No Secrets in IP Litigation

One of the things that seems to surprise and offend many IP litigants is the invasiveness of discovery under the Federal Rules of Civil Procedure. Parties often are surprised to learn how much they must disclose about their business in discovery. Understandably, they are offended when their adversary is given the opportunity to inspect sensitive business information, particularly product development and financial information.

Agreed upon protective orders often provide a measure of comfort by limiting the number of people who will have access to the disclosed information, but they are a double edged sword. Once a protective order is in place, one can almost guarantee that arguments that disclosure of possibly relevant evidence should not occur because of the secrecy of the material will fail.

A recent opinion that illustrates the point comes from a patent case in the Northern District of Illinois, Jab Distributors v. London Luxury. Jab sought discovery of London Luxury’s sales and financial information pertaining to the allegedly infringing product. London Luxury opposed production of such information generated prior to the time Jab began marking its product with the patent number, on the ground that such information was irrelevant because London Luxury could not recover damages prior to marking, and on ground that disclosure to a competitor would be harmful.

The court required production. It found that the profitability of the infringing product pre-marking would inform the calculation of a reasonable license fee (a measure of damages), and also relevant to the alleged obviousness of the patent. The Court rejected London Luxury’s argument that disclosure would be inappropriate because the information in question was the subject of a confidentiality agreement with a third party, and held that the protective order, which included an “attorneys eyes only” provision, provided adequate safeguards against disclosure of sensitive information to a competitor. The court noted that London Luxury offered only attorney argument and failed to submit sworn declarations or affidavits explaining the need for secrecy.

The take-away here is that parties involved in litigation should be aware of the presumptive expansiveness of federal court discovery, and that they will be fighting a steep uphill battles to keep even sensitive competitive information from their adversaries. If there is information that should not be disclosed, parties should first determine whether a suitable protective order can provide adequate protection. If so, more often than not courts are receptive to those. If not, parties should prepare early to resist disclosure and provide the best possible admissible evidence of the need for secrecy, but be aware that the odds are against them.

What's Stored on Your Copier's Hard Drive Can and Will Be Used Against You

Interesting blog post from my colleague Mark McCreary on his Privacy Compliance and Data Security blog last week. In it, he examines this story from CBS News concerning the dangers of disposing of digital copiers without first “wiping” their hard drives to delete stored information. CBS reported purchasing used copiers with stored images of materials from police files, design plans for a building near Ground Zero, and yes, medical records. The story was a major embarrassment for the Buffalo, NY police department and prompted a letter from Representative Ed Markey of Massachusetts to the FTC requesting action. The FTC response promises action, but does not suggest that additional regulation is likely.

As Mark suggests, it would be easy to go overboard reacting to this news. It seems as unlikely that the purchaser of your business’ used equipment is going to interested in searching through its hard drive as it is that someone will be searching through your company’s trash. But the stakes can be high, and just as one should require employees to take the time to shred sensitive paper documents before throwing them away, one should be certain that before copiers, computers, or any data storage devices are sold or discarded, they are wiped clean of any stored data.

From a litigator's perspective, this news is both inspiring and depressing.  It inspires me to consider seeking forensic examination of copier hard drives in cases involving trade secret theft, copyright infringement of printed materials, or suspected spoliation of evidence. It depresses me to think that we may soon be adding copier hard drives to the reams of largely useless electronic data the rules require us search when responding to discovery requests.