Nike, Inc. v. Enter Play Sports, Inc.
Filing
42
Opinion and Order - Plaintiff Nike, Inc.'s Motion for Entry of the Court's Form Two-Tier Protective Order (Dkt. 29 ) is GRANTED; Defendant Enter Play Sports, Inc.'s Cross Motion for Discovery Protections (Dkt. 33 ) is DENIED. Signed on 3/24/2015 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
NIKE, INC.,
Plaintiff,
Case No. 3:14-cv-01104-SI
OPINION AND ORDER
v.
ENTER PLAY SPORTS, INC.,
Defendant,
Jon P. Stride and Eric C. Beach, TONKON TORP LLP, 1600 Pioneer Tower, 888 S.W. Fifth
Avenue, Portland, OR 97204-2099; Christopher J. Renk, Michael J. Harris, Aaron P. Bowling,
BANNER & WITCOFF, LTD., 10 South Wacker Drive, Suite 3000, Chicago, IL 60606. Of
Attorneys for Plaintiff.
Judson M. Carusone, BEHRENDS, CARUSONE & COVINGTON ATTORNEYS AT LAW,
P.C., P.O. Box 10552, Eugene, OR 97440. Of Attorneys for Defendant.
Michael H. Simon, District Judge.
In the pending discovery dispute in this action for breach of contract and
misappropriation of trade secrets, Plaintiff moves for entry of a protective order (Dkt. 29) to
maintain the confidentiality of the parties’ respective trade secrets and other confidential
information. Defendant does not oppose the need for a protective order, but seeks several
additional provisions that Plaintiff opposes. Defendant also cross-moves for “discovery
PAGE 1 – OPINION AND ORDER
protections” (Dkt 33), seeking an Order that Plaintiff must first provide a more specific list
describing the trade secrets at issue with reasonable particularity before Defendant should be
required to provide discovery. Defendant also seeks an Order requiring a specific employee of
Plaintiff’s to be deposed before Defendant should be required to provide discovery. Finally,
Defendant seeks an Order limiting what it needs to disclose to Plaintiff in discovery. For the
reasons stated below, Plaintiff’s Motion for Entry of the Court’s Form Two-Tier Protective
Order (Dkt. 29) is GRANTED and Defendant’s Cross Motion for Discovery Protections
(Dkt. 33) is DENIED.
BACKGROUND
Plaintiff NIKE, Inc. (“NIKE”) is an Oregon corporation with its principal place of
business in Beaverton, Oregon. NIKE designs, markets, and distributes athletic footwear,
apparel, equipment, and accessories for a wide variety of sports and fitness activities. Defendant
Enter Play Sports, Inc. (“EPS”) is a New York corporation with its principal place of business in
Warrensburg, New York. EPS is owned by Brad and Terri Jamison. Mr. Jamison states that he
had acquired a lace braiding machine initially for manufacturing athletic equipment for a new
sport and later became a primary inventor practicing the art of lace braiding.
In its Complaint, NIKE asserts two claims against EPS. Nike’s first claim is for breach of
contract, alleging that EPS has breached a Non-Disclosure Agreement (“NDA”) between NIKE
and EPS. NIKE’s second claim alleges a violation of the Oregon Trade Secrets Act, Or. Rev.
Stat. § 646.461, et seq. EPS has filed an Answer, denying NIKE’s claims and asserting two
counterclaims. EPS’s first counterclaim seeks a declaration that its patent applications either do
not contain any confidential information subject to the parties’ NDA or that any such information
is not subject to the protections of the NDA based on the NDA’s express exclusions. EPS’s
second counterclaim seeks attorney fees and other costs under the parties’ NDA.
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As alleged by NIKE, in 2012 NIKE conceived of proprietary and confidential concepts
regarding a three-dimensional braided “upper” for athletic footwear (“3-D Braided Upper
Concepts"). As part of vetting its 3-D Braided Upper Concepts, NIKE looked to retain a
company with braiding capabilities to build samples for NIKE. NIKE discovered EPS through an
Internet search. EPS has a website, where EPS highlights a braided play ball it manufactures at a
braiding facility in New York. In late 2012, NIKE contacted EPS to inquire whether EPS could
build samples of the 3-D Braided Upper Concepts for NIKE. At that time, EPS confirmed that it
had no prior experience with braided uppers for footwear, and that it had no plans to develop or
work on braided uppers for footwear.
EPS and NIKE signed the NDA at issue, dated December 5, 2012. The purpose of the
NDA was to enable NIKE to share its proprietary and confidential 3-D Braided Upper Concepts
with EPS so that EPS could build samples for NIKE. According to Nike, its 3-D Braided Upper
Concepts and related documentation constitute “Confidential Information” under the NDA. After
EPS signed the NDA, NIKE disclosed its proprietary and confidential 3-D Braided Upper
Concepts to EPS. NIKE also created documents and sketches related to the concepts, which it
also disclosed to EPS. In early 2013, EPS built samples of NIKE’s 3-D Braided Upper Concepts
using NIKE’s Confidential Information. NIKE paid EPS for the samples.
On May 21, 2013, and June 3, 2013, unbeknownst to NIKE at the time, EPS filed
provisional patent applications with the U.S. Patent and Trademark Office (the “Patent Office”)
directed to NIKE’s Confidential Information, including at least three-dimensional braided uppers
and methods of fabricating three-dimensional braided uppers. EPS later filed a non-provisional
application claiming priority to the provisional applications. (These applications are collectively
referred to as the “Applications.”) In its Applications, EPS summarizes its alleged invention and
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allegedly describes the Confidential Information NIKE disclosed to EPS pursuant to the NDA.
EPS’s Applications also include figures that are allegedly based on the sketches and other
Confidential Information NIKE provided to EPS pursuant to the NDA and claims directed to
Confidential Information NIKE disclosed to EPS pursuant to the NDA. Complaint, ¶¶ 7-13, 1823 (Dkt. 1).
NIKE filed its Complaint under seal, and its Complaint includes numerous specifics,
including drawings and illustrations. As stated in EPS’s Answer, Affirmative Defenses, and
Counterclaim (Dkt. 18), also filed under seal, EPS contends, among other things, that the
Confidential Information claimed by NIKE either is not disclosed in EPS’s patent Applications
or that any information that is disclosed is not subject to the protections of the NDA based on the
NDA’s express exclusions.
STANDARDS
Rule 26(b)(1) of the Federal Rules of Civil Procedure provides in relevant part:
Parties may obtain discovery regarding any nonprivileged matter
that is relevant to any party’s claim or defense—including the
existence, description, nature, custody, condition, and location of
any documents or other tangible things and the identity and
location of persons who know any discoverable matter. For good
cause, the court may order discovery of any matter relevant to the
subject matter involved in the action. Relevant information need
not be admissible at the trial if the discovery appears reasonably
calculated to lead to the discovery of admissible evidence. All
discovery is subject to the limitations imposed by
Rule 26(b)(2)(C).
Fed. R. Civ. P. 26(b)(1).1 Among the limitations stated in Rule 26(b)(2)(C) is the direction that
the court must limit the extent of discovery if it determines that “the burden or expense of the
1
The Judicial Conference of the United States recently approved several significant
proposed changes to the Federal Rules of Civil Procedure, including changes to Rule 26(b).
These proposed changes are pending before the United States Supreme Court, which has until
May 1, 2015, to decide whether to forward the proposed changes to Congress. 28 U.S.C.
PAGE 4 – OPINION AND ORDER
proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in
controversy, the parties’ resources, the importance of the issues at stake in the action, and the
importance of the discovery in resolving the issues.” Fed. R. Civ. P. 26(b)(2)(C)(iii). This is
known as the “rule of proportionality.” In addition, Rule 26 provides that the court may, for good
cause, issue an order to protect a party or person from oppression or undue burden, 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).
DISCUSSION
A. Appropriate Form of Protective Order
By Local Rule, the District of Oregon has approved two model forms of sample
protective orders that may be used under Rule 26(c) of the Federal Rules of Civil Procedure. See
LR 26-4. These forms include a “single-tier” protective order and a “two-tier” protective order.
The latter includes a category for “Attorneys’ Eyes Only,” which is generally the most
appropriate form for use in trade secret cases. These forms have been approved by the District’s
Local Rules Committee and by the Judges of this District.
In this case, NIKE proposes using the District’s form “two-tier” protective order. EPS
objects on two grounds. First, EPS seeks to deny access to NIKE’s in-house counsel of materials
marked “Attorneys’ Eyes Only.” See Dkt. 35-1, at 6. EPS, however, does not offer sufficient
good cause for this modification of the approved form “two-tier” protective order. EPS’s first
objection is overruled. Second, EPS seeks to add an additional level of record-keeping governing
to whom “Attorneys’ Eyes Only” material has been shown. See Dkt. 35-1, at 9. Again, EPS does
§ 2074(a). If forwarded by the Supreme Court, the proposed changes will become effective seven
months later, December 1, 2015, unless Congress acts to the contrary. Id. The Court’s ruling on
the pending discovery motion is based on the rules that are now in effect.
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not offer sufficient good cause for this modification of the approved form “two-tier” protective
order. EPS’s second objection is overruled. The Court will enter NIKE’s proposed form of “twotier” protective order. See Dkt. 29, at 6-14.
B. Whether Plaintiff Must First Disclose Its Trade Secrets with Greater Particularity
EPS argues that NIKE should be required to further describe with particularity its alleged
trade secrets at issue in this case before it can proceed with discovery. EPS cites to several cases
in support of its position, including DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676, 680-81
(N.D. Ga. 2007) (weighing the policy considerations for discovery when trade secret
misappropriation has been alleged and concluding “that it is appropriate in this case to require
[the plaintiff] to first identify with ‘reasonable particularity’ those trade secrets it believes to be
at issue”); Switch Commc’ns Grp. v. Ballard, 2012 WL 2342929, at *5 (D. Nev. June 19, 2012)
(holding that a defendant was not required to respond to the plaintiff’s discovery requests until
the plaintiff “provides a description of its alleged trade secrets with reasonable particularity”).
In other cases, however, courts have declined to require the plaintiff to identify its alleged
trade secrets before being allowed to conduct discovery. See, e.g., Global Advanced Metals USA,
Inc. v. Kemet Blue Powder Corp., 2012 WL 3884939, at *7 (D. Nev. Sept. 6, 2012) (affirming
magistrate judge’s decision not to require the plaintiff to identify its trade secrets “because of
their voluminosity” and noting that “a listing of every trade secret would draw an objection from
Defendant that they must be narrowed, leading to additional discovery disputes and delays, and
that a protective order against disclosure would protect Defendant’s interests”); Montgomery v.
eTreppid Techs., LLC, 2008 WL 2277118, at *10-11 (D. Nev. May 29, 2008) (permitting
eTreppid to take discovery on its trade secret counterclaim against Montgomery without first
specifically identifying its own trade secrets at issue).
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One relatively recent case is particularly instructive for identifying the criteria that a
district court should consider in deciding this question. In BioD, LLC v. Amnio Tech., LLC, 2014
WL 3864658 (D. Ariz. Aug. 6, 2014), the court noted:
[d]etermining whether a trade secret has been misappropriated
usually involves examining things that the other party considers its
own trade secrets. There is no privilege excepting trade secrets
from discovery, but courts must exercise discretion to avoid
unnecessary disclosures of such information. [P]laintiff will
normally be required first to identify with reasonable particularity
the matter which it claims constitutes a trade secret, before it will
be allowed (given a proper showing of need) to compel discovery
of its adversary’s trade secrets.
BioD, 2014 WL 3864658, at *4 (alterations in original) (quoting Dura Global Technologies, Inc.
v. Magna Donnelly, Corp., 2007 WL 4303294, at *2 (E.D. Mich. Dec. 6, 2007). The Court in
BioD continued, however, by observing: “A plaintiff also might not be required to identify its
trade secrets with reasonable particularity prior to discovery.” Id. at *5. As explained by the
court:
[C]ourts have identified at least three policies which support
allowing the trade secret plaintiff to take discovery prior to
identifying its claimed trade secrets. First, courts have highlighted
a plaintiff’s broad right to discovery under the Federal Rules of
Civil Procedure. Second, the trade secret plaintiff, particularly if it
is a company that has hundreds or thousands of trade secrets, may
have no way of knowing what trade secrets have been
misappropriated until it receives discovery on how the defendant is
operating. Finally, if the trade secret plaintiff is forced to identify
the trade secrets at issue without knowing which of those secrets
have been misappropriated, it is placed in somewhat of a
“Catch-22” [because] [i]f the list is too general, it will encompass
material that the defendant will be able to show cannot be trade
secret. If instead it is too specific, it may miss what the defendant
is doing.
Id. (alterations in original) (quoting DeRubeis, 244 F.R.D. at 680).
Applying these considerations here, the Court has closely reviewed NIKE’s Complaint
and finds NIKE’s specifications of the trade secrets at issue to be sufficient, at least to permit
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discovery to proceed. The Court notes that EPS answered the Complaint. EPS did not move
under the Federal Rules of Civil Procedure to dismiss the Complaint for failure to state a claim
under Rule 12(b)(6) and did not move, or alternatively move, for a more definite statement under
Rule 12(e). Further, EPS asserted in its first counterclaim that NIKE’s alleged trade secrets either
were not disclosed in EPS’s patent Applications or, to the extent they were, then they were not
subject to the protections of the NDA based on the NDA’s express exclusions. NIKE’s claimed
trade secrets must have been sufficiently clear to EPS to permit EPS to make these assertions.
C.
Sequencing Discovery as Between Depositions and Document Production
EPS also argues that it should be permitted to depose NIKE’s employee Robert Bruce
before EPS is required to produce any documents in response to NIKE’s discovery requests.
NIKE responds by noting, among other things, that its discovery requests have been pending for
several months and EPS has produced nothing, and that EPS has not yet even served a notice for
the deposition of Mr. Bruce. The typical course of discovery is for parties to exchange
responsive documents and electronically-stored information (“ESI”) before taking depositions. If
EPS desires to take Mr. Bruce’s deposition before requesting or receiving NIKE’s documents
and ESI, it may do so. EPS may not, however, refuse to produce its own documents and ESI
responsive to NIKE’s requests until after that deposition has taken place.
D.
EPS’s Additional Objections to NIKE’s Requested Discovery
EPS has raised additional objections to NIKE’s discovery requests, arguing that unless
discovery is limited EPS “will be forced to disclose a large amount of confidential information
and trade secrets that are irrelevant to the contract dispute before the Court.” Dkt. 33, at 4. This
dispute is insufficiently precise at this stage to permit the Court to make a meaningful ruling. The
parties are directed to confer about discovery in light of the rulings stated in this Opinion and
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Order. If EPS continues to object to producing certain information, NIKE may file a motion to
compel, pursuant to Rule 37(a)(3)(B)(iv) of the Federal Rules of Civil Procedure.
CONCLUSION
Plaintiff Nike, Inc.’s Motion for Entry of the Court’s Form Two-Tier Protective Order
(Dkt. 29) is GRANTED; Defendant Enter Play Sports, Inc.’s Cross Motion for Discovery
Protections (Dkt. 33) is DENIED.
IT IS SO ORDERED.
DATED this 24rd day of March, 2015.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge
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