American Patents LLC v. Mediatek, Inc. et al

Western District of Texas, txwd-6:2018-cv-00339


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0 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION AMERICAN PATENTS LLC, Plaintiff, v. CIVIL ACTION NO. 6:18-CV-339 MEDIATEK INC., ET AL., JURY TRIAL DEMANDED Defendants. AMERICAN PATENTS' RESPONSE TO DEFENDANTS' SUBMISSION OF PROTECTIVE ORDER 0 I. INTRODUCTION Per this Court's direction at the September 20 status conference, the parties have revised and agreed on the vast majority of an approximately 33-page protective order. There are three provisions for which the parties cannot reach an agreement and therefore seek the Court's intervention: • Section 11(g) forbids Plaintiff from disclosing one Defendant's protected material to any other Defendant, through any means. The Court acknowledged that if American Patents relies on confidential information—for instance in an expert report—it will have to be disclosed at trial to Defendants. Yet to use that information at trial, the Federal Rules require American Patents to produce it to all Defendants before trial, or Defendants will be prejudiced by a "trial by ambush" and American Patents will risk exclusion of that evidence. Section 11(g) thus puts American Patents on a collision course with the Federal Rules. • Section 8(a) should be modified to clarify that Defendants may designate material "Highly Confidential—Source Code" as long as that material has not been: "1) emailed or otherwise made accessible via a public network or stored on cloud-based servers or on shared drives, or 2) provided to third party developers or similar third parties." This modification implements the Court's concern that Defendants should not impose costs or burdens on American Patents that they do not impose on themselves or third parties. • Section 11(a) should similarly be modified to clarify that AEO- or Source Code- level confidential material shall not be transmitted outside the United States, "provided that Producing Party only stores and allows third parties to store such materials within the United States." Three Defendant groups are headquartered abroad and likely store confidential information overseas. It makes no sense that Defendants may store such information outside the United States, or transmit it to third parties outside the United States, while forbidding American Patents from doing the same. Such a restriction would cause undue harm to American Patents by impairing its ability to work with its technical consultants based in India. 1 0 II. PROCEDURAL BACKGROUND This supplemental briefing follows this Court's direction at the September 20 status conference. First, the Court specifically offered to review supplemental briefing on Section 11(g). (Dkt. 156 [Hearing Tr.], at 78:1-14.) Second, American Patents' proposed revisions to Sections 8(a) and 11(a) are consistent with the Court's concern that the final protective order be fair and avoid imposing costs or burdens upon Plaintiff that Defendants do not impose upon themselves. (Id. at 10:15-11:17.) Further, the protective order itself states that any party may seek modification by the Court for good cause shown. (Dkt. 159-3, at ¶ 21(a) ["Right to Further Relief"].) This supplemental briefing is also necessary given the procedural posture of the dispute over the protective order, and American Patents believes it will help the Court. As background, American Patents initially sought entry of the Court's form protective order ("Appendix H"). (Dkt. 138.) Defendants opposed and cross-moved for entry of their proposed protective order, arguing that Appendix H did not adequately protect their interests. (Dkt. 140.) In response, American Patents argued that Defendants had not shown good cause for their proposed 35-page protective order, focusing on a handful of provisions as an example. (Dkt. 145.) Defendants, in turn, responded regarding those handful of provisions. (Dkt. 149.) This is all to say that neither party specifically briefed each disputed section of the protective order. Rather, American Patents argued there was good cause for adopting Appendix H, which does not include language in the disputed provisions (Sections 8(a) and 11(a), (g)), and that Defendants failed to meet their burden for showing good cause for their proposed protective order. American Patents was thus not aware until the September 20 status conference that the Court intended to use Defendants' proposed protective order as a default, even for provisions not discussed by either party during briefing. Thus, American Patents respectfully provides this supplemental brief on the three remaining disputed provisions of the protective order. 2 0 III. ARGUMENT A. Section 11(g) Must be Omitted to Prevent a Conflict with Federal Rules. Section 11(g) forbids Plaintiff from disclosing one Defendant's protected material to any other Defendant through any means, including court filings, oral argument in court, or expert reports, without the express prior written consent of the Producing Party.1 American Patents does not intend to routinely serve one Defendant's confidential discovery on another Defendant. The Court acknowledged, however, that if American Patents relies on confidential information— for instance in an expert report—it will have to be disclosed at trial to all Defendants. (Dkt. 156, at 68:8-13.2) Yet to use that information at trial, American Patents will need to produce it to all Defendants beforehand, or Defendants will claim to be prejudiced by its late disclosure to them, and American Patents will risk exclusion of that evidence. Discovery disclosure rules were adopted to prevent "trial by ambush." Fed. R. Civ. Proc. 26; Olivarez v. GEO Grp., Inc., 844 F.3d 200, 204 (5th Cir. 2016). "The rules are designed to narrow and clarify the issues and to give the parties mutual knowledge of all relevant facts, thereby preventing surprise." Shelak v. White Motor Co., 581 F.2d 1155, 1159 (5th Cir. 1978). Thus, all parties must exchange evidence they intend to rely on at trial, including expert reports, before trial (with limited exceptions). Fed. R. Civ. Proc. 26. Similarly, motions must be served on all parties. Fed. R. Civ. Proc. 5. Thus, Section 11(g) conflicts with the Federal Rules. If American Patents' summary judgment motion or expert report, for instance, includes information obtained from one Defendant, it must serve that motion or report on all Defendants before trial, or it may be considered reversible error necessitating a new trial. Shelak, supra, 581 F.2d at 1159; Riquelme Valdes v. Leisure Res. Grp., Inc., 810 F.2d 1345, 1357 (5th Cir. 1987). Or, in another 1 This includes production to any Defendant's counsel. (Dkt. 156, at 66:16-18.) 2 Court: "If you have a report -- if you have an expert report, a damages report, for example, that includes Lenovo information, then I guess we ought to figure this out now how -- what we're going to do. If we're going to go to trial ultimately because I don't see any way of Mediatek not getting that information." 3 0 unwelcome scenario, American Patents could be precluded from using such evidence at trial. Clear with Computers, LLC v. Hyundai Motor Am., Inc., No. 6:09 CV 479, 2011 WL 11562328, at *2 (E.D. Tex. July 5, 2011) (order forbidding defendant from using theory at trial that it failed to disclose in expert reports). If Section 11(g) stands, the only way to prevent this result is to use the dispute provision in Section 11(g). But that simply delays the problem. Per that provision, American Patents would need to seek consent from the Producing Party before a disclosure to another Defendant. The Producing Party then has ten business days—two weeks—to respond. If the Producing Party objects, the parties must then meet and confer before American Patents may bring a motion in Court. American Patents then could not disclose the information until the Court rules. Thus, the practical effect of this provision serves to only kick the can down the road, where it will come before the Court at a later time, when it is much more likely to disrupt deadlines for expert reports, dispositive motions, and even trial. If Defendants would waive in advance their objections to American's use at trial or otherwise of protected materials obtained through discovery but not disclosed to all defendants under Section 11(g), then problem would not be so severe—although it could still result in unnecessary effort spent on redactions when a report or filing contains confidential information from multiple defendants. But since defendants have not waived those objections, Section 11(g) remains wholly unworkable. Defendants' insistence on keeping Section 11(g) in the Protective Order appears to be an attempt to penalize American Patents. During the hearing, counsel suggested that American Patents did something wrong in joining Defendants in one action. (Dkt. 156, at 72:12-14.) But it was American Patents' right to join all Defendants in a single suit. Fed. R. Civ. Proc. 20. And Defendants have failed to object, for instance, through a motion to sever. See Fed. R. Civ. Proc. 21. In any event, judicial economy favors bringing the claims in one joined lawsuit, as "the prospect of inconsistent claim construction favors resolving related patent cases in the same forum when possible." MyMail, Ltd. v. Am. Online, Inc., 223 F.R.D. 455, 458 (E.D. Tex. 2004) 4 0 (denying motion to sever where severance would "decrease judicial efficiency by requiring duplicative claim constructions, discovery, and pretrial motions"); see also NFC Tech., LLC v. HTC Am., 2:13-CV-01058-JRG, 2014 WL 3834959, at *2 (E.D. Tex. Aug. 1, 2014) (denying motion to sever under 35 U.S.C. § 299 because Plaintiff "alleges, in essence, that each of the accused devices infringes the same patents by using the same NFC chipset in the same way," so there are "common factual and legal questions that are best resolved in the same legal proceeding."). Now, however, Defendants seem to be attempting a back-door severance by hampering how American Patents can use discovery materials. Courts have rejected similar provisions where several defendants are joined in a single case for trial, as is the case here. See, e.g., Eolas Techs. v. Adobe Systems, Inc., et al., No. 6:09- CV-446, Dkt. 403 at 2 (E.D. Tex. Sept. 3, 2010), Dkt. 404 at 1 (E.D. Tex. Sept. 7, 2010) (presenting dispute over similar provision and resolving dispute in plaintiff's favor). And courts have even rejected similar provisions in cases consolidated only for pre-trial purposes. See, e.g., Nonend Inventions, N.V. v. Apple Inc., Dkt. 268 at 24-26 & Dkt. 268-1 at 16 (E.D. Tex. Aug. 27, 2015) (presenting briefing on similarly restrictive language proposed by defendants in that case); Dkt. 638 (E.D. Tex. Mar. 9, 2016) (entering protective order without defendants' proposed language). B. Section 8(a) Must be Modified to Prevent Unfairness and Undue Burden. American Patents' proposed revision to Section 8(a) implements the Court's concern that Defendants' version of the protective order should not impose costs or burdens upon Plaintiff that Defendants do not impose upon themselves for the same materials. It therefore clarifies that Defendants may not designate discovery material as "Highly Confidential—Source Code" if that material is or has been: "1) emailed or otherwise made accessible via a public network or stored on cloud-based servers or on shared drives, or 2) provided to third party developers or similar third parties." (Dkt. 159-3, at ¶ 8(a).) Defendants' justification for the source code designation is that it is needed to properly protect their "crown jewels." (Dkt. 156, at 20:16-18.) American Patents does not object to 5 0 treating Defendants' source code as "crown jewels"—reviewing it on-site in a clean room, for instance—so long as Defendants' impose comparable restrictions on themselves and others. But if Defendants are emailing source code or storing it in the cloud, then such materials are not "crown jewels" after all. If Defendants store source code material on cloud-based or shared drives, or transmit source code material with each other via the internet, then it is fundamentally unfair for Defendants to impose additional burdens on Plaintiff that Defendants do not require of themselves or third parties. Similarly, if Defendants are transmitting such material to third-party developers electronically, then it is only fair for Plaintiff to have access in the same manner. The Court acknowledged this distinction at the hearing, stating, "If a customer gets it under an NDA, then your expert can get it in whatever form or however they send it to third parties." (Dkt. 156, at 11:15-17.) This limitation should be written into the Protective Order. Otherwise, the protective order will impose costs only on American Patents that do not reflect how Defendants treat their confidential material in the real world.3 This limiting provision is especially important given that Section 8(a) allows Defendants to designate as "Highly Confidential – Source Code" materials like chip-level schematics that are not source code, and are not normally treated as such in protective orders. Indeed, counsel for Plaintiff regularly reviews chip-level schematics in its own offices without the need to jump through the onerous hoops required for true source code. Unless Defendants are actually treating such material like a "crown jewel"—e.g., not emailing it, storing it in the cloud, or providing it to third-party developers—they should not be permitted to impose a heightened burden on American Patents to receive such documents in discovery. 3 One should not underestimate the costs and burdens associated with having to view material on-site in a clean-room environment (e.g., additional travel expenses, page limits on printing, being unable to take notes on a computer while reviewing code). These costs should not be imposed unless necessary and fair—which at least means unless Defendants themselves similarly protect such information. See, e.g., Fed. R. Civ. Proc. 1 (Federal Rules should be "construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding."). 6 0 C. Section 11(a) Must be Modified to Prevent Unfairness and Undue Burden. Defendants' Section 11(a) bars American Patents from transmitting or reviewing AEO- Designated Materials abroad, a ban that will likely cover the bulk of the technical documents produced in this case. Like with Section 8(a), a modification is necessary in order to implement the Court's concern that the protective order not impose costs or burdens upon Plaintiff that Defendants do not impose upon themselves for the same materials. So Section 11(a) should be modified to clarify that AEO- or Source Code-level confidential material shall not be transmitted outside the United States, "provided that Producing Party only stores and allows third parties to store such materials within the United States." (Dkt. 159-3, at ¶ 11(a).) Three of the four remaining Defendant groups are headquartered abroad. And all defendants presumably design and make their products overseas, and thus store their confidential information outside the United States. If confidential information is already stored overseas by Defendants, it makes no sense that a provision is imposed only upon Plaintiff to keep that same information in the United States. Doing so only imposes additional costs on Plaintiff that Defendants do not bear. This provision would also impair American Patents' ability to use its main technical consultant: a firm called iRunway out of Bangalore, India. (Declaration of Larry D. Thompson Jr. ("Thompson Decl.") ¶ 2.) iRunway has a business model that focuses on consulting efforts related to patent litigation. (Id.) By relying on the offset workday and lower cost of living in India, iRunway provides U.S. litigation teams with almost around-the-clock technical support at a much lower cost than purely U.S.-based advisors. (Id.) As Defendants likely store information overseas to save costs, it is patently unfair to allow Defendants to take advantage of cost-saving measures while forbidding Plaintiff from the doing the same. As a practical matter, iRunway has no incentive for violating a protective order. Some of the nation's most prominent law firms use iRunway's services. (Id. ¶ 3.) Any sanctions for violating a protective order could drive away iRunway's clients and devastate its business. iRunway's website acknowledges the confidential nature of its work, stating it has "an ethical 7 0 and legal obligation to protect the sensitive personal and business information of our clients." (Id. ¶ 4.) To that end, it has an Ernst & Young-designed security system and policies. (Id.) Further, Defendants' confidentiality will be also adequately protected through other provisions of the protective order. The parties have agreed to pages and pages of provisions limiting who may see confidential information, for what purpose, and under what circumstances. It prohibits unauthorized disclosure to, e.g., third parties not qualified under the order—whether in the United States or abroad. It addresses export controls limitations which, to the extent any exist, control the parties' conduct—independent of the protective order. Assuming no export control limitations are violated, there is no other justification for a provision that places a higher burden upon American Patents than it does on Defendants. Finally, provisions like Section 8(a) (as proposed by Defendants) have been repeatedly rejected by other judges in a sister district. See Swipe Innovations, LLC v. Elavon, Inc., No. 9:12-CV-40, Dkt. 180, slip op. at 2-3 (E.D. Tex., Sep. 19, 2012); Eon Corp. IP Holdings, LLC v. Landis+Gyr Inc., No. 6:11-cv-317, Dkt. 154, slip op. at 1, 4–5 (E.D. Tex., June 12, 2012); Versata Software, Inc. v. SAP Am., No. 2:07-cv-153, Dkt. 66, slip op. at 1 (E.D. Tex., Feb. 26, 2008). There is no reason for the Court to depart from that precedent here. IV. CONCLUSION For the reasons stated herein, American Patents respectfully requests that this Court enter the parties' protective order with the three modifications requested herein. Dated: October 2, 2019 Respectfully submitted, /s/ Larry D. Thompson, Jr. Matthew J. Antonelli (admission pending) Texas Bar No. 24068432 Zachariah S. Harrington (lead attorney) Texas Bar No. 24057886 Larry D. Thompson, Jr. Texas Bar No. 24051428 8 0 Christopher Ryan Pinckney (admission pending) Texas Bar No. 24067819 Michael D. Ellis Texas Bar No. 24081586 ANTONELLI, HARRINGTON & THOMPSON LLP 4306 Yoakum Blvd., Ste. 450 Houston, TX 77006 (713) 581-3000 Stafford Davis State Bar No. 24054605 Catherine Bartles Texas Bar No. 24104849 THE STAFFORD DAVIS FIRM The People's Petroleum Building 102 North College Avenue, 13th Floor Tyler, Texas 75702 (903) 593-7000 (903) 705-7369 fax Attorneys for American Patents LLC 9