Wireless Recognition Technologies LLC v. A9.com, Inc. et al
Joint MOTION for Protective Order (Entry of) by A9.com, Inc., Amazon.com, Inc., Google, Inc.,, Nokia, Inc., Ricoh Innovations, Inc., Wireless Recognition Technologies LLC. (Attachments: # 1 Exhibit 1-Proposed Protective Order with Competing Proposals, # 2 Exhibit 2-Plaintiff's Proposed Protective Order, # 3 Exhibit 3-Defendants' Proposed Protective Order, # 4 Exhibit 4-Dkt. No. 241 from LTT case, # 5 Exhibit 5-Dkt. No. 169 from LTT case, # 6 Exhibit Dkt. No. 169-1 from LTT case, # 7 Exhibit 7-ST Sales v. Daimler-LEXIS, # 8 Exhibit 8-Yudell Power of Attorney)(Shvodian, Daniel)
2 of 100 DOCUMENTS
As of: Aug 17, 2011
ST SALES TECH HOLDINGS, LLC v. DAIMLER CHRYSLER CO., LLC, et al
CIVIL ACTION NO. 6:07-CV-346
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
TEXAS, TYLER DIVISION
2008 U.S. Dist. LEXIS 107096
March 14, 2008, Decided
PRIOR HISTORY: ST Sales Tech Holdings LLC v.
Daimler-Chrysler Co. LLC, 2007 U.S. Dist. LEXIS 98160
(E.D. Tex., Aug. 22, 2007)
COUNSEL: [*1] For Plaintiff: Andrew Wesley
Spangler of Spangler Law PC, Longview, TX; David
Michael Pridham of Law Office of David Pridham,
Barrington, RI; John J. Edmonds of The Edmonds Law
Firm, PC, Houston, TX.
For Daimler Chrysler Co LLC and Daimler Chrysler
Corporation, Defendant(s): Frank C Cimino, Jr of
Dickstein Shapiro, LLP DC, Washington, DC; J Thad
Heartfield and M. Dru Montgomery of The Heartfield
Law Firm, Beaumont, TX.
For Ford Motor Co, Land Rover of North America Inc,
and Volvo Cars of North America Inc, Defendant(s):
Frank A Angileri, John S Le Roy, and Marc Lorelli of
Brooks & Kushman PC - Southfield, Southfield, MI; J
Thad Heartfield of The Heartfield Law Firm, Beaumont,
TX; Jennifer Parker Ainsworth of Wilson Sheehy
Knowles Robertson & Cornelius PC, Tyler, TX.
For Mazda Motor of America Inc, Defendant(s): Andrew
S Dallmann of Howrey LLP Irvine CA, Irvine, Ca;
Andrew R Sommer and Matthew J Moore of Howrey
LLP Washington, Washington, DC; J Thad Heartfield of
The Heartfield Law Firm, Beaumont, TX.
JUDGES: JOHN D. LOVE,
OPINION BY: JOHN D. LOVE
MEMORANDUM OPINION AND ORDER
Before the Court are Defendants' Motion For Entry
of a Protective Order (Doc. No. 88), and a number of
[*2] responses and replies. For the reasons that follow,
Defendants' motion is GRANTED.
ST Sales Tech Holdings, LLC (hereinafter "Sales
Tech") is a Texas limited liability company in the
business of acquiring, licensing, and enforcing patents.
2008 U.S. Dist. LEXIS 107096, *2
Pridham Decl. P 6. Sales Tech is the owner by
assignment of U.S. Patent No. 6,941,305 (hereinafter "the
'305 patent"), entitled "Customer management system for
automobile sales industry," which it seeks to enforce
through the present infringement proceedings. Compl. P
15. Plaintiff Sales Tech is one of many patent holding
entities owned and controlled by Erich Spangenberg and
represented in some capacity by attorney David Pridham.
Spangenberg's business entities, including Sales Tech, are
in the business of holding intellectual property for
litigation and pre-litigation activities. See Trial Transcript
at 186:16-19 (May 23, 2007), Orion IP LLC v. Hyundai
Motor Co., No. 6:05-cv-322 (E.D. Tex. 2007). See also
Def.'s Mot. For Entry of Protective Order (Doc. No. 88;
Ex. 1). The parties' present dispute regards whether
Pridham should be denied access to Defendants'
confidential information under a protective order.
Although Sales Tech as an entity [*3] is relatively
new, Spangenberg's many other patent holding entities
have previously sued these same Defendants a number of
times in just over three years. 1 The most recent lawsuits,
including this one, involve similar patents and infringing
conduct, specifically the operation of "build your own"
tools on Defendants' websites and web-based methods for
interacting with Defendants' auto dealerships. Def.'s Mot.
For Entry of Protective Order at 3. A number of the
lawsuits resulted in settlements, though Spangenberg's
entities continue to acquire and attempt to enforce other
similar patents against these same Defendants, including
the '305 patent asserted herein.
1 Specifically, this is the third lawsuit brought
by entities owned and controlled by Spangenberg
against Defendants Hyundai, Ford, Volvo, and
Mazda; the second against Land Rover; and the
fourth lawsuit brought against Mercedes and
Chrysler. See Orion IP, LLC v. Mercedes-Benz
USA, LLC, No. 6:05-cv-322 (E.D. Tex. 2005);
Orion IP, LLC v. Ford Motor Co. and
DaimlerChrysler Corp., No. 2:04-cv-313 (E.D.
Tex. 2004); Orion v. Chrysler Holding LLC, No.
6:07-cv-370 (E.D. Tex. 2006); Orion IP, LLC v.
Mercedes-Benz USA, LLC, No. 6:07-cv-451 (E.D.
Tex. 2007) [*4] ; Taurus IP, LLC v. Ford Motor
Co., No. 2:04-cv-313 (W.D. Wis. 2007); Taurus
IP, LLC v. DaimlerChrysler Corp. and
Mercedes-Benz USA, LLC, 519 F. Supp. 2d 905
(W.D. Wis. 2007); ST Sales Tech Holdings, LLC
v. Daimler-Chrysler Co., LLC, No. 6:07-cv-346,
2007 U.S. Dist. LEXIS 98160 (E.D. Tex. 2007).
Attorney David Pridham has been heavily involved
in Spangenberg's activities since as early as 2003. Prior to
working with Spangenberg, Pridham served as general
counsel of Firepond, Inc., a Minnesota software
company. Def.'s Mot. For Entry of Protective Order at 4.
Spangenberg purchased Firepond's patent portfolio while
Pridham served as general counsel, though Pridham
himself was conflicted out of the negotiations. 2 See Trial
Transcript at 193:1-14 (May 23, 2007), Orion IP, LLC v.
Hyundai Motor Co., 6:05-cv-322 (E.D. Tex. 2007). See
also Def.'s Mot. For Entry of Protective Order (Doc. No.
88; Ex.1). Though the parties dispute small nuances of
Pridham's exact role in Spangenberg's litigation-centered
business entities since their acquisition of the Firepond
patents, it is undisputed that Pridham has worked and
continues to work extensively with Spangenberg entities
in their business of acquiring, litigating, [*5] and
licensing patents. Pl.'s Sur-Reply to Def.'s Mot. For Entry
of Protective Order at 1.
2 Defendants speculate that "the existence of an
actual conflict suggests that Spangenberg was
either actively negotiating to hire Pridham as of
January 2004 or had already hired him." Def.'s
Mot. For Entry of Protective Order at 4 n.8.
Based on Pridham's role in the parties' litigation
history, Defendants have moved for entry of a protective
order pursuant to Rule 26(c) of the Federal Rules of Civil
Procedure. The proposed protective order would prevent
Pridham from viewing confidential information marked
for "Attorney's Eyes Only."
Under Rule 26 of the Federal Rules of Civil
Procedure, "for good cause shown...the court...may make
any order which justice requires to protect a party or
person from annoyance, embarrassment, oppression, or
undue burden or expense." 3 FED. R. CIV. P. 26(c).
Included in Rule 26(c)(7) is the power for the Court to
enter a protective order to restrict an individual attorney's
access to a trade secret or other confidential information.
See FED. R. CIV. P. 26(c)(7).
3 The "good cause " requirement of Rule 26(c)
means the burden is on the movant to show the
necessity for [*6] the issuance of a protective
order. In re Papst Licensing, GmbH, Patent
2008 U.S. Dist. LEXIS 107096, *6
Litigation, 2000 U.S. Dist. LEXIS 6374, 2000 WL
554219, at *3 (E.D. La. 2000).
In determining whether a protective order should bar
one party's attorney access to information, the Court must
focus on the risk of "inadvertent or and weigh that risk
against the potential that the protective order may impair
the other parties' ability to prosecute or defend its claims.
U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468
(Fed.Cir. 1984); In re Papst Licensing, GmbH, Patent
Litigation, 2000 U.S. Dist. LEXIS 6374, 2000 WL
554219, at *3 (E.D. La. 2000). When conducting the
balancing, courts look specifically at "the factual
circumstances surrounding each individual counsel's
activities, association, and relationship with a party." U.S.
Steel Corp., 730 F.2d at 1468 n.3; Infosint S.A. v. H.
Lundbeck A.S., 2007 U.S. Dist. LEXIS 36678, 2007 WL
1467784, at *3 (S.D.N.Y. 2007). Other factors to be
considered in the balancing include: (1) whether the
person receiving the confidential information is involved
in competitive decision making or scientific research
relating to the subject matter of the patent, (2) the level of
risk of inadvertent disclosure of proprietary information,
(3) [*7] the hardship imposed by the restriction, (4) the
timing of the remedy, and (5) the scope of the remedy.
Infosint S.A., 2007 U.S. Dist. LEXIS 36678, 2007 WL
1467784, at *2. The ultimate goal of the balancing is to
determine whether counsel's access to the confidential
information creates "an unacceptable opportunity for
inadvertent disclosure." 4 U.S. Steel Corp., 730 F.2d at
1468; In re Papst Licensing, GmbH, Patent Litigation,
2000 U.S. Dist. LEXIS 6374, 2000 WL 554219, at *3.
4 The inquiry is not directed at the attorney's
ethical standards, since "even if the competitor's
counsel acted in the best of faith and in
accordance with the highest ethical standards, the
question remains whether access to the moving
party's confidential information would create 'an
disclosure.'" Mikohn Gaming Corp. v. Acres
Gaming Inc., 50 U.S.P.Q.2d 1783, 1784 (D. Nev.
Balancing The Interests
Before proceeding to the balancing, the Court begins
the analysis by crediting the assurance that Pridham
would abide by any "Attorney's Eyes Only" protective
order that might be entered. However, as previous courts
have noted, accepting that an attorney will abide by a
protective order is the starting point of the inquiry, not
[*8] the end of the analysis. Autotech Techs. Ltd. P'ship
v. Automationdirect.com, Inc., 237 F.R.D. 405, 408 (N.D.
Ill. 2006) (citing Brown Bag Software v. Symantec Corp.,
960 F.2d 1465, 1471 (9th Cir. 1992)). Under the relevant
analysis, the focus of the inquiry is not the attorney's
good faith, but the risk for inadvertent disclosure, and
"[j]ust as '[i]nadvertence...is no respecter of its victims,'
neither is it a respecter of the integrity of those who fall
prey to it." Autotech Techs. Ltd. P'ship, 237 F.R.D. at
408-09 (quoting in part U.S. Steel Corp., 730 F.2d at
1468). See also Andrx Pharms., LLC v. GlaxoSmithKline,
PLC, 236 F.R.D. 583, 585-86 (S.D. Fla. 2006) ("Even if
the competitor's counsel acted in the best of faith and in
accordance with the highest ethical standards, the
question remains whether access to the moving party's
confidential information would create 'an unacceptable
opportunity for inadvertent disclosure.'"). The Court does
not question Pridham's ethics or integrity. However,
Pridham's and ST Sales' assurances of compliance with
the protective order are not enough on their own to deny
A. "Competitive Decisionmaker"
Involvement in "competitive decisionmaking" [*9]
is the oft-cited most critical factor weighing in favor of
denial of access. 5 U.S. Steel Corp., 730 F.2d at 1468 n.3.
The Federal Circuit has stated that "competitive
decisionmaking" refers to "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." Id. Specifically, courts are
concerned about the "untenable position" counsel would
be in if, after viewing other litigants' technology, counsel
would be forced to either refuse his client legal advice on
competitive matters or violate the protective order's
prohibition against revealing technical information. In re
Papst Licensing, GmbH, Patent Litigation, 2000 U.S.
Dist. LEXIS 6374, 2000 WL 554219, at *3.
5 Determining whether counsel is a competitive
decisionmaker is not the sole inquiry the Court
must address in the balancing. MGP Ingredients,
Inc. v. Mars, Inc., 245 F.R.D. 497, 501 (D. Kan.
2007). However, if counsel is a competitive
decisionmaker, most all of the policy concerns
underlying the rule allowing courts to deny
2008 U.S. Dist. LEXIS 107096, *9
attorneys' access to
information typically are present.
Plaintiff and Defendants argue a number of points
regarding whether or not Pridham's activities and
association with Erich Spangenberg qualify Pridham as a
"competitive decisionmaker" in Spangenberg's business
enterprise. Defendants argue that Pridham's continued
close relationship with Spangenberg and expansive roles
in Spangenberg's businesses qualifies Pridham as a
competitive decisionmaker, and increases their risk of
harm should he inadvertently disclose information. In
response, Sales Tech argues Pridham is outside counsel,
and that he is not involved in management of Sales Tech
or other entities. Sales Tech also argues that Pridham has
no role in patent prosecution, which is often a key factor
in courts' decisions to grant a protective order to restrict
certain counsel's access to confidential information. Since
the burden is on the movant to prove the necessity of the
protective order, the Court will address Defendants'
arguments in favor of the protective order first.
Defendants have presented a bevy of information
indicating that Pridham has served in many capacities
throughout Spangenberg's many patent-holding entities
since [*11] the two first met. In previous litigation,
Spangenberg testified that (at that time) Pridham served
as "both the general counsel at [IP Navigation Group,
LLC] and then in a separate capacity he's outside counsel
as well." See Trial Transcript at 193:15-22 (May 23,
2007), Orion IP, LLC v. Hyundai Motor Co., 6:05-cv-322
(E.D. Tex. 2007). IP Navigation Group, LLC (hereinafter
"IP Nav") is one of the entities owned and operated by
Spangenberg, and it provides consulting services to
Spangenberg's other patent-holding entities. Id. at
184:15-24. Defendants also note that Pridham has
appeared in pleadings as affiliated with Orion IP or other
Spangenberg entities at least seven times between 2004
and 2006, but since 2006 Pridham has generally
identified himself as affiliated with IP Nav. Def.'s Mot.
For Entry Protective Order at 5. Perhaps emblematic of
the confused mixing of roles within the various entities,
during one patent infringement lawsuit, Pridham listed
himself as Orion's in-house counsel, but with an @ipnav
email address. See Complaint at 4, Orion IP, LLC v.
Staples, Inc., No. 2:04-cv-297 (E.D. Tex. 2004). Aside
from his role as in-house counsel and outside counsel to
Spangenberg [*12] entities, Pridham has also served in at
least one Spangenberg entity solely in a business
capacity. Defendants cite reporting forms indicating
Pridham served as a director on the board of In Store
Media Systems, a company of which Spangenberg was
director, CEO, treasurer, and secretary. Def.'s Mot. For
Entry Protective Order at 4; (Doc. No. 88, Exs. 8-9).
In his legal roles, Pridham provides many services to
Spangenberg's entities. IP Nav, the entity Pridham most
often associates himself with as either general counsel or
outside counsel, "manages, acquires and monetizes a
diverse group of patents," and involves its attorneys with
"a variety of prosecution, licensing and litigation
projects." Def.'s Mot. For Entry of Protective Order at 4
(citing IP Nav attorney job posting attached as exhibit);
(Doc. No. 88, Ex. 2). Whether within IP Nav or serving
as outside counsel, Pridham himself focuses his practice
on patent litigation, licensing, and acquisition for
Spangenberg's entities. Defendants attached a chart to
their motion indicating that Pridham has appeared as
counsel (affiliated with IP Nav) in at least 38 different
lawsuits on behalf of at least six different Spangenberg
entities: [*13] Sales Tech, Orion IP, Phoenix, Polaris,
Triton, and Constellation. 6 See Def.'s Mot. For Entry
Protective Order at 4 n.7 (Doc. No. 88, Ex. 4). Sales Tech
does not dispute Pridham's extensive role in its litigation
ventures, and also admits to Pridham's role in the
licensing of patents in settlement of litigation. Pl.'s Resp.
To Def.'s Mot. For Entry of Protective Order at 2. Sales
Tech specifically denies that Pridham provided any legal
services related to the acquisition of the '305 patent, but it
makes no denial or mention of Defendants' repeated
accusations of his involvement in Spangenberg's
acquisition of other patents. 7 Pridham Decl. P 5. Also,
despite Spangenberg's previous statements, Sales Tech
now claims that Pridham is strictly outside general
counsel for patent litigation and the related licensing of
patents in settlement, and that he is not an employee or
owner of IP Nav or involved in management of any kind.
Though Sales Tech claims Pridham is not an employee,
Pridham continues to use IP Nav's business mailing
address and email address. Pridham claims the address is
nothing more than a "a convenient mail stop" in Texas
while he works in Rhode Island. Pl.'s Resp. To Def.'s
[*14] Mot. For Entry of Protective Order at 2.
6 Defendants also note, and Sales Tech does not
dispute, that all of the entities listed the same
business address that Pridham and IP Nav were
using at the time of the previous lawsuits. Def.'s
Mot. For Entry Protective Order at 4.
7 Sales Tech was assigned the '305 patent as part
2008 U.S. Dist. LEXIS 107096, *14
of a litigation settlement. Pridham represented the
entity in that case, though the parties do not
discuss the depth of his role in the settlement, and
as noted and credited by the Court, Pridham
denies any involvement in the acquisition of the
'305 patent itself.
Aside from outlining Pridham's active role
throughout Spangenberg's businesses, Defendants also
argue the extent of the potential harm to them if Pridham
were to inadvertently disclose confidential information to
Spangenberg is apparent by the most recent litigation
history among the parties. Defendants note that Pridham
represented one of Spangenberg's entities (Orion) in
litigation on two patents involving "build-your-own"
websites. As a representative of Orion, Pridham took part
in extensive discovery of the systems before most of the
Defendants settled the Orion litigation. Reply in Supp. of
Def.'s Mot. For [*15] Entry of Protective Order at 8-9.
Shortly thereafter, Taurus, a different Spangenberg entity
again represented by Pridham, sued many of these same
Defendants in the Western District of Wisconsin for
infringement of a different patent on the same accused
systems at issue in the Orion litigation. Id. Finally, in
May 2007, Spangenberg acquired the '305 patent in a
settlement with Symeron Systems, a defendant in
litigation with Spangenberg entity Triton (which was also
represented by Pridham). Id. The '305 patent was
assigned to Sales Tech, and Sales Tech, again represented
by Pridham, promptly filed the present lawsuit, accusing
the same systems as those accused in the Orion and
Taurus litigation. Id. Defendants argue that
Spangenberg's demonstrated willingness to acquire new
patents and enforce them on the same systems presents a
real danger of continuous litigation if Pridham were to
inadvertently disclose confidential information.
Based on the record before the Court, it appears that
Pridham's active role in Spangenberg's business makes
him a "competitive decisionmaker" as the term is defined
by the Federal Circuit. Under the U.S. Steel Corp.
definition, "competitive decisionmaking" [*16] refers to
"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., 730 F.2d at 1468 n.3. Pridham's involvement
in Spangenberg's business enterprise is extensive, and
goes well-beyond the typical role of outside counsel,
even outside counsel who might work with an entity for
years. By Spangenberg's characterization, Pridham is (or
was) general counsel of Spangenberg's consulting entity
that "manages, acquires, and monetizes" the patents for
Spangenberg's many other patent-holding entities.
Pridham has also appeared on behalf of Spangenberg's
patent-holding entities as general counsel or affiliated
counsel at least 38 times in the past couple years. Finally,
all sides agree that Pridham is also extremely involved in
the licensing of Spangenberg's patents after litigation.
Active involvement in these factors have troubled courts
in the past. Moreover, Spangenberg's entire business
model with his patent-holding companies such as Sales
Tech revolves around [*17] the acquisition, enforcement
(through litigation), and licensing of patents. Under such
a business model, it is difficult to argue that someone
such as Pridham, who is so heavily involved in these
aspects of the business, is somehow not a competitive
Another important aspect to consider is that there
appears to be no insulation between Spangenberg and
Pridham in their business. When asked if Pridham
worked for him during a trial less than a year ago,
Spangenberg was careful to correct the questioner to
reflect that Pridham "works with [Spangenberg]," not for
him. See Trial Transcript at 193:15-18 (May 23, 2007),
Orion IP, LLC v. Hyundai Motor Co., 6:05-cv-322 (E.D.
Tex. 2007). To any extent Pridham does not make final
decisions himself, he very clearly reports directly to
Spangenberg himself, who is the owner and controller of
the patent-holding enterprise discussed herein. Indeed, it
appears as though there is nobody else but Spangenberg
that Pridham even could report to, and Pridham's advice
affects every aspect of Spangenberg's patent acquisition,
litigation and licensing business. In short, Pridham's
extremely close relationship with Spangenberg, when
viewed in conjunction [*18] with his activity in all of the
critical aspects of the patent-holding litigation and
licensing business, qualifies Pridham as a competitive
decisionmaker under the U.S. Steel Corp. definition of
The cases where courts have dealt with analogous
situations provide ample support for the Court's
determination. See, e.g., Infosint S.A., 2007 U.S. Dist.
LEXIS 36678, 2007 WL 1467784, at *3-4; Nike, Inc. v.
Adidas America Inc., No. 9:06-cv-43, 2006 U.S. Dist.
LEXIS 97109 (E.D. Tex. 2006) (Doc. No. 58); Autotech
Techs. Ltd. P'ship, 237 F.R.D. at 410-11; Intel Corp. v.
2008 U.S. Dist. LEXIS 107096, *18
VIA Techs., Inc., 198 F.R.D. 525, 529-31 (N.D. Cal.
2000). In Infosint, a defendant manufacturing company
moved to have two attorneys representing a
patent-holding company screened from viewing highly
confidential information under a protective order. See
Infosint S.A., 2007 U.S. Dist. LEXIS 36678, 2007 WL
1467784, at *3-4. The Court ordered that one of the
attorneys be denied access to the information in part
because "[f]or nearly seven years, [counsel] has provided
[plaintiff] with patent advice, based on his scientific and
legal expertise." Id. The attorney's role in patent
prosecution also played a large role in the Infosint court's
determination. While Pridham himself is not involved in
patent prosecution [*19] for Sales Tech, Pridham's role
in IP Nav raises all the same concerns outlined by the
Infosint court related to an attorney's involvement in
patent prosecution after viewing certain confidential
information. The concern in Infosint was that
"[p]rosecuting patent applications 'involves decisions of
scope and emphasis' that implicate competitive decision
making, as claims may be drafted to 'read on new
products and new directions where [a party projects] sales
to be most critical.'" Infosint S.A., 2007 U.S. Dist. LEXIS
36678, 2007 WL 1467784, at *4. As Defendants point out
in their motion, Pridham's involvement in IP Nav, which
provides consulting on patent acquisition for
Spangenberg's patent-holding entities, also puts Pridham
in position to seek out and propose the purchase of
patents that read on activities known from Pridham's
involvement in confidential discovery during prior
lawsuits, and then seek to enforce those patents against
the same Defendants. Given Pridham's involvement from
patent acquisition through litigation and claim
construction, access to highly confidential information
would also allow him to seek out certain patents and then
propose claim constructions that read on Defendants'
known use [*20] of the allegedly infringing systems. The
risk of inadvertent disclosure would be high by the very
nature of Pridham's duties and his connection to
Spangenberg. If allowed to access the information,
Pridham would be forced into what other courts have
emphasized as the untenable position of having to
compartmentalize his knowledge of the confidential
information when asked about the acquisition or other use
of patents whose claims could arguably be utilized
against these Defendants. Courts have continuously
determined that attempting to compartmentalize
knowledge is an exercise in futility. Autotech Techs. Ltd.
P'ship, 237 F.R.D. at 410-11. Moreover, Spangenberg
and Pridham have demonstrated a willingness to sue
these particular Defendants over and over as they acquire
new patents, which puts Defendants at an even greater
risk of suffering harm from any inadvertent disclosure.
Pridham's active involvement in licensing and
litigation, and the lack of any other persons to whom
Pridham reports in the business, are also factors that other
courts have considered critical to "competitive
decisionmaker" analysis. One California court found that
an attorney's active involvement "in licensing [*21]
decisionmaking in part because "advice and counsel
necessarily affect licensing decisions," and licensing
agreements affected the parties' strength in the
marketplace. See Intel Corp. 198 F.R.D.at 530. The Intel
court reiterated the overarching concern that counsel
would be placed "in the untenable position of having
either to refuse to offer crucial legal advice at times or
risk disclosing protected information," and that counsel's
close interaction with the immediate supervisors making
the critical business decisions exacerbated the potential
for inadvertent disclosure of the confidential information.
Id. Yet another court denied counsel access primarily
because counsel took his "ultimate instructions in the
litigation from a single individual" who was "for all
intents and purposes, the [client] corporation," and there
were no "safeguards resulting from a layered managerial
hieracrchy." Autotech Techs. Ltd. P'ship, 237 F.R.D. at
410-11. Every aspect of Pridham's role has either been a
foundation of other courts' decisions in screening
attorneys such as Pridham from access to confidential
information, or is highly analogous to certain aspects
[*22] that have been critical to the decision, and thus,
there is ample support to conclude that Pridham himself
qualifies as a competitive decisionmaker.
In its response, Sales Tech argues that Pridham
cannot be a competitive decisionmaker because Sales
Tech does not manufacture products or design
automobiles, and is therefore not a 'competitor' to
Defendants. Sales Tech pulls this argument from the
decisionmaker," which covers counsel's association with
a client involving advice or participation in any decisions
"made in light of similar or corresponding information
about a competitor." U.S. Steel Corp., 730 F.2d at 1468
n.3 (emphasis added). However, since the U.S. Steel
Corp. decision, courts have found that a person can still
be a "competitive decisionmaker" under the Federal
Circuit's definition even when not representing a
2008 U.S. Dist. LEXIS 107096, *22
competitor. 8 See, e.g., Infosint S.A. v. H. Lundbeck A.S.,
2007 U.S. Dist. LEXIS 36678, 2007 WL 1467784, at *3-4
(S.D.N.Y. 2007) (finding that outside counsel was a
"competitive decisionmaker" even though he was "neither
an officer nor employee of [plaintiff], and [was] not
involved in 'business decisions regarding competitors of
[his client].'"). [*23] See also R.R. Donnelley & Sons Co.
v. Quark, Inc., 2007 U.S. Dist. LEXIS 424, 2007 WL
61885, at *2 n.2 (D. Del. 2007) (rejecting the argument
that a person cannot be a competitive decisionmaker
unless the party that person is a representative of a
competitor of the other parties in the litigation since trade
secrets and sensitive information could potentially be of
value to the plaintiff). Moreover, it is somewhat
disingenuous to argue Sales Tech is not Defendants'
competitor simply because Sales Tech is in the business
of acquiring and enforcing patents, while Defendants
manufacture and design automobiles. Plaintiff and
Defendants all seek to utilize, in one manner or another,
intellectual property as part of a business model for
pecuniary gain. The fact that Sales Tech is before the
Court seeking to enforce its attained intellectual property,
and has sued on similar patents against these same
Defendants on the same systems many times before,
indicates Sales Tech views Defendants as competitors for
the rights to use the accused systems. To the extent Sales
Tech and Defendants are not direct competitors in the
traditional understanding of the term, competitor status is
not the sole relevant inquiry, and it certainly [*24] is not
determinative of the matter. See MGP Ingredients, Inc. v.
Mars, Inc., 245 F.R.D. 497, 500-01 (D. Kan. 2007).
There is little doubt Defendants' confidential information
could be of value to an entity such as Sales Tech, whose
business model hinges on the ability to acquire
intellectual property and enforce it against other entities
using the allegedly infringing technology. It is that
ultimate potential for damaging use of the confidential
information that underlies the concerns of Rule 26 and
the U.S. Steel Corp. "competitive decisionmaker"
8 Sales Tech argues the present circumstance is
"somewhat similar" to a case decided in the
District of Kansas where the fact that the parties'
were not competitors played a role in denying a
motion for protective order. See MGP Ingredients,
Inc. v. Mars, Inc., 245 F.R.D. 497, 500-01 (D.
Kan. 2007). However, in MGP Ingredients the
Defendants grounded their motion on the fact that
the parties were competitors, making it a more
relevant issue in that case than it is here. Id. Here,
Defendants have based their motion for the
protective order on the notion that Pridham's
extensive business relationship with Spangenberg
and litigation [*25] history makes him a
competitive decisionmaker, and a risk to
inadvertently disclose confidential information
that Spangenberg could use to harm Defendants.
It is also important to note that even though the
issue of whether the parties were competitors was
placed squarely before the Court in the MGP
Ingredients case, the court properly noted that
"whether [plaintiff] and defendants are, in fact,
competitors is not the sole legally relevant inquiry
as to whether the [protective order] sought by
defendants is warranted," and proceeded to
analyze the case under all of the considerations
outlined by the Federal Circuit in U.S. Steel Corp.
See MGP Ingredients, Inc., 245 F.R.D. at 501.
Sales Tech also argues extensively that Pridham
cannot be a competitive decisionmaker because his title is
now strictly outside counsel to Sales Tech, and he is not
an owner or employee of Sales Tech, IP Nav, or other
Spangenberg entities. See Pridham Decl. PP 2-3.
However, Pridham's actual title is irrelevant to the
pertinent analysis, as courts have found attorneys to be
competitive decisionmakers regardless of whether they
are in-house and outside counsel. See U.S. Steel Corp.,
730 F.2d at 1467-68 (rejecting [*26] notion that in-house
counsel are more of a risk to inadvertently disclose
confidential information, since many outside counsel
maintain long-standing relationships with clients). See
also, e.g., Infosint S.A., 2007 U.S. Dist. LEXIS 36678,
2007 WL 1467784, at *4 (finding outside counsel to be
competitive decisionmaker); Nike, Inc. v. Adidas America
Inc., No. 9:03-cv-43, 2006 U.S. Dist. LEXIS 97109 (E.D.
Tex. 2006) (Doc. No. 58) (refusing to modify protective
order to grant in-house counsel access because of risk for
inadvertent disclosure of trade secrets). The risk of
inadvertent or accidental disclosure is the focus of the
issue, and that must be weighed against the potential
harm to all parties, not Pridham's actual title. In U.S. Steel
Corp., the Federal Circuit specifically articulated that the
"factual circumstances surrounding each individual
counsel's activities, association, and relationship with a
party, whether counsel be in-house or retained, must
govern any concern for inadvertent or accidental
disclosure." U.S. Steel Corp., 730 F.2d at 1468 (emphasis
2008 U.S. Dist. LEXIS 107096, *26
In looking at the totality of the facts surrounding
Pridham's role in Spangenberg's businesses, from patent
acquisition to active involvement in litigation and
licensing, [*27] all of the concerns prior courts have
found critical in denying certain attorneys access to
confidential information are present. The Court finds that
Pridham is a competitive decisionmaker, and that his
close relationship with Spangenberg presents a high risk
for inadvertent disclosure that bears great potential to
significantly harm Defendants through continued
litigation. While determining whether counsel is a
"competitive decisionmaker" is a critical factor for the
Court to consider, in itself the factor is not determinative.
The Court must also examine and balance the potential
for harm on both sides before determining whether a
protective order is ultimately necessary.
B. Balancing The Potential Harms and Risks of
If counsel is determined to be involved in
competitive decisionmaking, the issue then becomes
whether there is a demonstrated need for access to the
documents sufficient to outweigh the concerns such
access gives rise to. Infosint S.A., 2007 U.S. Dist. LEXIS
36678, 2007 WL 1467784, at *5. In their motion and
well-documented willingness to seek out similar patents
and assert them against these Defendants on similar
technology puts them at risk [*28] of continuous
litigation if Pridham is allowed continued access to their
confidential information. In response, Sales Tech argues
that the infringement claims in this lawsuit are based on
publicly available information, and that it would already
be apparent if they had misused "Attorneys' Eyes Only"
information Pridham had accessed in previous cases as
the bases of its claims against Defendants herein. Pl.'s
Resp. To Def.'s Mot. For Entry of Protective Order at 9.
Sales Tech also argues that Defendants have not
sufficiently demonstrated facts showing the competitive
harm that would befall them by any inadvertent
disclosure of confidential information by Pridham to
Spangenberg, and that Sales Tech would in fact be
severely harmed if denied Pridham's services during the
present proceeding. Finally, Sales Tech notes that it has
agreed to include terms in the protective order that would
limit the use of any confidential information gained
during discovery to use in the present proceeding, and
therefore any inadvertent disclosure Pridham makes
would subject him to violating the protective order.
As discussed in the competitive decisionmaker
subsection above, the Court agrees with Defendants
[*29] that the risk that Pridham might inadvertently
disclose confidential information to Spangenberg is very
high under the circumstances. Pridham and Spangenberg
share a close business relationship, and it appears there
are no levels of managerial hierarchy to insulate the
interaction of the two. Moreover, Pridham's involvement
in patent acquisition, litigation and licensing, which is the
very core of Spangenberg's business, underscores his
importance to Spangenberg's businesses. If Pridham were
to gain continued access to confidential material, he
would be in a difficult position when advising
Spangenberg on everything from patent acquisition to
claim construction to licensing. Defendants would
ultimately be at a high risk of continued litigation, as
Spangenberg has demonstrated a willingness to acquire
and enforce patents on the same systems against these
same Defendants when he has the capability of doing so.
In comparison, the harm to Sales Tech is relatively
minor. Sales Tech has other highly competent counsel
that has been involved in the case since the beginning of
the present litigation (and even in previous cases). Courts
have found time and again that requiring a party to rely
[*30] on its competent outside counsel does not create an
undue or unnecessary burden. Brown Bag Software, 960
F.2d at 1471; Autotech Techs. Ltd. P'ship, 237 F.R.D. at
413; Intel Corp., 198 F.R.D. at 529. Sales Tech has
presented no credible argument for why Pridham
absolutely needs access to Defendants' confidential
information, or that he is critical to the prosecution of its
Sales Tech's other arguments are also unavailing.
Sales Tech's argument that it would already be obvious if
it had misused information Pridham had accessed in the
prior litigation involving these Defendants misses the
point of the inquiry. The question is whether the potential
for inadvertent disclosure exists on a going-forward basis,
and whether the potential harm from such a disclosure
outweighs the potential harm to Sales Tech. Likewise,
Sales Tech's agreement in its proposed protective order to
limit the use of the information to use in the present
litigation only also ignores the underlying law, which is
the risk of inadvertent disclosure going forward. No
amount of guarantees to limit the use of the information
can ensure against such an inadvertent disclosure. See
U.S. Steel Corp., 730 F.2d at 1468.
2008 U.S. Dist. LEXIS 107096, *30
On [*31] the whole, the Court finds that Pridham's
relationship with Spangenberg and his role in
Spangenberg's business enterprise presents un
unacceptable risk of inadvertent disclosure that could
significantly harm Defendants. While the Court notes that
Plaintiff will be harmed by having one of its counsel
screened from accessing certain information in the case,
that harm is minor compared to the risk of continued
harm to Defendants since Sales Tech has other highly
competent attorneys that have been involved since the
beginning of the case.
For the stated reasons, Defendants' Motion For Entry
of a Protective Order (Doc. No. 88) is GRANTED.
So ORDERED and SIGNED this 14th day of March,
/s/ John D. Love
JOHN D. LOVE
UNITED STATES MAGISTRATE JUDGE
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