Philips North America LLC v. Global Medical Imaging, LLC

District Court, N.D. Illinois·Decided November 17, 2022·No. 1:21-cv-03615·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

PHILIPS NORTH AMERICA LLC, et al., ) ) Plaintiffs, ) ) v. ) No. 21 C 3615 ) GLOBAL MEDICAL IMAGING, LLC, et al., ) Magistrate Judge Finnegan ) Defendants. )

ORDER Plaintiffs Philips North America LLC, Koninklijke Philips N.V., and Philips India Ltd. (“Plaintiffs”) have moved for a protective order governing the use of confidential information. (Doc. 45). Defendants Global Medical Imaging, LLC d/b/a Avante Ultrasound, Avante Health Solutions f/k/a Jordan Health Products, LLC, and Jordan Industries International, LLC (“Defendants”) agree that a protective order is appropriate; however, the parties are unable to resolve disputes related to certain procedures for (1) giving designated in-house counsel access to highly confidential information; and (2) conducting source code inspections. For reasons set forth in this Order, the Court grants Plaintiffs’ motion. DISCUSSION I. Good Cause The party moving for a protective order is required to show that good cause exists to enter the protective order. FED. R. CIV. P. 26(c). “Good cause . . . generally signifies a sound basis or legitimate need to take judicial action.” Hobley v. Chicago Police Commander Burge, 225 F.R.D. 221, 224 (N.D. Ill. 2004). Here, the parties agree that a protective order should be entered and that, as competitors, they “should not have access to each other’s competitively sensitive information” and are best served by a multi-tiered order designating documents as either “Confidential,” “Highly Confidential,” or “Highly Confidential – Source Code.” (Doc. 46, at 6; Doc. 55, at 6). Such protective orders are

standard in cases involving trade secrets, and the Court finds good cause for the entry of a protective order to shield the parties’ confidential information. II. In-House Counsel’s Access to Highly Confidential Information A. Agreed Process in Protective Order The parties agree that one designated in-house counsel may have access to materials designated Highly Confidential. (See Doc. 46, at 7; Doc. 55, at 11). They also agree on the process to be followed before access is granted to that counsel. Initially, a party must make a request to the opposing party to provide access, indicating (in writing) the full name of the designated in-house counsel and “current and reasonably foreseeable future primary job duties and responsibilities in sufficient detail to determine present or

potential involvement in any Competitive Decision-Making for the medical imaging devices at issue in this lawsuit.” (Doc. 90-5, at ¶ 5(c)(i)) (emphasis added).1 After doing so, the requesting party “may disclose the designated material to the identified in-house counsel unless, within seven (7) days of delivering the request, the Party receives a written objection from the designator providing reasonably detailed grounds for the objection.” (Id. at ¶ 5(c)(ii)).2 If an objection is made, and the requesting party opts to

1 Clean and red-lined copies of various versions of the Protective Order are attached as exhibits to a joint status report. (Doc. 90). The version referenced in this order is a redline of Plaintiffs’ proposed protective order against Defendants’ proposed protective order identifying the provisions in dispute. (Doc. 90-5). 2 Defendants’ version of the Protective Order adds the word “reasonably” before the words “detailed grounds.” (Doc. 90-5, at ¶ 5(c)(ii)). It appears Plaintiffs have agreed to this modest change since their challenge it, the parties must meet and confer in an effort to resolve the objection. If they are unable to do so, the designated in-house counsel “shall not receive any Highly Confidential material until the Court resolves the dispute.” (Id. at ¶ 5(c)(iii)).3 B. Competitive Decision-Making

Despite agreeing to the above process, the parties disagree about whether (and how) to define the term “Competitive Decision-Making” referenced in paragraph 5 of the Protective Order. As Plaintiffs argue, “competitive decision making is a term of art” and what constitutes such decision-making here depends on the “specific issues in the case and the proposed designated in house counsel’s duties and responsibilities ‘in light of similar or corresponding information about a competitor.’” (Doc. 46, at 7) (citing U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468, n.3 (Fed. Cir. 1984)). In U.S. Steel, the Federal Circuit considered an appeal of an order denying in- house counsel access to confidential information based solely on counsel’s in-house position due to the perceived “greater risk of inadvertent disclosure within the corporate

setting.” 730 F.2d at 1467. The lower court had entered the order after concluding that it was “humanly impossible to control the inadvertent disclosure of some of [the highly confidential] information in any prolonged working relationship” given the great quantity of “extremely potent” information that was “intermixed with nonconfidential information[.]” Id.

motion did not address it, and the Court sees no basis for them to object. The final Protective Order submitted for entry by the Court should include this change. 3 The Court construes this to mean that if the parties cannot resolve the objection, the designated in-house counsel “shall not receive any Highly Confidential material until [and unless] the Court resolves the dispute [and allows that counsel to receive such material.”] The final Protective Order submitted for entry by the Court should include the bracketed words so it is clear that if the Court resolves the dispute in a way that denies designated in-house counsel access to Highly Confidential material, then the receiving party may not provide access. In overturning that order, the Federal Circuit observed that “[w]hether an unacceptable opportunity for inadvertent disclosure exists … must be determined … by the facts on a counsel-by-counsel basis, and cannot be determined solely by giving controlling weight to the classification of counsel as in-house rather than retained.” Id. at

1468. To determine the extent of the risk, courts must therefore consider “the factual circumstances surrounding each individual counsel’s activities, association, and relationship with a party, whether counsel be in-house or retained . . .” Id. In assessing this, the U.S. Steel court further indicated that a key inquiry is whether counsel is involved in competitive decision-making, and explained what it meant by that term: The parties have referred to involvement in “competitive decisionmaking” as a basis for denial of access. The phrase would appear serviceable as shorthand for a counsel’s activities, association, and relationship with a client that are such as to involve counsel’s advice and participation in any or all of the client’s decisions (pricing, product design, etc.) made in light of similar or corresponding information about a competitor.

Id. at 1468, n.3 (emphasis added). See also Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir.1992) (“A crucial factor in the U.S. Steel case was whether in-house counsel was involved in ‘competitive decisionmaking[.]’”); DSM Desotech, Inc. v. Momentive Specialty Chemicals, Inc., No. 2:15-CV-70, 2016 WL 8193590, at *8 (S.D. Ohio May 31, 2016) (counsel’s status as a “competitive decisionmaker … is the most critical factor in assessing the risk of inadvertent disclosure.”). The definition of competitive decision-making in U.S. Steel was not meant to be limited to client decisions involving pricing and product design. As the court observed in Cummins-Allison Corp. v. Glory Ltd., No. 02 C 7008, 2003 WL 26620151 (N.D. Ill. Dec. 31, 2003), “[t]he [U.S.

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