IBM thanks the United States Patent and Trademark Office ("Office") for the opportunity to comment on the additional discussion of TTAB's Standard Protective Order ("SPO"). We have provided our answers and comments to the posted questions below.
1. Please describe the entity or individual submitting the comments (i.e., a law firm, a private practice attorney, a corporation or other business entity, in-house counsel, a trade association, a legal or policy association, professor/academia, other).
Answers and Comments:
IBM Corporation, founded in 1911, is a leading US multinational information technology company with more than 380,000 employees serving clients in over 170 countries.
2. The SPO currently provides for the protection of information and documents designated as (1) Confidential or (2) Confidential – For Attorneys' Eyes Only (trade secret/ commercially sensitive) (AEO). Under the SPO, AEO material is only available for review by outside counsel, not in-house counsel. Absent agreement by the parties or Board order, in-house counsel currently cannot access AEO information and documents. Should the SPO be amended so that the default is to allow for in-house counsel access to AEO information and documents? YES or NO, and please explain the reason for your response.
Answers and Comments:
We believe that the SPO should not be amended to allow default access for in-house counsel to AEO information and documents. Rather, the current model, by which the AEO designation does not inherently allow for in-house counsel access, should be preserved. This configuration best protects party trade secrets and other commercially sensitive information (hereinafter "AEO information"), while still allowing for in-house counsel access in situations where the integrity of such AEO information may be truly preserved on a case-by-case analysis, which is fully in line with the ruling in the U.S. Steel Corp. v. United States, 730 F.2d 1465, 1469 (Fed. Cir. 1984).
Although there is a longstanding legal tradition to grant public rights to freely access and inspect all inter partes TTAB proceeding files, such right of public access is not absolute. TTAB may prevent the public and opposing parties the right to access certain categories of confidential information, if the risk of harm from improper disclosure and use of such information is exceedingly high. AEO information is frequently at issue in TTAB proceedings where the involved parties are competitors in the market and the trademark disputes center around marketing plans, customer information, secret product development and R&D plans in order to determine the likelihood of confusion. Therefore, as indicated from the previous version and the current version of its Standard Protective Order, TTAB has traditionally presumed that AEO information presents a significantly high risk of improper disclosure and use by competitors, and thus has provided the most heightened protection as default. Specifically, the TTAB SPO does not mandate disclosure of AEO information to in-house counsel and corporate executives of a business competitor, especially where that information is fully available to outside counsel.
Similarly, the United States International Trade Commission has taken a similar approach, and has also been historically reluctant to release the highly sensitive confidential information to adversary management and in-house counsel. As indicated in Akzo N.V. v. U.S. Int'l Trade Commission, 808 F.2d 1471, 1 USPQ2d 1241, 1248 (Fed. Cir. 1986): "Protection of confidential information is crucial to the Commission's ability to carry out its statutory responsibilities. In addition, review after discovery and an evidentiary hearing are completed would provide an inadequate remedy. The inappropriate release of confidential information can never be fully remedied. The Commission has traditionally been reluctant to release confidential information where not absolutely necessary…The Commission has resolved the difficult and controversial question of the role of in-house counsel by taking a conservative position on the side of optimum shielding of business information. Obviously, where confidential material is disclosed to an employee of a competitor, the risk of the competitor's obtaining an unfair business advantage may be substantially increased." See also General Electric Co. v. U.S. Nuclear Regulatory Com., 750 F.2d 1394, 1401-02 (7th Cir. 1984) (stating that once trade secret information is disclosed the potential harm cannot be protected against); Adventist Health Sys./Sunbelt Health Care Corp. v. Trude, 880 S.W. 2d 539 (Ky. 1994) (Once the information is furnished it cannot be recalled).
Considering the significant risk of uncoverable harm that may be caused from improper disclosure of the AEO information to employees of competitors (including in-house personnel) involved in TTAB proceedings, we therefore support the traditional and conservative presumptive position taken by TTAB, to deny in-house counsel access to AEO information without appropriate reasons. This, in our opinion, represents a reasonable balancing between the public's need to access as well as the parties' need for participation by its in-house personnel, and the parties' need to preserve the complete protection of AEO information.
In addition, this is especially true because the default proposition adopted by TTAB does not constitute a per se ban on in-house counsel access to AEO information. According to the SPO, in-house counsel access to AEO information can be granted upon an appropriate showing and approval by the Board, which is in full line with the decision from U.S. Steel Corp. v. U.S., 730 F.2d 1465 (Fed. Cir. 1984), where the court held that an attorney's status as in-house counsel alone cannot justify a ban on access to Attorney Eyes Only Documents. Instead, a counsel-by-counsel analysis should be considered based on the specific facts. It is true that the status of in-house counsel alone does not tell the full story of a corporate setup, and the realities of an office.
It is possible that in some circumstances where in-house counsel may be adequately sequestered, the significant risk of improper use of the AEO information by the in-house counsel's employer may be mitigated, and thus the in-house personnel can be granted limited and exceptional access along with any protective measure that the TTAB deems necessary to fully protect the AEO information.
In nature, in-house counsel is differently situated than outside counsel. In-house counsels typically work out of corporate offices, which belong to the company and may be accessed freely by other company personnel. It is common for in-house counsels to hold roles in the company that extend beyond offering legal advice, and may advise other personnel within the company on competitive business decisions. They may participate in meetings where non-legal or legal support personnel are present. Their common working devices, such as computers, mobile phones and tablets, as well as the company networks and servers they access in order to perform their work, are likely owned and controlled by the company, with the company retaining the full right to access these devices, including any stored information should the company decide to do so, with or without the employee's cooperation. It is noted that U.S Steel Corp was decided in 1984 and therefore does not fully contend with the technological realities of a modern workplace and nor consider the significant risk of disclosure presented by in-house counsel as employees in the information technology age. As stated in In re Dental Supplies Antitrust Litig., 2017 U.S. Dist. LEXIS 44591, *19-21, 2017 WL 1154995 (E.D.N.Y. 2017), the court in U.S. Steel "did not have to grapple with the security of information electronically sent to or stored in the integrated I.T. systems commonly used by in-house counsel."
Of course, this does not describe every in-house counsel situation. It is clear, however, that the question as to the type of office-set up and circumstances surrounding in-house counsel's employment within the corporation is a fact-specific determination. As suggested in Article: In-house Counsel Access to Confidential Information Produced During Discovery in Intellectual Property Litigation, 27 J. Marshall L. Rev. 657, 681, such fact-specific analysis requires looking at counsel's official title, as well as the organizational setup and whether it is a closely-held corporation. It also requires discerning the extent to which in-house counsel advises on issues related to competitive decision making, such as to pricing, vendor selection, sales or marketing, and/or whether in-house counsel is actively involved in product design, patent work and/or secret R&D plans. Id. at 682 to 684. In Sanofi-Aventis U.S. LLC v. Breckenridge Pharmaceutical, Inc., Nos. 15-289 & 15-1836 (D.N.J. 2016), the court held that sufficient measures were put in place to separate the in-house counsel, Vroom, from his peers and competitive decision-making so as to entitle him to review the highly confidential information designated as AEO at issue. The court found that Vroom did not and could not participate in competitive decision making because he was not involved in pricing, product design, patent prosecution or deciding which brand-name drug products the company pursues or with whom the company partners. Id. Moreover, the court found that Vroom has been functionally, geographically, and technologically isolated from his peers because his computer could not be accessed by the company and, vice versa, he could not access the company's systems since, apart from approximately 15 days per year, he worked either from home or at the office of outside law firms. Id. In order to fully protect the AEO information from inadvertent disclosure to others from the company, the court further ordered additional protective measures, including prohibiting the in-house counsel from reviewing, storing, or accessing any designated AEO information while at any company facility, that separate computer facilities had to be continuously maintained for in-house counsel so that he did not have access to the company's network drives, and vice versa. Id.
As discussed above, since the relevant questions center around the technological and business setup of an in-house counsel's role and office, as well as the safe-guards that has been and/or can be put in place to prevent improper disclosure of the AEO information to the competitor employer, it is the in-house counsel who is best situated to demonstrate the burden of proof. They possess the internal information that can be used to answer these factual questions, and are thus best suited to bring forth information to the Board regarding the company's structure and their own roles within it.
We therefore support maintaining the current presumption against in-house counsel access to "Attorney's Eyes Only" documents, considering the significant high risk of improper disclosure and use by the competitor employer, with in-house counsel being responsible for bearing the burden of proof that they work in circumstances that would guard against improper disclosure to best protect the confidentiality of AEO information, without banning in-house counsel's right to access these documents where circumstances are appropriate.
4. When a party requests that in-house counsel be entitled to access AEO information in a particular case, the TTAB currently relies on the test set forth in Akzo N.V. v. U.S. Int'l Trade Commission, 808 F.2d 1471, 1484, 1 USPQ2d 1241 (Fed. Cir. 1986) to make that determination. The factors to be balanced are:
(1) Whether the party seeking to gain access to AEO information for in-house counsel has "need for the confidential information sought in order to adequately prepare its case."
(2) Any showing of "harm that disclosure would cause the party submitting the information."
(3) The forum's interest in maintaining the confidentiality of the information sought."
Do you believe that this test is still appropriate for assessing in-house counsel access to AEO information? YES or NO, and please explain the reason for your response.
Answers and Comments:
We believe that the use of the Akzo test remains appropriate for assessing in-house counsel access to AEO information. There have been multiple decisions in the years prior to, and following Akzo that support the use of the same or similar balancing test. Furthermore, there are additional cases that set forth similar balancing tests that emphasize the need for caution when disclosing confidential information such as trade secrets. As such, we believe this test, and a balancing test approach in general, remains appropriate when assessing access to AEO information.
The Akzo test stems from a 1983 International Trade Commission decision in Certain Rotary Wheel Printers, Inv. No. 337-TA-145, 5 ITRD 1933 (Nov. 4, 1983), where the three-part balancing test was established. One year later, in 1984, the Federal Circuit, in U.S Steel Corp., 730 F.2d at 1469, adopted a similar two-step balancing test. First, courts are to assess "[w]hether an unacceptable opportunity for inadvertent disclosure exists." Id. Second, courts "must balance [risk of disclosure] against the potential harm to the opposing party from restrictions imposed on that party's right to have the benefit of counsel of its choice." Id.
When utilizing this balancing test, courts have pointed to different types of facts weighing in favor of finding significant risk of inadvertent disclosure. This is particularly true when making the determination as to whether the counsel in question is involved in "competitive decision-making" with its client, which is 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. U.S Steel Corp., 730 F.2d at 1468 n.3.
For instance, when looking to determine whether in-house counsel was a "competitive decisionmaker," the court in Norbrook Labs. Ltd. v. G.C. Hanford Mfg. Co., No. 5:03-CV-165 (HGM/GLS), 2003 U.S. Dist. LEXIS 6851 (N.D.N.Y. Apr. 24, 2003) held that a counsel who was a member of company's board of directors qualified as such due to their presence on the board. The court in ST Sales Tech Holdings, LLC v. Daimler Chrysler Co., LLC, No. 6:07-CV-346, 2008 U.S. Dist. LEXIS 107096 (E.D. Tex. Mar. 14, 2008) found that a counsel who "monetize[d] patents" and was "extremely involved in the licensing of ... patents" was a competitive decisionmaker. Furthermore, in Intel Corp. v. VIA Techs., Inc., 198 F.R.D. 525 (N.D. Cal. 2000), an in-house counsel that was actively involved in negotiating the terms of licensing agreements was also found to be a competitive decisionmaker. These cases demonstrate the variety of scenarios in which in-house counsel can qualify as competitive decisionmakers, raising significant potential for inadvertent disclosure to occur.
On the other hand, with respect to the analysis on whether the party seeking to gain access to AEO information for in-house counsel has need for the confidential information sought in order to adequately prepare its case, the Ninth Circuit, in Brown Bag Software v. Symantec Corp., 960 F.2d 1465 (9th Cir. 1992), concluded that the plaintiff could not demonstrate that its ability to litigate would be prejudiced by restricting access to outside counsel and thus the protective order remained intact. Similarly, many courts have concluded that excluding in-house counsel from access to AEO information does not constitute an "undue and unnecessary burden" to a party who can rely on its competent outside counsel. See, Intel Corp. v. Via Techs, Inc., 198 F.R.D. 525, 528-29 (N.D. Cal. 2000) ("Requiring a party to rely on its competent outside counsel does not create an 'undue and unnecessary burden.'"). See also, Hirsh, Inc. v. United States, 657 F. Supp. 1297, 1305, 11 C.I.T. 208, 211 (Ct. Intl. Trade 1987).
In the years following Akzo, multiple courts agreed with the Federal Circuit's conclusion that a balancing test is the most reasonable means of determining whether it is appropriate to disclose confidential information to in-house counsel. Holding that a corporation's motion for disclosure of confidential information to its attorney should be denied because confidentiality considerations outweighed the need for the disclosure to the corporation, the U.S. Court of International Trade concluded in Hirsh, Inc. that "Consistent with congressional concern over confidentiality, caution is the necessary approach when ordering disclosure of privileged information to anyone. This policy is reflected in numerous decisions on the issue of access - decisions which reflect concern over the 'incalculable harm' caused by unwarranted disclosure." Id.
A more recent case, Baldi Bros. v. United States, No. 15-1300, 2016 U.S. Claims LEXIS 1424, 3-4 (Fed. Cl. Sep. 27, 2016), also discussed restrictions on access to trade secrets or other competitively sensitive information whose disclosure could cause competitive harm, noting, "The court must balance the need for the trade secrets or other confidential information against the claim of injury resulting from disclosure." The court, in Carpenter Tech. Corp. v. Armco, Inc., 132 F.R.D. 24, 27 (E.D. Pa. 1990), wrote "The fact that in-house counsel are bound by the rules of professional responsibility is insufficient alone to warrant granting access to confidential information of a competitor to in-house counsel. Notwithstanding the rules of professional conduct, the inadvertent use or disclosure of confidential information remains a major concern." This case-by-case balancing approach continues to be utilized by modern courts. (See Voice Domain Techs., LLC v. Apple, Inc., No. 13-40138-TSH, 2014 U.S. Dist. LEXIS 143903 (D. Mass. Oct. 8, 2014), "In the context of a protective order, where the court has found that a risk of inadvertent disclosure exists, the court must also balance that risk against the potential harm to the opposing part." In re Deutsche Bank Tr. Co. Ams., 605 F.3d 1373, 1378 (Fed. Cir. 2010), "Whether an unacceptable opportunity for inadvertent disclosure exists must be determined by the facts on a counsel-by-counsel basis. The counsel-by-counsel determination thereof should turn on the extent to which counsel is involved in competitive decision-making with its client." Koninklijke Philips N.V. v. Iguzzini Lighting USA, Ltd., 311 F.R.D. 80, 83 (S.D.N.Y. 2015), "Because counsel's role in a corporation varies, an individualized assessment of each attorney's responsibilities is necessary.").
"In balancing these conflicting interests the district court has broad discretion to decide what degree of protection is required." In re Deutsche Bank Trust Co. Americas, 605 F.3d 1373, 1380 (Fed. Cir. 2010) (citing U.S. Steel, 730 F.3d at 1468). Federal Rule of Civil Procedure 26(c) confers broad discretion on the trial court to decide when a protective order is appropriate and what degree of protection is required. Roberts v. Shawnee Mission Fort, Inc., 352 F.3d 358, 362 (8th Cir. 2003). Specifically, Federal Rule 26(c)(7) of the Federal Rules of Civil Procedure provides that the court may enter an order "that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a designated way." Fed. R. Civ. P. 26(c)(7). Pricing and marketing information are widely held to be confidential business information that may be subject to a protective order. Vesta Corset Co. v. Carmen Founds., Inc., 1999 U.S. Dist. LEXIS 124, 1999 WL 13257, [**8] at *2 (S.D.N.Y. 1999); Sullivan Mktg., 1994 U.S. Dist. LEXIS 5824, 1994 WL 177795, at *1. In addition, courts often afford fuller protection to technical, proprietary information than that extended to ordinary business information. Davis v. AT & T Corp., 1998 WL 912012, at *1 (W.D.N.Y. 1998); Safe Flight Instrument Corporation v. Sundstrand Data Control Inc., 682 F. Supp. 20, 22 (D.Del. 1998).
Courts continue to advocate this notion, with the Supreme Court of Iowa stating in 2015, "In the context of trade-secret litigation, from the beginning, the cases have stressed the role of the district court judge in balancing the interests of the parties when determining the circumstances of disclosure. It will rest in the judge's discretion to determine whether, to whom, and under what precautions, the revelation should be made." Sioux Pharm, Inc. v. Eagle Labs., Inc., 865 N.W.2d 528, 536 (Iowa 2015). This quote alludes to the fact that a balancing approach in determining whether, to whom, and under what conditions to release AEO information has and continues to be a vital legal tool for federal judicial courts as well as federal administrative courts in these types of matters. As such, we believe it is appropriate for TTAB to continue to use the Akzo test and/or a balancing test approach in general to balance the opposing party's needs to have its in-house counsel access to AEO information against the risk/harm of disclosure that would cause the disclosing party.
5. If your answer to question 2 is no, and you do not think the SPO should be amended so that the default is to allow for in-house counsel access to AEO material, should the SPO instead be amended to incorporate the Akzo test described in question 4. YES or NO, and please explain the reason for your response.
Answers and Comments:
No, we do not support amending the current SPO to incorporate the Akzo test described in question 4. Although we support the Board continuing to apply the Akzo test to make the counsel-by-counsel analysis balancing the different parties' interests as discussed above regarding question 4, such test should be used by the Board in a separate process apart from SPO when the opposing party brings a motion seeking access to AEO material by its in-house counsel. Including this fact-specific test in the SPO is not a good fit because the SPO is designed to provide the clear-cut default rules on designating and disclosing confidential information in TTAB proceedings. SPO is provided to be used by the parties in dispute, not by the Board to make exceptional fact-driven decisions to deviate from or modify the SPO.
6. In addition to the issue of access to AEO material, the USPTO is interested in comments on the SPO's levels of confidentiality for protected information and documents. The previous version of the SPO included three levels: Confidential, Highly Confidential, and Trade Secret/Commercially Sensitive, with a presumption that in-house counsel would not have access to information or documents in the last category. Should the current SPO be amended to re-introduce the "Highly Confidential" tier? Please explain.
Answers and Comments:
We support the position that the current SPO should reintroduce the "Highly Confidential" tier, since this middle tier is essential and effective to protect certain types of confidential information and documents that fall somewhere between "Confidential" and "Attorney Eyes' Only (trade secret/commercially sensitive)." It is not uncommon that information falls outside the strict and limited definition of AEO information, but still requires heightened protection and more restricted access than the lowest "confidential" designation, in accordance with the specific facts and needs of parties.
At this middle level, outside counsel as well as only one or a few employee representatives (usually including in-house counsel) may receive access to such designated information, subject to certain conditions or restrictions as agreed to by parties. Additional details regarding the appropriate conditions or restrictions to be imposed under this middle level is discussed later in this section. This level can thus be used to meet the receiving party's need for accessing such information, facilitating the counsel's professional responsibility to communicate with limited employee representatives, as well as providing sufficient confidentiality protection to the disclosing party through the agreed restrictions.
In Uniroyal Chemical Co., Inc. v. Syngenta Crop Protection, 24 F.R.D. 53, 57 (D. Conn. 2004), the United States District Court for the District of Connecticut found that three levels of confidentiality are appropriate in that case, which involved a contract dispute concerning the development and supply agreements used for a plant growth regulator marketed by defendant. Similar to the three levels adopted by the Board in the previous version of the SPO, the court determined that the field trial research, which contained the underlying technical research into the new uses plaintiff alleges it developed for Bonzi, was subject to the highest limitation on disclosure ("Level 3"), to be disclosed only to defendant's outside counsel and outside experts. At the same time, the two-page summary of the results of the field trials were labeled at a less restrictive level ("Level 2"), to be disclosed to and reviewed by outside counsel and three designated employees of defendant only (including one in-house counsel for defendant, a technical manager who provided technical support for Bonzi but was not involved in Bonzi marketing, and another employee in marketing but not involved in Bonzi marketing). This case demonstrates the common circumstance when multiple levels of protection is needed in one litigation proceeding with respect to different types of confidential information and documents.
In addition, even for information that falls under the third AEO level by default, if the parties can reach a consensus on the sufficiency of the protective measures taken to mitigate the risk of inadvertent disclosure by in-house counsel to the client, providing the middle level as an option in the SPO will encourage parties to utilize this tool to engage in good faith discussions in the beginning to resolve any potential disputes regarding providing in-house counsel access to AEO. Parties in agreement thus do not need to spend extra time and resources to modify the order through stipulation or filing a motion to the Board (although the Board indicated in its notice to seek additional discussion of TTAB's SPO that "[b]oard attorneys have not needed to resolve any disputes involving access to AEO materials by in-house counsel"), which will allow both parties to move the proceeding forward in a more timely, efficient manner, to save resources of the parties and the Board. Furthermore, having this middle level as an option will also reduce the risk of the disclosing party overusing the third AEO level, which should be reserved for the special and limited trade secret/commercially sensitive scenario only. Without such middle ground in the current SPO, the disclosing party is sometimes left with no choice but to utilize the most restricted AEO designation in order to protect its "highly confidential" information from being overly accessed by unnecessary persons, causing damage that cannot be subsequently undone.
By adding this additional middle tier to the SPO, it will essentially provide the parties the opportunity and maximum freedom to custom design and come up with the most appropriate level of protection to different kinds of confidential information based on the specific facts. In order to facilitate the parties coming up with the appropriate level of protection by utilizing the middle tier in the SPO, the middle tier can contain a list template with a few commonly used conditions or restrictions that can be checked by parties if applicable, as well as provide an "Others" checkbox to allow parties to specify any additional conditions that the recipient must abide by.
For example, the middle tier can list which exact persons/roles can be granted access by limiting the definitions, such as limiting the outside counsel and in-house counsel defined under the middle tier to those counsels for the parties who are directly involved in the preparation and trial of the case, and paralegals, secretaries, and law department employees who directly assist such counsels with the provision of such legal preparations. For in-house counsel (and any associated legal staff), more restrictions can be added because of the underlying employment nature of an in-house counsel. Courts have ruled that in-house counsel shall have no further involvement in any other legal matters beyond this litigation in that the disclosed information could be potentially utilized, and such in-house counsel shall sign the certification to the Board to be bound by the terms of the SPO. See Zweidinger v. Toyota Motor Corp., 1195 Del. Super. LEXIS 327, *6 (Del. 1995).
Furthermore, the middle tier can list a few common conditions on how the information can be accessed, reviewed or used. For example, the receiving party may (1) not disclose, share or distribute the disclosed information with other employees or third parties that are not specifically identified in the SPO and/or agreed by both parties; (2) not use the disclosed information for any purpose other than for preparation and trial of this TTAB proceeding in question; (3) only access and review the disclosed information in the outside counsel's office or independent facilities outside the receiving party's facilities under the direct supervision of outside counsel; (4) only digitally store a copy of the disclosed information on a password secured and independent computer drive that cannot be accessed by the receiving party's ordinary business network;(5) not make and/or keep a copy of the disclosed information; and/or (6) not take notes concerning the content of the disclosed information.
Please note that these conditions are not provided as an exhaustive list, and both parties have the absolute discretion to choose, modify, and add different conditions to the SPO that meet their specific needs. If the Board is uncertain whether the list of conditions suggested above is relevant or sufficient for the middle tier, a pilot program may be utilized first to gather more public feedback in order to better assess the overall sufficiency, and what improvements can be made to further assist the parties and the Board.
IBM again thanks the Office for providing an opportunity to submit additional comments on the TTAB Standard Protective Order. Please let us know if IBM can offer any additional information or input.
Chief Trademark Counsel
Associate General Counsel
Intellectual Property Law