EON Corp, IP Holdings, LLC v. AT&T Mobility LLC
Filing
161
OPINION AND ORDER re: Patent Prosecution Bar. An updated protective order is due August 10, 2012. Signed by US Magistrate Judge Silvia Carreno-Coll(NBB)
IN THE UNITED STATES COURT
FOR THE DISTRICT OF PUERTO RICO
EON CORP. IP HOLDINGS,
LLC,
Plaintiff,
CIV. NO.: 11-1555(FAB/SCC)
v.
AT&T MOBILITY LLC, ET AL.,
Defendant.
OPINION AND ORDER
The parties in this case, unable to agree on a joint protective
order, filed competing proposals. See Docket Nos. 118, 119.
Defendants’ proposal included a patent prosecution bar, see
Docket No. 119; Plaintiff’s did not, see Docket No. 118. Finding
the record insufficient to determine whether such a bar was
appropriate, we entered an interim protective order without a
prosecution bar and called for additional briefing. See Docket
No. 142. After reviewing the parties’ filings, see Docket Nos.
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Page 2
150, 155, 159-2, we find that a patent prosecution bar is
appropriate in this case.
I. Legal Standard
In In re Deutsche Bank Trust Co. Americas, 605 F.3d 1373 (Fed.
Cir. 2010), the Federal Circuit1 for the first time addressed the
test that district courts should use in determining whether a
patent prosecution bar was proper. It did this in an odd
procedural posture. A protective order had previously issued,
but its patent prosecution bar exempted the plaintiff’s lead
counsel. See id. at 1376. The defendant then petitioned the
Federal Circuit for a writ of mandamus, arguing that the
prosecution bar should have covered all of the plaintiff’s
counsel. See id. at 1376–77. Granting the petition for mandamus
in part, the Circuit outlined the inquiry that a district court
should perform in approving a prosecution bar, as well as in
exempting individuals from such a bar. The court’s opinion
began with a discussion of whether the case presented an
“unacceptable risk of inadvertent disclosure” of one of the
1.
Because this discovery-related issue “implicates an issue of substantive
patent law . . . . the matter is governed by Federal Circuit law.” In re
Deutsche Bank Trust Co. Americas, 605 F.3d 1373, 1377–78 (Fed. Cir.
2010).
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parties’ confidential information, id. at 1378–79, and it seemed
to treat this as a threshold question. See id. at 1380 (“A determination of the risk of inadvertent disclosure or competitive use
does not end the inquiry.”). The remainder of the opinion is
somewhat less clear, at times suggesting that the threshold
inquiry is attorney-specific and at times suggesting the
opposite.
Most of the courts interpreting Deutsche Bank2 have read it
to require a particular two-step inquiry, step one of which
requires the moving party tho show, on a counsel-by-counsel
basis, that there is an unacceptable risk of inadvertent disclosure of confidential information;3 at the second step, they
2.
See, e.g., NexEdge, LLC v. Freescale Semiconductor, Inc., 820 F. Supp. 2d
1040 (D. Ariz. 2011); ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc.,
274 F.R.D. 576 (E.D. Va. 2010); Xerox Corp. v. Google, Inc., 270 F.R.D. 182
(D. Del. 2010); see also, e.g., Ameranth, Inc. v. Pizza Hut, Inc., No. 111810(JLS/NLS), 2012 WL 528248 (S.D. Cal. Feb. 17, 2012); AmTab Mfg.
Corp. v. SICO Inc., No. 11-2692, 2012 WL 195027 (N.D. Ill. Jan. 19, 2012);
Iconfind, Inc. v. Google, Inc., No. 11-319(GEB/JFM), 2011 WL 3501348
(E.D. Cal. Aug. 9, 2011); Kraft Foods Global, Inc. v. Dairilean, Inc., No. 108006, 2011 WL 1557881 (N.D. Ill. Apr. 25, 2011); Trading Techs. Int’l, Inc.
v. GL Consultants, Inc., No. 05-4120, 2011 WL 148252 (N.D. Ill. Jan. 18,
2011).
3.
The risk of inadvertent disclosure is based on whether counsel is
involved in “competitive decisionmaking.” In re Deutsche Bank, 605 F.3d
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balance that risk against the potential harm to the non-movant.
See NexEdge, LLC v. Freescale Semiconductor, Inc., 820 F. Supp. 2d
1040, 1043 (D. Ariz. 2010). Where, as here, the movant has
given no information whatsoever about the opposing counsel
suggesting such an unacceptable risk, courts have tended to
reject proposed prosecution bars. See, e.g., Iconfind, Inc. v.
Google, Inc., No. 110319(GEB/JFM), 2011 WL 3501348, *5 (E.D.
Cal. Aug. 9, 2011) (“Because Google has not met its initial
burden of showing that there exists a risk of inadvertent
disclosure (i.e., that Iconfind’s counsel participate in ‘competitive decisionmaking’) the court does not find that a prosecution
bar is necessary.”); Kraft Foods Global, Inc. v. Dairilean, Inc., No.
10-8006, 2011 WL 1557881 (N.D. Ill. Apr. 25, 2011) (“Kraft has
not cited any evidence to demonstrate that Dairilean’s outside
counsel is involved in competitive decisionmaking with respect
at 1378. “Competitive decisionmaking” is
shorthand for a counsel’s activities, association, and
relationship with a client that are such as to involve counsel’s
advice and participation in any or all of the client’s decisions
(pricing, product design, etc.) made in light of similar or
corresponding information about a competitor.
U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468 n.3 (Fed. Cir. 1984);
see also Matsushita Elec. Indus. Co., Ltd. v. United States, 929 F.2d 1577,
1580 (Fed. Cir. 1991).
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to Dairilean or any of its other clients who might compete with
Kraft.”).
At least one court, however, has taken a different course.
The court in Applied Signal Technologies, Inc. v. Emerging Mkts.
Commc’ns, Inc., No. 09-2180(SBA/DMR), 2011 WL 197811 (N.D.
Cal. Jan. 20, 2011), though it also followed a two-part inquiry,
framed the question somewhat differently. First, it asked
whether, “as a threshold matter[,] the proposed prosecution
bar ‘reasonably reflect[s] the risk presented by the disclosure
of proprietary competitive information.’” Id. at *2 (quoting In
re Deutsche Bank, 605 F.3d at 1381). It explained that this
threshold inquiry “essentially measures whether a prosecution
bar is reasonable” given the information at issue, the scope of
activities that would be prohibited and their subject matter,
and the duration of the bar. Id. At the second step, the Applied
Signal court measured this risk—rather than a risk determined
by
a
counsel-specific competitive
decisionmaking
in-
quiry—“against the potential injury to the party deprived of its
counsel of choice.” Id.
The conflict between these two lines of cases is a significant
one, concerning, as it does, the movant’s burden at the threshold stage: is it necessary that it show, on a counsel-by-counsel
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Page 6
basis, that the opposing counsel engage in competitive
decisionmaking?, or is it enough that it show that a general bar
would be reasonable in this particular case, shifting the burden
to opposing counsel to seek exemptions? For several reasons,
we think the Applied Signal approach is superior.
First, there is a simple practical problem with what we will
call the NexEdge approach. The need for of protective orders,
and thus patent prosecution bars, typically arises early in
patent cases, before confidential information begins to disseminated. See PETER S. MENELL, ET AL., PATENT CASE MANAGEMENT
JUDICIAL GUIDE 4-6 (2009) (“Protective orders should be
entered early in the case.”). At this early stage, however, it is
unlikely that the proponent of a prosecution bar could have
sufficient information about opposing counsel’s involvement
in competitive decisionmaking to make the threshold showing
that NexEdge requires.
Moreover, there are several related textual-practical
problems that arise from the NexEdge approach. NexEdge
requires that the movant first show that opposing counsel is
engaged in competitive decisionmaking. 820 F. Supp. 2d at
1043. This is confusing, though, because Deutsche Bank’s
discussion of counsel-specific competitive decisionmaking
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comes entirely in the context of proceedings seeking to have
attorneys exempted from a prosecution bar.4 See, e.g., Deutsche
Bank, 605 F.3d at 1380 (“It is therefore important for a court, in
assessing the propriety of an exemption from a patent prosecution
bar, to examine all relevant facts surrounding counsel’s actual
preparation and prosecution activities, on a counsel-by-counsel
basis.” (emphasis added)). Indeed, Deutsche Bank’s exemption
process contains the same inquiry that NexEdge says is essential
at the “threshold” stage. Compare Deutsche Bank, 605 F.3d at
1381 (requiring a party seeking an exemption to show, “on a
counsel-by-counsel basis,” that each counsel’s “representation
of the client in matters before the PTO does not and is not
likely to implicate competitive decisionmaking”), with NexEdge,
820
F.
Supp.
2d
at
1043
(describing
“competitive
decisionmaking” in terms of a threshold question). But if that
inquiry had been made at the threshold stage, it would not be
necessary to repeat it at the exemption stage: if NexEdge were
right, and a counsel-by-counsel determination were required
4.
According to Deutsche Bank, once the court has determined that a
prosecution bar is proper, it is the party seeking an exemption that has
the burden to show why it is warranted. See Deutsche Bank, 605 F.3d at
1381.
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Page 8
up-front, we fail to see why an exemption procedure would
need to exist at all.
In the section of its opinion immediately preceding its
conclusion, the Deutsche Bank court summarized its holdings.
Though language in other sections suggests a NexEdge-like
rule, in this summary the court essentially provided for a
burden-shifting framework. As to whether a patent prosecution bar should be adopted, it held that
a party seeking imposition of a patent prosecution bar
must show that the information designated to trigger
the bar, the scope of the activities prohibited by the bar,
and the subject matter covered by the bar reasonably
reflect the risk presented by the disclosure of proprietary information.
605 F.3d at 1381. This is, we think, the only inquiry the court
needs to make to impose a general prosecution bar, and it
relates only to the reasonableness of the bar itself. The Deutsche
Bank court went on to hold that a
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 rise to a risk of inadvertent use of
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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. Thus, the counsel-specific balancing is done only after a
court has decided that a prosecution bar is called for, and it
must be initiated by the party seeking the exemption. See
id. (referring to the exemption-seeking party as the “moving
party”).
The only question before us today is whether a general
prosecution bar should be entered in this case. Accordingly, we
consider solely whether the proposed bar is reasonable under
Deutsche Bank. See id.; see also Applied Signal, 2011 WL 197811,
at *2 (describing the reasonableness inquiry).
II. Analysis
In assessing whether a prosecution bar is reasonable, we
look first at whether “the information that will trigger the bar
is relevant to the preparation and prosecution of patents before
the PTO.” Deutsche Bank, 605 F.3d at 1381. Not all confidential
or proprietary information is the sort that would “normally be
expected to trigger a patent prosecution bar,” for example
“financial data and other sensitive business information.” Id. A
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prosecution bar might be more reasonable, however, when the
triggering information “relate[s] to new inventions and
technology under development, especially those that are not
already the subject of pending patent applications.” Id. (noting
that this sort of information “may pose a heightened risk of
inadvertent disclosure”).
Defendants’ proposed prosecution bar5 is triggered by the
viewing of documents marked “RESTRICTED CONFIDENTIAL—SOURCE CODE” as well as by technical information
marked “CONFIDENTIAL OUTSIDE COUNSEL ONLY.” See
Docket No. 150-2, at 2–3. The interim protective order entered
in this case, which was stipulated to by the parties, defines
“RESTRICTED CONFIDENTIAL—SOURCE
CODE”
as
documents “containing or substantively relating to confidential, proprietary and/or trade secret source code or technical
design documentation.” Docket No. 118-1, at 6–7. “CONFIDENTIAL OUTSIDE COUNSEL ONLY,” as it relates to
5.
Plaintiff has also provided its own proposal, see Docket No. 150-2, at
4–5, but it does not actually address the subject of inadvertent
disclosure, which is the primary concern of patent prosecution bars. We
accordingly largely dismiss the proposal, other than its request for a
loser-pays provision, and treat Defendants as the movants for the
purpose of the following analysis.
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technical information, refers to documents containing “information or data relating to future products not yet commercially
released and/or strategic plans.” Id. at 6. We think that both of
these categories of information are “relevant to a patent
application and thus may pose a heightened risk of inadvertent
disclosure.”6 See Applied Signal, 2011 WL 197811, at *2.
More problematic, however, is the scope of the subject
matter that Defendants wish the prosecution bar to cover.
Their proposal calls for a bar on prosecuting patents “relating
to the subject matter” of the confidential information triggering
the bar as to any particular individual. Docket No. 150-2, at 3.
Defendants call this narrow tailoring, see Docket No. 150, at 8,
but it strikes us as circular and vague. We agree with the
Applied Signal court that the subject matter of a prosecution bar
should be “coextensive with the subject matter of the patentsin-suit,” Applied Signal, 2011 WL 197811, at *3, and we think
that Defendants’ proposed language fails by this standard, as
it in fact provides no ex ante limitation whatsoever and instead
allows the bar’s subject-matter scope to be defined later by the
6.
We furthermore disagree with Plaintiff that distinguishing between
technical and non-technical confidential information will be
particularly onerous, and we accordingly approve of these categories.
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Page 12
information that is ultimately produced during discovery. We
find this impermissible and hold instead that the scope of the
subject matter covered by the prosecution bar must be limited
to the subject matter of the patents-in-suit in this case.
Finally, as to the prosecution bar’s duration, we think
Defendants’ proposal is excessively onerous. We agree with
Plaintiff that the bar’s duration should not be determined by
this case’s future life in the courts of appeals. See Docket No.
155, at 8 (quoting James Juo & David J. Pitman, A Prosecution
Bar in Patent Litigation Should Be the Exception Rather than the
Rule, 15 VA. J.L. & TECH. 43, 73 (2010) (arguing that patent
prosecution bars’ durations “should not depend on the length
of litigation”—and especially not on the exhaustion of appeals)). Instead, we hold that the duration of the bar should be
one year from a final judgment in this court.
There are two last issues raised by the parties’ briefs. The
first concerns whether the prosecution bar should apply, as
Defendants’ proposal does, to “any individual,” including
experts and technical advisers. See Docket No. 150-2, at 2.
Plaintiff argues that the bar, if imposed, should apply only to
counsel, but we see no reason why the concerns motivating the
prosecution bar—risk of inadvertent disclosure—would not
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also apply to experts or technical advisers. See Applied Signal,
2011 WL 197811, at *5 (“Allowing experts who prosecute
patents themselves to access confidential technical information
without the protection of a prosecution bar thus poses a
tremendous risk of inadvertent disclosure.”). The “any individual” language may therefore remain. The second issue is
Plaintiff’s proposal to add a loser-pays provision to the
prosecution bar. We can find no other court to have included
such a provision in a prosecution bar, and we decline to break
new ground on this point.7
III.
Conclusion
For the reasons stated above, we find that a patent prosecution bar is warranted in this case. However, we find Defendants’ proposal to be deficient in several respects. Accordingly,
the parties are given ten days to jointly file an updated
7.
The Applied Signal court, after it determined that a prosecution bar was
reasonable, proceeded to balance the risk of inadvertent disclosure
against the potential injury to the non-movant from the restrictions to
its choice of counsel. See Applied Signal, 2011 WL 197811, *3. It noted,
however, that the burden at that stage rested with the non-movant. Id.
But because Plaintiff has not at this time asked for any exemptions from
the bar, we need not conduct the balancing analysis at this time. Of
course, any party may hereafter challenge the application of the
prosecution bar as to any specific counsel or expert. Cf. id. at *5.
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protective order containing a patent prosecution bar consistent
with this opinion.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 30th day of July, 2012.
S/ SILVIA CARREÑO-COLL
UNITED STATES MAGISTRATE JUDGE
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