Filing Damage Expert's Reports Under Seal: Some Bright Line Rules

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There are two trends increasing the costs of patent litigation.  

The first is the increased use of Daubert motions to exclude the opinion of opposing damage experts as unqualified or unreliable. The practical result is that parties are filing an increased number of motions to seal in order to protect the sensitive financial, marketing and licensing data that typically are contained in expert damage reports.

The second is the court’s increased reluctance to find that a party’s interest in preventing disclosure of sensitive business information overcomes the strong common law presumption favoring public access. This raises the bar in terms of the minimum support necessary to succeed on a seal motion. The seal motion typically trickles down to lesser experienced attorneys who are both working under short deadlines and attempting to apply often byzantine local sealing rules, however. Thus, the seal motion is often denied on first submission and is subsequently followed by repeated do overs requiring the application of more experienced staff and attorney resources. The work on the motion to seal is inefficient and unduly expensive and a prejudicial (to the client) diversion of scarce resources from more substantive projects.

While by no means exhaustive, recent cases in the Ninth Circuit and Northern District of California provide some bright line rules [provided after the jump] that can streamline the approach to sealing a damage expert’s report.

  • Simply because the document at issue is a damage expert’s report does not mean it will be sealed. To the contrary, as opposed to the entire report of the damages expert, only narrowly tailored portions of the report will be sealed. Seeking to seal the entire report will be denied and, if you are lucky, elicit an order requiring a do over. Consequently, attempting to seal the entire report is a waste of time and money. See, e.g., Oracle America v. Google, Inc., 10–CV–03561–WHA, at ECF No. 540, (Judge Alsup advised counsel that, “unless they identify a limited amount of exceptionally sensitive information that truly deserves protection, the motions will be denied outright.”).
  • The general sealing rule is that “the party must articulate compelling reasons supported by specific factual findings that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.” Kamakana v. City & Cnty. Of Honolulu, 447 F.3d 1172, 1178–79 (9th Cir. 2006) (alterations omitted) (internal quotation marks omitted). The Ninth Circuit has carved out an exception to the more stringent “compelling reasons” test for non-dispositive Daubert motions directed to damage experts’ reports – a particularized showing of “good cause” is sufficient to seal these documents. Apple Inc. v. Samsung Electronics Co., Ltd., 727 F.3d 1214, 1222 (Fed. Cir. 2013) (“Under the exception, the usual presumption of the public's right of access is rebutted. Thus, a particularized showing of ‘good cause’ under Federal Rule of Civil Procedure 26(c) is sufficient to preserve the secrecy of sealed discovery documents attached to non-dispositive motions.” Id. The reason for the Ninth Circuit's distinction between dispositive and non-dispositive motions is that “the public has less of a need for access to court records attached only to non-dispositive motions because those documents are often unrelated, or only tangentially related, to the underlying cause of action.” (emphasis in original) (citations omitted).)
  • The identification of third parties with whom a party may have negotiated or entered into a license, and the terms of these licenses, are sealable. See, e.g., Apple Inc. v. Samsung Electronics Co., Ltd., 727 F.3d at 1222, citing, In re Elec. Arts, Inc., 298 Fed. Appx. 568, 569–70 (9th Cir.2008) (nonprecedential) (The Ninth Circuit held that a district court had abused its discretion in refusing to seal “pricing terms, royalty rates, and guaranteed minimum payment terms” found in a license agreement because such information “plainly falls within the definition of ‘trade secrets.’”).
  • Information relating to party's production and supply capacity is a “trade secret” under Ninth Circuit law and is therefore properly sealed. Apple, Inc. v. Samsung Electronics Co., Ltd., 2012 WL 5988570 (N.D. Cal. Nov. 29, 2012), rev'd and remanded on other grounds, 727 F.3d 1214 (Fed. Cir. 2013).
  • Detailed product-specific information concerning such things as costs, sales, profits, and profit margins should be sealed. Apple Inc. v. Samsung Electronics Co., Ltd., 727 F.3d at 1224.
  • Market research reports containing information that a party’s competitors could not obtain anywhere else are sealable. Id.
  • Sensitive commercial or proprietary information does not have to be shown to be a trade secret in order to be protected against disclosure. Id. (“We think it likely that the detailed financial information Apple and Samsung seek to seal would meet the Restatement's relatively broad definition of ‘trade secret’—‘any ... compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.’ However, the district court did not make a formal determination of whether these are trade secrets, and we do not believe we need to either. That is because documents may be sealed merely if they are ‘sources of business information that might harm a litigant's competitive standing.’ Nixon, 435 U.S. at 598, 98 S.Ct. 1306.”).

Don’t see the rule applicable to what you want to seal in your damage expert report? Check out Magistrate Judge Grewall’s thoughtful charting and ruling on over two dozen sealing motions relating to non-dispositive discovery motions covering thousands of pages of requested seal documents. Apple Inc. v. Samsung Electronics Co. Ltd., 2013 WL 412864 at *2-3 (N.D. Cal. Feb. 1, 2013) (“What tribbles are to the Starship Enterprise, Captain Kirk, and Mr. Spock, the parties' ever multiplying sealing and redaction requests are to this case, Judge Koh, and the undersigned.”)

Disclaimer: the above rules are focused on the correct application of the Ninth Circuit’s sealing rules generally and the Northern District of California’s Local Rule 79-5 specifically. The likelihood is that the application of these rules is at least instructive in other jurisdictions, but best approach is to first confirm the similarity of these rules to those in another jurisdiction.

 

Topics:  Daubert Hearing, Expert Testimony, Expert Witness, Sealed Records

Published In: Civil Procedure Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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