Errant Gene Therapeutics, LLC et al v. Soan-Kettering Institute for Cancer Research

Filing 77

MEMORANDUM OPINION AND ORDER re: 54 LETTER MOTION for Conference re: 53 Letter, Protective Order addressed to Judge Alison J. Nathan from Daniel R. Ferri dated 05/19/2016 filed by Errant Gene Therapeutics, LLC, 52 LETTER MOTION for Conference to discuss entry of a Protective Order addressed to Judge Alison J. Nathan from Daniel R. Ferri dated May 16, 2016 filed by Errant Gene Therapeutics, LLC. For the reasons that follow, both motions are GRANTED in par t, and DENIED in part. The Parties are HEREBY ORDERED to conduct discovery in manner consistent with this opinion. The clerk of court is directed to close Doc. No. 52 and 54. (As further set forth in this Order.) (Signed by Magistrate Judge Ronald L. Ellis on 9/2/2016) (kko) Modified on 9/2/2016 (kko).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
.1£RRANT GENE THERAPEUTICS, LLC,

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MEMORANDUM
OPINION AND ORDER

Plaintiff,
- against -

15-CV-2044 (AJN) (RLE)
SLOAN-KETTERING INSTITUTE
FOR CANCER RESEARCH,
Defendant.

.

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RONALD L. ELLIS, United States Magistrate Judge:
I.

INTRODUCTION

Before this Court are the Parties' cross-motions for entry of a protective order pursuant to
Federal Rule of Civil Procedure 26(c). (Doc. Nos. 61and62.) While the Parties agree that a
protective order is necessary to protect the exchange of information in discovery, they disagree
on the scope of the order. Plaintiff Errant Gene Therapeutics ("EGT") seeks: 1) a "Highly
Confidential" provision that would apply to "highly sensitive internal research documents," and
2) an "Attorneys' Eyes Only" provision that would apply to information reflecting the identity of
any entity with whom the Parties are in business negotiations. (Doc. No 61 at 1-2.) Defendant
Sloan-Kettering Institute for Cancer Research ("SKI") seeks a broader designation: an
"Attorneys' Eyes Only" provision that applies to discovery containing "proprietary or sensitive
personal, research or business information." (Doc. No. 62 at 1.)
The Parties also disagree on the number of people who will have access to information
designated "Confidential." EGT requests that confidential information be made accessible to
three executives. (Doc. No. 61 at 3.) SKI seeks to limit disclosure to two in-house counsel and

two additional officers or employees of either party. (Doc. No. 62 at 1.) For the reasons that

follow, both motions are GRANTED in part, and DENIED in part.
II.

BACKGROUND

EGT, a company that developed a treatment for sickle-cell anemia and thalassemia,
known as the vector, brings this breach of contract action against SKI. (Doc. No. 61 at 2.) EGT
alleges that SKI fraudulently induced EGT into an agreement to purchase the vector, promising
to commercialize it and share the proceeds. (See generally Complaint at Doc. No. 1.) SKI
contends that it has invested significant resources in vector product development with the
expectation that its related research and business dealings would be kept confidential. (Doc. No.
62 at 1.) SKI proposes to apply an "Attorneys' Eyes Only" provision to "proprietary or sensitive
personal, research or business information" in the hopes that it will prevent EGT from
benefitting from its product development. (Id. at 1-2.) This includes: (1) clinical studies and
scientific research; (2) valuable business practices and strategies that are not generally known
and for which reasonable efforts are undertaken to preserve their confidentiality, such as trade
secrets; and (3) sensitive personnel information. (Doc. No. 62 at 4-5.) The document requests
by EGT that SKI takes issue with include: (1) documents discussing, concerning or referencing
companies in the biotechnology industry; (2) documents concerning SKI's efforts to treat
patients with the vector; (3) documents concerning SKI's efforts to commercialize the vector;
and (4) documents of SKI' s efforts to recruit patients for clinical trials with the vector. (Doc.
No. 63 at Exhibit ("Ex") 1.)
Despite EGT's arguments to the contrary, SKI maintains that its research material would
be beneficial to EGT in developing another product or a modified version of the vector. SKI
consistently points to a New York Times article in which EGT's CEO, Pat Girondi ("Girondi"),

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explains that he is "raising money to make more of the therapy and treat more patients." (Doc.

No. 53-2 at 6.) SKI interprets that statement to mean that EGT is trying to develop and
commercialize another vector and treat patients at another hospital. (Doc. No. 62 at 2.) SKI also
argues that without an "Attorneys' Eyes Only" provision, the vector project could suffer harm if
EGT improperly uses SKI's research, leading to development delays, compromising product
safety and efficacy, and/or derailing the SKI project completely. (Id.) SKI believes that EGT
could gain an "unwarranted market advantage" with knowledge of SKI's unpublished research
and clinical-trial process. (Id. at 7.) Through this access to SKI's information, SKI posits that
EGT could use the information to advance its own research and clinical trials. (Id.)
EGT argues that the Parties have been collaborators in the development and
commercialization of the vector, and there is no articulable reason why it should not have access
to the information it seeks from SKI. (Doc. No. 61 at 2.) According to EGT, it is "already privy
to research material concerning the vector." (Doc. No. 70 at 2.) In any event, EGT contends that
it has already agreed that "highly sensitive research materials" can only be viewed in the offices
of SKI' s outside counsel, and no further restrictions are necessary to address SKI' s concerns.
(Id. at 1.)

With respect to harm to its business dealings, SKI contends that third-party companies
will be hesitant to engage in out-licensing transactions for the vector. It explains that the purpose
of developing the vector was to secure an out-licensing transaction with a pharmaceutical
company. (Doc. No. 62 at 6.) Such companies "conduct due diligence to learn who has received
access to the data, research, and product information." (Id. at 2.) SKI is concerned that granting
EGT employees access to such information will tum away prospective licensees if they perceive
a risk of being harassed by EGT or being drawn into litigation. (Id.) SKI additionally expresses

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concern about access to information from Memorial Sloan Kettering Cancer Center's ("MSK"),

of which SKI is a unit. (Id.)
The Parties also dispute the number of business people who will have access to the
information marked "Confidential." According to SKI, its proposal will permit EGT's
"independent experts and six outside lawyers" to view "Attorneys' Eyes Only" information.
Additionally, two employees will have access to any materials marked confidential, which SKI
argues is more than sufficient. (Id at 3.) EGT has agreed to limit the number of individuals who
can see "confidential" information to three: 1) Girondi; 2) Sam Salman ("Salman"), President;
and (3) Jason Feldman ("Feldman"), Director of Business Operations. (Doc. No. 61 at 3.) EGT
maintains that these three executives possess the knowledge and experience to determine
whether SKI' s documents support the claim that SKI has been working towards the
commercialization of the Vector. (Id)
III.
A.

DISCUSSION

Applicable Law

A party "may obtain discovery regarding any non-privileged matter that is relevant to any
party's claim or defense and proportional to the needs of the case." FED. R. C1v. P. 26(b)(l).
Rule 26( c)(1) authorizes courts, for good cause shown, to "issue an order to protect a party or
person from annoyance, embarrassment, oppression, or undue burden or expense." FED. R. C1v.
P. 26(c)(l). "The party seeking a protective order has the burden of demonstrating that good
cause exists for issuance of the order." Uniroyal Chem. Co. v. Syngenta Crop Prat., 224 F.R.D.
53, 56 (D. Conn. 2004) (internal citations omitted); see also Dove v. Atlantic Capital Corp., 963
F.2d 15, 19 (2d Cir. 1992) (citations omitted). More than "[b]road allegations of harm
unsubstantiated by specific examples or articulated reasoning," good cause requires "the moving

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party [to] demonstrate that 'disclosure will work a clearly defined and very serious injury.'"

Uniroyal Chem. Co., 224 F.R.D. at 56 (internal citations omitted).
There are a number of ways in which courts may enter a protective order, including
forbidding the disclosure or discovery sought, prescribing a discovery method other than the one
selected by a party, or designating the persons who may be present while the discovery is
conducted. FED. R. C1v. P. 26(c)(A), (C), (E). Courts may also require 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. C1v. P. 26(c)(G).
"Whether information merits protection in a particular case depends upon: 1) the extent
to which the information is known outside the business; 2) the extent to which information is
known to those inside the business; 3) the measures taken to guard the secrecy of the
information; and 4) the value of the information to the business and its competitors." Uniroyal

Chem. Co., 224 F.R.D. at 56-57. Protective orders limiting access to highly confidential
information to counsel and experts "are commonly entered in litigation involving trade secrets
and other confidential research, development, or commercial information." Vesta Corset Co.,

Inc. v. Carmen Foundations, Inc., No. 97-CV-6139 (WHP), 1999 WL 13257, at *3 (S.D.N.Y.
Jan 13, 1999) (internal citations omitted).
"Where a party seeks a protective order restricting the scope of discovery of technical,
proprietary information, the court should balance ... 'the interests in full disclosure of relevant
information and reasonable protection from economic injury.' Relevant considerations in
striking this balance include: 1) whether the person receiving the confidential information is
involved in competitive decision making or scientific research relating to the subject matter of
the patent, 2) the risk of inadvertent disclosure of proprietary information, 3) the hardship

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imposed by the restriction, 4) the timing of the remedy and, 5) the scope of the remedy."

Uniroyal Chem. Corp., 224 F.R.D. at 57 (internal citations omitted). "The competing interests to
be evaluated in determining the outcome of such a dispute are one party's right to broad
discovery and the other party's ability to protect its confidential materials from misuse by
competitors." Medimmune, Inc. v. Centocor, Inc., 271 F. Supp. 2d 762 (D. Md. 2003) (internal
citations omitted).

B.

Research and Development Material is Properly Restricted
Although the Parties do not appear to be direct competitors, SKI' s proposal to designate

as highly confidential research, development, and commercial information is consistent with the
protections afforded under Rule 26( c ). SKI seeks to restrict clinical studies, scientific research,
business practices and strategies, and sensitive personnel information to "Attorneys' Eyes Only."
It argues that the disclosure of SKI and MSK information will cause injury and risk of misuse,

which in tum could harm vector development. (Doc. No. 62 at 5.) What SKI seeks to protect is
not as broad as EGT suggests. SKI does not vaguely designate "any sensitive document," as
EGT states (Doc. No. 61 at 1), but rather describes what types of documents would be
considered highly confidential.
While EGT contends that the Parties were collaborators in vector development, and not
competitors, the very nature of the Parties' relationship in this litigation is adversarial. Prior to
dismissal of its replevin cause of action, EGT sought an order requiring SKI to allow EGT to
treat patients in clinical trials, which is what SKI purportedly failed to do for a period of twentyone months. (Doc. No. 16 at 2-20.) In its Complaint, EGT demanded reversion of right in the
vector, as well as intellectual property and clinical trial results. (Id. at 20.) The logical
conclusion to be drawn from such a demand is that EGT seeks return of the vector to develop

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and commercialize it. SKI's argument that EGT could gain unwarranted market advantage

through disclosure of unpublished research and clinical trial information is therefore plausible. lt
is equally plausible that prospective licensees would be wary of engaging in an out-licensing
transaction if a potential competitor such as EGT was known to have access to development and
proprietary information. See Tailored Lighting, Inc. v. Osram Sylvania Products, Inc., 236
F.R.D. 146, 148 (W.D.N.Y. 2006) ("Recognizing the sensitive nature of proprietary technical
information, courts generally afford more protection to it than to ordinary business
information"); Sullivan Marketing, Inc. v. Valassis Communications, Inc., No. 93-CV-6350
(PKL), 1994 WL 177795, at *2 (S.D.N.Y. May 5, 1994) (finding that knowledge of the
defendant's marketing plans would give its competitors an unwarranted advantage in the
market).
Such risks must therefore be balanced against the risk of disclosure and the hardship EGT
may suffer with an "Attorneys' Eyes Only" designation. EGT has agreed to designate as
confidential the names of entities with whom SKI is in business negotiations. (Doc. No. 70 at 4.)
This solution, however, does not seem to protect against misuse or improper disclosure.
According to SKI, Girondi has made assurances that he will not disclose confidential information
to employees who are not direct participants in competitive decision-making, product design, or
research. (Doc. No. 62 at 8.) Given EGT's repeated representations that it seeks to do the same
thing it contracted with SKI to do with the vector, the Court is not convinced that Girondi's
assurances are sufficient. In a New York Times article dated October 15, 2015, Girondi was
quoted as saying that he was raising money to make more therapy and treat more patients. (Doc.
No. 53-2 at 7.) SKI reportedly indicated it would not stop his endeavors, so long as he does not
use SKI's "money, property orpersonnel [sic]." (Id.) EGT points out that Girondi has spent

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years working on the development of the Vector. (Doc. No. 61 at 3.) Girondi's ambitions in

developing the vector directly contradicts providing him with unfettered access to information
regarding SKI's business dealings, clinical trials, or personnel information.

It follows that Girondi would be intimately involved in competitive decision-making.
EGT's president, Salaman, also holds a position as CEO of an investment firm that deals in the
biotechnology and pharmaceutical sectors. (Doc. No. 72 at 3.) EGT does not dispute this
assertion. Because of Girondi and Salaman' s roles in competitive decision-making, the
inadvertent risk of disclosure warrants a more restrictive designation for document production as
proposed by SKI. See Koninklijke Philips N. V v. iGuzzini Lighting USA, Ltd., 311 F.R.D. 80, 83
(S.D.N. Y. 2015) ("[T]he competitive decisionmaker analysis hinges on the risk of inadvertent
disclosure, because it is 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")
(citing In re Deutsche Bank Trust Co. Americas, 605 F.3d 1373, 1378 (Fed. Cir. 2010))
(emphasis in the original) (internal quotations omitted).
Nor does EGT dispute that its experts and six lawyers will have access to the information
under SKI's "Attorneys' Eyes Only" designation. Tailored Lighting, 236 F.R.D. at 148 ("[I]n
cases involving the disclosure of trade secrets, courts often issue protective orders limiting access
to the most sensitive information to counsel and their experts") (collecting cases). SKI' s need to
protect research materials and business information outweighs the hardship EGT will suffer if
the disclosure is limited to attorneys and experts for both Parties.
C.

EGT's Proposal to Limit to Three Employees for Disclosure of Confidential
Information is Sufficient

SKI has not shown good cause for limiting disclosure of confidential information to two
in-house counsel and two employees of each party, as opposed to EGT's proposal of three
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employees. SKI merely argues that an expansion from two to three employees will "only

increase the risk of misuse." (Doc. No. 62 at 10.) SKI has not specified, hased on the three
names provided by EGT, which executive it would seek to limit. The Court agrees with EGT
that SKI does not seem to care which two individuals see the information designated
confidential.
EGT identified Girondi, Salman, and Feldman as executive employees who should have
access to confidential information. EGT argues that these individuals have knowledge and
experience to determine whether SKI's documents support its claims that it has worked to
commercialize the Vector. (Doc. No. 61 at 3.) SKI has not provided a compelling reason to
outweigh the prejudice EGT will suffer if the executives are prevented from accessing
information. While these employees will not have access to information designated "Attorneys'
Eyes Only," the Court finds that they are properly within the scope of what SKI contemplates as
confidential information.
IV.

CONCLUSION

The Parties are HEREBY ORDERED to conduct discovery in manner consistent with
this opinion. The clerk of court is directed to close Doc. No. 52 and 54.

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l__ day of September 2016.

SO ORDERED this
New York, New York

The Honorable Ronald L. Ellis
United States Magistrate Judge

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