United States: Public Has Minimal Interest In Parties’ Confidential Information Not Central To A Decision On The Merits And Not Necessary To The Public’s Understanding Of The Case

In Apple Inc. v. Samsung Electronics Co., Nos. 12-1600, -1606, 13-1146 (Fed. Cir. Aug. 23, 2013), the Federal Circuit reversed and remanded because the district court abused its discretion in refusing to seal the confidential information at issue in the appeals.

Apple Inc. ("Apple") sued Samsung Electronics Company, Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC (collectively "Samsung"), asserting, among other claims, that Samsung's smartphones and tablets infringed several of Apple's patents and infringed Apple's trade dress embodied in its iPhone and iPad products.  Samsung filed counterclaims, alleging that the iPhone and iPad infringed several of Samsung's patents.  The case proceeded to a jury trial.  The trial drew an extraordinary amount of attention from the public and the media.  Consistent with the extraordinary level of interest in the case, the district court explained to the parties that the whole trial was going to be open.  Consequently, the district court agreed to seal only a small number of trial exhibits.  Similarly, most exhibits attached to pretrial and post-trial motions were ordered unsealed.

The parties did not challenge many of the district court's unsealing orders on appeal.  Rather, the parties limited their appeals to a small subset of exhibits attached to pretrial and post-trial motions filed by Apple and Samsung.  First, the parties challenged the district court's August Order, which contained its rulings with respect to pretrial motions.  Second, Apple challenged the November Order, which contained the district court's rulings with respect to post-trial motions.

"We recognize the importance of protecting the public's interest in judicial proceedings and of facilitating its understanding of those proceedings.  That interest, however, does not extend to mere curiosity about the parties' confidential information where that information is not central to a decision on the merits.  While protecting the public's interest in access to the courts, we must remain mindful of the parties' right to access those same courts upon terms which will not unduly harm their competitive interest."  Slip op. at 24.

The Federal Circuit explained that the broad issue on appeal was whether the district court abused its discretion in ordering the unsealing of the documents Apple and Samsung sought to seal.  The Court began its analysis by reviewing "the common law right of access to judicial records."  Slip op. at 9 (quoting Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006)).  The Court noted that, in the Ninth Circuit, a party seeking to seal judicial records can overcome the strong presumption of access to court records by providing "sufficiently compelling reasons" that override the public policies favoring disclosure.  Id. at 10 (quoting In re Midland Nat'l Life Ins. Annuity Sales Practices Litig., 686 F.3d 1115, 1119 (9th Cir. 2012)).  Further, the Court explained that the Ninth Circuit has carved out an exception to the presumption of access to judicial records for such records filed under seal when attached to a nondispositive motion.  Thus, a particularized showing of "good cause" under Fed. R. Civ. P. 26(c) is sufficient to preserve the secrecy of sealed discovery documents attached to nondispositive motions.

The Court then considered whether the district court applied the correct legal standard.  The Court explained that while the district court recognized the Ninth Circuit's general rule that a party seeking to seal documents attached to a nondispositive motion need only demonstrate "good cause," the district court nevertheless applied the "compelling reasons" standard to documents attached to nondispositive motions regarding the admissibility of evidence at trial "[b]ecause the admissibility of evidence is such a closely contested issue in this trial, which has become crucial to the public's understanding of the proceedings."  Id. at 12 (alteration in original) (citation omitted).  Finding legal error, the Court stated that it was not aware of any Ninth Circuit precedent applying the "compelling reasons" standard to nondispositive motions regarding the admissibility of evidence at trial.  The Court additionally stated that the district court's reasoning did not justify departure from the Ninth Circuit's general rule.  Despite the district court's error, the Federal Circuit reviewed all of the district court's orders under the more restrictive "compelling reasons" standard and concluded that, even under that standard, the district court erred in refusing to seal the documents at issue on appeal, as discussed in more detail below.

With respect to the documents at issue in Apple's and Samsung's appeals of the August Order, the parties challenged the district court's ruling with respect to a total of twenty-six documents—fourteen Apple documents and twelve Samsung documents—filed as exhibits in connection with pretrial motions.   Notably, the parties did not seek to seal these documents in their entirety.  Instead, as the Court explained, they sought to redact limited portions of the documents containing detailed product-specific financial information, including costs, sales, profits, and profit margins.  The Court began by stating that Apple and Samsung have an interest in keeping their detailed product-specific financial information secret because they could suffer competitive harm if this information is made public, and the district court erred by concluding otherwise.  In addressing the public's interest in the parties' detailed financial information, the Court noted that, in these appeals, Apple and Samsung had limited the documents they had challenged to a small subset of the documents they had originally sought to seal.  The Court further pointed out that, even within that small subset, they sought only to redact limited portions that contained what they considered their most confidential financial information.  Moreover, because the parties agreed to rely on less-detailed financial information to prove their damages at trial, none of the documents were introduced into evidence.  Thus, the Court reasoned, the financial information at issue was not considered by the jury and is not essential to the public's understanding of the jury's damages award.  The Court continued, nor is there any indication that this information was essential to the district court's rulings on any of the parties' pretrial motions.  Accordingly, the Court concluded that the particular financial information at issue in the appeals was not necessary to the public's understanding of the case, and that the public therefore had minimal interest in that particular information.

Finally, the Court considered the documents at issue in Apple's appeal of the November Order.  Specifically, Apple challenged the district court's ruling with respect to nine Apple market research reports, which Samsung attached to its opposition to Apple's post-trial motion for a permanent injunction and enhanced damages.  The reports totaled approximately five hundred pages, only twelve of which were cited by Samsung in its briefing.  Apple agreed to make public seven of those pages and, as for the remaining five pages cited by Samsung, Apple agreed to make that information public insofar as it pertained to customer information from the United States, but sought to redact the customer information for other countries not relied on by Samsung in its briefing.  The Court found that the nine market research documents contained information that Apple's competitors could not obtain elsewhere.  The Court noted the critical distinction between Apple's competitors being able to "infer the most significant results by simply observing Apple's product releases and marketing campaigns," and being able to predict Apple's future product releases and marketing strategies.  Id. at 23 (citation omitted).  Further, the Court noted that because Apple had agreed to make public all of the information contained in these documents that was actually cited by the parties or the district court, the other information in these reports was irrelevant to the public's understanding of the judicial proceedings.  Thus, the Court concluded that the district court abused its discretion in refusing to seal the nine market research documents.

Judges: Prost (author), Bryson, O'Malley

[Appealed from N.D. Cal., Judge Koh]

This article previously appeared in Last Month at the Federal Circuit, September 2013

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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