Auris Health, Inc. v. Noah Medical Corporation

• Court: District Court, N.D. California
• Decided: September 12, 2023
• Docket: 3:22-cv-08073
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 AURIS HEALTH, INC., et al., Case No. 22-cv-08073-AMO (LJC) Plaintiffs, 8 ORDER GRANTING IN PART AND 9 v. DENYING IN PART MOVING DEFENDANTS’ REQUESTS FOR 10 NOAH MEDICAL CORPORATION, et al., RELIEF IN JOINT STATEMENT NOS. 1 AND 2 AND DENYING AND Defendants. 11 GRANTING ADMIN MOTIONS TO SEAL 12 Re: ECF. Nos. 73, 74, 84, 86 13 Before the Court in this trade secrets case are two discovery disputes set forth in the 14 parties’ Joint Statement Nos. 1 and 2. ECF Nos. 73, 74. Moving Defendants are Noah Medical 15 Corporation (Noah Medical), Enrique Romo, Diana Cardona Ujueta, and Kenneth Nip. Plaintiffs 16 Auris Health, Inc. (Auris), Verb Surgical Inc. (Verb), and Cilag Gmbh International (Cilag) 17 oppose Moving Defendants’ requests for relief. The first dispute concerns Plaintiffs’ responses to 18 an interrogatory that asks them to identify with precision and specificity each alleged trade secret 19 they contend is at issue (Interrogatory No. 1). ECF No. 73. Each Moving Defendant received an 20 identical Interrogatory No. 1. The second dispute concerns several interrogatories served by 21 Moving Defendants on each Plaintiff that purportedly seek information related to elements of 22 Plaintiffs’ Defend Trade Secrets Act (DTSA) cause of action. Plaintiffs contend that these 23 interrogatories impermissibly exceed the 25-interrogatory limit of Federal Rule of Civil Procedure 24 33(a)(1). ECF No. 74. Having read the briefing filed by the parties and carefully considered their 25 arguments, the record in this case, and the relevant legal authority, the Court GRANTS IN PART 26 and DENIES IN PART Moving Defendants’ requests for relief. 27 I. BACKGROUND 1 by former employees of Auris who left the company and began working for Noah Medical. ECF 2 No. 36 (First Amended Complaint, or FAC) ¶ 1.1 Both companies are in the medical robotics 3 field. Id. ¶¶ 2, 5. Noah Medical was founded in 2018 by a former Auris executive who now 4 serves as Noah Medical’s CEO and was Auris’ second employee. Id. ¶¶ 5-6. 5 Plaintiffs have named seven former Auris employees as individual Defendants, including 6 Enrique Romo, Noah Medical’s Vice President of Research and Innovation. Id. ¶ 7. Plaintiffs 7 allege that Romo “had a hand in nearly all aspects of research and development” at Auris during 8 his time there from 2012 to September 2019. Id. ¶ 82. Auris alleges that Romo sent to his 9 personal Gmail account an email with a PowerPoint presentation depicting an endoscopic system 10 developed by his team at Auris, and that he copied to a USB drive “extensive information related 11 to his work at Auris” in the form of presentations, engineering test and lab data, and workshop 12 notes. Id. ¶¶ 89-93. Other named individual Defendants—who allegedly emailed, downloaded, 13 and/or copied thousands of documents containing Auris trade secrets—include Diana Cardona 14 Ujueta, Auris’ former Senior Robotics and Controls Engineer, and Kenneth Nip, Auris’ former 15 Manufacturing Sustaining Engineer Manager, both of whom joined Noah Medical in 2021 and 16 2020, respectively. Id. ¶¶ 110-127, 128-142. 17 Plaintiffs filed suit on December 12, 2022. After Defendants Noah Medical, Nip, Romo, 18 and Cardona Ujueta moved to dismiss the complaint and to compel arbitration, Plaintiffs filed 19 their First Amended Complaint on February 24, 2023. ECF Nos. 29, 30, 36. The FAC added four 20 more former Auris employees as defendants--Leobardo Centeno Contreras, Mouslim Tatarkhanov, 21 Maziyar Keshtgar, and Sarika Pandhare. On February 28, 2023, Plaintiffs served their First Set of 22 Requests for Production on Noah Medical, Nip, Romo, and Cardona Ujueta. ECF No. 93 at 3. 23 On April 6, 2023, the Court denied the motion to compel arbitration (ECF No. 58) and on 24

25 1 The two other plaintiffs in this lawsuit are Verb and Cilag. FAC ¶ 1. Verb was founded in 2015 as a joint venture between Johnson & Johnson (J&J) and Verily Life Sciences. Id. ¶ 3. In 2019, 26 Auris was acquired by Ethicon, Inc., a subsidiary of J&J. Id. ¶ 2. In early 2020, J&J acquired complete ownership of Verb and integrated Verb and Auris, which now operate together within 27 J&J’s Robotics and Digital Solutions business. Id. ¶ 3. Cilag is a wholly owned subsidiary of J&J 1 this same day each Defendant, except for Centeno Contreras, served a First Set of Interrogatories 2 on each Plaintiff—each set consisting of seven interrogatories. ECF No. 85-1.2 Relevant to the 3 pending dispute, Interrogatory No. 1 requested that Plaintiffs:

4 IDENTIFY WITH PRECISION AND SPECIFICITY EACH AND EVERY ALLEGED TRADE SECRET that PLAINTIFF contends 5 DEFENDANT… acquired without PLAINTIFF’s authorization. (“IDENTIFY WITH PRECISION AND SPECIFICITY EACH AND 6 EVERY ALLEGED TRADE SECRET” as used herein means to provide a specific description of each such alleged trade secret, on an 7 individual basis for each such alleged trade secret, in such a manner that the exact identity, scope, boundaries, constitutive elements, and 8 content of each such alleged trade secret are fully disclosed in writing, in contrast to an agglomerated set of conclusory phrases that does not 9 separately list and describe each such alleged trade secret, in contrast to a mere list of documents or file names, and with precision above 10 that required by any applicable pre-discovery trade secret claim identification requirement). 11 12 ECF No. 85-1 at 6. It appears that the seven propounding Defendants each served the same 13 Interrogatory No. 1 on each Plaintiff, modified only to address the alleged trade secret violations 14 that pertained to each party specifically. See e.g., id. at 30, 38, 46. 15 On May 12, 2023, Plaintiffs responded to the interrogatories, asserting various objections, 16 and directing Defendants to Plaintiffs’ forthcoming “trade secret disclosure.” ECF No. 84-1. 17 Thereafter, on May 31, 2023, Plaintiffs served a Pre-Discovery Identification of Alleged Trade 18 Secrets as to Noah Medical, Romo, Cardona Ujueta, and Nip. ECF No. 93 at 3. Less than a 19 month later, on June 23, 2023, the parties filed Joint Statements Nos. 1 and 2 before the presiding 20 judge, who then referred them to the undersigned. ECF Nos. 73, 74, 81. On July 20, 2023, 21 Plaintiffs served an Amended Pre-Discovery Identification of Alleged Trade Secrets as to Noah 22 Medical, Romo, Cardona Ujueta, and Nip, and a Pre-Discovery Identification of Alleged Trade 23 Secrets as to Centeno Contreras, Keshtgar, Tatarkhanov, and Pandhare. ECF No. 93 at 3. 24 Plaintiffs’ May 31 and July 30, 2023 disclosures are collectively referred to as the “Trade Secret 25 Identifications.” 26 The Court set a hearing for oral argument on the disputes and to discuss the parties’ 27 1 discovery schedule. ECF No. 81. Pursuant to the parties’ request, the hearing was continued to 2 August 8, 2023. ECF No. 83. At the hearing counsel for Plaintiffs and moving Defendants 3 presented their arguments but were unable to offer any details regarding a proposed discovery 4 schedule for the case that might balance the competing needs of the parties. The Court indicated 5 its skepticism as to the need for early contention interrogatories and ordered the parties to file a 6 joint statement with additional information regarding the discovery conducted up to that point, 7 including document productions, what discovery remained to be completed, and a jointly proposed 8 schedule that recognized the issues that arise in trade secret cases. ECF No. 92. 9 On August 24, 2023, Plaintiffs, Noah Medical, and all seven individual Defendants filed a 10 Joint Statement addressing their progress on discovery. ECF No. 93. Plaintiffs stated that neither 11 Noah Medical nor any other Defendant, except Romo, had begun production, and no Defendant 12 had produced a single document deriving from their work at Noah.3 Id. at 3-4. Plaintiffs have 13 produced 105,445 pages, of which 101,887 pages are, according to Defendants, reproductions of 14 the same documents that Defendants provided to Plaintiffs prior to the filing of this lawsuit. Id. at 15 4. In addition, the parties proposed a schedule for discovery that involves a sequence of deadlines 16 for narrowing the asserted trade secrets. Id. at 5. On August 31, 2023, the Court held a further 17 hearing on the status of discovery, adopted the parties’ proposed deadlines, and approved their 18 stipulation for the discovery of electronically stored information. ECF Nos. 96, 97. 19 II. LEGAL STANDARD 20 In trade secret cases defining the scope of discovery is widely recognized as being 21 particularly difficult. See Uni-Sys., LLC v. U.S. Tennis Ass’n, No. 17CV147KAMCLP, 2017 22 WL 4081904, *4 (E.D.N.Y. Sept. 13, 2017); Peter S. Menell et al., Trade Secret Case 23 Management Judicial Guide, 2023 WL 4687411, Ch. 1.2.1 (2023). The quandary involved in 24 identifying the trade secrets with the appropriate level of specificity, while also protecting trade 25 secrets throughout the litigation, “often requires the court to assist the parties in customizing the 26 discovery process to . . . facilitate[e] the exchange of sensitive information, often to competing 27 1 business enterprise defendants.” Menell et al., at Ch. 1.2.1. The Court in Social Apps, LLC v. 2 Zynga, Inc. explained the sensitivities inherent in trade secret litigation.

3 The nature of a trade secrets claim is such that pleading is necessarily general. To require more detail would be to force a plaintiff to 4 disclose, in a publicly filed pleading, the very secrets it seeks to protect. However, the countervailing concern is that discovery must 5 be limited to those matters that the plaintiff truly contends are secret. Otherwise the discovery mechanism, and the litigation itself, could 6 become a tool to force a defendant to reveal its own trade secrets in defense against unfounded or specious claims.” 7 8 No. 4:11-CV-04910 YGR, 2012 WL 2203063, at *2 (N.D. Cal. June 14, 2012). 9 Now the Court turns to the rules that govern discovery in federal civil cases, and the use of 10 contention interrogatories as a discovery device. “Parties may obtain discovery regarding any 11 nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs 12 of the case,” considering, among other things, “the importance of the discovery in resolving the 13 issues.” Fed. R. Civ. P. 26(b)(1). Contention interrogatories are governed primarily by Rule 14 33(a)(2):

15 An interrogatory may relate to any matter that may be inquired into under Rule 26(b). An interrogatory is not objectionable merely 16 because it asks for an opinion or contention that relates to fact or the application of law to fact, but the court may order that the 17 interrogatory need not be answered until designated discovery is complete, or until a pretrial conference or some other time. 18 19 “Courts using their Rule 33(a)(2) discretion generally disfavor contention interrogatories 20 asked before discovery is undertaken.” In re eBay Seller Antitrust Litig., No. C07-1882 JF, 2008 21 WL 5212170, at *1 (N.D. Cal. Dec. 11, 2008). “In fact, courts tend to deny contention 22 interrogatories filed before substantial discovery has taken place, but grant them if discovery 23 almost is complete.” Id. Thus, as a general rule, a party moving to compel responses to 24 contention interrogatories at an early stage in litigation must show that the responses would 25 “contribute meaningfully” to one of the following: (1) clarifying the issues in the case; (2) 26 narrowing the scope of the dispute; (3) setting up early settlement discussions; or (4) exposing a 27 substantial basis for a motion under Rule 11 or Rule 56. See In re Convergent Techs. Secs. Litig., 1 “These guidelines are not to be applied rigidly, and so any decision must be made on a 2 case by case basis.” HTC Corp. v. Tech. Props. Ltd., No. C 08-00882 JF, 2011 WL 97787, at *2 3 (N.D. Cal. Jan. 12, 2011); see In re eBay Seller, 2008 WL 5212170, at *1 & n.3 (acknowledging 4 “non-rigid rule.”) The requesting party has the “burden of justification” to overcome the “general 5 policy…to defer propounding and answering contention interrogatories until near the end of the 6 discovery period.” In re Convergent Techs., 108 F.R.D. at 336. 7 III. ADMINISTRATIVE MOTIONS TO SEAL 8 Before resolving the parties’ discovery disputes, the Court will first address two pending 9 administrative motions to file certain material under seal. ECF Nos. 84, 86. 10 After initially reviewing the parties’ Joint Statements Nos. 1 and 2, the Court ordered 11 Plaintiffs “to file under seal a complete copy of their Trade Secret Identification, including any 12 supplements,” and Defendants to “file a complete copy of Interrogatories Nos. 2 through 7, as well 13 as Plaintiffs’ responses…along with an accompanying motion to seal, if necessary to protect 14 confidential information.” ECF No. 81. 15 Defendants filed their Interrogatories Nos. 2 through 7 as well as Plaintiffs’ responses and 16 objections along with an Administrative Motion to Consider Whether Another Party’s Material 17 Should be Sealed. ECF Nos. 85, 85-1, 86. Defendants represented to the Court that Plaintiffs had 18 designated their responses and objections as “Highly Confidential – Attorney’s Eyes Only” 19 pursuant to the parties’ Stipulated Protective Order. ECF No. 86 at 2; see ECF No. 79. As 20 required by Civil Local Rule 79-5(f), Plaintiffs filed a Statement Regarding Sealing in response to 21 Defendants’ motion. ECF No. 88. According to Plaintiffs, when they served their responses and 22 objections on May 12, 2023, the Protective Order was not in place, and at that time they asked that 23 their responses be treated as “Outside Counsel’s Eyes Only” pursuant to an existing agreement on 24 information sharing between the parties. Id. at 2. After the Protective Order was entered, 25 Plaintiffs designated their supplemental responses as “Confidential,” but not their original 26 responses served in May. Id. Plaintiffs’ position is that it is not seeking sealing of the materials 27 filed by Defendants. Id. Accordingly, Defendants’ Administrative Motion to Consider Whether 1 In their response to the Court’s Order, Plaintiffs filed an Administrative Motion to File 2 Under Seal, along with a complete copy of their Trade Secret Identification. ECF No. 86. 3 Plaintiffs argue that “good cause” exists to seal the Trade Secret Identification documents because 4 disclosure could cause them irreparable injury. Id. at 3. For good cause shown, the Court hereby 5 GRANTS Plaintiffs’ Administrative Motion to File Under Seal. 6 IV. JOINT STATEMENT NO. 1 7 Moving Defendants request an order requiring Plaintiffs to further respond to their 8 Interrogatories No. 1, such that “each Plaintiff precisely identify each alleged trade secret it 9 contends is at issue in writing with respect to each Moving Defendant, with precision and 10 specificity, so that the actual contents of each alleged trade secret is divulged.” ECF No. 73 at 2. 11 Moving Defendants contend that Plaintiffs must, at this time, “divulge the actual content 12 comprising each separate alleged trade secret,” so that they can best investigate and prepare their 13 defenses. Id. Moving Defendants state that they need to investigate what is in the public 14 literature, and thus not a trade secret; what it independently developed so there is no 15 misappropriation; and, in particular in this case, what employee-defendants merely possessed in 16 personal drives or email accounts and did not take into Noah Medical. Id. 17 In Joint Statement No. 1, Plaintiffs represent that there are 78 distinct trade secrets,4 and 18 contend that their responses to the Moving Defendants’ Interrogatories Nos. 1 are complete. ECF 19 No. 73 at 4. In support of their position, Plaintiffs have filed a declaration by a medical robotics 20 expert. ECF No. 73-5. The expert, having reviewed Plaintiffs’ amended identification of trade 21 secrets, infra at 3, opines that all 78 trade secrets asserted therein are described with reasonable 22 particularity. Id. at ¶¶ 4, 17. Plaintiffs’ expert also points to the “sufficient particularity” standard 23 and opines that the standard has been met with respect to Trade Secrets Nos. 31, 32, and 37. Id. at 24 ¶¶ 12, 14, 15, 17. 25 Moving Defendants correctly point out that the reasonable particularity standard is a pre- 26

27 4 In the parties’ August 24, 2023 Joint Statement, Plaintiffs refer to 130 trade secrets. ECF 93 at 6. 1 discovery test. ECF No. 73 at 3. The standard does not establish that Plaintiffs have satisfied their 2 obligation, in the course of discovery, to identify the trade secrets. Id. Federal courts have 3 required plaintiffs in federal cases to meet the reasonable particularity standard, deriving from 4 California Code of Civil Procedure Section 2019.210, prior to commencing discovery. 5 InteliClear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 658, n.1 (9th Cir. 2020) (citing 6 Social Apps, 2012 WL 2203063, at *1-3). In contrast, at the discovery phase, the level of detail 7 that a plaintiff must provide in its trade secret disclosures is greater. The Ninth Circuit, reviewing 8 a district court’s grant of summary judgment, applied the reasonable particularity standard to 9 determine whether a jury could be instructed to determine what trade secrets exist. InteliClear, 10 978 F.3d at 657-660. At that stage, “[t]he plaintiff should describe the subject matter of the trade 11 secret with sufficient particularity to separate it from matters of general knowledge in the trade or 12 of special knowledge of those persons . . . skilled in the trade.” Id. at 658. Thus, Plaintiffs’ expert 13 declaration does not support their position that they have completed their trade secret disclosures 14 as to all their asserted trade secrets. 15 However, this shortcoming does not mean that Plaintiffs are obligated to complete their 16 responses to Moving Defendants’ contention interrogatories (Interrogatories No. 1) at this time. 17 The Court is not persuaded that the contention interrogatories, at this stage, meaningfully advance 18 the case. See In re Convergent Techs., 108 F.R.D. at 338–39. The contention interrogatories are 19 directed to each and every alleged trade secret. The parties agree, however, that only a subset of 20 the alleged trade secrets will ultimately go to trial. The contention interrogatories will not 21 meaningfully clarify key issues, narrow the scope of the dispute, or facilitate early settlement or 22 dispositive motion practice. Other discovery tools are better suited to reveal which alleged trade 23 secrets Noah Medical has likely misappropriated and which trade secrets may not have been used 24 by Noah Medical because they remained on the personal devices of the individuals without ever 25 being used. That information is in Defendants’ possession. Yet Noah Medical and the individual 26 defendants, apart from Romo, had not begun its discovery productions as of August 24, 2023. 27 More progress must be made on discovery before Plaintiffs are reasonably required to supplement 1 make significant progress on their productions, the alleged trade secrets that lack merit will very 2 likely become more apparent, and then Interrogatories Nos. 1 will be more useful to clarify or 3 narrow the issues in the case. Moreover, requiring a further response regarding the 78 distinct 4 trade secrets against the original defendants would be disproportionate to the present needs of the 5 case. 6 The limited discussion in Attia v. Google LLC, No. 5:17-cv-06037, 2018 U.S. Dist. LEXIS 7 84196 (N.D. Cal. Jan. 2, 2018) does not counsel a different result. The decision, as reported, does 8 not address the extent to which document production and other discovery had been completed. 9 Here, there are a substantial number of asserted trade secrets, but in Attia, the number of alleged 10 trade secrets may be substantially smaller. Id. at *6. There is insufficient information in Attia to 11 determine that this is a comparable case, and that supplementation of Plaintiffs’ interrogatory 12 responses should be similarly ordered. 13 After the initial hearing on the discovery disputes, the parties submitted a proposed 14 discovery schedule (ECF No. 93 at 5) that illustrated a middle path between Plaintiffs’ claim that 15 their responses to the contention interrogatories were already complete, and Moving Defendants’ 16 claim that they are immediately entitled to specific and precise trade secret disclosures early in the 17 discovery process. In this case, sequencing discovery such that Plaintiffs are required to 18 supplement their responses to the contention interrogatories only after sufficient discovery has 19 been completed does not mean that the Court is necessarily adjudicating the merits question of 20 misappropriation, as Moving Defendants contend. The process of winnowing which trade secrets 21 that will advance and must be identified with sufficient particularity is consistent with the 22 discovery process that the Ninth Circuit has endorsed. In trade secret cases “discovery provides an 23 iterative process where requests between parties lead to a refined and sufficiently particularized 24 identification.” InteliClear, 978 F.3d at 662. 25 Moving Defendants’ request for relief is GRANTED and DENIED in part. No later than 26 December 15, 2023, thirty days after the deadline for substantial production, Plaintiffs shall 27 supplement their responses to Moving Defendants’ Interrogatories No. 1 for the trade secrets 1 V. JOINT STATEMENT NO. 2 2 Moving Defendants request an order requiring Plaintiffs to respond to their Interrogatories 3 Nos. 2 to 7. The interrogatories seek information related to elements of Plaintiffs’ DTSA cause of 4 action. Each interrogatory asks for information specific to each alleged trade secret—who created 5 each trade secret, each third party to whom each trade secret has been delivered, how each 6 Defendant acquired it, how each Defendant used or disclosed it, and what, if anything, Plaintiffs 7 contend each Defendant possesses and has not returned. The parties disagree as to whether the 8 interrogatories contain multiple subparts, given that the interrogatories seek information for each 9 of the trade secrets. 10 Plaintiffs have the more persuasive position that interrogatories seeking information about 11 “each” of multiple things comprise discrete subparts for each of those things. However, the Court 12 recognizes that Moving Defendants may have good cause to seek additional interrogatories 13 beyond the 25-interrogatory limit set forth in Rule 33 of the Federal Rules of Procedure. The 14 challenge is that, at this stage of the litigation, it is unclear which and how many trade secrets 15 Plaintiffs will take to trial. Accordingly, Moving Defendants’ request for relief in Joint Statement 16 No. 2 is GRANTED IN PART and DENIED IN PART. Plaintiffs shall respond to 17 Interrogatories Nos. 2 through 7 to the extent that they know, at this stage of the litigation, that 18 certain trade secrets will be pursued. At the parties’ next meet and confer regarding discovery, 19 Plaintiffs shall indicate to Defendants which trade secrets that they are certain to pursue in this 20 litigation, and, with respect to those trade secrets, the parties shall plan a schedule for Plaintiffs to 21 respond to Interrogatories 2 to 7, and, if necessary, whether the parties are willing to stipulate to 22 additional written interrogatories beyond the ordinary limit. 23 // 24 // 25 // 26 // 27 // i VI. CONCLUSION For the forgoing reasons, Moving Defendants’ requests for relief in Joint Statements Nos. 2 1 and 2 is GRANTED and DENIED IN PART. 3 IT IS SO ORDERED. 4 Dated: 9/12/2023 5 Jo 7 LIBA/). CIXNEROS 8 Unifed StateS Magistrate Judge

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