Vasudevan Software, Inc. v. International Business Machines Corporation et al, No. 5:2009cv05897 - Document 160 (N.D. Cal. 2010)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART 152 Motion for Protective Order. See order for details. Signed by Magistrate Judge Howard R. Lloyd on 09/14/2010. (hrllc1, COURT STAFF) (Filed on 9/14/2010)

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Vasudevan Software, Inc. v. International Business Machines Corporation et al 1 Doc. 160 ** E-filed September 14, 2010 ** 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 For the Northern District of California NOT FOR CITATION 8 United States District Court 7 SAN JOSE DIVISION 11 VASUDEVAN SOFTWARE, INC, Plaintiff, 12 13 14 15 16 No. C09-05897 RS (HRL) ORDER GRANTING IN PART AND DENYING IN PART THE PARTIES’ JOINT MOTION FOR ENTRY OF PROTECTIVE ORDER v. INTERNATIONAL BUSINESS MACHINES CORPORATION; and ORACLE CORPORATION, [Re: Docket No. 152] Defendants. ____________________________________/ 17 18 This is a patent infringement case brought by plaintiff Vasudevan Software, Inc. (“VSi”) 19 against defendants Oracle Corp. (“Oracle”) and International Business Machines Corp. (“IBM”) 20 (collectively, “Defendants”). After meeting-and-conferring, and coming to agreement as to most of 21 the language for a protective order to govern the production of confidential information, the parties 22 filed this joint motion asking the Court to resolve disputes over four remaining sections. (Docket 23 No. 152 (“Motion”).) 24 25 DISCUSSION A. First Disputed Section: § 7.3(b) (Disclosure of Highly Confidential - Attorneys’ Eyes Only Information or Items) 26 27 VSi proposes adding a subsection (currently, subsection (b)) to § 7.3 of the stipulated 28 protective order. Specifically, VSi proposes that information or items designated “HIGHLY Dockets.Justia.com 1 CONFIDENTIAL - ATTORNEYS’ EYES ONLY” (hereinafter, “Highly Confidential 2 Information”) may be disclosed: 3 4 (b) [t]o the extent disclosure is limited to financial information, including both sales and licensing information, [to] one House Counsel for the Receiving Party (1) to whom disclosure is reasonably necessary for this litigation, and (2) who has signed the “Agreement to Be Bound by Protective Order” (Exhibit A); 5 6 (Docket No. 153, Ex. A (“Stipulated Protective Order” or “SPO”), ¶ 7.3(b).) VSi argues that at least 7 one in-house counsel should be allowed access to financial information, including both sales and 8 licensing information, because without it, VSi cannot have open discussions regarding damages 9 valuation and potential settlement offers. (Motion at 5-6.) For the Northern District of California United States District Court 10 Defendants oppose including this subsection at all. Citing U.S. Steel Corp. v. United States, 11 730 F.2d 1465 (Fed. Cir. 1984), and Brown Bag Software v. Symantec Corp., 960 F.2d 1465 (9th 12 Cir. 1992), Defendants point out that in deciding whether to allow an in-house counsel to access 13 confidential information, courts look at the facts surrounding that counsel’s relationship with a party 14 and the risks of, and safeguards to prevent, inadvertent disclosure. (Motion at 7.) To that end, 15 Defendants explain that there is only one in-house counsel at VSI, Helen Vasudevan, and she is a 16 principal of VSi and wife of Mark Vasudevan, the named inventor of the patents-in-suit and the 17 President and CEO of VSi. (Id.) Defendants thus contend that her marital relationship and financial 18 stake in VSi creates a conflict of interest and so the risk of inadvertent disclosure is simply too great. 19 (Id. at 7-8 (citing Thomas & Betts Corp. v. Panduit Corp., 1997 WL 603880, a t *12 (N.D. Ill. 1997) 20 (“A party’s concern about permitting its opponent’s in-house counsel to access its confidential 21 information would be heightened where the in-house counsel was also a family member of certain 22 corporate officers.”); A. Hirsh, Inc. v. United States, 657 F.Supp. 1297, 1303-04 (C.I.T. 1987) 23 (finding an “unacceptable opportunity for inadvertent disclosure” where in-house counsel was the 24 son of the company’s owner)).) 25 Yet while courts do indeed look to the facts of each individual case, the “crucial factor” is 26 whether the in-house counsel engages in “competitive decisionmaking,” Brown Bag Software v. 27 Symantec Corp., 960 F.2d at 1470 (citing U.S. Steel Corp. v. United States, 730 F.2d at 1468 n.3), 28 which refers to “a counsel’s activities, association, and relationship with a client that are such as to 2 1 involve counsel’s advice and participation in any or all of the client’s decisions (pricing, product 2 design, etc.) made in light of similar or corresponding information about a competitor,” U.S. Steel 3 Corp. v. United States, 730 F.2d at 1468 n.3. This is the crucial factor because the courts in U.S. 4 Steel and the cases relying upon it were largely concerned with the difficulty “for the human mind to 5 compartmentalize and selectively suppress information once learned, no matter how well- 6 intentioned the effort may be to do so.” In re Deutsche Bank Trust Co. Americas, 605 F.3d 1373, 7 1378 (Fed. Cir. 2010); see also Brown Bag Software v. Symantec Corp., 960 F.2d at 1470-72; 8 Mercexchange, LLC v. eBay, Inc., 467 F.Supp.2d 608, 622-23 (E.D. Va. 2006) (“[I]t is oftentimes 9 impossible for an individual, even with the noblest intentions, to delineate between ideas that they For the Northern District of California United States District Court 10 may advance as a result of their own creation, and those influenced by past exposure to confidential 11 information.”); In re Worlds of Wonder Sec. Lit., 147 F.R.D. 214, 216-17 (N.D. Cal. 1992) (noting 12 that it would be “naïve” to think that expert witnesses who would “most likely” be competitors of 13 the party opposing disclosure would be able to “erase” from their minds the at-issue documents that 14 revealed confidential, internal details of how that party conducts its business). Here, while 15 Defendants offered little evidence in their papers that Helen Vasudevan engaged in competitive 16 decisionmaking, they did convince the Court at the motion hearing that she plays an integral role in 17 the conduct of VSi’s business. And as the only in-house counsel for VSi, she provides legal advice 18 in a number of business contexts. 19 Both sides have legitimate concerns. On one hand, the Court is sensitive to the fact that in- 20 house counsel to a party, in most circumstances, needs to have some access to the opposing party’s 21 confidential financial information to understand the potential damages at issue and thus make an 22 informed decision with respect to any possible settlement of the lawsuit. But on the other hand, the 23 Court also understands that in-house counsel who is exposed to a competitor’s confidential 24 information often cannot simply forget what he or she has learned. 25 As discussed at oral argument, the Court believes that the creation of a subset of Defendants’ 26 financial information to which Helen Vasudevan may have access is the best solution in this 27 particular instance. Indeed, at the hearing on the parties’ motion, counsel for VSi acknowledged 28 that it is Defendants’ annual revenue and annual unit sales data by product line that is most 3 1 important for settlement purposes, and Defendants’ attorneys conceded that there would be little 2 harm in allowing Helen Vasudevan access to such high-level numbers.1 As such, the parties shall 3 include a subsection similar to VSi’s proposed Section 7.3(b) but shall re-draft the language to allow 4 Helen Vasudevan access to Defendants’ (1) annual revenue by product; and (2) annual unit sales by 5 product. B. Second Disputed Section: § 10 (Prosecution Bar) 6 The parties also disagree as to language in the protective order’s prosecution bar, which 7 8 provides that recipients of Highly Confidential Information “shall not be involved in the prosecution 9 of patents or patent applications relating to patents-in-suit or relating to the subject matter of” any of For the Northern District of California United States District Court 10 the parties’ produced discovery. (SPO, § 10.) “Prosecution” is defined to include “directly or 11 indirectly drafting, amending, advising, or otherwise affecting the scope of maintenance of patent 12 claims.” (Id., § 10.) But the parties wish to also include language to make clear what does not fall within the 13 14 definition of “prosecution.” Defendants propose the following: “To avoid any doubt, ‘prosecution’ 15 as used in this paragraph does not include representing a party challenging a patent before a 16 domestic or foreign agency (including, but not limited to, a reissue protest, ex parte reexamination 17 or inter partes reexamination).” (Motion at 10.) Plaintiff agrees with all of this language, but it 18 wants to add “or defending” such that “prosecution” does not include representing a party 19 “challenging or defending” a patent under these circumstances. (Id.) Because Defendants seek further restrictions on access to confidential information, they have 20 21 the burden to establish good cause to justify doing so. See Document Generation Corp. v. 22 Allscripts, LLC, No. 6:08-CV-479, 2009 WL 1766096, at *2 (E.D. Tex. Jun. 23, 2009). Defendants 23 contend that VSi’s proposed language “would allow VSi-affiliated individuals with access to 24 Defendants’ highly confidential technical documents the ability to amend and draft new claims 25 directly reading on Defendants’ Accused Products during a reexamination process.” (Motion at 11.) 26 “This,” they argue, “would be contrary to the fundamental purpose of a prosecution bar,” which “‘is 27 1 28 Defendants did convince the Court that Helen Vasudevan should not be allowed access to Defendants’ licensing information, such as specific agreements, royalty payments, and/or licensing terms. Such information is more appropriately analyzed by VSi’s retained expert(s). 4 1 to prevent outside counsel from using, even inadvertently, confidential information obtained in the 2 lawsuit for purposes outside the lawsuit (e.g., drafting claims during patent prosecution).’” (Id. at 3 11-12 (quoting Visto Corp. v. Seven Networks, Inc., No. 2:03-CV-333-TJW, 2006 WL 3741891, at 4 *7 (E.D. Tex. Dec. 19, 2006)).) VSi rightfully counters that Defendants’ concerns are misplaced because the agreed-upon 5 6 language prohibits them from prosecuting new patents related to the patents-in-suit or those based 7 on any discovery produced by Defendants and because patents cannot be broadened upon 8 reexamination. (Id. at 10-11.) Indeed, as one court has explained: 14 Patent reexaminations, as the name suggests, are invoked to challenge a PTO patent grant. . . . [T]hey are exclusively a “post-grant” procedure, distinguishable from prosecution efforts on an initial patent application. Although patent claims may be amended, redrafted or substituted for new albeit narrower claims, unlike prosecution of an initial patent application, the Patent Act, 35 U.S.C. §§ 305, 314, expressly curtails the scope of reexamination, prohibiting any claim amendment that would enlarge the scope of the initial patent. This restriction both underscores the distinction between initial patent prosecution and reexamination, and effectively mitigates the potential to misuse PTO procedures to gain a collateral business or litigation advantage, thereby rendering a prosecution bar in the reexamination context largely unnecessary. 15 Pall Corporation v. Entegris, Inc., 655 F.Supp.2d 169, 173 (E.D.N.Y. 2008) (internal citation 16 omitted). For this reason, Defendants’ Highly Confidential Information “is ‘basically irrelevant to 17 the reexamination.’”2 Kenexa Brassring Inc. v. Taleo Corp., Civ. No. 07-521-SLR, 2009 WL 18 393782 (D. Del. Feb. 18, 2009) (quoting Hochstein v. Microsoft Corp., No. 04-CV-73071, 2008 WL 19 4387594, at 3 (E.D. Mich. Sep. 24, 2008)). Accordingly, Defendants fail to meet their burden and 20 the Plaintiff’s proposed language shall be used for the prosecution bar. 9 For the Northern District of California United States District Court 10 11 12 13 C. Third Disputed Section: § 11 (Competitive Decisionmaking Bar) 21 22 23 2 24 25 26 27 28 In analyzing a similar issue, the court in Pall even considered, and then distinguished, three of the cases cited by Defendants in support of their claim that courts have “recognized the need to exclude participations in reexamination proceedings as part of patent prosecution bars.” (Motion at 12-13 (citing Visto Corp. v. Seven Networks, Inc., 2006 WL 3741891, at *7; MicroUnity Sys. Eng’g., Inc. v. Dell Inc., No. 2:04-CV-120-TJW, 2005 WL 2299455 (E.D. Tex. Aug. 1, 2005); Grayzel v. St. Jude Med., Inc., 162 Fed.Appx. 954 (Fed. Cir. 2005)).) This outcome is in line with “‘[t]he bulk of recent cases, [analyzing the issue of the use of a party’s confidential information upon reexamination], [which] have determined that the confidentiality concerns cited by Defendant[s] are mitigated by the nature of the reexamination process.’” Document Generation Corp. v. Allscripts, LLC, 2009 WL 1766096, at *2 (quoting Crystal Image Tech., Inc. v. Mitsubishi Elec. Corp., No 08307, 2009 WL 1035017, at *2 (W.D. Pa. Apr. 17, 2009)). 5 1 The parties disagree as to whether a competitive decisionmaking bar is needed at all; 2 Defendants think that it is, but VSi thinks that it is not. Specifically, Defendants propose adding as 3 § 11 the following: Notwithstanding any other provision of this Order, absent the written consent of the Producing Party, any individual[,] including all Experts[,] that accesses “HIGHLY CONFIDENTIAL - ATTORNEYS’ EYES ONLY” or “HIGHLY CONFIDENTIAL SOURCE CODE” shall not be involved in competitive decision-making, as defined by U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468 n.3 (Fed. Cir. 1984). 4 5 6 7 (Motion at 13.) Again citing U.S. Steel Corp. and Brown Bag Software, Defendants point out that individuals 8 9 who engage in competitive decisionmaking are routinely barred from viewing confidential For the Northern District of California United States District Court 10 information of other parties during litigation. (Id. at 15.) Defendants appear to be particularly 11 concerned with Mark and Helen Vasudevan viewing their Highly Confidential Information. (Id at 12 16.) 13 VSi first responds that a competitive decisionmaking bar is unnecessary because the 14 Stipulated Protective Order “already prohibits anyone from using Protected Material for any 15 purpose outside of this litigation, as well as from disclosing any Protected Information except in the 16 limited circumstances contemplated by this Protective Order.” (Id. at 14-15.) This argument, 17 however, fails to take into account the problem acknowledged by U.S. Steel and the cases following 18 it which were discussed above; specifically, the difficulty “for the human mind to compartmentalize 19 and selectively suppress information once learned, no matter how well-intentioned the effort may be 20 to do so.” In re Deutsche Bank Trust Co. Americas, 605 F.3d at 1378. For this reason, a 21 competitive decisionmaking bar — subject to the subset of certain of Defendants’ financial 22 information that will be available to Helen Vasudevan — is appropriate. 23 VSi, however, also responds that Defendants’ proposed competitive decisionmaking bar in 24 particular is overbroad. (Motion at 14.) It worries that “it is possible under [D]efendants’ proposal 25 that Mark Vasudevan could be barred from competitive decision making for VSi if he is shown 26 [Attorneys’ Eyes Only] materials during a deposition or at trial.” (Id.) VSi surely misreads 27 Defendants’ intent. Defendants instead appear to intend their proposed language to mean that any 28 person who engages in competitive decisionmaking cannot have access to Highly Confidential 6 1 Information. (Id. at 15 (“[I]t is appropriate that VSi and all individuals associated with VSi who 2 engage in competitive decisionmaking are barred from obtaining Defendants’ [Highly Confidential 3 Information].”).) The Court does not believe that Defendants intend their proposed language to 4 mean that any person who is shown Highly Confidential Information by Defendants cannot later 5 engage in any competitive decisionmaking. Such a reading would invite absurd results. For 6 example, Defendants could, in effect, prevent Mark Vasudevan from doing his job simply by 7 showing him some of their Highly Confidential Information during a deposition. (Id.) 8 9 That said, Defendants’ proposed language is, admittedly, somewhat ambiguous. Accordingly, the parties are directed to re-draft the language of the competitive decisionmaking bar For the Northern District of California United States District Court 10 to make clear that it is a not a prohibition that seeks to enjoin an individual from competitive 11 decisionmaking once he or she happens to gaze upon the other side’s secrets when directed to do so 12 by the other side; rather, it should be make clear that it acts to prevent competitive decisionmakers 13 from having access to Highly Confidential Information in the first place. 14 D. Fourth Disputed Section: § 15 (Privileged/Work Product and Inadvertent Production of Protected Materials) 15 16 VSi and defendant IBM (defendant Cisco takes no position on this particular dispute) 17 disagree as to the extent of the privileged communications and attorney work product which will be 18 included on the parties’ privilege log. 19 The first disagreement involves communications protected by the attorney-client privilege: 20 VSi proposes that no privileged communications between the parties and their respective counsel- 21 of-record with respect to this litigation need be logged, while IBM argues that any privileged 22 communication made prior to the filing of the complaint in this action should be logged. (Id. at 17.) 23 The second disagreement involves attorney work product: VSi proposes that no attorney 24 work product relating to this litigation need be logged, while IBM argues that any attorney work 25 product created before the filing of the complaint in this action should be logged. (Id.) 26 VSi argues that it is unfair to require the logging of pre-complaint privileged 27 communications and attorney work product but to not require the logging of those made post- 28 complaint because “there will generally be much more work product and many more privileged 7 1 communications” for a plaintiff than a defendant prior to a complaint being filed. (Id. at 18.) This 2 is certainly true, and IBM’s justification for its distinction — that “[n]ot requiring [such] a privilege 3 log would create an opportunity to improperly withhold responsive documents made before the 4 litigation began” — is not particularly compelling, given that, as VSi points out, this reasoning is 5 true of any limitation on the logging of privileged documents; ultimately, each side will have to 6 make a good faith determination of what must be logged and what may be omitted.3 (Id. at 18-19). 7 Thus, the Court finds VSi’s reasoning to be pursuasive. However, IBM notes that VSi’s language limiting the communications and attorney work 8 For the Northern District of California product to “counsel-of-record” cuts out support staff, and therefore creates an undue burden on all 10 United States District Court 9 parties who will have to make this distinction. The Court agrees that there is no real reason for this 11 distinction, and so the language of the privilege log provision should include communications 12 between any attorneys, including support staff and vendors, and party clients that are related to this 13 litigation. CONCLUSION 14 Based on the foregoing, the Court GRANTS IN PART and DENIES IN PART the parties’ 15 16 joint motion for entry of a protective order. The parties are directed to submit a stipulated protective 17 order that contains the following: 18 1. a re-drafted in-house counsel provision whereby Helen Vasudevan is allowed access to 19 Defendants’ annual revenue by product and annual unit sales by product (see § 7.3(b)); 20 2. a prosecution bar using VSi’s proposed language (see § 10); 21 3. a re-drafted competitive decisionmaking bar that is subject to the subset of certain of Defendants’ financial information that will be available to Helen Vasudevan (see § 11); and 22 23 4. a re-drafted privilege log provision that makes clear that privileged communications between 24 any attorneys (including all support staff and vendors) and party clients that are related to 25 this litigation or attorney work product, regardless of the date made or created need not be 26 included on the parties’ privilege logs (see § 15). 27 28 3 Moreover, Judge Seeborg apparently stated at the April 2010 case management conference that emails between counsel and clients with respect to this litigation should not be logged and he did not distinguish between communications taking place before and after the complaint was filed. (See Motion at 18.) 8 1 2 3 IT IS SO ORDERED. Dated: September 14, 2010 HOWARD R. LLOYD UNITED STATES MAGISTRATE JUDGE 4 5 6 7 8 9 For the Northern District of California United States District Court 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 1 C09-05897 RS (HRL) Notice will be electronically mailed to: 2 Andrew G Heinz 3 Brad Evan Rosen Brooke Taylor Brooke Ashley-May Taylor Daniel J Walker 4 5 6 7 8 David A Nelson Ellen M Padilla Eric James Enger Harper Siems Batts Jennifer A Bauer Jennifer Anne Bauer 9 For the Northern District of California United States District Court 10 11 12 13 John M. Desmarais Jon T Hohenthaner Joseph Allen Loy Leslie V Payne Martin A Galese Matthew M Sarboraria Meghan Elizabeth Bordonaro Michael F. Heim 15 Robert Alan Appleby Sean S Pak Sean Sang-Chul Pak 16 Stephen Edward Morrissey 14 andrew.heinz@kirkland.com, aheinz@kirkand.com, jason.emden@kirkland.com bradrosen@quinnemanuel.com btaylor@susmangodfrey.com, bnealious@susmangodfrey.com btaylor@susmangodfrey.com dwalker@susmangodfrey.com, canderson@susmangodfrey.com davenelson@quinnemanuel.com ellenpadilla@quinnemanuel.com eenger@hpcllp.com, nbaudoin@hpcllp.com harper.batts@kirkland.com, julie.bueno@kirkland.com, lesley.ahlberg@kirkland.com jenniferbauer@quinnemanuel.com jenniferbauer@quinnemanuel.com, lisagarner@quinnemanuel.com jdesmarais@kirkland.com jon.hohenthaner@kirkland.com joseph.loy@kirkland.com lpayne@hpcllp.com martin.galese@kirkland.com matthew.sarboraria@oracle.com meghanbordonaro@quinnemanuel.com mheim@hpcllp.com, abranum@hpcllp.com, awilson@hpcllp.com, canderson@hpcllp.com rappleby@kirkland.com, jemden@kirkland.com seanpak@quinnemanuel.com seanpak@quinnemanuel.com, susanneglobig@quinnemanuel.com smorrissey@susmangodfrey.com, hdanielson@susmangodfrey.com 17 18 Counsel are responsible for distributing copies of this document to co-counsel who have not registered for e-filing under the court’s CM/ECF program. 19 20 21 22 23 24 25 26 27 28 10

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