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CFGenome, LLC v. Streck, Inc.

United States District Court, D. Nebraska

June 1, 2018

CFGENOME, LLC, a Delaware limited liability company; and DR. M. ROHAN FERNANDO, an individual; Plaintiffs,
v.
STRECK, INC., Defendant.

          MEMORANDUM AND ORDER

          Cheryl R. Zwart, United States Magistrate Judge

         Plaintiff CFGenome, LLC and Defendant Streck are direct competitors. Plaintiff Fernando previously worked for Streck, and he now works for CFGenome, LLC.[1] The parties' lawsuit centers on whether Plaintiffs misappropriated Streck's trade secrets regarding the development and marketing of blood collection tubes (“BCT”); specifically, Streck's Cell-Free DNA BCT® (“Cell-Free BCT”) (a project Fernando worked on while at Streck). CFGenome marketed a competing product, the Exo DNA ProTeck BCT (“Pro-teck BCT”), after Fernando started working at CFGenome. CFGenome seeks a declaration that its ProTeck BCT was not invented through misappropriation of Streck's trade secrets: Streck counterclaims for misappropriation of trade secrets and breach of contract.

         The parties agree that to effectively pursue discovery and prepare for trial, they need a protective order. They do not agree on whether that protective order should include a patent prosecution bar, an attorneys' eyes only provision (“AEO”), or both. Plaintiffs argue that the protective order in this case should include a patent prosecution bar to protect against the risk of inadvertent disclosure of confidential information. Defendant does not agree that a patent prosecution provision is necessary in this case, arguing an AEO provision is sufficient.[2] The court required briefing on the issue. (Filing No. 77).

         ANALYSIS

         Parties participating in patent litigation in the federal courts may be required to disclose confidential technical and proprietary information as part of the discovery process. Disclosure of such information to a direct competitor raises significant concern that the information will be misused, particularly when the competitor's counsel serves as both its counsel in civil litigation before the court and as its patent prosecutor before the Patent and Trademark Office (“PTO”).

         To remedy this perceived threat of misuse, the disclosing party may propose a protective order which includes a “patent prosecution bar;” an order prohibiting persons who had access to the opponent's confidential information produced for litigation from patent prosecution before the PTO regarding the litigation subject matter. Edwards Lifesciences AG v. CoreValve, Inc., 699 F.3d 1305, 1316 (Fed. Cir. 2012) (citing In re Deutsche Bank Trust Co. Americas, 605 F.3d 1373 (Fed. Cir. 2010)). A patent prosecution bar is entered to limit the risk that counsel will inadvertently disclose or improperly use confidential information received and reviewed during litigation when later performing patent prosecution work. Id. Courts recognize that despite good faith and rigorous efforts to maintain confidentiality, a recipient of confidential information during litigation may unintentionally disclose or use that information; that once learned, the confidential information cannot be unlearned, and it may infiltrate that attorney's future patent prosecution work on the same subject matter. Id.

         Determining whether a trial lawyer should be denied access to information under a protective order because of his additional role in patent prosecution, or alternatively be barred from representing clients in certain matters before the PTO, is an issue unique to patent law. Deutsche Bank, 605 F.3d at 1377. To promote nationwide uniformity, “Federal Circuit law applies to discovery matters if the determination implicates an issue of substantive patent law.” Id. As such, the question of whether a protective order in patent litigation should include a patent prosecution bar is governed by Federal Circuit law. Id. at 1378; Clayton Corp. v. Momentive Performance, Materials, Inc., No. 4:12CV1349 AGF, 2013 WL 2099437, at *1 (E.D. Mo. May 14, 2013) (Fleissig, J.). Specifically, Deutsche Bank provides the law applicable to the issue of whether, under the facts presented, a patent prosecution bar is warranted.

         Unfortunately, courts have adopted and applied two different interpretations of the Deutsche Bank standard. As thoroughly explained in EON Corp. IP Holdings, LLC v. AT&T Mobility, 881 F.Supp.2d 254 (D. PR 2012),

Most of the courts interpreting Deutsche Bank have read it to require a particular two-step inquiry, step one of which requires the moving party [to] show, on a counsel-by-counsel basis, that there is an unacceptable risk of inadvertent disclosure of confidential information; at the second step, they balance that risk against the potential harm to the non-movant.

EON Corp., 881 F.Supp.2d at 255-56 (citing NexEdge, LLC v. Freescale Semiconductor, Inc., 820 F.Supp.2d 1040, 1043 (D. Ariz. 2010); Iconfind, Inc. v. Google, Inc., No. 110319(GEB/JFM), 2011 WL 3501348, *5 (E.D. Cal. Aug. 9, 2011); Kraft Foods Global, Inc. v. Dairilean, Inc., No. 10-8006, 2011 WL 1557881 (N.D. Ill. Apr. 25, 2011)). Under this interpretation, after step one is complete and the court has determined a risk exists based on the competitive decisionmaking role of counsel, the court must then determine whether the information involved in the case is the type that would trigger a patent prosecution bar and then must balance the risk of potential harm against the party's right to its chosen counsel. Deutsche Bank, 605 F.3d at 1380-81.

         In contrast, some courts first decide whether, "as a threshold matter[, ] the proposed prosecution bar 'reasonably reflect[s] the risk presented by the disclosure of proprietary competitive information.'" [Applied Signal Technologies, Inc. v. Emerging Mkts. Commc'ns, No. 09-2180(SBA/DMR), 2011 WL 197811 at *2 (N.D. Cal. Jan. 20, 2011)] (quoting In re Deutsche Bank, 605 F.3d at 1381). 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. If the court decides the threshold is met, it then “measure[s] this risk-rather than a risk determined by a counsel-specific competitive decisionmaking inquiry-‘against the potential injury to the party deprived of its counsel of choice.'" Id. EON Corp., 881 F.Supp.2d at 256.

         The distinction between these two interpretations significantly impacts the burden carried by the party seeking a patent prosecution provision: The first requires the movant to make a threshold showing that a risk of inadvertent disclosure exists based on opposing counsel's role in competitive decisionmaking; the second requires that the movant only show a patent prosecution bar would be reasonable in a particular case, and after the entrance of the bar, requires the parties to show a particular attorney should either be exempt from or subject to the bar.

         While this issue is a matter of first impression in this district, [3] our sister courts within the Eighth Circuit have followed the first interpretation-requiring the party seeking a patent prosecution provision to make a threshold showing that the specific counsel is involved in competitive decisionmaking. See Regal Beloit Am., Inc. v. Broad Ocean Motor LLC, No. 4:16cv00111JCH, 2017 WL 35702 (E.D. Mo. Jan. 4, 2017); Clayton Corp. v. Momentive Performance Materials, Inc., No. 4:12CV1349, 2013 WL 2099437 (E.D. Mo. May 14, 2013); Sanders v. Mosaic Co., 09-00016-CV-W-JTM, 2012 WL 640159 (W.D. Mo. Feb. 27, 2012). The undersigned magistrate judge agrees.

         Patent prosecution bars are imposed on a counsel-by-counsel basis and the court must first determine “[w]hether an unacceptable opportunity for inadvertent disclosure exists” based upon the role of the party's counsel. Deutsche Bank, 605 F.3d at 1378. This question specifically turns on the extent to which counsel is involved in “competitive decisionmaking” for his client. ‘Competitive decisionmaking' refers to counsel's relationship with his client and his role in advising and participating in the client's decisions concerning pricing, product design, and other matters which may be “made in ...


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