10.6.12 Confidentiality
Due to the sensitive nature of information relevant to patent litigation, one of the first orders of business following the filing of a patent complaint is establishing a protective order. Many patent-heavy district courts have developed default protective orders that go into effect immediately upon the filing of a patent case or soon thereafter upon a motion of a party. These rules enable the discovery process to begin promptly. Most sophisticated parties will typically want to customize the protective order and will generally agree relatively quickly on an order best tailored to their particular circumstances. The expectation that the court will enter a default protective order often facilitates consensus among the parties.
Protective orders need to serve two opposing purposes. First, they must enable the litigators to access information needed to resolve the issues posed by the case, such as product engineering, internal communications, and strategic plans that are often trade secrets. Second, they must prevent disclosure of highly sensitive technical, financial, licensing, or business strategy information both to the public and to the parties’ competitive decision-makers.
The Northern District of California’s multi-tiered default protective order illustrates how courts have approached the task of balancing these clashing objectives. It distinguishes three tiers: (1) “confidential” information (information that qualifies for protection under FRCP 26(c)), (2) “highly confidential – attorneys’ eyes only” information (information that is “extremely sensitive,” disclosure of which “would create a substantial risk of serious harm that could not be avoided by less restrictive means”), and (3) “highly confidential – source code” information (“extremely sensitive” information “representing source code and associated comments and revision histories, formulas, engineering specifications, or schematics that define or otherwise describe in detail the algorithms or structure of software or hardware designs”).214 While “confidential” information may be disclosed to parties and their representatives who sign an acknowledgment of the protective order, so long as it is used only for the purposes of litigation, “highly confidential – attorneys’ eyes only” information may be disclosed only to in-house attorneys who are not involved in competitive decision-making and whose identities are disclosed in advance. “Highly confidential – source code” information is made available for inspection pursuant to a strict set of guidelines – rather than produced – and is restricted to the same two in-house attorneys, as well as outside counsel and approved experts.
In situations where an attorney represents a party both in litigation and in front of the Patent Office in prosecution or PTAB proceedings, the parties or the court will typically include a “prosecution bar” in the protective order. This provision limits the ability of those who have seen designated material to engage in prosecution activities for a certain amount of time.
In view of the large volume of discoverable materials in patent litigation, courts may be called upon to resolve disputes regarding over-designation of confidential information. Many district judges refer discovery matters to magistrate judges. In extreme cases, a party’s overzealous confidentiality designations may warrant sanctions.
Courts may also have to deal with clawing back privileged documents that were inadvertently produced. FRCP 26(b)(5)(B) addresses this situation, providing that a party that believes it has unintentionally produced privileged information may give notice to the receiving party, who must then “promptly return, sequester, or destroy the specified information and any copies it has” and “take reasonable steps to retrieve” any information it has already distributed or disclosed to others. The producing party is required to preserve the information, and the receiving party may not use or disclose it. Many protective orders include clawback provisions, which provide a process for retrieving documents that were inadvertently produced.