FONTEM VENTURES B.V., et al. v. R.J. REYNOLDS VAPOR COMPANY
Filing
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MEMORANDUM OPINION AND ORDER. Signed by JUDGE CATHERINE C. EAGLES on 5/23/2017, that Reynolds' motion for a protective order, (Doc. 70 ), is DENIED in part, to the extent it seeks a prosecution bar, and is otherwise GRANTED. The Court will enter a protective order shortly. (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
FONTEM VENTURES B.V., a
Netherlands company; and FONTEM
HOLDINGS 1 B.V., a Netherlands
company,
Plaintiffs,
v.
R.J. REYNOLDS VAPOR
COMPANY, a North Carolina
company,
Defendant.
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1:16-CV-1255 (Lead Case)
1:16-CV-1257
1:16-CV-1258
1:17-CV-175
MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
Fontem Ventures has filed four suits against R.J. Reynolds Vapor Company
claiming that Reynolds is infringing fifteen Fontem patents used in the manufacture and
design of electronic cigarettes. The parties have largely agreed on a protective order to
cover the scope of discovery and the exchange of confidential information, but they
disagree on whether the Court should impose a patent prosecution bar. The Court
concludes that the parties are entitled to a protective order governing the use of
designated confidential information during the litigation process, but that Reynolds has
not shown good cause for a patent prosecution bar.
I.
Protective Orders Generally
For good cause, a court may issue a protective order that limits the scope of
discovery, for instance by prescribing a particular discovery method, prohibiting inquiry
into certain subjects, limiting how confidential information can be used, or designating
who may see confidential business or technical information. Fed. R. Civ. P. 26(c)(1). To
obtain a protective order to protect confidential information, “[t]he proponent must show
that the information is confidential and that its disclosure would create a risk of harm to
the party’s interests,” and that the risk of harm from disclosure outweighs the harm of
restricting discovery. Biazari v. DB Indus., LLC, No. 5:16-CV-49, 2017 WL 1498122, at
*2 (W.D. Va. Apr. 26, 2017); see also In re Violation of Rule 28(D), 635 F.3d 1352,
1357-58 (Fed. Cir. 2011); In re Wilson, 149 F.3d 249, 252 (4th Cir. 1998). Technical
information in patent cases is ordinarily entitled to “a heavy cloak of judicial protection
because of the threat of serious economic injury to the discloser of scientific
information.” Valencell, Inc. v. Apple, Inc., No. 5:16-CV-1-D, 2016 WL 7217635, at *2
(E.D.N.C. Dec. 12, 2016) (quotation omitted).
The parties agree that a protective order is appropriate to protect confidential,
proprietary, or private information subject to discovery. See Doc. 72 at ¶ 2; Docs. 75-2,
72-1.1 They further agree on a process for designating such information, who can see
such information, how such information can be used, and a process for bringing disputes
over confidentiality designations before the Court. See Docs. 75-2, 72-1. The Court
finds good cause for entry of a protective order along the lines proposed by the parties.
See In re Deutsche Bank Trust Co. Ams., 605 F.3d 1373, 1378 (Fed. Cir. 2010) (noting
that protective orders “specifying that designated confidential information may be used
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Citations to the CM-ECF docket refer to the lead case, 16-cv-1255, unless otherwise noted.
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only for purposes of the current litigation . . . are generally accepted as an effective way
of protecting sensitive information while granting trial counsel limited access to it for
purposes of the litigation”). Such an order will be entered separately.
II.
The Request for a Patent Prosecution Bar
a. Background
The patents at issue in this case are part of the extensive “Hon patent portfolio”
concerning e-cigarettes and vapor technology. Doc 72 at ¶¶ 7-8; see also Fontem
Ventures B.V. v. R.J. Reynolds Vapor Co., No. 17-CV-175, Doc. 24 at 5 (M.D.N.C. Apr.
24, 2017). The Hon patent portfolio is still growing and Fontem has at least seven
pending patent applications before the United States Patent and Trademark Office (PTO)
related to patents asserted in this case.2 Doc. 72 at ¶ 8.
Since 2007, Perkins Coie, the law firm representing Fontem in this case, has
prosecuted the Hon patent portfolio before the PTO by preparing patent applications,
amending claims, and participating in office actions, among other things. Id. at ¶ 11; see
also Docs. 72-6, 72-7. Perkins Coie has also represented Fontem and its predecessor,
Ruyan Investment Holdings Limited, in other litigation on the Hon patent portfolio. Doc.
72 at ¶¶ 12-13; Doc. 72-8; see also Doc. 75-1 at ¶¶ 10-12.
2
U.S. App. Nos. 14/525,066 and 15/167,825 claim priority from the same family of patents
as the ‘628, ‘726, and ‘549 patents. Doc. 72 at ¶ 8. U.S. App. Nos. 15/091,296 and 15/169,929
claim priority from the same family as the ‘239 patent. Id. U.S. App. Nos. 15/167,659 and
15/167,690 claim priority from the same family as the ‘742 and ‘548 patents. Id. U.S. App. No.
15/158,421 claims priority from the same family as the ‘205 patent. Id. U.S. App. No.
13/740,011 was recently issued as Patent No. 9,456,632, which Fontem then asserted along with
seven other patents in the most recent case in this consolidated litigation. See Compl., Fontem
Ventures B.V. v. R.J. Reynolds Vapor Co., No. 17-CV-175, Doc. 1 at ¶¶ 533-84 (M.D.N.C. Mar.
1, 2017).
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Fontem identifies four lawyers, Michael Wise, Joseph Hamilton, Ken Ohriner, and
Lara Dueppen, who have been particularly involved with both the prosecution and
litigation of the Hon patent portfolio for a number of years. See Doc. 75-1 at ¶¶ 3-6, 912. Mr. Wise, Mr. Hamilton, and Ms. Dueppen are counsel of record in these
consolidated cases. E.g., Doc. 1 at 1. Mr. Wise, Mr. Hamilton, and Mr. Ohriner
prosecuted several of the patents-in-suit before the PTO. Doc. 75-1 at ¶ 9.
b. Nature of the Dispute
Reynolds asks the Court to include a patent prosecution bar in the protective order
to preclude anyone who reviews certain confidential information from then participating
in patent prosecution for the Hon patent portfolio or otherwise relating to aerosol or vapor
electronic cigarette technology. Doc. 70; see Univ. of Va. Patent Found. v. Gen. Elec.
Co., No. 3:14-CV-00051, 2016 WL 379813, at *1 n.1 (W.D. Va. Jan. 29, 2016)
(explaining that a patent prosecution bar “restricts the patent-related activities of an
individual who receives confidential information from a party during litigation, or limits
the receipt of such information if the individual has already engaged in certain
activities”).
Specifically, Reynolds’ proposed prosecution bar would prevent “any Outside
Counsel or Expert who accesses” designated confidential documents “that reflect[] or
contain[] technical information concerning current or future aerosol or vapor electronic
cigarette technology” from then “be[ing] involved in prosecution of patents or patent
applications relating to aerosol or vapor electronic cigarette technology,” including the
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patents in this case and patents related to those asserted in this case. Doc. 72-1 at ¶ 7.5.3
The proposed bar would last “from the date of access until expiration of two years from
the final disposition of this action.” Id. Reynolds does not identify specific counsel who
should be subject to the bar, but asks that the bar be triggered as to any outside counsel or
experts who access the designated documents. See id.
Fontem asserts that Reynolds has not met its burden to show that a prosecution bar
is warranted and that such a bar is not necessary. Doc. 75; see Doc. 75-2. As to the
accused products, Fontem contends that the relevant technical information is publicly
available and subject to reverse engineering, meaning the information is already available
to attorneys involved in patent prosecution. See Docs. 75-11, 75-12 (noting physical
aspects of claimed components and accused products that can be visually inspected and
identified). As to Reynolds’ future products and technology, Fontem asserts that
Reynolds claimed that the information is not relevant, meaning Reynolds does not need
to produce the information in discovery. See Doc. 75-10 at 8-9 (contesting Fontem’s
production request as overbroad and restricting production to devices “sold or offered for
sale within the United States”). Instead of a prosecution bar, Fontem asks the Court to
preclude discovery on future products. See Doc. 72-1 at ¶ 12.
Reynolds defines “prosecution” as “directly or indirectly (a) crafting or controlling the
content, type or scope of patent applications, (b) providing strategy, influencing, or otherwise
advising on the direction of the patent or patent application, or (c) otherwise writing, reviewing,
supervising, commenting upon, or approving the content or scope [sic] patent applications and
claims, office actions responses and other submissions to the Patent Office, and the amendment
of claims, including surrender of claims or claim scope.” Doc. 72-1 at ¶ 7.5. Reynolds excludes
inter partes proceedings from its patent prosecution bar.
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c. Legal Background
Federal Circuit law governs whether a protective order should include a patent
prosecution bar. Deutsche, 605 F.3d at 1378. If trial counsel, experts, or other
individuals are involved in litigation and in a proceeding before the PTO, there may be a
risk of inadvertent disclosure or the accidental use of confidential information gleaned
from the litigation to draft or amend patent claims in proceedings before the PTO. Id. at
1378-79; see also Univ. of Va. Patent Found., 2016 WL 379813, at *4-5 (applying
protection order to expert involved in competitive decision-making). On a showing of
good cause and in appropriate circumstances, the court can impose a patent prosecution
bar to preclude those who view the confidential information from participating in
proceedings before the PTO. See Deutsche, 605 F.3d at 1378-79.
To decide whether to impose a patent prosecution bar, the court balances the risk
of inadvertent disclosure against the potential harm of restricting a party's choice of
counsel. Id. at 1380. The party seeking the protection of a prosecution bar bears the
burden of demonstrating good cause to impose the restriction. Id. at 1378. The Federal
Circuit has established the following test to determine whether a patent prosecution bar is
warranted:
We therefore hold that a party seeking imposition of a patent prosecution
bar must show that the information designated to trigger the bar, the scope
of activities prohibited by the bar, the duration of the bar, and the subject
matter covered by the bar reasonably reflect the risk presented by the
disclosure of proprietary competitive information. We further hold that the
party seeking an exemption from a patent prosecution bar must show on a
counsel-by-counsel basis: (1) that counsel's representation of the client in
matters before the PTO does not and is not likely to implicate competitive
decisionmaking related to the subject matter of the litigation so as to give
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rise to a risk of inadvertent use of confidential information learned in
litigation, and (2) that the potential injury to the moving party from
restrictions imposed on its choice of litigation and prosecution counsel
outweighs the potential injury to the opposing party caused by such
inadvertent use.
Id. at 1381.4
To merit a patent prosecution bar, the information that triggers the bar must be
relevant to the preparation and prosecution of patent applications before the PTO.
Deutsche, 605 F.3d at 1381. “[T]he moving party must identify ‘specific information that
would cause it injury if disclosed.’” Helferich Patent Licensing, LLC v. Suns Legacy
Partners, LLC, No. CV-11-02304, 2012 WL 6049746, at *3 (D. Ariz. Dec. 5, 2012)
(quoting AmTab Mfg. Corp. v. SICO, Inc., No. 11 C 2692, 2012 WL 195027, at *2 (N.D.
Ill. Jan. 19, 2012)). “[B]road allegations of speculative harm are not sufficient to
establish good cause.” Id.
d. Analysis
It is undisputed that each party possesses confidential business information
relevant to the issues in dispute and that the public disclosure of this information could
cause competitive harm. See Doc. 72-1 at 3; Doc. 75-2 at 3. It is further clear that
Perkins Coie attorneys are currently and significantly involved in Fontem’s efforts to
District courts are split on how to apply the moving party’s initial burden. Front Row
Techs., LLC. v. NBA Media Ventures, LLC, 125 F. Supp. 3d 1260, 1277 (D.N.M. 2015). A
majority require the movant to show that there is a risk of inadvertent disclosure on a counsel-bycounsel basis and that the bar is reasonable. Id. (citing, e.g., NeXedge, LLC v. Freescale
Semiconductor, Inc., 820 F. Supp. 2d 1040, 1043 (D. Ariz. 2011)). A minority require the
movant to show only that a general bar is reasonable and then use the counsel-by-counsel
analysis to determine whether an exemption from the bar is appropriate. Id. at 1278 (citing, e.g.,
Eon Corp. IP Holdings, LLC v. AT&T Mobility LLC, 881 F. Supp. 2d 254, 257 (D.P.R. 2012)).
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expand its Hon patent portfolio. See supra pp. 3-4. However, that is not enough to
establish that protective order prohibiting use of such confidential information outside the
litigation is insufficient to protect Reynolds’ rights and that a prosecution bar is
appropriate.
Reynolds has not provided evidence about how Fontem’s pending patent
applications relate to the confidential information that would trigger the proposed
prosecution bar. See Deutsche, 605 F.3d at 1381. It has not provided any evidence about
what technical information is at risk for misappropriation in the pending patent
applications. See id. It has not identified what elements of its commercially available
products are still confidential and not subject to reverse engineering. See Karl Storz
Endoscopy-Am., Inc. v. Stryker Corp., No. 14-CV-00876-RS, 2016 WL 3129215, at *2, 4
(N.D. Cal. June 2, 2016) (noting that a patent prosecution bar is not necessary for
commercially available products whose designs are available in patents or through
reverse engineering).
Instead, Reynolds relies primarily on a conclusory affidavit signed by an employee
of unstated job title or responsibilities.5 See Doc. 73. He asserts, with no detail, that
“[m]uch of the technical information about the accused products and other vapor products
and processes is highly confidential and sensitive technical information that would result
5
Reynolds also provided two affidavits from outside counsel. Docs. 72, 77. Ms. Miller
addressed the parties’ discovery negotiations, Fontem’s pending patent applications, and Perkins
Coie’s involvement in prosecution and litigation. Doc. 72. Mr. Bachman addressed discovery
designations. Doc. 77. Neither discussed what Reynolds’ information was allegedly
confidential or why.
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in significant risk of competitive disadvantage or harm to Reynolds if disclosed without
restriction upon use or further disclosure,” and that this information “cannot be obtained
merely through inspection.” Id. at ¶¶ 3-4.
Such a conclusory affidavit is insufficient to provide good cause for the extremely
broad patent prosecution bar Reynolds seeks in this case. See Helferich, 2012 WL
6049746, at *3; Doc. 72-1 at ¶ 7.5 (seeking to preclude Fontem lawyers who access
documents that “reflect[] or contain[] technical information concerning current or future
aerosol or vapor electronic cigarette technology” from participating in patent office
prosecutions). Because “general assertions with no support” are insufficient to make the
“specific showing of harm or prejudice” necessary to justify a patent prosecution bar,
Paice, LLC v. Hyundai Motor Co., No. WDQ-12-0499, 2014 WL 4955384, at *4 (D. Md.
Sept. 29, 2014), the Court will deny Reynolds’ motion for a patent prosecution bar.6
The Court appreciates that “information related to new inventions and technology
under development . . . may pose a heightened risk of inadvertent disclosure by counsel
involved in prosecution-related competitive decisionmaking.” Deutsche, 605 F.3d at
1381; see also Eon Corp. IP Holdings, LLC v. AT&T Mobility LLC, 881 F. Supp. 2d 254,
257 (D.P.R. 2012). However, that generic risk alone is not enough to justify a patent
prosecution bar, absent evidence to support the conclusion that the risk of inadvertent
disclosure is particularly high in a particular case. See Deutsche, 605 F.3d at 1381. The
6
The Court need not enter the debate on the issue of which party must meet the counsel-bycounsel showing required by Deutsche, see supra note 4, as it is unnecessary for resolution of
this motion. Likewise, the Court makes no determination of whether counsel here are involved
in competitive decision-making.
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protective order itself prohibits Fontem’s lawyers and experts from using Reynolds’
confidential information outside this litigation, including before the PTO, and there is
nothing to indicate that Fontem’s lawyers and experts will not comply.
The Court will also deny Fontem’s request to preclude all discovery on future
technology. Fontem is free to withdraw its discovery requests for such material if it
wishes. Reynolds’ counsel suggest this information is relevant to invalidity or damages
issues. Doc. 71 at 22-23. Reynolds should not be precluded during the discovery process
from relying on or developing this evidence to build its defense. See Fed. R. Civ. P.
26(b).
It is ORDERED that Reynolds’ motion for a protective order, Doc. 70, is
DENIED in part, to the extent it seeks a prosecution bar, and is otherwise GRANTED.
The Court will enter a protective order shortly.
This the 23rd day of May, 2017.
__________________________________
UNITED STATES DISTRICT JUDGE
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