Maxchief Investments Limited v. Plastic Development Group, LLC (TWP2)
Filing
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MEMORANDUM AND OPINION as set forth in following order. Signed by District Judge Thomas W Phillips on 2/22/17. (ABF)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
MAXCHIEF INVESTMENTS LIMITED,
Plaintiff,
v.
PLASTIC DEVELOPMENT GROUP, LLC,
Defendant.
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No. 3:16-cv-63
MEMORANDUM OPINION
This matter is before the Court on the parties’ Joint Motion for Protective Order
[doc. 34] and the parties’ Stipulated Protective Order [doc. 34-1]. For the reasons herein,
the Court will deny the motion.
I.
BACKGROUND
Defendant Plastic Development Group, LLC (“Plastic Development”) describes
itself as “a leading manufacturer and distributor of blow-molded and injection-molded
plastic products, including banquet tables.” [Guck Decl., doc. 19, ¶ 3]. Plaintiff Maxchief
Investments Limited (“Maxchief”) claims that Plastic Development’s bi-fold tables are
infringing its rights under United States Patent No. 6,622,644, entitled “Collapsible
Table.” [Compl., doc. 1, ¶¶ 4, 7, 9; ‘644 Patent, doc. 1-1, at 2]. As a result, it has brought
this patent-infringement action under 35 U.S.C. § 271(a)–(c), (f). [Compl. ¶¶ 7–18].
The parties now jointly move the Court to enter a protective order that would
preemptively allow them to exclude various documents from discovery—documents that
they “anticipate” will concern their “sales,” “customers,” and “other things,” which they
believe are confidential or qualify as trade secrets. [Mot. for Protective Order at 1]. Under
the terms of the parties’ Stipulated Protective Order, the parties would have the authority
to exclude from discovery “any document, information or other thing” that they consider
to be “confidential,” a term that encompasses “information [that] . . . includes, but is not
limited to, answers to interrogatories, answers to requests for admission, responses to
requests for production of documents, deposition transcripts and videotapes, deposition
exhibits, and other writings or things produced.” [Stipulated Protective Order at 1–2].
The parties would also have license to withhold, again in their discretion, any documents
that they “deem[]” to be “highly confidential/attorneys’ eyes only.” [Id. at 2].
II.
FEDERAL RULE OF CIVIL PROCEDURE 26(c)(1)
Under Federal Rule of Civil Procedure 26(c)(1), a court may, “for good cause,”
issue a protective order to “[a] party or any person from whom discovery is sought,” to
prevent “annoyance, embarrassment, oppression, or undue burden or expense.” In
particular, under Federal Rule of Civil Procedure 26(c)(1)(G), a court may protect certain
business-related materials, including trade secrets and other commercially sensitive
information, from disclosure.1 The movant for a protective order has the burden to show
that good cause is present. Nix v. Sword, 11 F. App’x 498, 500 (6th Cir. 2001). “Rule
26(c) confers broad discretion on the trial court to decide when a protective order is
A trade secret is “any information that can be used in the operation of a business or
other enterprise and is sufficiently valuable and secret to afford an actual or potential economic
advantage over others.” Orthofix, Inc. v. Hunter, 630 F. App’x 566, 567 (6th Cir. 2015)
(quotation omitted).
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appropriate and what degree of protection is required.” Seattle Times Co. v. Rhinehart,
467 U.S. 20, 36 (1984).
III. ANALYSIS
In patent-infringement cases, courts apply “regional circuit law when the issue
involves an interpretation of the Federal Rules of Civil Procedure,” Manildra Milling
Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178, 1181–82 (Fed. Cir. 1996), including when the
issue involves “the propriety of entering a protective order to protect trade secrets or
other confidential information,” JLIP, LLC v. Stratospheric Indus., Inc., No. 14-61798CIV, 2016 WL3944076, at *3 n.6 (S.D. Fla. Feb. 8, 2016) (citation omitted); see Eli Lilly
& Co. v. Actavis Elizabeth LLC, No. 07-3770 (DMC), 2008 WL 2783345, at *2 (D.N.J.
July 15, 2008) (applying Third Circuit law in a patent-infringement case to resolve a
dispute concerning a protective order under Rule 26(c)). In the Sixth Circuit, to show
good cause under Rule 26(c)(1)(G), the movant must (1) demonstrate the existence of an
actual trade secret or other commercial information that falls within Rule 26(c)(1)(G)’s
protection, Republic Servs., Inc. v. Liberty Mut. Ins. Co., No. Civ.A. 03-494-KSF, 2006
WL 1635655, at *3 (E.D. Ky. June 9, 2006), and (2) identify “specific facts” that indicate
a “clearly defined and serious injury” would occur without a protective order, Nix, 11 F.
App’x at 500; see Nemir v. Mitsubishi Motors Corp., 381 F.3d 540, 550 (6th Cir. 2004)
(stating that protective orders under Rule 26(c) are appropriate “only under [certain]
circumstances,” which require “a particular and specific demonstration of fact, as
distinguished from stereotyped and conclusory statements” (quotation omitted)).
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The Court begins by recognizing that district courts in this circuit generally agree
that protective orders serve an important function in patent-infringement cases. See E3
Biofuels, LLC v. Biothane Corp., No. 1:12-mc-76, 2013 WL 3778804, at *3 (S.D. Ohio
July 18, 2013) (“[P]articular cases, such as patent lawsuits, routinely require protective
orders designating material ‘Confidential’ and ‘Highly Confidential—Attorney Eyes
Only’ to protect the interests of the litigants.”); Methode Elecs., Inc. v. Delphi Auto. Sys.
LLC, No. 09-13078, 2009 WL 3875980, at *2 (E.D. Mich. Nov. 17, 2009) (“Patent
litigation often requires parties to disclose confidential information to one another.
[T]here is danger that one party may use such information to the competitive
disadvantage of the other. The typical means to mitigate this risk is through a protective
order that allows documents to be designated ‘attorneys eyes only.’”). The Court shares
the view that protective orders can have a vital role in patent-infringement cases and
acknowledges that, in some or most of these cases, they have even become customary—
indeed, courts in other circuits have adopted pre-approved protective orders that parties in
patent-infringement suits may enter into. See, e.g., Model Protective Order for Litig.
Involving Patents, Highly Sensitive Confidential Info. and/or Trade Secrets (N.D. Cal.
Jan. 17, 2017), http://www.cand.uscourts.gov/model-protective-orders.2
The Northern District of California’s pre-approved protective order, however, contains
explicit provisions that preserve the integrity of and promote compliance with Rule 26(c). For
instance, it confines the definition of “confidential” information to items “that qualify for
protection” under Rule 26(c) and “does not confer blanket protections on all disclosures or
responses to discovery.” Model Protective Order for Litig. Involving Patents at 1–2. The
pre-approved protective order also forbids “[m]ass, indiscriminate, or routinized designations” of
materials as confidential and exposes the parties to sanctions for failure to comply with Rule
26(c). Id. at 4.
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Despite the general acceptance and widespread use of protective orders in these
types of cases, the mere fact that parties are engaged in patent litigation does not entitle
them to preferential treatment en route to a protective order. Even in patent-infringement
suits, when parties fail to show good cause under Rule 26(c), the Federal Circuit has, in
multiple cases, refused their requests for protective orders. See, e.g., Iris Corp. Berhad v.
United States, 84 Fed. Cl. 489, 492–94 (Fed. Cir. 2008) (denying the plaintiff’s motion
for protective order because the plaintiff failed to show good cause under Rule 26(c));
AG-Innovations, Inc. v. United States, 82 Fed. Cl. 69, 78–79 (Fed. Cir. 2008) (“[B]road
allegations of harm, unsubstantiated by specific examples, are insufficient to justify
issuance of a protective order.” (citations omitted)); Northbrook Dig., LLC v. Vendio
Servs., Inc., 625 F. Supp. 2d 728, 737 (D. Minn. 2008) (stating that “many courts
recognize that patent prosecution can pose the type of competitive threat that justifies a
protective order” but “[t]his is not to say that courts have universally prohibited lawyers
and inventors involved in patent prosecution from having access to opposing parties’
confidential information”). More importantly, the Sixth Circuit—whose case law, again,
governs the parties’ request for a protective order here—has underscored the point that
Rule 26(c)’s legal standard, though not insurmountable, is far from a mere technicality.
In Procter & Gamble Co. v. Bankers Trust Co., 78 F.3d 219 (6th Cir. 1996), the
Sixth Circuit addressed the propriety of a “broad stipulated protective order” in which the
district court allowed the parties to withhold documents from discovery if, “in their
discretion,” they contained trade secrets or other confidential information. Id. at 222. The
Sixth Circuit concluded that the protective order violated Rule 26(c) partly because “[t]he
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parties and not the court would determine whether particular documents met the
requirements of Rule 26.” Id. at 222, 227. Although it recognized that district courts have
latitude in granting or denying protective orders, it noted that “th[is] discretion is limited
by the careful dictates of [Rule 26].” Id. at 227. In this vein, it reasoned that the district
court, by letting the parties designate certain documents as confidential, “allowed [them]
to adjudicate their own case based upon their own self-interest” and “abdicate[d] its
responsibility to oversee the discovery process.” Id. In reviewing Procter, this Court has
no doubts that its teachings are applicable to requests for protective orders in patentinfringement cases too—and incidentally, neither does the Federal Circuit, which has
endorsed Procter. See In re Violation of Rule 28(D), 635 F.3d 1352, 1358 (Fed. Cir.
2011) (stating that “[p]arties frequently abuse Rule 26(c) by seeking protective orders for
material not covered by the rule” and citing Procter in noting that “[o]ur sister circuits
have repeatedly condemned the improper use of confidentiality designations”).
A. Particular and Specific Demonstration of Fact
In this case, the parties fall short of making even a tepid illustration of good cause,
having failed to identify any actual confidential information or articulate specific facts as
to any particularized harm they would suffer without a protective order. The parties’
motion is three sentences long, contains no mention of Rule 26(c)’s legal standard, and is
unaccompanied by affidavits or declarations. The parties state that a protective order is
necessary to safeguard information concerning their “sales,” “customers,” and “other
things,” which they consider to be confidential, [Mot. for Protective Order at 1], but these
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thumbnail, generic characterizations do not amount to a manifestation of a protectable
trade secret or other commercial information that falls within Rule 26(c)(1)(G)’s domain,
see Nemir, 381 F.3d at 550 (stating that Rule 26(c) calls upon parties to make “a
particular and specific demonstration of fact, as distinguished from stereotyped and
conclusory statements” (quotation omitted)); see also AmerGen Energy Co., LLC v.
United States, 115 Fed. Cl. 132, 140–41 (Fed. Cir. 2014) (stating that the plaintiff, in
citing the need to protect its “cost structures, business opportunities, and market
situations,” made “no effort to identify specific information . . . that would cause specific
harm to its competitive interests” under Rule 26(c)); Forest Prods. Nw., Inc. v. United
States, 62 Fed. Cl. 109, 114 (Fed. Cir. 2004) (concluding that the plaintiff’s statement
that its “business and competitive position” would suffer without a protective order did
not satisfy Rule 26(c) because it was “conclusory,” “self-serving,” and “nothing more
than a mere ipse dixit”); Wall Indus., Inc. v. United States, 5 Cl. Ct. 485, 487–88 (Ct. Cl.
1984) (stating that “it is axiomatic that nebulous and conclusory allegations of
confidentiality . . . are insufficient to carry the movant’s burden.” (citations omitted)).
The parties also do not describe—not even in conclusory fashion—any type of
harm that would result from discovery of any of the numerous materials that are subject
to their Stipulated Protective Order. Operating under a standard that requires them to
identify “specific facts” indicating that they would suffer a “clearly defined and serious
injury,” they have made no headway in demonstrating to the Court that particularized
harm awaits them without a protective order. Nix, 11 F. App’x at 500; see AmerGen
Energy, 115 Fed. Cl. at 141 (finding that the plaintiff failed to demonstrate good cause
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under Rule 26(c) because it made “no effort to identify . . . specific harm to its
competitive interests”). In short, the parties have made only conclusory statements that
the documents subject to their Stipulated Protective Order will contain confidential
information and have made no assertion at all of particularized harm that would befall
them absent a protective order. As a result, they have not established good cause for a
protective order under Rule 26(c)(1)(G). Compare [Mot. for Protective Order at 1
(containing the parties’ terse, conclusory assertions as to the existence of confidential
information and no assertion of harm)], with In re Gabapentin Patent Litig., 312 F. Supp.
2d 653, 659 (D.N.J. 2004) (determining that the parties, who were involved in a patentinfringement suit, were entitled to a protective order under Rule 26(c) because each of
them “submitted detailed affidavits, declarations, setting forth in detail the nature of their
trade secrets and the specific harm that will be suffered upon disclosure”).
B. The Scope of the Stipulated Protective Order
In case the parties intend to renew their request for a protective order before
proceeding with this litigation, the Court, to avoid confusion, notes that blanket
protective orders, which by their nature are broad and cover a range of documents, are
not per se violative of Rule 26(c). In fact, both the Sixth Circuit and the Federal Circuit
have recognized that blanket protective orders have practical uses. See Howes v. Ashland
Oil, Inc., No. 87-5939, 1991 WL 73251, at *3 (6th Cir. May 6, 1991) (“Blanket
protective orders . . . ‘greatly expedite the flow of discovery material while affording
protection against unwarranted disclosures.’” (quotation and footnote omitted)); see also
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AmerGen Energy, 115 Fed. Cl. at 138 (“Blanket or umbrella protective orders . . . are
frequently employed by this court and others to facilitate discovery in complex cases.
However, ‘such orders should not substantively expand the protection provided by Rule
26(c)[.]” (citations and quotation omitted)); Armour of Am. v. United States, 73 Fed. Cl.
597, 599 (Fed. Cir. 2006) (“Federal courts have widely utilized umbrella or blanket
protective orders, particularly in complex cases or cases involving large-scale discovery,
upon a threshold showing of good cause by the party seeking protection.” (citations
omitted)).
Although blanket protective orders can be useful, they are, again, prone to abuse in
the federal system. See Procter, 78 F.3d at 227; see also In re Violation of Rule 28(D),
635 F.3d at 1358 (observing that “[p]arties frequently abuse Rule 26(c) by seeking
protective orders for material not covered by the rule”). Simply, when parties agree to a
blanket protective order, do not show—specifically—that the documents subject to the
protective order will contain sensitive information whose disclosure will cause harm, and
retain the right to decide which of these documents they will exclude from discovery,
then they abuse Rule 26(c) by converting to their own use the inherent discretion that
belongs to the Court. See Procter, 78 F.3d at 227. This scenario describes what the
parties have done here. The parties not only fail to establish good cause under Rule 26(c)
but also cast the widest of nets, seeking to protect “any document, information or other
thing” that, in their judgment, they “deem[]” to be confidential or highly confidential.
[Stipulated Protective Order at 1–2]. The Stipulated Protective Order’s language is so
imprecise and expansive—permitting the parties even to withhold materials “not limited
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to” those that they enumerate in the Stipulated Protective Order—that the they could keep
practically any item off limits from discovery. [Id. at 2].
By approving the Stipulated Protective Order, the Court would commit a clear
legal error—namely the dereliction of its duty to oversee discovery. See Procter, 78 F.3d
at 227; see also Citizens First Nat’l Bank of Princeton v. Cincinnati Ins. Co., 178 F.3d
943, 945 (7th Cir. 1999) (“The order is so loose that it amounts . . . to giving each party
carte blanche to decide what portions of the record shall be kept secret. Such an order is
invalid.” (citations omitted)); Jepson, Inc. v. Makita Elec. Works, Ltd., 30 F.3d 854, 858
(7th Cir. 1994) (acknowledging that even when parties agree to a protective order, they
still have the burden of establishing that good cause exists); Solar X Eyewear, LLC v.
Bowyer, No. 1:11-cv-763, 2011 WL 3921615, at *2) (N.D. Ohio Sept. 7, 2011) (“[T]he
proposed protective order is so broad and speculative as to defy any credible assertion of
particularized injury.”); Waelde v. Merck, Sharp & Dohme, 94 F.R.D. 27, 30 (E.D. Mich.
1981) (“The proposed order amounts to a blanket protective order, which would apply to
any information defendant cares to characterize as confidential.”). As a result, the Court
must deny the parties’ request for a protective order.
IV. CONCLUSION
Rule 26(c) confers broad discretion on the Court to grant or deny a motion for a
protective order. While blanket protective orders often promote efficiency in discovery,
the inquiry under Rule 26(c) is not a policy-laden one. Rather, it is a legal inquiry that
requires good cause, which, in this circuit, necessitates a showing of specific facts
indicative of a clearly defined and serious injury. The parties have not even come within
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reach of the requisite showing. The Joint Motion for Protective Order [doc. 34] is
therefore DENIED. The Court will enter an order consistent with this opinion.
IT IS SO ORDERED.
ENTER:
s/ Thomas W. Phillips
United States District Judge
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