Microsoft Corporation v. Hon Hai Precision Industry Co., Ltd.

District Court, N.D. California·Decided August 20, 2020·No. 5:19-cv-01279·Unknown

Opinion

NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

MICROSOFT CORPORATION, et al., Case No. 19-CV-01279-LHK

Plaintiffs, ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO v. SEAL WITHOUT PREJUDICE

HON HAI PRECISION INDUSTRY CO., Re: Dkt. Nos. 243, 244, 249, 251, 256 LTD., Defendant.

This case concerns Plaintiffs Microsoft Corporation’s and Microsoft Licensing GP’s (“Microsoft’s”) suit for breach of contract and Defendant Hon Hai Precision Industry Co., Ltd.’s (“Hon Hai’s) counterclaims for breach of the implied covenant of good faith and fair dealing, fraudulent inducement, and negligent misrepresentation. Before the Court are the parties’ administrative motions to seal portions of Microsoft’s and Hon Hai’s motions for summary judgment, Microsoft’s and Hon Hai’s oppositions, and Microsoft’s reply. ECF Nos. 243, 244, 249, 251, 256. The parties’ administrative motions to seal also seek to seal related exhibits. “Historically, courts have recognized a ‘general right to inspect and copy public records and documents, including judicial records and documents.’” Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (quoting Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 & n.7 (1978)). Thus, when considering a sealing request, “a strong presumption in favor of access is the starting point.” Id. (internal quotation marks omitted). Parties seeking to seal judicial records relating to motions that are “more than tangentially related to the underlying cause of action,” Ctr. for Auto Safety v. Chrysler Grp., 809 F.3d 1092, 1099 (9th Cir. 2016), bear the burden of overcoming the presumption with “compelling reasons supported by specific factual findings” that outweigh the general history of access and the public policies favoring disclosure, Kamakana, 447 F.3d at 1178–79. By contrast, records attached to motions that are “not related, or only tangentially related, to the merits of a case” are not subject to the strong presumption of access. Ctr. for Auto Safety, 809 F.3d at 1099; see also Kamakana, 447 F.3d at 1179 (“[T]he public has less of a need for access to court records attached only to non- dispositive motions because those documents are often unrelated, or only tangentially related, to the underlying cause of action.”) (internal quotation marks omitted). Accordingly, parties moving to seal records attached to motions unrelated or only tangentially related to the merits of a case must meet the lower “good cause” standard of Rule 26(c) of the Federal Rules of Civil Procedure. Ctr. for Auto Safety, 809 F.3d at 1098–99; Kamakana, 447 F.3d at 1179–80. In addition, parties moving to seal documents must comply with the procedures established by Civil Local Rule 79-5. Pursuant to that rule, a sealing order is appropriate only upon a request that establishes the document is “sealable,” or “privileged, protectable as a trade secret or otherwise entitled to protection under the law.” Civ. L.R. 79-5(b). “The request must be narrowly tailored to seek sealing only of sealable material, and must conform with Civil L.R. 79-5(d).” Id. Civil Local Rule 79-5(d), in turn, requires the submitting party to attach a “declaration establishing that the document sought to be filed under seal, or portions thereof, are sealable,” a “proposed order that is narrowly tailored to seal only the sealable material,” and a proposed order that “lists in table format each document or portion thereof that is sought to be sealed,” as well as an “unredacted version of the document” that “indicate[s], by highlighting or other clear method, the portions of the document that have been omitted from the redacted version.” Id. Microsoft and Hon Hai agree that the instant motions to seal are subject to the compelling reasons standard. The Court agrees, as motions for summary judgment are more than tangentially related to the underlying causes of action. The compelling reasons standard therefore applies. Compelling reasons justifying the sealing of court records generally exist “when such ‘court files might have become a vehicle for improper purposes,’ such as the use of records to gratify private spite, promote public scandal, circulate libelous statements, or release trade secrets.” Id. at 1179 (quoting Nixon, 435 U.S. at 598). However, “[t]he 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.” Id. The Court now addresses the substance of the instant sealing motions in the order in which they were filed. A. Hon Hai’s Motion to Seal Portions of Its Motion For Partial Summary Judgment and Exhibits 1–3 In Support Thereof (ECF No. 243) Hon Hai first seeks to seal portions of its motion for partial summary judgment and Exhibits 1–3 in support thereof. ECF No. 243. The Court holds that Hon Hai’s motion for partial summary judgment at page 2, line 19 is sealable because it recites a damages figure based on royalty rates and pricing terms. “[P]ricing terms, royalty rates, and guaranteed minimum payment terms” of patent licensing agreements have been deemed sealable trade secrets. In re Elec. Arts, Inc., 298 Fed. App’x 568, 569 (9th Cir. 2008). The Court holds that Exhibit 1 is not sealable in its entirety. Exhibit 1 contains pages from the deposition transcript of Juan Gonzalez III, which in turn include royalty calculations and alleged amounts owed to Microsoft by Hon Hai. These portions of the deposition transcript are sealable. However, Hon Hai also cites to the Gonzalez Deposition in its motion for partial summary judgment to establish the deadlines for Hon Hai to submit its royalty reports. See ECF No. 242 (“Hon Hai MSJ”) at 1. Thus, this provision is relevant to the public’s understanding of the judicial process. See Valley Broad. Co. v. U.S. Dist. Ct. for Dist. of Nev., 798 F.2d 1289, 1294 (9th Cir. 1986) (presumption of public access to judicial records grounded in need to promote “the public’s understanding of the judicial process and of significant public events”). Therefore, Exhibit 1 cannot be sealed in its entirety, and Hon Hai must file requests that are “narrowly tailored to seek sealing only of sealable material.” N.D. Cal. Civ. L.R. 79-5(b). The Court also holds that Exhibit 2 cannot be sealed in its entirety. Exhibit 2 is an excerpt of an email chain between Microsoft and Hon Hai. Microsoft designated Exhibit 2 “CONFIDENTIAL” in its entirety, and Hon Hai claims that this email chain contains confidential information entitled to trade secret protection. Again, the problem with Hon Hai’s request to seal is that Hon Hai seeks to seal Exhibit 2 in its entirety, even as Hon Hai acknowledges that Hon Hai quotes from this document in its motion for partial summary judgment and those quotations are unredacted. ECF No. 243 at 3. Furthermore, though Microsoft designated Exhibit 2 “CONFIDENTIAL,” Civil Local Rule 79-5(d)(1)(A) explains that “[r]eference to a stipulation or protective order that allows a party to designate certain documents as confidential is not sufficient to establish that a document, or portions thereof, are sealable.” Accordingly, though portions of Exhibit 2 may indeed be sealable as protectable trade secrets, Exhibit 2 cannot be sealed in its entirety. The Court holds that Exhibit 3 is sealable in its entirety. Exhibit 3 is a small, one-page excerpt from Microsoft’s damages expert’s supplemental expert report. Exhibit 3 contains a single table replete with confidential trade secret information concerning royalty rates and pricing terms. As a result, the Court holds that Exhibit

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