Fontem Ventures B.V. v. R.J. Reynolds Vapor Co.

FONTEM VENTURES B.V., a Netherlands company; and FONTEM HOLDINGS 1 B.V.,a Netherlands company, Plaintiffs, v. R.J. REYNOLDS VAPOR COMPANY, a North Carolina company, Defendant.

1:16-CV-1255 (Lead Case)

1:16-CV-1257

1:16-CV-1258

1:17-CV-175

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

May 23, 2017

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, District Judge.

Fontem Ventures has filed four suits against R.J. Reynolds Vapor Company claiming that Reynolds is infringing fifteen Fontem patents used in the manufacture and design of electronic cigarettes. The parties have largely agreed on a protective order to cover the scope of discovery and the exchange of confidential information, but they disagree on whether the Court should impose a patent prosecution bar. The Court concludes that the parties are entitled to a protective order governing the use of designated confidential information during the litigation process, but that Reynolds has not shown good cause for a patent prosecution bar.

I. Protective Orders Generally

For good cause, a court may issue a protective order that limits the scope of discovery, for instance by prescribing a particular discovery method, prohibiting inquiry into certain subjects, limiting how confidential information can be used, or designating who may see confidential business or technical information. Fed. R. Civ. P. 26(c)(1). To obtain a protective order to protect confidential information, "[t]he proponent must show that the information is confidential and that its disclosure would create a risk of harm to the party's interests," and that the risk of harm from disclosure outweighs the harm of restricting discovery. Biazari v. DB Indus., LLC, No. 5:16-CV-49, 2017 WL 1498122, at *2 (W.D. Va. Apr. 26, 2017); see also In re Violation of Rule 28(D), 635 F.3d 1352, 1357-58 (Fed. Cir. 2011); In re Wilson, 149 F.3d 249, 252 (4th Cir. 1998). Technical information in patent cases is ordinarily entitled to "a heavy cloak of judicial protection because of the threat of serious economic injury to the discloser of scientific information." Valencell, Inc. v. Apple, Inc., No. 5:16-CV-1-D, 2016 WL 7217635, at *2 (E.D.N.C. Dec. 12, 2016) (quotation omitted).

The parties agree that a protective order is appropriate to protect confidential, proprietary, or private information subject to discovery. See Doc. 72 at ¶ 2; Docs. 75-2, 72-1.¹ They further agree on a process for designating such information, who can see such information, how such information can be used, and a process for bringing disputes over confidentiality designations before the Court. See Docs. 75-2, 72-1. The Court finds good cause for entry of a protective order along the lines proposed by the parties. See In re Deutsche Bank Trust Co. Ams., 605 F.3d 1373, 1378 (Fed. Cir. 2010) (noting that protective orders "specifying that designated confidential information may be usedonly for purposes of the current litigation . . . are generally accepted as an effective way of protecting sensitive information while granting trial counsel limited access to it for purposes of the litigation"). Such an order will be entered separately.

II. The Request for a Patent Prosecution Bar

a. Background

The patents at issue in this case are part of the extensive "Hon patent portfolio" concerning e-cigarettes and vapor technology. Doc 72 at ¶¶ 7-8; see also Fontem Ventures B.V. v. R.J. Reynolds Vapor Co., No. 17-CV-175, Doc. 24 at 5 (M.D.N.C. Apr. 24, 2017). The Hon patent portfolio is still growing and Fontem has at least seven pending patent applications before the United States Patent and Trademark Office (PTO) related to patents asserted in this case.² Doc. 72 at ¶ 8.

Since 2007, Perkins Coie, the law firm representing Fontem in this case, has prosecuted the Hon patent portfolio before the PTO by preparing patent applications, amending claims, and participating in office actions, among other things. Id. at ¶ 11; see also Docs. 72-6, 72-7. Perkins Coie has also represented Fontem and its predecessor, Ruyan Investment Holdings Limited, in other litigation on the Hon patent portfolio. Doc. 72 at ¶¶ 12-13; Doc. 72-8; see also Doc. 75-1 at ¶¶ 10-12.

Fontem identifies four lawyers, Michael Wise, Joseph Hamilton, Ken Ohriner, and Lara Dueppen, who have been particularly involved with both the prosecution and litigation of the Hon patent portfolio for a number of years. See Doc. 75-1 at ¶¶ 3-6, 9-12. Mr. Wise, Mr. Hamilton, and Ms. Dueppen are counsel of record in these consolidated cases. E.g., Doc. 1 at 1. Mr. Wise, Mr. Hamilton, and Mr. Ohriner prosecuted several of the patents-in-suit before the PTO. Doc. 75-1 at ¶ 9.

b. Nature of the Dispute

Reynolds asks the Court to include a patent prosecution bar in the protective order to preclude anyone who reviews certain confidential information from then participating in patent prosecution for the Hon patent portfolio or otherwise relating to aerosol or vapor electronic cigarette technology. Doc. 70; see Univ. of Va. Patent Found. v. Gen. Elec. Co., No. 3:14-CV-00051, 2016 WL 379813, at *1 n.1 (W.D. Va. Jan. 29, 2016) (explaining that a patent prosecution bar "restricts the patent-related activities of an individual who receives confidential information from a party during litigation, or limits the receipt of such information if the individual has already engaged in certain activities").

Specifically, Reynolds' proposed prosecution bar would prevent "any Outside Counsel or Expert who accesses" designated confidential documents "that reflect[] or contain[] technical information concerning current or future aerosol or vapor electronic cigarette technology" from then "be[ing] involved in prosecution of patents or patent applications relating to aerosol or vapor electronic cigarette technology," including thepatents in this case and patents related to those asserted in this case. Doc. 72-1 at ¶ 7.5.³ The proposed bar would last "from the date of access until expiration of two years from the final disposition of this action." Id. Reynolds does not identify specific counsel who should be subject to the bar, but asks that the bar be triggered as to any outside counsel or experts who access the designated documents. See id.

Fontem asserts that Reynolds has not met its burden to show that a prosecution bar is warranted and that such a bar is not necessary. Doc. 75; see Doc. 75-2. As to the accused products, Fontem contends that the relevant technical information is publicly available and subject to reverse engineering, meaning the information is already available to attorneys involved in patent prosecution. See Docs. 75-11, 75-12 (noting physical aspects of claimed components and accused products that can be visually inspected and identified). As to Reynolds' future products and technology, Fontem asserts that Reynolds claimed that the information is not relevant, meaning Reynolds does not need to produce the information in discovery. See Doc. 75-10 at 8-9 (contesting Fontem's production request as overbroad and restricting production to devices "sold or offered for sale within the United States"). Instead of a prosecution bar, Fontem asks the Court to preclude discovery on future products. See Doc. 72-1 at ¶ 12.

c. Legal Background

Federal Circuit law governs whether a protective order should include a patent prosecution bar. Deutsche, 605 F.3d at 1378. If trial counsel, experts, or other individuals are involved in litigation and in a proceeding before the PTO, there may be a risk of inadvertent disclosure or the accidental use of confidential information gleaned from the litigation to draft or amend patent claims in proceedings before the PTO. Id. at 1378-79; see also Univ. of Va. Patent Found., 2016 WL 379813, at *4-5 (applying protection order to expert involved in competitive decision-making). On a showing of good cause and in appropriate circumstances, the court can impose a patent prosecution bar to preclude those who view the confidential information from participating in proceedings before the PTO. See Deutsche, 605 F.3d at 1378-79.

To decide whether to impose a patent prosecution bar, the court balances the risk of inadvertent disclosure against the potential harm of restricting a party's choice of counsel. Id. at 1380. The party seeking the protection of a prosecution bar bears the burden of demonstrating good cause to impose the restriction. Id. at 1378. The Federal Circuit has established the following test to determine whether a patent prosecution bar is warranted:

We therefore hold that a party seeking imposition of a patent prosecution bar must show that the information designated to trigger the bar, the scope of activities prohibited by the bar, the duration of the bar, and the subject matter covered by the bar reasonably reflect the risk presented by the disclosure of proprietary competitive information. We further hold that the party seeking an exemption from a patent prosecution bar must show on a counsel-by-counsel basis: (1) that counsel's representation of the client in matters before the PTO does not and is not likely to implicate competitive decisionmaking related to the subject matter of the litigation so as to giverise to a risk of inadvertent use of confidential information learned in litigation, and (2) that the potential injury to the moving party from restrictions imposed on its choice of litigation and prosecution counsel outweighs the potential injury to the opposing party caused by such inadvertent use.

Id. at 1381.⁴

To merit a patent prosecution bar, the information that triggers the bar must be relevant to the preparation and prosecution of patent applications before the PTO. Deutsche, 605 F.3d at 1381. "[T]he moving party must identify 'specific information that would cause it injury if disclosed.'" Helferich Patent Licensing, LLC v. Suns Legacy Partners, LLC, No. CV-11-02304, 2012 WL 6049746, at *3 (D. Ariz. Dec. 5, 2012) (quoting AmTab Mfg. Corp. v. SICO, Inc., ...