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Audio of Oral Argument on Apple v. Samsung at March 26 Hearing on Public's Right to Know ~pj
Wednesday, March 27 2013 @ 05:33 PM EDT

Yesterday was the hearing in the appeal by both Apple and Samsung of the district court's orders to unseal more documents used in the trial in Apple I. A group of journalists were granted the right to appear as amici and argue the public's right to access. Here's where you can find the audio from the hearing. It's in two parts, but part two is very brief.

At issue was what should go into the public record of this litigation. And the biggest question discussed was, what is a trade secret? It for sure is any secret business process or information that isn't generally known, like the recipe for Coke, that your business builds the business around, the publication of which would ruin the business. Its value is its secrecy. But is the line the parties are trying to draw in this case broader than that central definition, so that they are seeking to cover pretty much any business information? There is a difference between a trade secret and a business secret, so which is which in this case? Specifically, does the law protect all historical company marketing research and financial information, as the parties hope the court will decide? It's not a silly issue they are raising. Imagine if you knew that seeking legal redress in the courts meant all your business secrets now become public knowledge? Might it hold you back from seeking the courts' help? If so, that would be detrimental. So there is a line. The question is, where is it in this case?

Reminder -- We are still prior art searching: I'll tell you some of the highlights, but please don't forget that we are still searching for prior art on Nokia's patents it claims WebRTC may infringe, specifically the VP8 video encoding scheme proposed as part of this standard, right here, and if you are free to do so, please contribute your expertise. The goal is to make the proprietary side say, "Curses, foiled again" and help to ensure that the free and open Internet can't be severely restricted by such patents. So the more prior art we find, the better. A Groklaw member sent me this this article in the Harvard Business Review, "Feeling Stumped? Innovation Software Can Help" and it is about a tool called Analogy Finder, a program that mines the U.S. Patent Database for analogous solutions. Here's the demo. Can some of you give it a whirl? Here's how you get going:

You start with two words that describe what you are looking for. ... From here, the program will take the two words and basically find all the patents that are relevant to the original goal — however that goal is expressed. It will then allow you to narrow and order the results in various ways. The program will even take into account what areas you are an expert in so you don't waste time looking at solutions that you would already have thought of.
Let's try it out and if you find anything, please post it on the article where the prior art already is under way, not on this article, or email me.

On the hearing, the panel at the Federal Circuit hearing the matter was made up of three judges, Sharon Prost, William C. Bryson, and Kathleen M. O'Malley, the newest member of the three, appointed by President Obama in 2010. So, two women and one man, and that means it's hard to know which female judge is speaking unless the lawyer addresses her by name.

William Lee of Wilmer Cutler argued first, for Apple. This was followed by Victoria F. Maroulis of Quinn Emanuel for Samsung. And then the two lawyers for The Reporters Committee for Freedom of the Press, Gregg P. Leslie, and for the First Amendment Coalition, Eric Parnes of Hughes Hubbard, presented their arguments.

Here's the docket notice:

03/26/2013 - 104 - Submitted after ORAL ARGUMENT by Mr. Gregg Paul Leslie for Dow Jones & Company, Inc., The Reporters Committee for Freedom of the Press, American Society of News Editors, Bloomberg L.P., Gannett Co., Inc., The New York Times Company, The Washington Post and Society of Professional Journalists, Mr. Eric S. Parnes for The First Amendment Coalition, William F. Lee for Apple Inc. and Mrs. Victoria Fishman Maroulis, Esq. for Samsung Electronics America, Inc., Samsung Electronics Co., Ltd. and Samsung Telecommunications America, LLC. Panel: Prost, Bryson and O'Malley. [61667]
William Lee, for Apple:

Mr. Lee concentrates on customer survey information from outside the US, which it views as a trade secret. The US survey information, Apple concedes, could be made public, since it was the US materials that Samsung relied on at trial. It was Samsung that introduced the documents, not Apple, he points out. Apple wants 488 pages kept sealed out of 500 or so pages from 9 surveys conducted. The female judge asks if the judge relied on anything in the 488 pages, and Mr. Lee says he'll confirm but he believes not. As he's talking, another attorney for Apple, Andrew J. Danford, checks and confirms. The arguments are found in Apple's Supplemental Brief [PDF], where it wrote:

First, Apple’s market research is a trade secret, which controlling Ninth Circuit precedent has consistently recognized as a compelling reason for sealing. Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006) (“In general, ‘compelling reasons’ sufficient to outweigh the public’s interest in disclosure and justify sealing court records exist when such ‘court files might have become a vehicle for improper purposes,’ such as the use of records to ... release trade secrets.” (quoting Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 598 (1978))). Although others may collect their own market research, the unique market research that Apple conducts—as well as the conclusions that Apple draws from that data—cannot be replicated by anyone other than Apple and is closely intertwined with Apple’s future product development and marketing strategies. As a result, public disclosure of this information would cause serious competitive injury to Apple, which far outweighs any minimal interest in these materials to facilitate the public’s understanding of this case.
The Nixon case is too old to be readily available online for free, but here's Judge Lucy Koh ruling in an unrelated 2012 case, explaining how the Ninth Circuit views the public's right of access, and she references the Nixon case; Kamakana is here.

Victoria Maroulis for Samsung:

Samsung's Ms. Maroulis next argues that Samsung has even more reason to keep its materials private than Apple, in that the district court judge, the Hon. Lucy Koh, failed to separately analyze Samsung's showing of the harm of disclosure to Samsung, that she only did that for Apple. Neither company can show prior harm of losing trade secrets to the public in other situations, she notes, in a real-world example, because both companies are very careful to keep trade secrets secret, she says. She says that, I suppose, because the way trade secrets law goes, if you are careless, you are less likely to have a court protect you. She also says that it isn't just a question of unsealing materials related to dispositive motions, and one of the female judges points out that it could be broader, that the public can't understand what is happening in a case unless they follow more than just the dispositive motions. Dispositive here means it brings an end to the case or the issue. And the analysis of the harm is different for dispositive and nondispositive motions.

Is there something that Samsung pointed out to the court that was different from Apple, Judge Bryson asks? Ms. Maroulis says the steps taken to protect the secrecy are different for the two companies. But what about harm? Is there a difference in Samsung's harm? One of Samsung's witnesses said that if he had a competitor's equivalent information as what Judge Koh seeks to unseal, he could figure out plenty to undercut their position, she says.

One female judge asks if Judge Koh denied sealing all of Samsung's nondispositive motions to seal, from the list being discussed, and the answer is yes, and I got the impression that the judge was surprised.

Both parties seem to imply, but don't outright say, that the other party introduced into the case the materials that they now seek to keep private.

Gregg P. Leslie for the Reporters Committee for Freedom of the Press:

Then the journalists get their time to speak (at around the 40:00 mark of part one). The lawyer for the Reporters Committee for Freedom of the Press, Gregg P. Leslie, is interrupted very quickly, and the question he is asked is whether readers are looking for investment information or what is the public's interest? Is it in the companies or in how the decision was made in court to rule in favor of one or the other? He says it's varied, but it includes how the courts work, how courts allow one company to end up with a billion-dollar damages ruling.

He is asked, are you asking for a more expansive rule? There is a common law right of access and there is a First Amendment right of access, he says. The public wants to know how the court runs. But why is a particular case interesting to the public, he is asked? If a very popular product is taken off the market, he responds, the public certainly wants to know how a court came to that decision. So where is the line, he is asked, between the dispositive and nondispositive issues? He says, that's not the definition. They are different in that there is a good cause showing required for one and a compelling interest in the other, but he says the public has an interest in both. The question is, is the evidence tangential to the merits of the case? He cites several nondispositive motions cases and one where there was discovery not attached to any motion or even filed. The Ninth Circuit hasn't given us a good test for materials related to nondispositive motions, but they are still important to the case and relate to how the case is decided. It's about access all along, he says. He suggests looking to the Second Circuit, which has a continuum it looks at -- if it is irrelevant, then there is a lesser standard of access. But if there is a fundamental determination in the case, those materials considered by the court should be public, even if the matter isn't the ultimate disposition of the overall case.

Why would the public care about all that, one female judge asks? He says the common law standard only works when the judge makes a specific decision in the fact pattern in the case before the judge.

So the company in litigation stands naked before the public, then, she follows up? They get to see everything? That's just the cost of doing business? They can argue for sealing, he says.

May I interject that the public cares a lot more than anyone in that room seemed to address -- we want to know how to avoid being the victims of patent infringement allegations. And we may know things that are helpful to the public discussion, technical knowledge that isn't always on display in courts of law. But I digress.

The judges seemed to be concerned that this would be broader than what they were thinking, that it should be only if the judge or the party uses certain material in the trial, not if the judge considers it without mentioning it in any orders. Mr. Leslie says it's up to a court's discretion, but the assumption, albeit one that can be overcome, should be and is access for the public.

Then they get to the important question of what is a trade secret, anyway? He argues that not everything is a trade secret, just because it's a business method or process. Judge Bryson says he seems to be describing trade secrets as only things like the recipe for Coke, that it sounds very narrow. If revealing something would harm a party's competitive standing, it could be a trade secret, couldn't it? It's along a continuum, Mr. Leslie says. He references a case, Nixon.

Eric Parnes for the First Amendment Coalition:

The First Amendment Coalition's lawyer, Eric Parnes of Hughes Hubbard, then has his turn. He begins with a stipulation filed, in which the parties agreed on what would be used at trial, but he argues that earlier motions were not covered by that stipulation and order and therefore must be ruled on separately. All of the motions to strike were denied, but that is irrelevant to the Ninth Circuit analysis. He cites cases where evidence attached to nondispositive motions were unsealed.

He says the labels aren't the issue so much as the question of whether the material is only tangential to the case. Would nondispositive motions materials then be subject to the compelling reason standard, he is asked by one of the female judges? She asks, in civil cases, what *doesn't* relate in some way to the ultimate disposition of the case? If that is the ruler's edge, where do you draw the line for sealing anything at all? What if a motion only sought maybe the use or not of particular evidence? The judge would have to decide based on the facts at the time, he responds. There are some hard calls, he acknowledges, but it's not necessary for the public right to access for it to be a motion that decides the entire case.

One of the female judges asks about investors -- are they part of the public interest or do they represent an independent interest? She means that it's not about learning the judicial process if your interest is in investing. It's easy to see there are some things that are of no real consequences to the way the legal case is handled but could still be of great interest to investors, say the readers of the Wall Street Journal, she posits. It's not just interest in the legal process, is it? Mr. Parnes says, no, they are part of the public, and how the process affects their rights is important to them, as to all of the public.

All the questions about what is the public interest is putting the cart before the horse, he says. The real question is related to abuse of discretion. Did the district court get it right or not? Have the parties shown compelling reasons to seal?

A female judge asks about the documents before the court, saying that Judge Koh never called them trade secrets. So is there a necessary analysis of whether they are trade secrets? There's no finding saying they are not trade secrets. Mr. Parnes says no, but what the parties seek to seal are not trade secrets, just business papers. Judge Koh did label some things trade secrets, and the rest, historical financial data, she just said didn't meet the standard of compelling reasons. He cites the definition of trade secret, a process or device for *continuous* use in the operation of the business the revelation of which could be damaging if known by competitors. It isn't the same as just ephemeral business information that happened in the past. Apple said it has no process for deciding such pricing. It's not using these past materials over and over, in other words.

If it were present information, it wouldn't be a trade secret, the judge asks? There could be competitive harm, yes, Mr. Parnes answers, without being a trade secret or it could be a trade secret. The parties can show the competitive harm and seek a ruling, but the judge said they didn't make that showing.

Mr. Lee, Rebuttal:

Mr. Lee then stands for rebuttal. Apple doesn't argue there is a blanket exception for trade secrets, he says. The judge analyzes it, and the standard for review of her analysis is abuse of discretion. She never found that the pricing information is not considered a trade secret. The products are on the market still. But if she found you didn't make that showing of harm, he is asked? He addresses specific reasons he thinks Judge Koh's analysis was flawed. As one example, of three he cites, he says Judge Koh said that Apple would have to be using predatory pricing for the financial information to be useful to competitors. He says that's not so. It would be useful if you are competing at all. Also the court ruled that others could get the same data by just doing their own surveys. But they could not. They don't know Apple's customers, or what questions they asked, or what conclusions Apple reached and included in the materials.

Judge Bryson asks what is the best way to look at this proceeding? As a collateral to the merits order, he says, and "if it's not decided, it's over." That is his suggestion. And if it's going to become the rule that anything that gets filed in a patent litigation becomes subject to public disclosure, Mr. Lee says, that is going to have a huge impact on people with legitimate intellectual property concerns, and they won't address intellectual property rights and that would harm all of us.

Well, some of us might argue that it would be an intense relief if companies would stop using the courts to handle such matters. Such harm we could endure. But he has a point.

Ms. Maroulis, Rebuttal: They get to rebut also, because they are responding to amici. Samsung's Ms. Maroulis says there is no dispute that financial data is a trade secret, as per the Electronic Arts case and many others. Amici can't legitimately argue it isn't, she says. There are rules for sealing, precisely because some data *needs* to be sealed, if it meets the compelling reason standard. Knowing the specific profit margins in the documents and similar financial information gives competitors an unearned advantage, while the public learns nothing about how the courts handled this matter. She reinforces what Mr. Lee said about the chilling effect of Judge Koh's orders to unseal, unless the appeals court acts to overrule, and she concurs that this is a collateral order.

Personally, I found Mr. Lee the most persuasive on this day. That may be because I believe so strongly in privacy rights for individuals, but whatever the reason, he persuaded me. We'll see how he did with the Federal Circuit panel, but I'm guessing he persuaded at least two of them, and that's all Apple and Samsung need.


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