secrets and deserves trade secret protection. See Jager, Trade Secrets Law, § 9.3 at 9-5-11
(Supp. 2006) (and cases cited therein) (trade secret protection has long been afforded to
computer software programs). See, e.g., Sun Dial Corp. v. Rideout, 108 A.2d 442, 445 (N.J.
1954) (“trade secret may consist of a formula, process, device or compilation which one uses in
his business and which gives him an opportunity to obtain an advantage over competitors who do
not know or use it”); Lehman v Dow Jones & Co., Inc., 783 F2d 285, 297 (2d Cir. 1986) (citing
Restatement (First) of Torts § 757 (1939)). See also Apple Computer, Inc. v. Franklin Computer
Corp., 714 F.2d 1240, 1248 (3d Cir.1983).
ReDigi has invested significant time, effort and money in developing its software, and
internal processes, and zealously protects its software. See Rogel Decl., ¶8-11. ReDigi does not
make its source code or the processes of how it performs certain functions available to the public

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and it otherwise takes every conceivable step to prevent public disclosure of this information,
which is the “golden nugget” intellectual property that is at the core of the value of its business.
Id. ¶4-6, 8-11.
The material that ReDigi seeks to seal through this motion is its software processes, its
competitively sensitive information derived from that source code, such as “logical flow” and the
information contained in the Declarations of Larry Rudolph Rogel, Jonathan Lin and Colin
Worth, and the Depositions of Larry Rudolph Rogel and John Ossenmacher, and the
Memorandum of Law and 56.1 Statement of Undisputed Facts of both parties. Id. ¶4. These
documents illustrate step-by-step the sequence and flow of the ReDigi system and how they
perform certain actions involved in the software and system. Id. If disclosed, this information
would permit ReDigi’s competitors and hackers, to have information that would allow them to
duplicate the proprietary ReDigi system, without having to incur the significant development
costs associated with engineering the software and hardware configuration themselves. Id. ¶1011.
This type of information can be thought of as the “words and paragraphs” that make up
the “novel” that is ReDigi’s software, which are protected expressions of ideas, the logical flow,
how certain processes work and which detail the logical order in which the program processes
the information it receives and works towards obtaining a result, is “the plot” of the novel. A
competitor or hacker with this type of information, would have a map to how ReDigi’s software
works and can simply “knock off” the plot, thus recreating the software without incurring the
many dollars of development costs that ReDigi has. That, of course, threatens the very essence of
ReDigi’s business. This court should therefore allow the parties to take appropriate measures to
protect ReDigi’s confidential and proprietary information, including, without limitation, by

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sealing the record with the redactions that the Parties have made to the documents and
prohibiting disclosure of the ReDigi proprietary information.
Furthermore, ReDigi believes that the instant request is narrowly tailored so as not to
unduly prevent public access to judicial documents and that in this instance any interest the
public may have in these documents is far outweighed by the competitive harm that ReDigi
would suffer as a result of their disclosure.
CONCLUSION
For all of the foregoing reasons, ReDigi respectfully submits that the Court should order
the sealing and continued redaction of the material submitted in connection with ReDigi's and
the Plaintiff’s summary judgment motions.
Dated: New York, New York
July 27, 2012
Respectfully submitted,
MEISTER SEELIG & FEIN LLP
/s/ Gary Adelman, Esq.______
Gary Adelman, Esq.
Attorneys for ReDigi Inc.
Two Grand Central Tower
140 East 45th Street, 19th Floor
New York, New York 10017
Telephone: [phone]
E-mail: [e-mail]

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