Last week, I wrote about the media’s scrutiny of Apple’s many trade secrets and the special challenges for any party trying to protect its trade secrets in a public proceeding, especially a high profile one generating media coverage. As my post noted, there were several media reports of preliminary rulings by U.S. District Court Judge Lucy Koh on some of the trade secrets questions raised by the parties and by Reuters, which had sought the release of some of that data. Reuters had intervened in the lawsuit and challenged a number of the parties and third parties’ claims of trade secrecy. Late last Thursday, Judge Koh issued a 29-page opinion and order formally addressing the various trade secrets claims of Apple and Samsung, as well as those of non-parties Intel, Qualcomm, IBM, Nokia and Microsoft. (A copy of the opinion is attached as a PDF below).

Judge Koh’s opinion strikes the right balance on the many trade secrets presented. Her analysis notes the historic right of public access to court documents and records and the strong presumption in favor of access unless a particular court record is traditionally kept secret. Her opinion emphasized the public’s interest in this trial and the importance of certain data being publicly available to assist in the public’s understanding of the eventual outcome. 

While her analysis is sound, the opinion avoids any bold pronouncements about the importance of trade secrets or forceful rulings regarding the intersection of trade secrets and public proceedings. As a result, her fact-based opinion, while highly visible, probably won’t have far-reaching consequences because her holdings are strongly rooted in the arguments and facts before her. Frankly, this was probably the right approach given the myriad of claims, arguments and facts at issue in this very complex dispute.
Apple and Samsung’s Trade Secrets: As to Apple’s many trade secrecy claims, Judge Koh ordered that evidence of Apple’s profits and other financial data would not be placed under seal. Judge Koh was unpersuaded by Apple’s claims that evidence of past profits and unit sales data could be used to meaningfully predict its future business plans that might benefit competitors. Perhaps more significantly, Judge Koh noted that Apple’s request for $2.5 billion in damages, the extreme importance of the public’s understanding of the eventual outcome and the extraordinary public interest that this trial had generated strongly weighed in favor of disclosure of this data.
Apple was able to preserve the trade secrecy of some information. Judge Koh did place information regarding Apple’s production and supply capacity, its source code, its licensing information and some of its marketing survey data under seal. She applied the same analysis and rationale to Samsung, which made similar requests for its confidential financial information and trade secrets.  
Third Parties’ Trade Secrets: Not surprisingly, Judge Koh was more sympathetic to the claims of third parties such as Intel, Qualcomm, IBM, Nokia and Microsoft, who sought to prevent disclosure of the terms of their licensing agreements to the public. She found that the “public release of such information would place these third-parties in a weakened bargaining position in future negotiations, thereby giving their customers and competitors a significant advantage.” She, therefore, sealed all information related to the pricing terms, royalty rates and payments of all current and past licensing agreements.

One interesting issue: IBM and Reuters appear to have sparred over the publication of its licensing agreement, as Reuters threatened to publish it because the agreement had been served as an exhibit on all parties. While IBM was apparently unsuccessful in getting a TRO barring its publication, Judge Koh rejected Reuters’ waiver argument, reasoning that none of the information had been publicly disseminated and that “such limited disclosure does not strip IBM’s information of its trade secret status. She firmly warned Reuters that if it did publish that information, it would be in direct violation of her order.

The Takeaway? Judge Koh’s opinion may provide some support down the road for parties trying to protect public disclosure of their trade secrets at trial, but her fact-based opinion will have limited presidential value. 

For that reason, Magistrate Clifford Shirley’s opinion in the high profile trade secret prosecution of Wycko employees convicted of stealing Goodyear’s trade secrets in 2010 probably provides the best guidance, particularly for trade secret claimants. In U.S. v. Roberts, 2010 U.S. Dist. LEXIS 25236 (D. Tenn. March 17,2010), Magistrate Shirley not only struck the right balance between the competing needs for public access and trade secrecy, but provided a template for future courts confronted with similar questions. Observing the “flat absurdity  for the trial judge to compel [Goodyear] to publicly disclose its processes in the act of protecting them from disclosure,” Magistrate Shirley balanced the needs of the criminal defendants, the public’s right to access and Goodyear’s trade secrets by limiting disclosure of the trade secrets — illicit photographs taken of Goodyear’s manufacturing operations — to display of the photos to the jury alone.

Apple v. Samsung.pdf (144.98 kb)