Court Denies Provision of Protective Order That Would Restrict Transmission of Protected Information Outside of the United States

June 26, 2012

In this patent infringement action, the district court analyzed the parties' disputes regarding whether a protective order should include a provision to restrict the transmission of center sensitive documents outside of the United States. The defendants requested a provision in the protective order that would preclude the transmission of highly confidential information outside of the United States and that would preclude the transmission of confidential information outside of the United States, except for disclosure to principals and employees of a party who agreed to be bound to the protective order and would also agree to submit to the district court's jurisdiction.

Defendants' requested the restriction due to the highly sensitive information:

Defendants argue that the above restrictions should be imposed because of the "extremely sensitive nature of the Protective Material, the heightened risk of an inadvertent or intentional discloser in a foreign jurisdiction beyond this Court's reach and the myriad of jurisdictional and enforcement issues, practical and legal, that would arise in the event of a breach." Specifically, Defendants take issue with Plaintiff's plan to outsource litigation services to overseas vendors. In support of a complete bar on overseas transmission, Defendant point to a situation in an unrelated case before Judge Everingham in the District where a security breach occurred at an overseas third party vendor potentially causing sensitivity information to be leaked despite the existence of a protective order. See id. At 16 (citing Versata Software, Inc. v. SAP America, Inc., et al., Civ. No. 2:07-cv-153, Doc No. 572, slip op. at 13 (E.E. Tex Sept. 9, 2011)).

Plaintiff asserted that the provision was unnecessary given other protections in the protective order against disclosure and that it would be disproportionately impacted because it planned to rely on vendors who were outside of the United States. Plaintiff argues, however, that additional provisions barring overseas transmission are unnecessary given that the Protective Order already significantly limits public dissemination and disclosure of a confidential information. (Doc. No. 1348) at 12-13. Thus, for Plaintiff, "the proposed paragraph only bars innocent conduct; improper conduct is already made so by the other thirty-nine paragraphs." Id. At 13. Moreover, Plaintiff argues that it is disproportionately affected by the provision because it intends to rely third party litigation support groups located overseas. Id. At 13-14. Plaintiff argues that these third party vendors are akin to Defendants' "use of librarian, paralegals, contract attorneys, and support personnel in their foreign offices." Id. Lastly, Plaintiff argues that the proposed restrictions are technologically impossible because '[electronic communications know no borders."

After reviewing the standards for a protective order, the district court determined that the burden of proof fell upon defendants as it proposed the more restrictive provision and then denied the defendants' request. In this case, Defendants' proposed provision is more restrictive, and thus the burden of establishing good cause falls on Defendants. The Court finds that "[i]n light of the safeguards already present in the protective order, Defendants have not shown that their additional proposed safeguards are necessary." Document Generation Corp. 2009 WL 1766096, at *3. As plaintiff points out, the Protective Order provides strong protection against the dissemination of confidential information. See e.g., (Doc. No. 148-1 at ¶¶ 18-19) identifying the only persons permitted to receive material marked "confidential," "confidential-outside counsel only," and "highly confidential - source code"); id. at ¶ 19 (identifying protocols for viewing material marked "highly confidential-source code"); id at ¶ 30 (noting that "the recipient of any confidential Material shall maintain such information in a secure and safe place, and shall exercise at least the same degree of care in handling the Confidential Material as is exercised by the recipient with respect to its own Confidential Material and to confidential information of a similar nature...'). Although the Court is mindful of Defendants' concerns regarding the disclosure of confidential or highly confidential information, it is not persuaded that one unfortunate incident that occurred in an unrelated case amounts to a "clearly defined and serious harm" such that all transmission of confidential materials outside of the United Stats should be forbidden. Unfortunately, breaches of protective orders do occur; however, the Court has the ability to impose severe sanctions for noncompliance. See, e.g., Versata Software, Inc. v. SAP America, Inc., et al., Civ. No. 2:07-cv-153, Doc NO. 572, slip. Op. at 13 (E.D. Tex. Sept. 9, 2011)). Thus, the court declines to adopt Defendants' proposal.

Although the district court denied the requested provision, it did require that any person located outside of the United States review the protective order, agree in writing to abide by it and submit in writing to the jurisdiction of the district court. While the court declines to adopt the specific provisions advocated by Defendants, the Court nevertheless encourages the parties to meet and confer to develop additional safeguards to ensure that confidential material delivered to third party vendors receives adequate protection. The Court notes that Plaintiff itself and its domestic counsel could potentially be sanctioned for failing to comply with the provisions of a Court entered protective order. Moreover, the parties should include at least the following provisions in the protective order to safe guard the overseas treatment of the parties Protected Material. Prior to receiving any Protected Material, a person located outside of the Untied States shall (1) review the court's protective order in this case, (2) agree in writing to abide by the terms of the Protective Order, and (3) submit in writing to the undersigns jurisdiction for the purpose of resolve any issues that may arise concerning the protective order, including the ability and willingness to personally appear before the undersigned.

Eon Corp. IP Holdings, LLC v. Landis+Gyr Inc., et al., Case No. 6:11-CV-317 (E.D. Tex. June 12, 2012)