Cisco Systems, Inc. v. Dexon Computer, Inc.

District Court, N.D. California·Decided September 14, 2023·No. 3:20-cv-04926·Unknown

Opinion

CISCO SYSTEMS, INC., et al., Case No. 20-cv-04926-CRB

Plaintiffs,

ORDER RE: ADMINISTRATIVE v. MOTIONS TO FILE UNDER SEAL

DEXON COMPUTER, INC., et al., Defendants.

Plaintiff Cisco Systems, Inc. (“Cisco”) and Defendant Dexon Computer, Inc. (“Dexon”) have filed many, many administrative motions to seal portions of the parties’ confidential or highly confidential material. This Order addresses the motions to seal that relate to Cisco’s Motion for a Preliminary Injunction (dkt. 202) and Cisco’s Motion for Leave to File a Second Amended Complaint (dkt. 205).1 As more particularly set forth herein, the Court evaluates and resolves each of the parties’ sealing requests in these various motions. I. LEGAL STANDARD A. Good Cause vs. Compelling Reason We must first decide the standard for sealing that applies to Cisco’s motions and the documents underlying them. Courts in the Ninth Circuit apply two standards to determine whether to allow a document supporting a motion to remain under seal: the “compelling reasons” standard, Kamakana, 447 F.3d at 1178, or the “good cause” exception, see Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1213–14 (9th Cir. 2002). Where a motion is “dispositive,” or “more than tangentially related to the merits of a case,” the “compelling reasons” standard applies. Where the motion is “non-dispositive,” or “unrelated, or only tangentially related, to the cause of action,” the “good cause” standard applies. Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1098–1102 (9th Cir. 2016). Dexon contends that, because a preliminary injunction motion is non-dispositive, the Phillips “good cause” standard shall apply, but this argument misunderstands Ninth Circuit precedent on this issue. In Center for Auto Safety, the Ninth Circuit decided precisely the question to be resolved here: What standard should be applied to a preliminary injunction motion which, while not strictly dispositive, was clearly relevant to the merits of the case. 809 F.3d at 1102. The Court concluded that the “compelling reasons” standard should apply because the motion was “more than tangentially related to the merits,” in part because the relief the movant was seeking—“that Chrysler notify its customers that there was a part in their vehicle which could require replacement and be dangerous if it failed”—was one of the aspects of the ultimate relief plaintiffs sought in the action as a whole. Id at 1102. So too here. In its prayer for relief in its complaint, Cisco seeks to enjoin Dexon from selling counterfeit Cisco products; in its motion for a preliminary injunction, Cisco seeks to enjoin Dexon from selling counterfeit Cisco products. It would be difficult to find a motion that is more relevant to the merits than this one. Therefore, any documents put forth in support of that motion—though produced pursuant to a protective order in the Texas Litigation—must meet the more stringent “compelling reasons” standard to remain under seal.2 2 This standard also applies to any request to seal a portion of a complaint. See In re NVIDIA Corp. Derivative Litig., 2008 WL 1859067, at *3 (N.D. Cal. Apr. 23, 2008) (“[A] request to seal all or part of a complaint must clearly meet the ‘compelling reasons’ standard and not the ‘good cause’ standard. While a complaint is not, per se, the actual pleading by which a suit may be B. Applying the “Compelling Reasons” Standard In considering motions to seal, courts recognize “a strong presumption in favor of access is the starting point.” Kamakana, 447 F.3d at 1178 (cleaned up). A request to seal may be supported by compelling reasons if the documents or portions of documents at issue are “sources of business information that might harm a litigant’s competitive standing.” Ctr. for Auto Safety, 809 F.3d at 1097; see also Nixon, 435 U.S. at 598. “The mere fact that the production of records may lead to a litigant's embarrassment, incrimination, or exposure to further litigation will not, without more, compel the court to seal its records.” Kamakana, 447 F.3d at 1179. Confidential business information in the form of “license agreements, financial terms, details of confidential licensing negotiations, and business strategies” can be “compelling reasons” to prevent competitors from leveraging this information to harm the designating parties in future negotiations. See Exeltis USA Inc. v. First Databank, Inc., No. 17-cv-04810-HSG, 2020 WL 2838812, at *1 (N.D. Cal. 2020) (citation omitted); In re Qualcomm Litig., No. 3:17-cv-0108-GPC-MDD, 2017 WL 5176922, at *2 (S.D. Cal. 2017). If publicly disclosing that information would harm a designating party’s competitive standing and divulge terms of confidential contracts or contract negotiations, compelling reasons may exist to seal that information. See FTC v. Qualcomm Inc., No. 17- cv-00220-LHK, 2019 WL 95922, at *3 (N.D. Cal. Jan. 3, 2019). However, the fact that documents are subject to a protective order, or labeled as confidential under a protective order, is not a compelling reason justifying continued sealing of the document if attached to a dispositive motion. Foltz, 331 F.3d at 1136; see also Est. of Nunez by & through Nunez v. Cnty. of San Diego, 386 F. Supp. 3d 1334 (S.D. Cal. 2019) (“[A] party does not satisfy the compelling reasons standard to justify sealing documents merely by labeling them as ‘CONFIDENTIAL.’”). II. DISCUSSION Under the compelling reasons standard, this Court proceeds to balance the interests of the public in access to judicial records against the parties’ interest in sealing those records. Ctr. for Auto Safety, 809 F.3d at 1092. We find that the designating parties have satisfied the compelling reasons standard for some sealing requests but failed for others. As described below, the Court denies the requests in whole or in part where either Cisco or Dexon did not meet its burden to show that the at-issue portion could reveal competitively damaging information sufficient to outweigh the public’s presumption of public access to judicial records. Kamakana, 447 F.3d at 1178–79; Epic Games, Inc., 2021 WL 1925460, at *1, 4. For example, the Court denies several requests where the designated material contains nothing more than conclusory allegations with no business information. Where the requests are overbroad, the Court orders the parties to tailor the redactions to the competitively damaging information and unseal the rest. A. Cisco’s Second Amended Complaint (Dkt. 245) Cisco filed an administrative motion to seal confidential Dexon material in its second amended complaint. Dkt. 244. Dexon seeks sealing of fifty-two of those statements.3 Dkt. 252. The Court’s rulings on these requests are as follows: Portions of Materials Designating Reasons Proffered Ruling Requested to be Sealed Party for Sealing Portions of ¶ 33 Dexon Proprietary Business GRANTED. Record, containing sales information Portions of ¶ 35 Dexon Proprietary Business DENIED. Dexon did Record, containing not meet its burden of supplier information showing competitive harm. Portions of ¶ 37 Dexon Confidential Client GRANTED only as Communications consistent with the redactions proposed in Dkt. 208 at 2, lines 23–28. Entirety of ¶ 38 Dexon Confidential Client GRANTED only as Communications consistent with the

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Cisco Systems, Inc. v. Dexon Computer, Inc., (N.D. Cal. 2023).

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