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Microsoft Files Motion in Apple v. Samsung to Hide Patent License Agreement Terms ~pj
Friday, July 27 2012 @ 09:49 AM EDT

There's been a fascinating development in the Apple v. Samsung litigation. It is possible we'll get to see the cross-license agreement between Microsoft and Samsung that the parties announced in this press release [PDF], which mentioned that it also covered Android. If we get to see it, it would be the first time we get to see exactly what are the terms of such an agreement, because Microsoft always insists on an NDA.

Of course, Microsoft's hair is on fire about it, and so it's asking the court [PDF] to seal it:

As explained in the accompanying declaration of Tanya Moore, Microsoft's General Manager of Outbound Licensing, Exhibits 3A and 3B to the Teece Report contain sensitive confidential and proprietary business information from the Confidential Agreement between Microsoft and Samsung. The Teece Report summarizes sensitive portions of the Confidential Agreement, including the licensed technology, term of the license, royalty rates, and payment information, among other things. (Moore Decl. at ¶¶ 3-4).
Here's the attorney declaration in support [PDF] of the Microsoft motion. This particular judge, Hon. Lucy Koh, has been insisting on making things public when possible, even spanking Samsung publicly for asking to seal materials and for not applying in the right way, writing "This standard may be exacting, but it is necessary in light of the Ninth Circuit's direction that public access must be respected unless truly unwarranted."

I am so, so hoping, against all hope, that she means it and doesn't allow Microsoft to hide this information.

Here's the full docket entry from the judge on sealing where she spanked Samsung:

1115 - Filed & Entered: 06/21/2012
ORDER DENYING [1109] MOTION TO STAY ORDER DENYING ADMINISTRATIVE MOTIONS TO FILE UNDER SEAL, FOR EXTENSIONS OF TIME, AND TO SEAL DOCUMENTS entered by Magistrate Judge Paul Singh Grewal. Even as it acknowledges that it did not file any timely declaration pursuant to Civ. L.R. 79-5(d) justifying the sealing of the documents at issue in the underlying motion, Samsung now asks this court to seal many of those same documents without complying--again-- with that same rule. Rule 79-5(d) is explicit in requiring that any proposed order be "narrowly tailored" to avoid depriving the public of access to material that it is entitled to see. Samsung's request fails this test. In particular, sections of various exhibits that give rise to no discernible proprietary interest at all are requested to be kept from the public eye. See, e.g. Docket No. 799, Ex. 5 at 9 (noting Samsung's sponsorships of the NFL and NASCAR and community activities); Ex. 9 at 2 (announcing vacation plans); and Ex. 12 at 5 (quoting well-known management expert Peter Drucker). This standard may be exacting, but it is necessary in light of the Ninth Circuit's direction that public access must be respected unless truly unwarranted. Given Samsung's repeated disregard for the rule, this court's previous guidance to Samsung in response to its request to seal transcripts, and the pressing need to turn to other, more substantial disputes in this case, the court must decline the invitation to give Samsung yet another chance. (This is a text-only entry generated by the court. There is no document associated with this entry.)
In fact a number of third parties have also filed emergency motions, RIM and Motorola and Qualcomm most recently, because Samsung has been notifying them that they intend to use the licenses the parties signed for Samsung's FRAND patents at trial, so everyone is going nuts about their trade secrets. Here's Motorola's filing [PDF]. So Microsoft isn't alone in wanting to keep these exhibits sealed.

One of Samsung's defenses to Apple's contention that it is asking too much for its standards patents is that others have paid them for their FRAND patents the same royalty it asked Apple for, so I suspect that is the context.

Usually, courts give more privacy to third parties, so Microsoft may be able to keep its secrets, but here's hoping the judge is as strict with Microsoft as she has been with Samsung. I say hope, because I doubt it. However, Reuters, which asked for leave to intervene and was granted it, has asked the court to deny all the third-party motions, so you never know. [Note that Justia has made all the filings in this dispute available to the public for free, so have at it, by all means!]

I seriously want to see those license terms, and I'd go so far as to suggest that the public has a right to know what those terms are, particularly future victims of Microsoft's patent strategy, and I know you want to know this too, because we've all heard the rumors that Microsoft licenses on very, very low royalties, just to be able to say to the world that Android/Linux folks are paying Microsoft for its patents. I'd love to know if that is true. Plus, if Microsoft paid for Samsung's FRAND patents the fee Samsung is asking Apple for, on what basis would Microsoft argue in its litigation against Motorola, that FRAND patents should be paid for at a greatly reduced royalty?

There was another development in the trial, regarding Samsung asking the court [PDF] for an adverse inference jury instruction regarding Apple not saving emails, similar to the one just granted to Apple against Samsung. FOSSPatents is calling it ridiculous, but it's not, and I'll do a separate article explaining exactly why it's not. The short version is this: In the earlier order, the magistrate told Samsung it could file this motion. When a judge tells a party that it can file such a motion, it would be malpractice not to file it, in my view. FOSSPatents seems not to fully understand how the US legal system works, so perhaps that is the explanation. But I don't want you to be misled, so I'll take the time to explain all about it in the next article.

Reuters' objections are the following, leaving off the full header in the interests of time, but may I take a moment to say, Thank you, Reuters! Here's the text of the filing:

***************

THIRD PARTY REUTERS AMERICA
LLC’S OPPOSITION TO VARIOUS
THIRD PARTY MOTIONS TO SEAL

I. INTRODUCTION

Various third parties have filed administrative motions to seal, primarily based upon the claim that they have license agreements with either Apple or Samsung (or both) whose terms should remain confidential. Well-settled rules govern the disposition of these motions and, we respectfully submit, call for their denial.

II. NON-PARTY RELIANCE UPON PROTECTIVE ORDER OR CONFIDENTIALITY AGREEMENT IS
UNREASONABLE AND NOT A COMPELLING REASON TO SEAL.

First, as the Ninth Circuit explained in Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1183 (9th Cir. 2006), “we have held that a non-party’s reliance on a blanket protective order is unreasonable and is not a ‘compelling reason’ that rebuts the presumption of access.” Thus, even if the third parties negotiated contracts with Apple or Samsung providing for confidentiality, those agreements cannot and do not control in the arena of a public courtroom. “[T]he claimed reliance on the order is not a ‘compelling reason’ that rebuts the presumption of access.” (Id. at 1183; see also Littlejohn v. BIC Corporation, 851 F.2d 673, 676 (3rd Cir. 1988).

III. ALLEGED CONFIDENTIALITY IS NOT WITHOUT MORE A TRADE SECRET AND
NOT A COMPELLING REASON TO SEAL.

Second, talismanic incantations that information is a trade secret are not enough to meet the “compelling reasons” standard required to rebut the presumption of openness. As the Third Circuit explained in Littlejohn v. BIC Corporation, 851 F.2d 673, 685, “documents do not contain trade secrets merely because they are confidential.” Thus, the mere fact that a line from an expert’s exhibit may contain a financial term from a licensing arrangement that a third party would prefer to keep under wraps is not enough to meet the “compelling reasons” standard required for sealing.

As the Third Circuit in Littlejohn explained, in terms entirely consistent with the Ninth Circuit’s Kamakana decision, “The presumption of public access to evidentiary materials is strong.” (851 F.2d at 684.) In that case, the district court rejected arguments that portions of the judicial record contained trade secret or confidential business information (id. at 685), and the Third Circuit affirmed. (Id. at 685.) The Third Circuit explained: “The affidavit does support BIC’s contention that the documents contain confidential information which might injure its commercial standing. But documents do not contain trade secrets merely because they are confidential. [Citation.] Under these circumstances, we cannot find that the district court’s finding of fact is clearly erroneous.” (Ibid.)

In Littlejohn, the Third Circuit drew the line where this Court drew it on July 18 in telling the parties that while “third party source code” might merit sealing, the rest of the trial would be open and no other sealing would be allowed. (July 18 Transcript at 87-89.) The Third Circuit explained, “Further, non-trade secret but confidential business information is not entitled to the same level of protection from disclosure as trade secret information. A private interest in secrecy has not been weighed heavily once the information has been used at trial....” (851 F.2d at 685.) The Third Circuit rejected an argument, identical to the one asserted by Apple, Samsung and the third parties here, that “disclosure ‘would work a clearly defined and serious injury to its interests.’ The injury that BIC describes is an adverse effect on its disposable lighter sales by competitive use of the information and a potential loss in its capital stock value.” (Ibid.) The Court explained that the presumption of openness is “not overcome by the proprietary interest of present stockholders in not losing stock value or the interests of upper-level management in escaping embarrassment.” (Ibid.)

The same conclusion follows here as to assertions by such behemoth companies as Nokia and IBM. These companies have not demonstrated that “a clearly defined and serious injury” is likely to result from disclosure of license terms. (851 F.2d at 685.) Their license terms may or may not be confidential but they are not trade secrets like the so-called “secret formula of Coke” so often used to describe that term.

Indeed, their attempt to seal such information is similar to Apple’s assertion that the margin on iPhone products can be sealed: that information cannot be deemed a secret since Apple’s own expert has publicly filed a declaration disclosing both Apple’s $33 billion in revenues from the sale of iPhone products over a two-year period and its margins (49 to 58 percent) on the sale of iPhones. (Document 1372, ¶ 6; see Ex. A hereto.) This kind of information is not sealable.

IV. INSUFFICIENT SHOWING THAT TERMS ARE CURRENT, AND
INSUFFICIENT SHOWING OF HARM.

Third, the parties and third parties have failed to show, amid their conclusory recitations of harm, that their license terms, or the portions they want to seal, are truly current. As the Third Circuit explained in Leucadia v. Applied Extrusion Technologies Inc., 998 F.2d 157, 167 (3rd Cir. 1993), “In determining whether any document or portion thereof merits protection from disclosure, the district court should be guided by our prior advice that continued sealing must be based on ‘current evidence to show how public dissemination of the pertinent materials now would cause the competitive harm they claim.”1 Whatever amount of money that companies received in the past from license agreements that may or may not be in effect now do not merit sealing.

It also bears mention that the redactions sought by third parties would seem to disclose only total numbers and not more sensitive information. Thus, even if competitors were able to look at such information they would probably not glean the competitive advantage feared by the third parties since they would not necessarily be able to compare apples to apples.

V. CLOSING THE COURTROOM, AS ONE THIRD PARTY SUGGESTS, WOULD
BE IMPERMISSIBLE.

One third party, Interdigital, has gone so far as to request that the courtroom be closed during any discussion of its license agreement (Document 1334 at 4:22). This request should be summarily denied.

To put things in perspective, we quote the Seventh Circuit in Hicklin Engineering, L. C. v. R. J. Bartell, 439 F.3d 346 (9th Cir. 2006):

“What happens in federal courts is presumptively open to public scrutiny. Judges deliberate in private but issue public decisions after public arguments based on public records. The political branches of government claim legitimacy by election, judges by reason. Any step that withdraws an element of the judicial process from public view makes the ensuing decision look more like fiat and requires rigorous justification. The Supreme Court issues public opinions in all cases, even those said to involve state secrets. See New York Times Co. v. United States, 403 U. S. 713 (1971). A district court issued public opinions in a case dealing with construction plans for hydrogen bombs. United States v. Progressive, Inc., 467 F. Supp. 990 (W. D. Wis. 1979).”
If decisions about state secrets and hydrogen bombs are rendered in public, so should the presentation of evidence about a license agreement.

VI. CONCLUSION

The California Supreme Court in NBC Subsidiary v. Superior Court, 20 Cal. 4th 1178, 1211 (1999), observed, “[A] trial court is a public governmental institution. Litigants certainly anticipate, upon submitting their disputes for resolution in a public court, before a state-appointed or publicly elected judge, that the proceedings in their case will be adjudicated in public. . . .’ [a]n individual or corporate entity involved as a party to a civil case is entitled to a fair trial, not a private one.’” That observation holds true not just as to the multi-billion-dollar tussle between Apple and Samsung, but as to the third parties who do business with them. The parties have invoked a U. S. District court to resolve their dispute, and by doing so they act with full knowledge that they and those with whom they do business cannot insist upon confidentiality.

The third parties’ reliance upon agreements they may have made with Apple or Samsung for confidentiality is not a compelling reason to seal, and their license terms do not rise to the level of trade secrets meriting sealing. The third party motions should be denied.

Dated: July 26, 2012

By: /s/ Karl Olson
Karl Olson (SBN 104760)
RAM, OLSON, CEREGHINO & KOPCZYNSKI
[address, phone, fax, email]
Attorneys for Reuters America, LLC

__________
1 Interdigital seeks to seal a Patent License Agreement between it and Samsung which was entered into in 2008. (Document 1134 at 3:7-9.) Four years are light years in the technology field.


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