Although the focus of IPR and other PTAB trials is on the validity of patents, parties cannot reflexively rely on the safeguards of FRE 408 for licensing and settlement negotiations that apply in Federal Court. In Palo Alto Networks, Inc. v. FinJan, Inc., (Cases IPR2016-00149 and IPR2016-00150, Paper 12), the Board denied a motion to seal, stressing that "[t]here is a presumption that the record of our proceedings, including documents submitted as exhibits, shall be made available to the public [under 37 C.F.R. § 42.14.]" The Patent Owner was unable to overcome this presumption with respect to an email it sent to the Petitioner in order to engage in pre-litigation negotiations.
The Patent Owner's Motion to Seal, regarding an infringement claim chart based on Petitioner's publicly available marketing materials and submitted with the IPR Petition, was filed three months after the Petition was published. In its Motion, the Patent Owner argued that the exhibits "are protectable under Rule 408 of the Federal Rules of Evidence and should not be disclosed to the public." The email, it argued, "would not have been provided to Palo Alto Networks if not for the purpose of licensing discussions and the express understanding that the parties mutually agree to not disclose such information." Patent Owner's basis for confidentiality was that "the public's interest in accessing this information for the purposes of the patentability of the challenged claims in this proceeding is outweighed by the prejudicial effect and competitive harm of disclosing Finjan's confidential business information."
In its Opposition, Petitioner countered that "admissibility under Rule 408 is not at issue. Rather, the issue is whether the patent owner 'has made a sufficient showing of confidentiality to warrant sealing.'" Petitioner noted that, upon receipt of the email, it "made clear in follow-up communications that it did not consider these documents confidential because Patent Owner freely sent them to Petitioner without any obligation of secrecy.  While Patent Owner requested that Petitioner sign one to receive further information, Petitioner conveyed that it would not and, in fact, never did."
In denying the Motion, the Board agreed that the Patent Owner had not made a sufficient showing of confidentiality to warrant sealing. "We determine that Patent Owner's claim of confidentiality is not supported by sufficient evidence. No harm or prejudice to Patent Owner from making [the exhibits] available to the public is identified. Further, we are not convinced by Patent Owner's unsupported assertion that denying their Motions "'could result in significant competitive harm to the licensing parties as it would provide insight into the structure of their licensing deals, forcing them into an uneven bargaining position in future negotiations.'" Patent Owner's delay of three months to file its Motion countered its argument of harm.
When entering pre-litigation negotiations, parties are advised to take care to treat information confidential at all stages of engagement. Conveying the confidential nature of communications to third parties by unequivocal statements and markings and acting swiftly in the case of a breach are both crucial if a party expects the Board to provide a remedy.
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