ATI INDUSTRIAL AUTOMATION, INC. v. APPLIED ROBOTICS, INC.
Filing
164
MEMORANDUM OPINION AND ORDER signed by MAG/JUDGE L. PATRICK AULD on 6/11/2014; that Defendant's Motion to Seal Document (Docket Entry 128 ) is GRANTED. FURTHER that the unredacted copy of the Document shall remain under seal. (Sheets, Jamie)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
ATI INDUSTRIAL AUTOMATION, INC.,
Plaintiff,
v.
APPLIED ROBOTICS, INC.,
Defendant.
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1:09CV471
MEMORANDUM OPINION AND ORDER
This case comes before the Court on Defendant’s Motion to Seal
Document.
(Docket Entry 128.)
For the reasons that follow, the
Court will grant the instant Motion.
I.
BACKGROUND
Plaintiff’s Second Amended Complaint alleges that Defendant
has infringed
three
of
its
utility
patents
for
robotic
tool
changers and that Defendant’s claimed design patent is invalid as
functional.
(Docket Entry 154 at 4-9.)
The Parties previously
filed a Joint Motion for Impoundment Renewed (Docket Entry 48),
which sought to seal documents containing trade secrets filed in
connection with Defendant’s Motion to Dismiss (see id. at 1-2). In
granting that Motion, the Court concluded that the First Amendment
standard (as
opposed
to
the
common law
standard)
applied
to
documents filed in connection with a dispositive motion and that
Defendant’s interest in protecting its trade secrets outweighed the
public’s First Amendment right of access.
(Docket Entry 84 at 14-
19.)
Defendant now moves to seal a document (“the Document”) it
filed in opposition to Plaintiff’s Motion to Amend its Amended
Complaint.
(See Docket Entry 129 at 1; see also Docket Entry 127-1
(redacted version of document).)
spreadsheet
containing
lists
It describes the Document as “a
of
[Defendant’s]
customers
and
identifying information thereof such as their locations[] and
specifics of their order histories[,] . . . . [as well as] highly
sensitive cost and pricing information . . . . [and, further, notes
that said document] is not publicly available and is maintained
confidentially by [Defendant] as a trade secret.” (Docket Entry 129
at 4.) Defendant’s instant Motion thus contends that “[d]isclosure
of this type of information would unnecessarily burden [Defendant]
with economic harm by providing a competitive advantage to its
direct competitors in the industry.”
oppose Defendant’s instant Motion.
II.
A.
(Id.)
Plaintiff does not
(Docket Entry 142 at 1.)
DISCUSSION
Standard for Sealing Documents
Federal Rule of Civil Procedure 26(c) states in relevant part
that:
The court may, for good cause, issue an order to protect
a party or person from annoyance, embarrassment,
oppression, or undue burden or expense, including one or
more of the following:
. . . .
(G) requiring that a trade secret or other confidential
research, development, or commercial information not be
revealed or be revealed only in a specific way; and
(H) requiring that the parties simultaneously file
specified documents or information in sealed envelopes,
to be opened as the court directs.
Fed. R. Civ. P. 26(c) (emphasis added).
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The United States Court of Appeals for the Fourth Circuit has
recognized
that
“there
may
be
instances
in
which
discovery
materials should be kept under seal even after they are made part
of a dispostiive motion.”
Rushford v. The New Yorker Magazine,
Inc., 846 F.2d 249, 253 (4th Cir. 1988).
However, the authority
granted to a court under Rule 26(c) to require special handling of
information
gathered
during
discovery
is
constrained
by
the
public’s right of access when that information later becomes part
of a judicial record.
See Level 3 Commc’ns, LLC v. Limelight
Networks, Inc., 611 F. Supp. 2d 572, 576 (E.D. Va. 2009) (“There is
a highly-developed body of case law governing the handling of
discovery documents and other materials filed with courts under
seal in civil cases.
For current purposes, this case law can be
divided analytically into two categories.
One body of case law
relates to the protected status of documents produced in pre-trial
discovery pursuant to a stipulated, court-approved protective order
under Rule 26(c) of the Federal Rules of Civil Procedure.
second
body
of
case
law
governs
the
public
availability
The
of
materials that have been submitted to courts in connection with
civil pleadings or motions (dispositive or otherwise) or entered by
courts into evidence in the course of hearings or trial, whatever
the materials’ origins or pre-trial confidentiality status might
previously have been.”).
This constraint arises because “[t]he operations of the courts
and the judicial conduct of judges are matters of utmost public
concern,” Landmark Commc’ns, Inc. v. Virginia, 435 U.S. 829, 839
-3-
(1978).
As a result, “the courts of this country recognize a
general right to inspect and copy . . . judicial records and
documents.”
(1978).1
Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597
“The right of public access to documents or materials
filed in a district court derives from two independent sources:
the common law and the First Amendment.”
Virginia Dep’t of State
Police v. The Washington Post, 386 F.3d 567, 575 (4th Cir. 2004).
“While the common law presumption in favor of access attaches to
all ‘judicial records and documents,’ the First Amendment guarantee
of access has been extended only to particular judicial records and
documents.”
Stone v. University of Md. Med. Sys. Corp., 855 F.2d
178, 180 (4th Cir. 1988) (internal citation omitted).
Moreover,
“[t]he common law does not afford as much substantive protection to
the interests of the press and the public as does the First
Amendment.”
Rushford, 846 F.2d at 253.
Before considering whether a constitutional or only a common
law right of access exists, however, a court must assess whether
the materials at issue actually constitute “judicial records and
documents,” Stone, 855 F.2d at 180.
In this regard, the Fourth
Circuit (albeit in an unpublished opinion) has joined other courts
in “hold[ing] that the mere filing of a document with a court does
not render the document judicial.”
In re Policy Mgmt. Sys. Corp.,
67 F.3d 296, 1995 WL 541623, at *4 (4th Cir. Sept. 13, 1995)
1
The right of access to court records flows from the right of
access to in-court proceedings; it applies in both civil and
criminal cases. See Rushford, 846 F.2d at 253 & n.4.
-4-
(unpublished) (citing United States v. Amodeo, 44 F.3d 141, 145 (2d
Cir. 1995)).
Accordingly, in any given case, some court-filed
“documents fall within the common law presumption of access, while
others are subject to the greater right of access provided by the
First Amendment.
records’ at all.”
Still
others
may
not
qualify
as
‘judicial
United States v. Moussaoui, 65 F. App’x 881, 889
(4th Cir. 2003) (citing Amodeo, 44 F.3d at 145-46).
In light of this legal framework, “[w]hen presented with a
request to seal judicial records or documents, a district court
must comply with certain substantive and procedural requirements.”
Virginia Dep’t of State Police, 386 F.3d at 576.
Procedurally:
[The district court] must give the public notice of the
request to seal and a reasonable opportunity to challenge
the request; it must consider less drastic alternatives
to sealing; and if it decides to seal it must state the
reasons (and specific supporting findings) for its
decision and the reasons for rejecting alternatives to
sealing. Adherence to this procedure serves to ensure
that the decision to seal materials will not be made
lightly and that it will be subject to meaningful
appellate review.
Id. (internal
citation
omitted).
“As
to
the
substance,
the
district court first must determine the source of the right of
access with respect to each document, because only then can it
accurately weigh the competing interests at stake.”
Id. (internal
citations and quotation marks omitted); see also Moussaoui, 65 F.
App’x at 889 (“We therefore must examine [materials submitted under
seal] document by document to determine, for each document, the
source of the right of access (if any such right exists).
As to
those documents subject to a right of access, we must then conduct
-5-
the appropriate balancing to determine whether the remainder of the
document should remain sealed, in whole or in part.” (internal
citation omitted)).
B.
Trade Secrets
Trade secret protection generally arises as a function of
state law.
Cf. Rohm and Haas Co. v. ADCO Chem. Co., 689 F.2d 424,
429 (3d Cir. 1982) (“A trade secret claim in the federal courts is
governed not by federal common law but by state law.”).2
Thus,
federal courts have referred to state law for purposes of defining
a trade secret in the context of orders addressing public access.
See, e.g., Pochat v. State Farm Mut. Auto. Ins. Co., No. Civ. 085015-KES,
2008
WL
5192427,
at
*7
(D.S.D.
Dec.
11,
2008)
(unpublished) (“Courts look to applicable state law to determine if
the requested documents qualify as trade secrets.” (citing In re
Remington Arms Co., Inc., 952 F.2d 1029, 1033 (8th Cir. 1991)));
International Ass’n of Machinists & Aerospace Workers v. WernerMatsuda, 390 F. Supp. 2d 479, 484-85 (D. Md. 2005) (granting motion
to
seal
and
examining
state
law
to
determine
if
proposed
information constituted trade secret).
North Carolina’s Trade Secrets Protection Act defines a trade
secret as follows.
“Trade secret” means business or technical information,
including but not limited to a formula, pattern, program,
2
The Economic Espionage Act of 1996 provides for criminal
penalties for certain forms of trade secret misappropriation. See
Pub. L. No. 104-294, § 1832, 110 Stat. 3489 (1996), codified at 18
U.S.C. §§ 1831-39.
-6-
device, compilation of information, method, technique, or
process that:
a.
Derives independent actual or potential
commercial value from not being generally known or
readily
ascertainable
through
independent
development or reverse engineering by persons who
can obtain economic value from its disclosure or
use; and
b. Is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
N.C. Gen. Stat. § 66-152(3).
The North Carolina Court of Appeals
has identified six factors to “consider when determining whether an
item is a trade secret”:
(1) the extent to which information is known outside the
business; (2) the extent to which it is known to
employees and others involved in the business; (3) the
extent of measures taken to guard secrecy of the
information; (4) the value of information to business and
its competitors; (5) the amount of effort or money
expended in developing the information; and (6) the ease
or difficulty with which the information could properly
be acquired or duplicated by others.
Sunbelt Rentals, Inc. v. Head & Enguist Equip., L.L.C., 174 N.C.
App. 49, 53, 620 S.E.2d 222, 226 (2005) (quoting State ex rel.
Utils. Comm’n v. MCI, 132 N.C. App. 625, 634, 514 S.E.2d 276, 282
(1999)).
The North Carolina Court of Appeals has also observed
that, in “[a]pplying these factors, [North Carolina’s] courts have
found the following to constitute a trade secret: cost history
information; price lists; and confidential customer lists, pricing
formulas and bidding formulas.”
Id. (citations omitted).
This
Court also has recognized that “courts have found that special
knowledge of customer needs and preferences is a trade secret.”
Philips Elec. N. Am. Corp. v. Hope, 631 F. Supp. 2d 705, 721
-7-
(M.D.N.C. 2009) (Schroeder, J.) (citing Sunbelt, 174 N.C. App. at
54-56, 620 S.E.2d at 226-28).
C.
Analysis
Initially, the Court observes that the instant Motion has been
publicly docketed since February 21, 2014.
(Docket Entry 128.)
Any interested party therefore has had sufficient time to seek
intervention to contest any sealing order, but no opposition has
been filed.
(See Docket Entries from Feb. 21, 2014, to present.)
Accordingly, the Court concludes that, as to the instant Motion,
the “public notice” prerequisite to entry of a sealing order has
been satisfied.
See Stone, 855 F.2d at 181 (discussing use of
docketing to comply with procedural requirements for sealing).
As to the level of substantive protection due for the instant
Document, the Fourth Circuit has not provided conclusive guidance.
Defendant produced the document during discovery and later filed it
with the Court in connection with its response to a motion by
Plaintiff to amend the Complaint.
Entry 130.)
(See Docket Entry 127-1; Docket
The more rigorous First Amendment standard applies to
attachments to dispositive motions. See Rushford, 846 F.2d at 25253 (“Once the documents are made part of a dispositive motion, such
as a summary judgment motion, they lose their status of being raw
fruits of discovery. . . . We believe that the more rigorous First
Amendment
connection
standard
with
a
should
summary
also
apply
judgment
to
motion
documents
in
a
(internal quotation marks and citations omitted)).
filed
civil
in
case.”
In contrast,
substantial authority indicates that documents filed in connection
-8-
with nondispositive discovery motions do not constitute judicial
documents at all (and thus do not benefit from protection afforded
by either the First Amendment or the common law).
See Bond v.
Utreras, 585 F.3d 1061, 1075 n.8 (7th Cir. 2009) (“[M]aterial filed
with discovery motions is not subject to the common-law right of
access.”) (quoting Chicago Tribune Co. v. Bridgestone/Firestone,
Inc., 263 F.3d 1304, 1312 (11th Cir. 2001)); Anderson v. Cryovac,
Inc., 805 F.2d 1, 10 (1st Cir. 1986) (“Although we agree that the
public has a right of access to some parts of the judicial process,
we conclude that this right does not extend to documents submitted
to a court in connection with discovery proceedings.”).
However,
a
motion
to
amend
a
complaint
constitutes
a
nondispositive pretrial motion that does not concern discovery.
See Stonecrest Partners, LLC v. Bank of Hampton Roads, 770 F. Supp.
2d 778, 783 (E.D.N.C. 2011) (“The courts of appeal that have
addressed the issue have concluded that a motion to amend a
complaint is a pretrial matter not dispositive of a claim or
defense of a party within the purview of Fed. R. Civ. P. 72(a).”
(internal quotation marks omitted)).
No consensus has emerged
among the circuit courts of appeal as to the appropriate level of
protection for documents filed in connection with such motions.
Some courts of appeal have declined to apply common law right of
access
and/or
First
Amendment
analysis
to
discovery
material
attached to any nondispositive motion (and instead required only a
showing sufficient to trigger protection under Rule 26(c)).
See,
e.g., Pintos v. Pacific Creditors Ass’n, 565 F.3d 1106, 1115 (9th
-9-
Cir. 2009) (“‘[G]ood cause’ is also the proper standard when a
party seeks access to previously sealed discovery attached to a
nondispositive motion.”).
Other courts have drawn the line of
demarcation as to the common law right of access between discovery
motions and other nondispositive, pretrial motions.
See, e.g.,
Leucadia, Inc. v. Applied Extrusion Techs., Inc., 998 F.2d 157, 165
(3d Cir. 1993) (“[W]e hold there is a presumptive right to public
access to all material filed in connection with nondiscovery
pretrial motions . . . , but no such right as to discovery motions
and their supporting documents.”).
It does not appear that the
Fourth Circuit has made clear its position on this subject, but it
has held “that
documents
filed
with
the
court
are ‘judicial
records’ if they play a role in the adjudicative process, or
adjudicate substantive rights,” In re U.S. for an Order Pursuant to
18 U.S.C. Section 2703(D), 707 F.3d 283, 290 (4th Cir. 2013).
Defendant’s
instant
Motion
does
not
address
whether
the
Document constitutes a judicial record, and if so, which public
right of access applies.
(See Docket Entry 129 at 1-4.)
Rather,
the instant Motion simply requests relief under Federal Rule of
Civil Procedure 26(c).
(See id. at 2.)
Nonetheless, the Court
need not determine which standard applies for the instant Document,
because it concludes that it may remain sealed under the most
rigorous First Amendment standard. In this regard, the Court notes
that
the
Document
appears
substantially
similar
to
several
documents which the Court deemed to survive the First Amendment
-10-
standard when it decided the Parties’ Joint Motion for Impoundment
Renewed.
(See Docket Entry 84 at 13-18.)
In that Order, the Court concluded that documents containing
“‘[Defendant’s]
customers
contact
numbers,
phone
in
North
emails
and
Carolina,
including
addresses’
and
names,
‘pricing
information about [Defendant’s] products’ . . . . [, as well as]
‘specific [Defendant] products purchased by the customers’” (id. at
13 (quoting Docket Entry 49 at 11-12)) constituted trade secrets
meriting sealing, notwithstanding the public’s First Amendment
right of access (id. at 15-17).
contains
“lists
of
Similarly, the instant Document
[Defendant’s]
customers
and
identifying
information thereof such as their locations[] and specifics of
their order histories[,] . . . . [as well as] highly sensitive cost
and pricing information.”
(Docket Entry 129 at 4.) In their prior
Joint Motion for Impoundment Renewed, the Parties contended that
the exhibits were “not publically available [and were] maintained
confidentially by Defendant . . . .” (Docket Entry 49 at 11-16.)
Correspondingly, according to Defendant, the instant Document “is
not
publicly
[Defendant]
as
available
a
trade
and
is
secret.”
maintained
(Docket
confidentially
Entry
129
at
by
4.)
Furthermore, in accord with the Court’s prior determination, no
viable alternative to sealing exists, because the Document consists
almost entirely of confidential information, as evidenced by the
fact that the redacted version of the document does not appear
comprehensible (see Docket Entry 127-1). The Court thus finds that
the instant Document also constitutes a trade secret warranting
-11-
sealing
and
neither
the
common
law
nor
the
First
Amendment
precludes such action.
In considering the relationship between the standards for
sealing documents under Federal Rule of Civil Procedure 26(c), the
common law,
and
the
First
Amendment,
the
Fourth
Circuit
has
consistently held that the First Amendment right of access imposes
the highest burden on litigants seeking to seal judicial records.
See In re U.S., 707 F.3d at 290 (citing Virginia Dep’t of State
Police, 386 F.3d at 575).
Therefore, without the need to address
the question of whether the Document in fact constitutes a judicial
record (and if so, which category of public rights attach to it),
the Court concludes that Defendant’s document may remain under seal
because it satisfies the First Amendment standard.
III.
CONCLUSION
The Court observes that the public has had sufficient time to
intervene to oppose the instant Motion.
Moreover, the Court finds
that the Document incorporates trade secrets and that Defendant’s
interest in protecting those trade secrets overcomes any right the
public may possess to access the Document.
IT IS THEREFORE ORDERED that Defendant’s Motion to Seal
Document (Docket Entry 128) is GRANTED.
IT IS FURTHER ORDERED that the unredacted copy of the Document
shall remain under seal.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
June 11, 2014
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