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International Equipment Trading Ltd. v. Illumina, Inc.

United States District Court, N.D. Illinois, Eastern Division

November 20, 2019

INTERNATIONAL EQUIPMENT TRADING, LTD., Plaintiff,
v.
ILLUMINA, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          HONORABLE MARVIN E. ASPEN UNITED STATES DISTRICT JUDGE.

         Plaintiff International Equipment Trading (“IET”) and Defendant Illumina, Inc. (“Illumina”) filed a joint request for a confidentiality order. (Dkt. No. 92.) Although titled “Joint Order, ” the parties dispute several facets of the structure of the order. (Joint Mem. of Law in Support of Joint Mot. (“Mem.”) (Dkt. No. 93) at 1.) The Joint Memo contains the arguments from each side presented as if they were filing briefs on a contested question. (Id.) We therefore refer to Plaintiff's section of the Joint Memorandum as “Pl. Mem.” and Defendant's section as “Def. Mem.” for clarity. For the forgoing reasons, we will enter the below order, primarily in line with Defendant's proposed order.

         The parties agree we should issue a protective order but disagree as to the content of that order. (Mem. at 1.) There are three main areas of dispute: (1) whether “Highly Confidential” material may be disclosed to a receiving party's employees or officers if they are (or may be) used as experts or consultants by the receiving party; (2) whether a receiving party must identify its experts or consultants to the producing party and provide an opportunity for the producing party to object prior to disclosing “Highly Confidential” material to said experts or consultants; (3) which party must first file a motion in the event of a dispute as to designations of material as “Highly Confidential.” (Id.)

         ANALYSIS

         I. Limiting Disclosure to a Party's Employees or Officers May be Necessary

         The parties dispute whether limiting disclosure of information to the parties' employees or officers will ultimately prove necessary. The Plaintiff contends disclosure would allow IET to participate in prosecuting its own case. If counsel cannot share certain information with their clients, Plaintiffs worry their counsel will face difficulty in understanding the nature of the disclosed materials. Defendant argues disclosure may be necessary, but instead of allowing any information to be disclosed to any employee who may consult or serve as an expert, we should adopt safeguards. Defendant believes the party receiving discovery of “Highly Confidential” information should be allowed to object to disclosure of information to particular individuals designated as experts or consultants before any information is disclosed. Defendant's approach resolves two issues simultaneously because it allows disclosure to employees who will actually serve as consultants or experts, while still guarding against unnecessary disclosure to all employees of the party receiving discovery.

         Discovery of confidential business information, trade secrets, or technical specifications deserves care, particularly where the parties operate as competitors. See Saso Golf, Inc. v. Nike, Inc., No. 8 C 1110, 2009 WL 3242112, at *2 (N.D. Ill. Oct. 5, 2009); Amsted Industries, Inc. v. Nat'l Castings, Inc., No. 88 C 924, 1988 WL 90022, at *1 (N.D. Ill. Aug. 22, 1988) (Rovner, J.); Davis v. Gen. Motors Corp., 64 F.R.D. 420, 422 (N.D. Ill. 1974) (Bauer, J.). There is no privilege against discovery of trade secret information. Davis, 64 F.R.D. at 422. Nevertheless, “[c]onfidentiality orders routinely are entered in cases like this to protect sensitive an confidential material.” In re Broiler Chicken Antitrust Lit., 2019-1 Trade Cases P 80, 773, at *3 (N.D. Ill. 2019) (slip op.). Designation of material as “attorneys' eyes only” is permissible, but such a designation should “only be used on a relatively small and select number of documents where a genuine threat of competitive or other injury dictates such extreme measures.” Team Play, Inc. v. Boyer, No. 03 C 7240, 2005 WL 256476, at *1 (N.D. Ill. Jan. 31, 2005.)[1] One common solution is to restrict disclosure of “Highly Confidential” information to “witnesses, outside counsel, outside expert witnesses, outside consultants, and their respective staffs.” See id.; Davis, 64 F.R.D. at 422. Given the difficulty of “practically polic[ing] a protective order” and the fact that “[if an] expert is called upon two years after this litigation to assist a potential competitor . . . will he really be able to compartmentalize all he or she has learned and not use any of the information . . . ” courts have been willing to prophylactically police protective orders. Saso, 2009 WL 3242112, at * 3 (citation omitted). Team Play was a decision on release of sales documents to a party for his use in determining whether to settle, in part because he was not a direct competitor of the producing party. 2005 WL 256476, at *1-2. This is an example of such ex ante policing resulting in timely release of the requested discovery. Id.

         Defendant's approach properly balances the interests between potential competitive harm and the Plaintiff's interest in keeping litigation costs manageable. Illumina suggests a similar scheme of designation to Judge Bauer's design in Davis and Judge Rovner's scheme in Team Play. (Def. Mem. at 10-11.) As in those cases, Illumina does not object to use of party experts; instead, they only want to preserve the opportunity to object to disclosure of information to potential experts who are IET's own principals before that information is released. (Def. Mem. at 12.) Given that information, once known, is difficult to forget, Illumina's prophylactic notice requirement is well-designed to protect its interests, while still allowing IET to use its principals as experts. See Saso, 2009 WL 3242112, at * 3; Team Play, 2005 WL 256476, at *1-2.

         Plaintiff is concerned that Defendants' policy requires disclosure of all experts or consultants to whom they may show “Highly Confidential” information. (Pl. Mem. at 7.) Plaintiff's concern about the situation where “a potential expert does not agree with a party's counsel's theory of the case” is unwarranted in this context. (Id.) The party's counsel is an agent of the potential expert at issue in this discussion, since the potential expert is a principal of IET itself. Thus, IET essentially ports a concern about outside expert disclosure into the context of a party expert without explaining the applicability of their argument. That is reasonable, because their argument does not apply.

         Plaintiff is also worried pre-clearance of experts may unnecessarily drive up litigation costs. (Id. (citing Saso, 2009 WL 3242112, at *2).) Plaintiff has answered their own contention within their memo. As “IET is a small company with under 10 employees, and it realistically will designate one representative - its founder and President - as an expert witness” there is little cause for concern about protracted or duplicative litigation over disclosure of “Highly Confidential” material. (Pl. Mem. at 6.) Indeed, IET's characterization appears to limit the universe of likely potential experts who might need access to specific documents to one person. (Id.) Plaintiff would therefore need only present a single motion to this court to resolve all disclosure issues related to their single potential representative expert witness. See Saso, 2009 WL 3242112, at *2-4 (addressing disclosure of multiple categories of information to a single expert through a single motion). Thus, Plaintiff's concerns do not comport with their own account of reality. Accordingly, we should decline to endorse their view.

         Finally, there is some dispute whether the parties are competitors or not. While this is relevant to the inquiry of potential harm to competition, we do not need to determine whether the harm to competition is uniform as to all possible information in this case. See Saso, 2009 WL 3242112, at *3. In Saso, the Court found certain categories of information more likely to harm competition than others, because of the oblique competitive relationship between the parties. Id. at *3-4. Accordingly, we do not need to resolve this dispute in the abstract. Illumina's proposed preclearance order provides a mechanism to evaluate the impact on competition of disclosures in a case-by-case manner, as in Saso. Id.

         II. The Burden of Persuasion is on the Producing Party, but the Burden to Move is Not

         The parties agree that the producing party would have the burden of persuasion on any challenge to its designation of information as “Highly Confidential.” (Pl. Mem. at 7; Def. Mem. at 14.) The parties disagree whether the producing or receiving party should file a motion to dispute designation of material as “Highly Confidential.” (Pl. Mem. at 7; Def. Mem. at 13.) The Plaintiff argues the burden of persuasion and the burden to move follow one another, and thus, the producing party has a burden to argue for designation of information as “Highly Confidential.” The Defendant argues that “requiring the party challenging the confidentiality designation to move the court to resole the dispute, . . . provides the court with an opening brief that lays out specific objections to the contested confidentiality designation.” (Def. Mem. at 14-15 (citing Johnson v. Kemps, No. 09 CV 4857, 2011 WL 2550507, at *5 (N.D. Ill. June 20, 2011).) The Defendant's position comports with both law and good sense.

         A procedure requiring the producing party to move to justify its designation of confidential information “might result in the court receiving an opening brief setting forth broad justifications for confidentiality without addressing the opposing party's specific objections; the court may have to wait for the response to get a brief that addresses the heart of the parties' dispute.” Johnson, 2011 WL 2550507, at *5. In addition, requiring justification of the “Highly Confidential” designation for each document could quickly devolve into requiring the court to make a “duplicate finding on a virtual document-by-document basis, a process that Seventh Circuit has already found unnecessary.” Alexander Housing LLC v. Int'l Broth. of Elec. Workers, No. 04 C 1650, 2004 WL 1718654, at *4 (N.D. Ill. July 29, 2004). While over-designation is a concern, the court can always modify a protective order to reduce protections. This is a one-way rachet, since information, once disclosed, cannot be removed from the mind of the recipient. Thus, courts have rejected speculation about over-designation at such an early stage as premature. See Johnson, 2011 WL 2550507, at *5. Finally, as in Johnson: “Should the defendants use confidentiality designations in bad faith to, for example, drive up the cost of litigation or impose an undue burden on Johnson, the court will not hesitate to use its power to impose sanctions.” Id.

         CONCLUSION

         We therefore enter the following protective order in accordance with this decision. It is so ordered.

         CONFIDENTIALITY ORDER

         The parties to this action, having agreed to certain terms and having disagreed as to other terms, have jointly moved that the Court enter a confidentiality order. The Court has determined that the terms set forth herein are appropriate to protect the respective interests of the parties, the public, and the Court; accordingly, it is ORDERED:

         1. Scope.

         All materials produced or adduced in the course of discovery, including initial disclosures, responses to discovery requests, deposition testimony and exhibits, and information derived directly therefrom (hereinafter collectively “documents”), shall be subject to this Order concerning Confidential Information and Highly Confidential Information as defined below. This Order is subject to the Local Rules of this District and the Federal Rules of Civil Procedure on matters of procedure and calculation of time periods.

         2. Confidential Information and Highly Confidential Information (collectively, “Protected Material(s)”).

         (a) Confidential Information.

         As used in this Order, “Confidential Information” means information designated as “CONFIDENTIAL - SUBJECT TO PROTECTIVE ORDER” by the producing party that is commercially, competitively, or otherwise sensitive, including but not limited to information that falls within one or more of the following categories: (a) information prohibited from disclosure by statute; (b) information that reveals trade secrets; (c) research, development, technical, proprietary, commercial, or financial information that the party has maintained as confidential; (d) medical information concerning any individual; (e) personal identity information. Information or documents that are available to the public may not be designated as Confidential Information.

         (b) Highly Confidential Information.

         As used in this Order, “Highly Confidential Information” means information designated as “HIGHLY CONFIDENTIAL -COUNSEL'S EYES ONLY” that is Confidential (see Paragraph 2(a)), and that, in addition, in the good faith belief of the designating party and its Counsel, is among that considered to be most sensitive by the party or of another party to which a duty of confidentiality is owed, including but not limited to trade secret or other confidential research, development, proprietary, financial or other commercial information. Absent unusual circumstances, Highly Confidential Information does not include any of the following: communications between the parties; agreements between any of the parties and their customers (such as license agreements or terms and conditions of sale) that do not provide as one of its terms that the parties to the contract are to treat the contract as “confidential, ” or maintain as confidential to all parties to the contract; and organizational charts.

         3. Designation.

         (a) A party may designate a document as Confidential Information or Highly Confidential Information for protection under this Order by placing or affixing the words “CONFIDENTIAL - SUBJECT TO PROTECTIVE ORDER” or “HIGHLY CONFIDENTIAL -COUNSEL'S EYES ONLY” on the document and on all copies in a manner that will not interfere with the legibility of the document. As used in this Order, “copies” includes electronic images, duplicates, extracts, summaries or descriptions that contain the Protected Material. The marking “CONFIDENTIAL - SUBJECT TO PROTECTIVE ORDER” shall be applied prior to or at the time of the documents are produced or disclosed. Applying the marking “CONFIDENTIAL -SUBJECT TO PROTECTIVE ORDER” to a document does not mean that the document has any status or protection by statute or otherwise except to the extent and for the purposes of this Order. Any copies that are made of any documents marked “CONFIDENTIAL - SUBJECT TO PROTECTIVE ORDER” shall also be so marked, except that indices, electronic databases or lists of documents that do not contain substantial portions or images of the text of marked documents and do not otherwise disclose the substance of the Protected Material are not required to be marked. Within five (5) business days of producing material marked “HIGHLY CONFIDENTIAL - COUNSEL'S EYES ONLY, ” the designating party shall provide a separate log identifying such material by Bates number.

         (b) Where electronic files and documents are produced in native electronic format, such electronic files and documents shall be designated for protection under this Order by appending to the file names or designators, information indicating whether the file contains Protected Material, or shall use any other reasonable method for so designating Protected Materials produced in electronic format. When electronic files are printed for use at deposition, in a court proceeding, or for provision in printed form to an expert, the party printing the electronic files or documents shall affix a legend to the printed document corresponding to the designation of the designating party and including the bates number and designation associated with the native file.

         (c) When Protected Material is disclosed in a form not appropriate for placing or affixing a legend in accordance with the above, such Protected Material shall be designated as Protected Material in writing at the time it is delivered to the receiving party.

         (d) A party may increase the designation (i.e., change any material produced without a designation to a designation of Confidential or Highly Confidential or change any material produced as Confidential to a designation of Highly Confidential) of any document that contains that party's own Protected Material. Increasing a designation shall be accomplished by providing written notice to all parties identifying (by bates number or other individually identifiable information) the material whose designation is to be increased. Promptly after providing such notice, the designating party shall provide re-labeled copies of the materials to each receiving party reflecting the change in designation. The receiving party will replace the prior designated materials with the newly designated materials and will destroy the prior designated materials. Any party may object to the increased designation pursuant to the procedures set forth in Paragraph 9 of this Agreed Confidentiality Order regarding challenging designations. The upward designating party shall bear the burden of establishing the basis for the increased designation.

         (e) In the event the producing party elects to produce materials for inspection, no marking need be made by the producing party in advance of the initial inspection. For purposes of the initial inspection, all materials produced will be considered as “HIGHLY CONFIDENTIAL - COUNSEL'S EYES ONLY, ” and must be treated as such pursuant to the terms of this Order. Thereafter, upon selection of specified materials for copying by the inspecting party, the producing party must, within a reasonable time prior to producing those materials to the inspecting party, mark the copies of those materials that contain Protected Material with the appropriate confidentiality marking.

         (f) In the event that a designating party produces two or more identical copies of a document of which at least one copy is designated as Confidential or Highly Confidential and at least one copy is not so designated, once such a discrepancy is discovered, all copies of the document shall be treated with the protection so designated. If a receiving party identifies such a discrepancy, it shall promptly notify the designating party. Once the designating party identifies or becomes aware of the discrepancy, it shall promptly notify all other parties to the Action.

         (g) The designation of a document as Protected Material is a certification by an attorney or a party appearing pro se that the document contains Protected Material as defined in this order.[2]

         4. Depositions.

         (a) Unless all parties agree on the record at the time the deposition testimony is taken, all deposition testimony taken in this case shall be treated as Highly Confidential Information until the expiration of the following: No. later than the fourteenth day after the transcript is delivered to any party or the witness, and in no event later than 60 days after the testimony was given regardless of whether a transcript has been ordered or received. Within this time period, a party may serve a Notice of Designation to all parties of record as to specific portions of the testimony that are designated Protected Material, and thereafter only those portions identified in the Notice of Designation shall be protected by the terms of this Order. The failure to serve a timely Notice of Designation shall waive any designation of testimony taken in that deposition as Protected Material, unless otherwise ordered by the Court.

         (b) Notwithstanding section 4(a), a party (within the meaning of section 5(b)(2) below) shall not be excluded from a deposition solely because the deposition testimony is presumed Highly Confidential Information. Rather, a party may only be excluded from a deposition if the other party specifically designates the anticipated deposition testimony as Highly Confidential on the record at the time the testimony is taken. Such designation shall be specific as to the testimony that is likely to contain Highly Confidential Information, and the exclusion of the party shall only last for as long as the testimony concerns Highly Confidential Information.

         (c) The originals of the deposition transcripts and all copies of the deposition must bear the legend “CONFIDENTIAL - SUBJECT TO PROTECTIVE ORDER” or “HIGHLY CONFIDENTIAL - COUNSEL'S EYES ONLY, ” as appropriate, and the original or any copy ultimately presented to a court for filing must not be filed unless it can be accomplished under seal, identified as being subject to this Order, and protected from being opened except by order of this Court.

         (d) The use of a document as an exhibit at a deposition shall not in any way affect ...


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