Saxon Innovations, LLC v. Nokia Corp.
Saxon Innovations, LLC v. Nokia Corp.
2008 WL 11346472 (E.D. Tex. 2008)
August 18, 2008

Love, John D.,  United States Magistrate Judge

Proportionality
Protective Order
Form of Production
ESI Protocol
Source Code
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Summary
The Court granted a protective order as agreed upon by both parties, but did not include a provision proposed by Plaintiff regarding "Highly Confidential" designations. Defendants were ordered to store their source code at a secure third party site in Boston, at Plaintiff's expense. The Court also allowed Plaintiff to use compilers to analyze the source code, despite objections from Defendants, based on applicable laws and the burden of proof falling on the party seeking the protective order.
SAXON INNOVATIONS, LLC Plaintiff,
v.
NOKIA CORP., et al. Defendants
Civil Action No. 6:07–CV–490
United States District Court, E.D. Texas, Tyler Division
Signed August 18, 2008

Counsel

Thomas John Ward, Jr., Jack Wesley Hill, Ward & Smith Law Firm, Longview, TX, Aaron J. Levangie, Pro Hac Vice, Alexandra C. Fennell, Alison McCarthy, David Loo, Pro Hac Vice, Gregory D. Len, Pro Hac Vice, Russell J. Barron, Jr., William D. Belanger, Pepper Hamilton LLP, Courtney M Quish, Pro Hac Vice, Matthew David Durell, Michael T. Renaud, Mintz Levin Cohn Ferris Glovasky & Popeo PC, Thomas E. Lent, Pro Hac Vice, Lurie & Krupp LLP, Boston, MA, Ibrahim M Hallaj, Stephen Parker Cole, Intrinsic Law Corp, Waltham, MA, for Plaintiff.
Allen Franklin Gardner, Diane DeVasto, Thomas J. Friel, Jr., Michael E. Jones, Potter Minton, a Professional Corporation, Tyler, TX, Brian P. Wikner, Matthew J. Brigham, Timothy S. Teter, Cooley LLP, Palo Alto, CA, Peter John Chassman, Winston & Strawn LLP, Houston, TX, for Defendants.
Love, John D., United States Magistrate Judge

ORDER

*1 Before the Court are Plaintiff's and Defendants' competing motions for protective orders (Doc. Nos. 153, 165). The present dispute focuses on three issues: (1) the scope of the class of documents to be designated “Highly Confidential;” (2) the location in which relevant computer source code is to be produced; and (3) whether Plaintiff's experts may use compilers to analyze Defendants' source code.
Having carefully considered the motions and proposed protective orders supplied by the parties, the Court hereby GRANTS IN PART and DENIES IN PART both parties' motions. The Court will enter the protective order as agreed by the parties. The order will not contain the Plaintiff's proposed provision dealing with “Highly Confidential” designations. Defendants will be ordered to select a secure third party site in Boston for storage of Defendants' source code. The source code will be maintained at Plaintiff's expense. Plaintiff may use compilers to analyze Defendants' source code.
Background
On October 18, 2007, Plaintiff Saxon Innovations, LLC filed a complaint against the defendants alleging infringement of several patents (Doc. No. 1). The parties have now filed cross motions for protective orders (Doc. Nos. 153, 165). The parties have agreed that a protective order is appropriate, and have agreed to the majority of the order's content, but disagree on three provisions.
The parties agree that certain “Highly Confidential” documents must not be viewed by Plaintiff's in house counsel, and have agreed on general parameters for designating documents as “Highly Confidential.” The parties agree to the following classification of protected documents:
Protected Documents shall not include (a) advertising materials, (b) materials that on their face show that they have been published to the general public, or (c) documents that have been submitted to any governmental entity without request for confidential treatment. By way of non-limiting example, Protected Documents in one or more of the following categories may qualify for the “HIGHLY CONFIDENTIAL—ATTORNEYS' EYES ONLY” designation: (i) non-public technical information, including schematic diagrams, manufacturing and engineering drawings, engineering notebooks, specifications, research notes and materials, technical reference materials, and other non-public technical descriptions and/or depictions of the relevant technology; (ii) non-public damage-related information (e.g., the number of products sold, total dollar value of sales products, and profit margins); (iii) non public financial information; (iv) customer lists; (v) business and/or marketing plans; (vi) price lists and/or pricing information; and (vii) information obtained from a non-party pursuant to a current nondisclosure Non–Disclosure Agreement (“NDA”).
Plaintiff wishes to add the following caveat:
Notwithstanding the foregoing, HIGHLY CONFIDENTIAL – ATTORNEYS' EYES ONLY documents do not include (1) technical information that is not maintained as a trade secret, (2) technical information that is provided to third parties in the ordinary course of business; (3) revenue and unit information; or (4) licenses that form the basis for a claim or defense.
*2 The parties also disagree as to how Plaintiff should acquire access to Defendants' source code. Plaintiff asks the Court to direct all Defendants to make their source code available at a secure third party location in Boston, at Defendants' expense.[1] Defendants argue that each Defendant should be able to select a secure location for Plaintiff to access the source code, at Plaintiff's expense.
Finally, the parties disagree as to whether Plaintiff's experts can use compilers to evaluate the source code. Compilers translate human-readable source code into object code, which can be run by a computer. Plaintiff contends that compilers may assist its experts in evaluating the source code. Defendants counter that compilers will be ineffective in this case because only complete source code files can be compiled and Plaintiff will only be inspecting incomplete portions of source code. In addition, they claim that compilers could misrepresent product functionality and unnecessarily modify the source code.
Applicable Law
Rule 26(b)(1) of the Federal Rules of Civil Procedure permits parties to obtain discovery of all non-privileged information reasonably calculated to lead to the discovery of admissible evidence. FED. R. CIV. P. 26(b)(1). Despite the broad scope of Rule 26(b)(1), a Court may limit discovery if the burden or expense of the proposed discovery outweighs its likely benefit. FED. R. CIV. P. 26(b)(2)(C)(iii). In addition, the Court may, for good cause, issue an order to protect a party from annoyance, embarrassment, oppression, or undue burden or expense by directing, inter alia, that trade secrets or other confidential information research, development, or commercial information not be revealed or be revealed only in a designated way. FED. R. CIV. P. 26(c)(1)(G).
The party seeking a protective order generally bears the burden of establishing good cause. In re Terra Int'l, Inc., 134 F.3d 302, 305 (5th Cir. 1998). When parties to an action agree on entry of a protective order but differ on the order's terms, the party seeking to limit discovery bears the burden of demonstrating that “good cause” exists for the protection of that information. Cf. id. at 306 (imposing burden of showing good cause on the party seeking a protective order). The party attempting to establish good cause must demonstrate “a clearly defined and serious injury to the party seeking closure.” See Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994); see, e.g., L.G. Philips LCD Co. v. Tatung Co., No. C 07 80073WHA, 2007 WL 869256, at *2 (N.D. Cal. Mar. 20, 2007) (patent case, applying “clearly defined and serious injury” language).
Analysis
I. Highly Confidential Designation
Two-tiered protective orders, such as the one agreed to by the parties, are common in cases involving trade secrets. See Tommy Hilfiger Licensing, Inc. v. Bradlees, Inc., No. 99–civ–4677, 2002 WL 31465811, at *1 (Nov. 1, 2002). These orders distinguish between confidential disclosures—available only to the receiving party and its counsel—and “Highly Confidential” disclosures—available only to the receiving party's outside counsel. Id. Typically, these orders grant blanket authority to the producing party over how to categorize documents. See, e.g., Medtronic Vascular, Inc. v. Abbott Cardiovascular Systems, Inc., No. C–06–1066, 2007 WL 4169628 at *1 (N.D. Cal. 2007). If the producing party abuses its authority, the receiving party can challenge the producing party to show good cause as to why particular documents are categorized as “Highly Confidential.” See id. In this case, Plaintiff asks the Court to impose limitations from the start on Defendants' ability to designate certain materials as “Highly Confidential.”
*3 A producing party may be entitled to a two tier protective order to prevent certain individuals from receiving confidential documents if those individuals are involved in “competitive decision-making.” U.S. Steel Corp v. United States, 730 F.2d 1465, 1468 (Fed. Cir. 1984). This approach is appropriate where specific facts indicate that allowing a party access to the documents could seriously jeopardize the confidentiality of the documents. Id. at 1469. A court must balance the producing party's right to avoid “inadvertent disclosure,” with the receiving party's right to broad discovery. Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992); Medtronic Sofamor Danek, Inc. v. Michelson, No. 01–2373, 2002 WL 33003691, at *4 (W.D. Tenn. Jan. 30, 2002); see also Infosint S.A. v. H. Lundbeck A.S., No. 06–civ–2869, 2007 WL 1467784, at *5 (S.D.N.Y. May 16, 2007) (allowing a two tier approach after determining that the receiving party failed to demonstrate a need for access).
After careful analysis of the disputed provision, the Court finds that the parties have not shown that there would be a material difference between a protective order which contains the provision, and one that does not. The first category of documents mentioned in the disputed provision includes “technical information that is not maintained as a trade secret.” Other than speculation that Defendants will improperly designate documents, Plaintiff offers no explanation as to how this provision provides any greater clarity than the agreed protective order. Defendants will already have a good faith obligation to only designate proprietary information as “Highly Confidential.” Thus, there is no need for category one.
The second category of documents mentioned in the disputed provision includes “technical information that is provided to third parties in the ordinary course of business.” Defendants claim that it may need to designate some documents in this category as “Highly Confidential” because it occasionally distributes proprietary information to third parties under the protection of nondisclosure agreements. However, the undisputed portion of the proposed order allows them to designate a variety of non-public technical information. In light of this, Plaintiff again offers no rationale as to how this provision prohibits Defendants from designating documents they would not be allowed to designate otherwise.
The third and fourth categories of documents include “revenue and unit information” and “licenses that form the basis for a claim or defense.” Defendants claim that these categories may include some proprietary information. To the extent that these categories include proprietary information, Defendants are protected by the undisputed provisions which allows them to designate non public commercial information as “Highly Confidential.” To the extent that these categories include non-proprietary information, Defendants have a good faith obligation to not over-designate documents.
Plaintiff asserts that these four categories only include public information that Defendants have no right to designate as Highly Confidential. It claims that the disputed provision is necessary to prevent abuse, but if the categories only include public information, then the provision provides Plaintiff no greater protection above and beyond Defendants' duty to designate documents in good faith. The parties have already agreed to a protective order which creates a simple, effective, and commonly used framework for discovery. The Court sees no reason to complicate the order with a highly contested, ambiguous, and unnecessary provision.
*4 If Plaintiff later determines that Defendants are over-designating documents as “Highly Confidential,” Plaintiff is free to challenge those designations. Plaintiff may file a motion with the Court specifying the particular documents it would like to show to specific individuals and state the basis for its position. At that time, the Court will weigh Defendants' need for protection from inadvertent disclosure against the Plaintiff's need for broad discovery. See Brown Bag Software, 960 F.2d at 1470.
II. Source Code Location
Under Rule 26(b)(2)(C)(I) of the Federal Rules of Civil Procedure, a court must limit discovery if it is unreasonably cumulative or can be obtained from a more convenient source. Plaintiff contends that it would be unduly burdened if it had to access Defendants' source code at eight different sites around the world. Defendants contend that they should each be able to select their own secure site for the source code. Defendants Nokia and RIM, which already have source code stored in a third party facility in Dallas, argue that they should not be required to make their source code available at an additional location. Overall, Defendants claim that Plaintiff's position will be costly and jeopardize the security of the source code.
While the Court is sympathetic to Defendants' concerns about cost, it would also be extraordinarily costly for Plaintiff's expert(s) to travel to multiple locations around the world to review Defendants' source code. Therefore, the Court adopts a compromise whereby Defendants may select a secure third party storage site in Boston requiring Plaintiff to pay for the cost of such storage. Furthermore, the Court finds Defendants' arguments regarding security somewhat disingenuous. If, for example, Defendants Nokia and RIM were able to find a secure third party site for their source code in Dallas, the Court sees no reason why they, or any other Defendant, could not find a secure site in Boston. Although Defendants claim the lack of a particular engineering facility will impair their ability to fully protect their code, they offer no reasonable basis for this claim.
III. Use of Compilers
Defendants argue that Plaintiff should not be able to use compilers to evaluate source code, because they may misrepresent product functionality and unnecessarily modify the source code. Their main objection to the use of compilers is that such use will be at best irrelevant, and at worst technically infeasible.
A court may, for good cause, issue an order to protect a party from annoyance, embarrassment, oppression, or undue burden or expense. FED. R. CIV. P. 26(c)(1)(G). The party seeking a protective order bears the burden of establishing good cause, which contemplates “particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements.” In re Terra Int'l, Inc., 134 F.3d at 305 (quoting United States v. Garrett, 571 F.2d 1323, 1326 n. 3 (5th Cir. 1978)). In addition, Rule 26(b)(1) of the Federal Rules of Civil Procedure prohibits discovery that is not “reasonably calculated to lead to the discovery of admissible evidence.” See Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351–52 (1978) (quoting Fed. R. Civ. P. 26(b)(1)).
Defendants' vague and conclusory statements regarding misrepresentation do not justify entry of a protective order on this issue. See In re Terra Int'l Inc., 134 F.3d at 305. They lack the factual specificity necessary to establish good cause. Id. Once Plaintiff has had an opportunity to analyze the source code, Defendants may bring an appropriate motion to exclude any evidence which they feel misrepresents their products. At this stage however, it is difficult to see how Defendants could be harmed by the use of compilers by Plaintiff's experts.
*5 Defendants also assert that compiling the source code may not yield any relevant information, but this assertion is not supported by any expert affidavits or other evidence. They claim that compilers will be ineffective in this case because only complete source code files can be compiled and Plaintiff will only be inspecting portions of the source code. This unsupported assertion may turn out to be correct, but at this early stage in the litigation the Court sees no reason to prohibit compilers, especially since any time and money wasted on their use will be at Plaintiff's expense.
CONCLUSION
Both parties' motions are GRANTED IN PART and DENIED IN PART. The Court will enter the protective order as agreed by the parties. The order will not contain the disputed provision. dealing with “Highly Confidential” designations. Defendants will be ordered to select a secure third party site for storage of Defendants' source code in Boston. The source code will be maintained at Plaintiff's expense. Plaintiff may use compilers to analyze Defendants' source code.
So ORDERED and SIGNED this 18th day of August, 2008.