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In re Zimmer Nexgen Knee Implant Products Liability Litigation

United States District Court, Seventh Circuit

December 10, 2013

IN RE: ZIMMER NEXGEN KNEE IMPLANT PRODUCTS LIABILITY LITIGATION.

MEMORANDUM ORDER

REBECCA R. PALLMEYER, District Judge.

In these consolidated cases, Plaintiffs allege injury as a result of alleged defects in knee implants manufactured by the Zimmer Defendants[1] ("Zimmer"). Zimmer seeks a "Supplemental Confidentiality Order" related to documents that it is producing in discovery which originate from prior litigation and arbitrations between Defendants and Doctor W. Norman Scott. Through the Steering Committee, Plaintiffs oppose this request and have moved to strike the declaration of Brian Earl, Zimmer's Director of Knee Development, from the record. As explained below, Defendants' motion [954] and Plaintiffs' motion [963] are both denied. On November 14, 2013, based on the parties' respective proposed orders, the court drafted a memorandum order as well as a proposed supplemental confidentiality order [999] for the parties' consideration. In response to comments made by counsel at a status hearing the following day and upon further consideration, the court has revised both its memorandum order and its proposed supplemental confidentiality order (appended below).

BACKGROUND

The Zimmer Defendants manufacture artificial joints, including the knee implants at the center of this pending MDL. The parties have already engaged in several months of discovery, and Defendants have produced some 10.8 million pages of documents to date. (Status Hr'g Tr. of 11/15/13 at 52:10.) At issue now are additional documents sought by Plaintiffs that are, at least in Defendants' view, tangential to this litigation: namely, Plaintiffs request documents produced in several arbitrations and court actions relating to an intellectual property dispute between Defendants and Doctor W. Norman Scott ("Scott"), an orthopedic surgeon who claimed that he was entitled to royalties for work as a consultant in the design of various Zimmer knee systems. (Defs.' Mot. for Supp. Conf. Order [954], hereinafter "Defs.' Mot., " at 2.) Defendants read this recent request as requiring the production of some 481, 573 additional pages of documents and transcripts related to three Zimmer product lines: NexGen, NexGen Flex, and Persona, and have asked the court for a protective order excusing compliance with it. ( Id. at 2-3.) Following a discovery hearing on May 31, 2013 [877], the court granted Plaintiffs' motion to compel and denied Defendants' motion for a protective order. As part of its ruling, the court noted that it has already entered a broad protective order [165] and directed the parties to negotiate any additional confidentiality provisions they deemed necessary.

In the months since then, the parties have attempted to reach an agreement as to a supplemental protective order regarding the documents from the Scott proceedings ("Scott materials"), and have exchanged drafts, but negotiations have stalled as to two issues: (1) proposed restrictions on certain witnesses' access to the documents; and (2) proposed restrictions on future employment by Defendants' competitors for any of Plaintiffs' experts who are granted access to the documents.[2] (Defs.' Mot. at 3.) Further, Defendants seek to bar current employees and consultants of Zimmer's competitors from accessing the Scott materials, while Plaintiffs' proposed order would not impose such a prohibition. (Ex. C. to Defs.' Mot., ¶ 3.)

DISCUSSION

I. Supplemental Protective Order

The court may, "for good cause, issue an order to protect a party... from... undue burden or expense" such as "requiring that a trade secret or other confidential... information not be revealed or be revealed only in a specific way." FED. R. CIV. P. 26(c); see also Fed. Open Market Comm. of Fed. Reserve Sys. v. Merrill, 443 U.S. 340, 356 (1979). Defendants urge that producing the Scott materials, under either the existing protective order or Plaintiffs' proposed supplemental order, would impose an undue burden; specifically, Defendants argue that the Scott materials contain proprietary trade secrets related to Zimmer's Persona product line, which Defendants are in the process of bringing to market. (Defs.' Mot. at 5.) Though some Persona products have been available since November 2012, the full line will not come out until "2016 at the earliest." ( Id. at 8.) Defendants assert that, once exposed to these materials, Plaintiffs' experts "cannot avoid being influenced by [them]" (Defs.' Reply at 5), such that, even acting in good faith, the experts will be unable to resist "improperly using their review of that information-even unconsciously-to assist Zimmer's competitors and to hurt Zimmer's Persona sales." (Defs.' Mot. at 8.) Should a competitor gain access to the Scott materials, Brian Earl, Zimmer's Director of Knee Development, estimates that Defendants would lose "between $50 million and $100 million per year for the next several years." (Earl Decl., Ex. 2 to Defs.' Mot., hereinafter "Earl Decl., " ¶ 12.) "The only apparent solution to this danger, " Defendants insist, "is for the court to bar Plaintiffs' experts who have access to the Persona design documents from working for Zimmer's competitors for [three years] until the Persona line is fully on the market...."[3] (Defs.' Mot. at 7.)

In addition to this mandatory non-competition agreement, Defendants' proposed order would also (1) create a two-tier designation for discovery materials, adding the designation of "Special Attorney's Eyes Only" ("SAEO") for the Scott materials to the existing "confidential" label in the standing protective order [165]; (2) require Plaintiffs to seek advance approval from Zimmer before disseminating any SAEO information to any of Plaintiffs' experts who are Zimmer's own former employees, current consultants, or former consultants; and (3) bar current employees and consultants of Zimmer's competitors from any access to the SAEO material.[4] (Defs.' Proposed Supplemental Confidentiality Order, hereinafter "Defs.' Proposed Order, " Ex. 1 to Defs.' Mot., at 3-4.) Zimmer argues that it needs "both advance notice of Plaintiffs' intention to show these extraordinarily sensitive documents to witnesses who are not Zimmer employees and a means of objecting to such disclosure before it occurs." (Defs.' Mot. at 6.) Though they urge these restrictions are necessary, Defendants nevertheless express confidence that disclosure will not be a frequent issue of contention; rather, Zimmer "expects that it will have no objection to Plaintiffs' attorneys showing SAEO documents to most consultant or former employee witnesses to whom they have a reason to show them." ( Id. at 5-6.)

Prior to the filing of Defendants' motion, the parties had been engaged in negotiations to develop a mutually agreed supplemental protection order. Plaintiffs' position is that "there is no need for a supplemental order, " as the existing protective order and Zimmer's patent applications for the Persona Knee System are sufficient to protect Defendants' interests. (Pls.' Resp. [963] at 4 n.3.) If, however, the court determines that a supplemental order is warranted, Plaintiffs have directed the court to a version of the proposed order "reflecting Plaintiffs' view of the state of negotiations." (Pls.' Resp. at 4 n.3.; E-mail from Becker to Fiterman of 8/28/13, hereinafter "Pls.' Proposed Order, " Ex. A to Pls.' Resp.) This version, which includes numerous suggested deletions, additions, and modifications, was e-mailed to Defendants by Plaintiffs on August 28, 2013. Notably, Plaintiffs' version is consistent with Defendants' in that it would (1) establish dual-tier protection for sensitive documents produced by Zimmer (i.e., "confidential" and "special attorneys eyes only"); and (2) prohibit any experts who access the Scott materials from participating in patent prosecution activities involving knee replacements for a period of two years. (Pls.' Proposed Order ¶¶ 2-3.) Plaintiffs' order differs from Defendants', however, in three major respects: (1) it would not require prior notice to Zimmer before disclosure of SAEO documents to former Zimmer employees, current Zimmer consultants, and former Zimmer consultants; (2) it would not require Plaintiffs' experts who review the SAEO documents to sign a non-competition agreement; and (3) it would not bar current employees and consultants of Zimmer competitors from accessing the SAEO documents.

In favor of their proposed order, Plaintiffs point out that the existing protective order already limits disclosure of documents stamped "confidential" to the parties, their law firms, and "any person(s) noticed for deposition or designation as trial witnesses, who has knowledge of the subject matter to which the documents relate[.]" (Pls.' Resp. at 5; Protective Order [165], ¶¶ 3-4.) Disclosure of confidential documents and their contents to any other person is prohibited "except with the prior written consent of the party... designating a document as a Stamped Confidential Document." (Protective Order ¶ 3.) And any individual who reviews a Stamped Confidential Document must sign a confidentiality agreement that prohibits the use of said document "for any purpose other than this litigation." (Protective Order ¶ 4; Confidentiality Agreement, Ex. A to Protective Order, ¶ 3.) In light of these existing restrictions, Plaintiffs suspect that Defendants' request for a three-year non-competition agreement for all experts who review the Scott materials is aimed more at impeding Plaintiffs' pursuit of their claims than at protecting Zimmer's trade secrets. (Pls.' Resp. at 6.) For support, Plaintiffs cite to the deposition of Brian Earl, who acknowledged that the proposed order would impose harsher restrictions on Plaintiffs' experts than those that Zimmer includes in contracts with its own employees and consultants. (Earl Dep., Ex. C to Pls.' Notice of Supp. Authority [973], at 44:19-45:1.) For instance, Zimmer requires its own consultants to sign ten-year non-compete agreements (Earl Decl. ¶ 7), but those restrictions apply only to future work on knee arthroplasty. (Earl Dep. at 24:4-20.) Earl himself, and other Zimmer employees, sign eighteen-month non-compete agreements limited to the products they worked on. ( Id. at 10:16-12:17.) The restrictions proposed by Defendants here, in contrast, would prohibit Plaintiffs' experts from working with any Zimmer competitor on any product for three years. (Defs.' Proposed Order at 3-4.)

Multi-tier protective orders are relatively common in cases between direct competitors. See, e.g., Santella v. Grizzly Indus., 286 F.R.D. 478, 482 (D. Or. 2012) ("Because SawStop and Grizzly compete in the manufacture and sale of table saws, this court entered a two-tier protective order."); Apple Inc. v. Samsung Elecs. Co., No. 11 C 1846, 2012 U.S. Dist. LEXIS 49201 (N.D. Cal. Jan. 30, 2012) (creating three levels of confidentiality designation for documents produced in discovery in intellectual property litigation between market rivals). Where, as here, the parties are not competitors, the need for extreme protective measures is less obvious.

Moreover, even in highly contentious litigation between business rivals, the protections Defendants are seeking appear to be unprecedented. Zimmer relies on the confidentiality order imposed in its earlier arbitration with Scott, but cites to no instance in which a court has been willing to impose a mandatory non-compete agreement on an opposing party's experts. This court has been similarly unable to find any such precedent in the Seventh Circuit (or elsewhere) either approving or disapproving of such an agreement.[5] To the extent that such a non-competition provision was appropriate in the Scott arbitration, where Zimmer was opposed by a doctor who also designs knee replacements, it is less compelling in a case such as this, alleging products liability. Further, the need for aggressive protection of Defendants' intellectual property has diminished in the intervening years, as the life cycle of the Persona product line has progressed. (Pls.' Resp. at 7-8.) Zimmer has not satisfied the court that such a drastic measure-a non-competition agreement for all experts-is necessary to protect Zimmer's competitive advantage with regard to products that are already on the market or will be in the near future.

Similarly, requiring Plaintiffs to seek Zimmer's advanced approval before sharing the Scott materials with any expert who is or was a Zimmer employee or consultant appears to be unnecessary. Not only does the existing protective order (which would also apply to the SAEO documents) already protect Zimmer's interests through the threat of contempt, but it also limits the dissemination of any confidential documents to those individuals who already possess "knowledge of the subject matter to which the documents relate." (Protective Order ¶ 3(d).) If Zimmer believed that the information in the Scott materials was too sensitive to be shared with particular former employees or consultants, the court presumes that Zimmer would not have granted them access to this information at the time they were employed or engaged by Zimmer. If disclosure of the Scott materials does create genuine risk, because of the possibility that Plaintiffs' experts might violate the court's existing protective order by disclosing Zimmer's trade secrets to competitors, the court notes that Defendants themselves admit that it would take at least two years for a competitor to bring products utilizing that knowledge to market. By that time, the Persona products would be established in the market, presumably with appropriate patent protection. (Earl Dep. at 134:12-14.)

As the court has observed, the threat posed to Zimmer by permitting Plaintiffs' experts to have access to proprietary information in this instance is generally diminished by the fact that the instant case is not one between competitors. There may indeed be some competitive threat in circumstances where Plaintiffs' experts are currently employed by Zimmer's direct competitors (either as employees or consultants) and are working on products that directly compete with those at issue in this suit (i.e., knee implants). The existing protective order imposes restrictions on such individuals, but the court recognizes that disclosure of confidential trade secrets to experts who work for Zimmer's peers may nevertheless present at least a theoretical risk analogous to the risks arising from disclosure in litigation between market rivals. And in that context, courts have frequently employed protective orders barring the employees of parties' competitors from accessing highly sensitive information. See, e.g., Apple Inc., No. 11 CV 1846, 2012 U.S. Dist. LEXIS 49201, *19 (barring the disclosure of confidential information to any person that is "a current officer, director, or employee of a Party or of a competitor of a Party with respect to the subject matter of the patents-in-suit"). Accordingly, the court finds good cause for Defendants' proposed prohibition of disclosure of the Scott materials and other SAEO information to its competitors' employees and consultants who are currently working on products that compete with the products at issue in this suit.

Defendants have not demonstrated, however, that it would be subjected to an undue burden if (1) Plaintiffs' experts who are also current or former consultants and employees of Zimmer are granted access to the Scott materials without Zimmer's advanced approval; or (2) experts who review the Scott materials are not required to agree to a non-competition agreement. Defendants' motion for a supplemental confidentiality order is, therefore, denied. Given the apparent progress between the parties regarding a supplemental order, however, the court declines to rely exclusively on the existing protective order. Instead, the court has drafted a proposed supplemental confidentiality order (attached below) consistent with the parties' negotiations and the reasoning above.

This proposed order would supplement rather than supersede the existing protective order [165]. Importantly, this means that paragraph seven of the protective order, which established the procedure by which the parties may object to the confidentiality designation of any document, applies with equal force to any documents designated as SAEO in the Scott proceedings. Due to the fact that the SAEO designation was originally adopted in the Scott proceedings-which arose out of an intellectual property dispute-this procedure may be particularly significant in the context of the Scott materials because Plaintiffs' interest in sharing these documents with experts may be inconsistent with Scott's. For instance, in support of his claim that he played a role in designing the knee systems detailed in the SAEO documents, Scott may have had no need or desire to disseminate these materials to third parties, and therefore no real motivation to object to the designation of these documents as highly confidential. In this litigation, in contrast, the Scott materials are useful to the Plaintiffs only to the extent that experts may access and analyze them. Given the potential incongruity between the use of the SAEO documents by Scott and Plaintiffs, the objection procedure of paragraph seven allows the parties to correct any instances where that protection may be inappropriately broad (or narrow) in the context of this litigation.

II. Declaration of Brian Earl

In addition to opposing Defendants' proposed supplemental confidentiality order, Plaintiffs have moved to strike the declaration of Brian Earl ("Earl"), Zimmer's Director of Knee Development, on the grounds that it is "based entirely on inadmissible hearsay and speculation." (Pls.' Resp. at 11.) Specifically, Plaintiffs object to the lack of "proof, evidence, or documentation to support [Earl's] contentions" regarding the mental states of Plaintiffs' experts ( Id. at ...


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