April 18, 2011
LES Insights
By John C. Paul; D. Brian Kacedon; Susan Y. Tull
Authored by D. Brian Kacedon, John C. Paul, and Susan Y. Tull
In U.S. courts, there is a presumption that the substance of proceedings in front of the court should be available to the public. Frequently, however, parties to a litigation need the ability to use confidential business information to prove their cases. This creates a tension between allowing parties to make their case with the best available information without losing the confidentiality of that information, and the public interest in having the judiciary's work available for the public.
There are avenues, however, for litigants to protect their confidential information. Specifically, a party in a federal court action may seek a protective order to protect certain classes of information from disclosure. Under a protective order, a party typically may file a document entirely under seal to prevent public disclosure, or may mark portions as confidential and then file both sealed and public versions. Given these protections, parties sometimes exhibit a tendency to overuse confidentiality designations, effectively preventing disclosure of information that does not truly require protection. This tendency can become especially strong when cases involve license agreements or other transactional documents. A recent order from the Court of Appeals for Federal Circuit, however, emphasizes the danger in abusing confidentiality designations.
In Miscellaneous Docket No. 976,1 the Federal Circuit sanctioned counsel for Sun Pharmaceutical Industries, Ltd. and Caraco Pharmaceutical Laboratories, Ltd. (collectively "Sun") for improperly designating portions of its appellate brief as confidential. The Federal Circuit asked counsel for Sun to explain its excessive confidentiality designations, and, not satisfied with the response, then sanctioned counsel. The Federal Circuit held that confidentiality designations for case citations, quotations, and descriptions of the law were excessive and violated the Court's procedural rules.
In Order No. 976, the dispute centered around the interpretation of license and settlement agreements between the parties, Sanofi-Aventis U.S. LLC ("Sanofi") and Sun. In 2007, Sanofi had sued Sun, among others, for patent infringement. By mid-2009, Sanofi and Sun had settled and entered into a license agreement, which included certain "At-Risk Launch" provisions. Specifically, these provisions allowed Sun to market the accused products only if another entity-including the other named defendants-entered and remained in the market. If the district court ordered the other defendants to exit the market, Sun had to cease any marketing efforts.
Shortly after entering into the agreement, the court entered summary judgment of non-infringement. Sanofi, however, refused to deliver an executed version of the settlement documents to Sun, and the district court never entered a consent judgment. Sanofi then entered into settlement agreements with the other defendants and the court entered a consent judgment between those parties. The district court then granted Sanofi's motion to enter a revised consent judgment against Sun, the terms being substantially similar to those entered into with the other defendants.
Sun appealed the revised consent judgment to the Federal Circuit, arguing that the terms of the revised consent judgment were inconsistent with the agreement between Sanofi and Sun. The Federal Circuit issued a non-precedential opinion that the relevant section of the license agreement was ambiguous, vacating and remanding to the district court to resolve the ambiguity.
In the appeal brief, both parties marked as confidential discussion of various aspects of the settlement documents. During oral argument, the panel of judges questioned whether such confidentiality markings were appropriate under the relevant rules - Rule 28(d) of the Rules of the Federal Circuit and Rule 26 of the Federal Rules of Civil Procedure. The Court's concern was not that Sun had designated the settlement documents as confidential, but that Sun had also designated nearly its entire argument section, including case citations, quotations from published decisions, and legal arguments.
The Federal Circuit then ordered Sun to show cause as to why it should not be sanctioned. In responding, Sun did not admit to error, but rather attempted to justify its extensive confidentiality designations, arguing that citations to case law would have revealed to readers various facts and key terms related to the settlement documents.
The Federal Circuit disagreed, citing the strong, though not absolute, common law presumption favoring public access to court proceedings. The Court reasoned that Federal Rule of Civil Procedure 26(c)(1) is consistent with the common law presumption, permitting courts to issue, for good cause, limited protective orders to prevent the disclosure of certain protected information. Although none of the Federal Rules of Appellate Procedure deal directly with confidentiality markings, Federal Circuit Rule 28(d) permits parties to mark information in briefs as confidential only if the material is "subject to confidentiality mandated by statute or to a judicial or administrative protective order."
The Federal Circuit did not question the confidentiality designations on the settlement documents, but rather those for case citations, case quotations, and legal argument. As the Court noted, the triggering event for the settlement documents-a final court decision-could not properly be designated as confidential. Because the existence and nature of the triggering event was publicly disclosed in the consent judgment, legal argument pertaining to the triggering event could also not be designated confidential, regardless of the designation of the settlement documents.
The Court remarked that Sun's confidentiality designations were so extreme as to render the non-confidential version of the brief incomprehensible: "The action of Sun's counsel bespeaks an improper casual approach to confidentiality markings that ignores the requirements of public access, deprives the public of necessary information, and hampers [the] court's consideration and opinion writing."
Accordingly, the Federal Circuit found that Sun violated Federal Circuit Rule 28(d) regarding confidentiality markings. Pursuant to Federal Rule of Appellate Procedure 46(c), which permits the Court to discipline an attorney who practices before it for failure to comply with any court rule, the Federal Circuit sanctioned counsel for Sun personally in the amount of $1,000.
1 Order No. 976: http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-m976%20order.pdf.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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