In this patent infringement action, the parties filed a joint motion for a stipulated protective order where they agreed that they could designate certain documents and information produced in the case as “Confidential” or “Highly Confidential – Trial Counsels’ Eyes Only.” The protective order also provided that the confidential information could only be used for the action. The plaintiff, Static Media, designed certain testimony and exhibits from various deposition as Confidential or Highly Confidential, particularly pertaining to a licensing and royalty agreement and Static Media’s sales and revenue information.
The inventory of the patent-in-suit subsequently sent a letter to OJ Commerce alleging infringement of the patent-in-suit. Counsel for OJ Commerce then contacted the counsel for Leader regarding the pending action Static Media had filed against Leader. Leader and OJ Commerce then decided to enter into a joint defense group (“JDG”) where they agreed to work like a group of mutually retained outside counsel for the purpose of common defense and to work together to promote a common joint interest.
After Static Media filed suit against OJ Commerce in the Southern District of Florida, Leader and OJ Commerce executed a joint defense agreement (“JDA”) and Leader’s counsel shared Static Media’s confidential information with counsel for OJ Commerce pursuant to the JDA.
During settlement discussions between Static Media and OJ Commerce, Static Media learned of the disclosure of the confidential information and then moved to have Leader and its counsel found in contempt of court for filing the protective order.
Leader opposed the motion arguing that OJ Commerce’s counsel as permitted to access the confidential information because he was providing consulting services as part of the joint defense agreement and that OJ Commerce’s counsel had agreed to comply with the protective order. Leader also argued that there was no harm from the disclosure because OJ Commerce would have been entitled to the same materials during discovery in the pending case in Florida.
The district court began its analysis by noting that: a protective order is not a “paper tiger” and will be enforced in accordance with Fed. R. Civ. P. 37(b)(2), which allows for the imposition of sanctions for a party’s failure to obey a discovery order. Frazier v. Layne Christensen Co., No. 04-C-315-C, 2005 WL 372253, at *4 (W.D. Wis. Feb. 11, 2005). See also Intelligraphics, Inc. v. Marvell Semiconductor, Inc., 2009 WL 10695131, at *3 (N.D. Cal. Jan. 29, 2009) (applying Rule 37 to protective orders). Sanctions may include “treating as contempt of court the failure to obey any order.” Fed. R. Civ. P. 37(b)(2)(A)(vii); GQ Sand, LLC v. Range Mgmt. Sys., LLC, 278 F. Supp. 3d 1115, 1123 (W.D. Wis. 2017) (holding defense attorneys in civil contempt for violating protective order by using confidential materials for a purpose unrelated to the lawsuit). In addition, Rule 37(b)(2)(C) requires that “the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.”
The district court then found that paragraph 3 of the protective order unequivocally states that all confidential information “shall be used solely for the purpose of this action,” and that disclosures are limited to those persons identified in paragraph 4. Paragraph 4(f) and 5 discuss the release of information to outside consultants and experts, but those provisions also make clear that any such services must be furnished “in this action.” OJ Commerce’s attorney admitted that he used the confidential information he received from Leader to bolster OJ Commerce’s defense in the Florida litigation, and he made those intentions clear to Leader’s counsel before entering the JDA.
Static Media also pointed out that the “joint defense” or “common interest” doctrine on which Leader relies “is an exception to the rule that no privilege attaches to communications between a client and an attorney in the presence of a third person” and “extends the attorney-client privilege to otherwise non-confidential communications in limited circumstances.” United States v. BDO Seidman, LLP, 492 F.3d 806, 815 (7th Cir. 2007). See also Integra Bank Corp. v. Fid. & Deposit Co. of Maryland, 2014 WL 116292, at *4 (S.D. Ind. Jan. 10, 2014) (quoting same and holding “joint defense privilege . . . applies when a non-party sharing the client’s interest is a party to a confidential communication between an attorney and client”). The district court concluded that “[t]he confidential depositions, exhibits, and licensing agreement filed by Static Media in this court are not Leader’s attorney-client communications or work product and cannot be protected under the JDA between Leader and OJ Commerce under any conceivable interpretation of the common interest or joint defense doctrine. These documents were designated as confidential or highly confidential by Static Media and filed under seal in this case. Moreover, the JDA is a private contract between Leader and OJ Commerce, and its terms cannot supersede, modify, or amend the protective order entered in this case. It is illogical, unreasonable and self-serving for Leader to contend that it can unilaterally disclose Static Media’s confidential information from this case to a third party so long as Leader agrees to do so under the terms of a JDA.”
The district court also rejected Leader’s “no harm, no foul” defense. “This is not a close call. Leader was at fault and it acted willfully and in bad faith by disclosing confidential and highly confidential information to third parties in violation of the protective order.”
Accordingly, the district court found Leader and its attorneys in contempt of court and determined to assess a fine and cost shifting pursuant to Rule 37(b)(2)[c] as relief.
Static Media LLC v. Leader Accessories LLC, Case No. 18-cv-330-wmc (W.D. Wisc. Dec. 24, 2019)
The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.