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Profil Institut Fur Stoffwechselforschung Gmbh v. Prosciento, Inc.

United States District Court, S.D. California

July 3, 2017

PROFIL INSTITUT FUR STOFFWECHSELFORSCHUNG GMBH, Plaintiff,
v.
PROSCIENTO, INC., Defendant. AND RELATED COUNTERCLAIMS

          ORDER RE: PROPOSED PROTECTIVE ORDER [ECF NO. 64]

          Hon. Barbara L. Major United States Magistrate Judge.

         On June 12, 2017, the parties advised the Court that they had a dispute concerning the Protective Order that they were negotiating. The Court instructed the parties to lodge their letter briefs before the Telephonic Case Management Conference (“TCMC”) scheduled for June 14, 2017. See ECF No. 65. The parties lodged the briefs as instructed by the Court but, due to the large number of disputes, the Court was not able to resolve the issues during the TCMC so the Court took the matter under submission. The Court has reviewed and considered Plaintiff's letter brief concerning the Proposed Protective Order [Exh. A attached to this order (“Pl.'s Mot.”)], Defendant's “Memorandum in Support of ProSciento's Proposed Protective Order” [ECF No. 64 (“Def.'s Mot.”)], the Proposed Protective Order (“Proposed P.O.”) with the parties' proposed edits [Def.'s. Mot., Exh. B], Plaintiff's “Memorandum of Points and Authorities in Opposition to ProSciento's Proposed Protective Order” [ECF No. 70 (“Pl.'s Oppo.”)], and Defendant's “Reply in Support of ProSciento's Proposed Protective Order” [ECF No. 72 (“Def.'s Reply”)].

         DISCUSSION

         A. Federal Rules of Civil Procedure v. Foreign Data Privacy Laws [Paragraphs 1(g); 21(f); 21(g)]

         The parties disagree on the applicability of foreign data privacy laws. Defendant seeks to include a clause in Paragraph 1(g) stating that foreign data privacy laws “shall not be asserted as[] grounds to deny or refuse to search for or produce any relevant discovery in these Actions, as the parties' discovery obligations shall be governed by the United States Federal Rules of Civil Procedure.” See Proposed P.O. at 43. Defendant also wants to add Paragraph 21(f), requiring that all disputes regarding the order “be governed by California law, without regard to California choice-of-law provisions, ” and 21(g), requiring that the Federal Rules of Civil Procedure “govern the Actions.” See id. at 62-63.

         Plaintiff opposes the language proposed by Defendant. Pl.'s Mot. at 3-5. Plaintiff argues that as a German company it is required to comply with European Union (“EU”) and German data privacy laws. Id. at 1; Pl.'s Oppo. at 20. Plaintiff alleges that European data privacy laws impose strict guidelines for the collection and transfer of personal data outside the EU and broadly define “personal data” as “any information relating to an identified or identifiable natural person.” Pl.'s Mot. at 3 (citing Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 (“Directive”)); Pl.'s Oppo. at 20. Plaintiff further contends that noncompliance with these laws can result in serious liability, which may include criminal penalties. Pl.'s Mot. At 3; Pl.'s Oppo. at 20. Plaintiff explains that there are three relevant exceptions for the legal transfer of personal data from Germany to the United States: (1) with consent of the data subject, (2) where all persons receiving transferred data agree to be bound by the Standard Contractual Clauses, and (3) where the data transfer is necessary for the establishment, exercise, or defense of legal claims. Pl.'s Oppo. at 21; ECF NO. 70-1, Declaration of Mr. Andreas Endemann In Support of Profil's Opposition to ProSciento's Proposed Protective Order (“Endemann Decl.”) at 4.

         With respect to consent, Plaintiff states that it expects to obtain consent from all its key personnel, but is unsure it will be able to obtain consent “from all parties, including third-parties, located in the EU that may be implicated by [Defendant's] discovery requests.” Pl.'s Oppo. at 21. Plaintiff also warns that some of its employees may withdraw or refuse to give consent. Id. As to the third exception, Plaintiff asserts that personal data can be transferred if necessary for the establishment, exercise, or defense of legal claims and personal data is only “necessary” if it is the least severe means of achieving the purpose. Id. at 22; Edemann Decl. at 6. Plaintiff also explains that, pursuant to the second exception, it believes it is compelled by its obligations under EU law to ask the Court to require all recipients of personal data to be bound by the Standard Contractual Clauses. Pl.'s Oppo. at 22-23; Edemann Decl. at 5.

         Plaintiff also argues that Federal Rule of Civil Procedure (“FRCP”) 26 vests federal courts with discretion to limit discovery on the ground of international comity. Pl.'s Mot. at 4; Pl.'s Oppo. at 18. Plaintiff states that a court conducting a comity analysis is required to balance several factors related to the specific request and information at issue, including, inter alia, the importance of the documents to the litigation, the degree of specificity of the request, whether the information originated in the United States, the availability of alternative means of securing the information, and the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located. Pl.'s Mot. at 4-5; Pl.'s Oppo. at 19. Plaintiff argues that in this case and at this stage of litigation, such analysis is premature because “there is no actual request at issue.” Pl.'s Mot. at 4-5; see Pl.'s Oppo. at 19-20.

         Defendant argues that the Federal Rules should govern this action. Def.'s Mot. at 3-10; Def.'s Reply at 3-5. Defendant asserts that Plaintiff waived foreign procedures by suing in the U.S. under the U.S. law. Def.'s Mot. at 4-6; Def.'s Reply at 3. Defendant further contends that even if foreign law applied, Plaintiff has not demonstrated that foreign law bars production of relevant discovery in this case. Def.'s Mot. at 6-10; Def.'s Reply at 3-5. Defendant argues in support that (1) even under foreign law, exceptions allow Plaintiff to transfer purportedly protected “personal data, ” (2) courts consistently have held that the Federal Rules of Civil Procedure do not conflict with EU and German data protection laws and have compelled German parties to produce discovery pursuant to the FRCP because compliance with U.S. discovery obligations does not create a genuine risk of liability under EU or German law, and (3) comity favors the application of the FRCP in light of the U.S.' overriding interest in ensuring fair play for U.S. companies sued in the U.S. Def.'s Mot. at 6-10; Def.'s Reply at 3-5. Defendant emphasizes that it is not seeking the discovery of “personal data” that Plaintiff alleges is protected, and claims that it is entitled to discovery that “incidentally contains personal data, including relevant emails and text messages, which by virtue of their ‘to' and ‘from' fields, could theoretically fall under the aegis of foreign data protection laws.” Def.'s Mot. at 4 (emphasis in original) (citing Directive, Art. 2(a) (protecting “any information relating to an identified or identifiable natural person”).

         Because the issue currently before the Court is the appropriate language for a protective order governing the disclosure of confidential information and not a dispute regarding specific discovery, the Court declines to adopt the broad language requested by Defendant. In paragraph 1(g), the Court will include the following language: “Such rules shall not be asserted as grounds to refuse to search for any relevant discovery in these Actions.” While the Court declines to include in the protective order the additional language requested by Defendant, the Court notes that the Federal Rules of Civil Procedure govern discovery and case management in this action. If any party disagrees with respect to any specific piece or type of discovery, the party must file an appropriate motion seeking a modification or exemption. Moreover, if Plaintiff believes that it cannot produce relevant documents or information due to a privilege or other requirement, Plaintiff must notify Defendant in writing of the documents or information being withheld and the basis for the withholding. See Paragraphs 9(b) & 17. If Defendant disagrees, the parties must meet and confer in good faith in an effort to resolve the matter and if they are unable to do so, counsel must comply with the Court's Chamber Rules regarding discovery disputes.

         B. Information that May be Designated as “Highly Confidential-Outside Counsel's Eyes Only” (“OCEO”) [Paragraphs 9(a) & (b)]

         (1) Trade Secrets

         Plaintiff proposes to include the following language in Paragraph 9(a): “A Producing Party may designate Discovery Material as ‘HIGHLY CONFIDENTIAL-OUTSIDE COUNSEL'S EYES ONLY' if the Producing Party believes in good faith that it contains or reflects trade secret(s), as defined in the Uniform Trade Secrets Act and California Civil Code 3426-3426.11, or that it contains or reflects information that is extremely confidential and/or sensitive in nature such that the disclosure of such Discovery Material is likely to cause economic harm or significant competitive disadvantage to the Producing Party.” Proposed P.O. at 51-52; Pl.'s Oppo. at 9-11. Alternatively, Plaintiff requests the Court adopt language allowing the designation “. . . only if, in the good faith belief of such party and its counsel, the information is among that considered to be most sensitive by the party, including but not limited to trade secret or other confidential research, development, financial or other commercial information.” Pl.'s Oppo. at 10. Defendant proposes to define “Highly Confidential-OCEO” information as limited to “trade secret(s), as defined in the Uniform Trade Secrets Act and California Civil Code 3426-3426.11” that have not been alleged to have been misappropriated by the other Party. Proposed P.O. at 51-52; Def.'s Mot. at 10-13. Defendant also proposes adding the following language: “To resolve any doubt: information that a party alleges was misappropriated will, if designated at all, be designated as ‘Confidential, ' or ‘Highly Confidential, ' but may not be designated ‘Highly Confidential-Outside Counsel's Eyes Only.” Id.

         Plaintiff contends that Defendant's proposed language is too narrow and would expose Plaintiff to competitive harm if it were forced to disclose extremely sensitive information to Defendant. Pl.'s Mot. at 5; Pl.'s Oppo. at 10. Plaintiff further asserts that its proposed language tracks the Court's Model Protective Order for patent cases (“Model P.O.”), Paragraph 2.8, which states: “‘HIGHLY CONFIDENTIAL-ATTORNEYS' EYES ONLY' information or Items: extremely sensitive ‘Confidential Information or Items, ' disclosure of which to another Party or Non-Party would create a substantial risk of serious harm that could not be avoided by less restrictive means.'” Pl.'s Mot. at 5; Pl.'s Oppo. at 10. Plaintiff contends that the parties are direct competitors, and that courts have recognized the danger of sharing trade secret information with employees of a direct competitor. Pl.'s Mot. at 6. Plaintiff asserts that Defendant's proposed language would allow Defendant's employees, including competitive decision makers, to access Plaintiff's “extremely valuable” trade secrets and deprive Plaintiff of its competitive advantage. Pl.'s Mot. at 6; see Pl.'s Oppo. at 12. Plaintiff further contends that Defendant may no longer have some of the allegedly misappropriated trade secrets in its possession, and may misuse trade secrets not already in its possession to compete against Plaintiff. Pl.'s Mot. at 6; ...


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