Business Law

Uniloc 2017, LLC v. Apple, Inc., Intervenor Electronic Frontier Foundation (Fed. Cir.)

The following is a case update written by the Hon. Meredith Jury (United States Bankruptcy Judge, C.D. Cal, Ret.), analyzing a recent decision of interest:

The United States Court of Appeals for the Federal Circuit, ruling in a patent case from the Northern District of California, affirmed in main the district court’s denial of a motion to seal documents and a subsequent motion for reconsideration of that decision based on the failure of the movant to narrowly tailor the request to seal and the lack of a compelling reason for the court to do so. The Federal Circuit’s opinion reinforced that sealing documents is an extraordinary interference with the public’s right of access to documents filed with the federal courts and should only occur after the moving party has met a heavy burden to show why the documents need protection, the specific harm that will occur if not sealed, and that the protection has been sought for the fewest documents possible. Uniloc 2017 LLC v. Apple, Inc., Intervenor Electronic Frontier Foundation, 2020 WL 3865275 (Fed. Cir. 7/9/20).

To view the opinion, click here.

FACTS

Uniloc filed four patent infringement actions against Apple. Apple moved to dismiss for lack of subject matter jurisdiction, asserting that Uniloc had granted its creditor, Fortress Credit Co., a license with the right to sublicense in the event of a Uniloc default, which had occurred, and following which Fortress had sublicensed the patents to Apple. Apple’s motion referenced material that Uniloc had designated as highly confidential under a protective order entered by the district court; consistent with that protective order, Apple filed a motion to seal these materials. Similar sealing motions were filed by Uniloc in conjunction with its opposition and again by Apple with its reply, all of which were considered together by the district court. Uniloc’s motion asked the court to seal the briefs, including citations to case law and quotations from published opinions, and voluminous exhibits which contained matters of public record. In support of the motion, Uniloc filed three short declarations which broadly stated that the exhibits contained “sensitive, confidential and proprietary information related to financial data, licensing terms and business plans.”

After it ascertained that Apple had no personal stake in the outcome, the Electronic Frontier Foundation (EFF) moved to intervene to protect the public’s right to access, which motion was granted for the purpose of appellate review only.

The district court denied the motions, finding that Uniloc sought to seal an “‘astonishing’ amount of material” including court pleadings and that its generalized assertions of potential competitive harm simply did not outweigh the public’s right to view the documents. Moreover, it noted that movants had failed to comply with the district’s local rule regarding such motions. Uniloc moved for reconsideration, in conjunction with which it filed a modified motion in which it admitted that 90% of the materials should be made available to the public eye. The district court found these efforts too little, too late and denied both the reconsideration and the modified seal motion. Uniloc appealed, with EFF now joining as the party in interest. In its issues on appeal Uniloc pointed out that some of the documents it sought to seal were confidential materials of third party licensees who had not been given the opportunity to participate. The circuit court affirmed, with the exception of vacating the decision regarding the third party licensees’ documents, which it remanded for further consideration.

REASONING

The circuit court first determined it had jurisdiction to consider the non-final order before it under the collateral order doctrine, which provides a narrow exception to the final judgment rule, permitting review of orders affecting rights that will be irretrievably lost in the absence of an immediate appeal. It then focused its discussion on two aspects of the orders on appeal which were dispositive. First, the initial motion was vastly overbroad and grossly deficient in justifying the reasons asserted to seal such a divergent variety of information. Moreover, movant had not even made an effort to comply with the relevant local rule until its initial efforts were struck down. Second, the primary matter on appeal was the reconsideration motion, a proceeding largely disfavored by trial courts and often summarily denied when none of the Civil Rule 59 or 60 reasons to grant such a motion were even argued, moreover asserted persuasively.

On this backdrop, affirmation was straightforward. Compliance with the local rule would have compelled Uniloc to file a specific declaration which showed that each type of material qualified to be sealed, including specifying the injury which would occur if the documents were made public. Uniloc’s conclusionary declarations and the overbreadth of its initial request “fell woefully short” of the required showing of potential harm. The appellate court strongly expressed its displeasure that Uniloc thought its “offer” to make 90% of the materials available to the public should somehow shift the burden to the court to justify not sealing the rest. Not only did the circuit court deem this a maneuver to try for a second bite at the apple after it failed to make a serious initial attempt, but it also reprimanded Uniloc for not recognizing that the heavy burden fell on it to justify sealing, not on the court to explain why it would not do so.

The circuit court did soften its stance when it came to the proprietary materials from the third party licensees. It recognized they were not to be blamed for Uniloc’s shortcomings and should have their own opportunity to participate by making a showing to the district court of their potential injuries.

AUTHOR’S COMMENTS

This case highlights several issues arising from the increasingly burdensome effect of the burgeoning use of court approved protective orders in civil litigation. These protective orders then compel parties to file motions to seal whenever any of the documents produced as “confidential” or “privileged” under the terms of such protective order are filed as part of the normal course of litigation. From my experience as a bankruptcy judge, it was not uncommon for parties to request that the court approve a protective order, the terms of which were boilerplate and had been stipulated to by the parties during discovery whenever any financial or remotely proprietary information or documents might be exchanged. Court approval of such stipulated orders has become perfunctory because, in theory, these orders lessen the discovery disputes which might otherwise burden the courts. But in practice, they just defer the fight until someone wants to use a document that a party, on its own accord, has stamped “confidential.” What follows is often a series of motions to seal, as happened here, with at least some of them filed by parties because they must under the protective order, not because they have a stake in the outcome. The knee jerk response of the party who cares is to scramble around to file a declaration to support the often ill-conceived notion to stamp the document “confidential” in the first place. It is no wonder such motions are often deficient.

My concern is they are often granted anyway. Unless a protector of the public’s right to know gets wind of what is going on and intervenes or the overburdened trial judge has the time (and law clerk availability) to make the right to seal his or her own issue, many of the sealing motions get granted almost as a matter of course. This entire process runs counter to the concept that everything filed with a court should be in the public domain and he who would have it otherwise must climb a steep hill to obtain that prize.

This case should be read by all civil litigants whose practice involves any type of commercial or business litigation. It provides a great reminder of what should be done to justify sealing anything filed with the court and the consequence if the litigant does not take his or her burden seriously from the start.

These materials were written by the Hon. Meredith Jury (United States Bankruptcy Judge, C.D. Cal, Ret.) a member of the ad hoc group, with editorial contributions by Corey R. Weber, a partner at Brutzkus Gubner Rozansky Seror Weber LLP, a member of the ad hoc group and the Chair of the CLA Business Law Section. Thomson Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.

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