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Lg Electronics U.S.A., Inc. and Lg Electronics, Inc v. Whirlpool Corp. and Anchor Appliance

June 14, 2011

LG ELECTRONICS U.S.A., INC. AND LG ELECTRONICS, INC., PLAINTIFFS,
v.
WHIRLPOOL CORP. AND ANCHOR APPLIANCE, INC.,
DEFENDANTS.



The opinion of the court was delivered by: Brown, Chief Judge

NOT FOR PUBLICATION

MEMORANDUM OPINION

REDACTED PUBLIC VERSION

This matter comes before the Court on Whirlpool Corporation's appeals (D.E. 121, 145, and 146) from Magistrate Judge Esther Salas' decision finding that certain transcript designations were confidential and that certain of LG's responses to requests for admissions were appropriate and should not be deemed admitted. (D.E. 134).*fn1 LG Electronics U.S.A., has opposed the appeals. The Court has reviewed the parties' submissions and decided the motion without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Judge Salas' decision is affirmed in part and reversed in part.

I. BACKGROUND

This is a patent infringement case involving four patents directed toward certain refrigerators and refrigerator systems. Plaintiffs filed this case on October 7, 2009, and the case proceeded without relevant event until, on June 25, 2010, November 3, 2010, and January 14, 2011, Whirlpool sought inter-partes reexaminations challenging the validity of the patents before the Patent Office ("PTO"). (See D.E. 67, 73, 75). Since that time, the parties have conducted parallel proceedings before the PTO and this Court. The parties have frequently cited the current proceedings before the PTO to this Court, and this appeal arises, in part, because Whirlpool wishes to disclose to the PTO information obtained in this action.

The parties recently stipulated to a protective order. In the section of the order setting forth its purposes, the order cites concern about the confidentiality of certain information:

Whereas [LG] and [Whirlpool] are currently litigating the present patent infringement action, which is likely to involve discovery of documents and testimony containing trade secrets and other confidential research, development, and commercial information of the parties to this action and third parties . . . and commercially sensitive information relating to business strategies, manufacturing and distribution capabilities, costs, pricing, profitability, customers, suppliers, and other business and financial data. (Confidentiality Order at 1; D.E. 119). The order explains that this concern is based upon an irreparable harm to the legitimate business interests of the parties if third parties are able to access this information. (Id. at 2). The order further explains that information designated by the producing party as confidential shall remain so designated until a challenge results in a court order removing the designation. (Id. at 3, 4, 7). However, the order nonetheless requires that the burden of showing that the designated material is confidential remains on the party who makes that designation. (Id. at 3, 4, 7, 12).

The Confidentiality Order further explains that its terms apply where a party in good faith represents that the information is not in the public domain and it: contain[s] any trade secrets within the meaning of the Uniform Trade Secrets Act or other confidential or proprietary information, including, without limitation, financial, strategic, research, development, manufacturing costs or other costs of doing business, technical, personal or commercial information, or any other information not normally revealed to third parties or, if revealed to third parties, is such that the Producing Party would require that the material be held in confidence. (Id. at 4-5). The order sets forth that the receiving party shall use any information designated Confidential for no other purpose other than the preparation, trial and appeal of this case, except based on further order of the Court.

II. DISCUSSION

A. Standard of Review

Pursuant to 28 U.S.C. § 636(b)(1)(A), Federal Rule of Civil Procedure 72(a), and Local Civil Rule 72.1(a), a United States Magistrate Judge may hear non-dispositive motions. "A magistrate judge's ruling on a non-dispositive matter such as a discovery motion is entitled to great deference and is reversible only for abuse of discretion." Eisai Co. v. Teva Pharms. USA, Inc., 629 F.Supp.2d 416, 433--34 (D.N.J. 2009). On appeal, a district court may modify or set aside a magistrate judge's non-dispositive order only if the ruling was "clearly erroneous or contrary to law." Fed.R.Civ.P. 72(a); L. Civ. R. 72.1(c)(1)(A); see also Haines v. Liggett Group Inc., 975 F.2d 81, 91 (3d Cir. 1992); Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1113 (3d Cir. 1986).

A ruling is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Dome Petroleum Ltd. v. Employers Mut. Liab. Ins. Co., 131 F.R.D. 63, 65 (D.N.J. 1990) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). A magistrate judge's order is contrary to law "when the magistrate judge has misinterpreted or misapplied the applicable law." Doe v. Hartford Life & Accident Ins. Co., 237 F.R.D. 545, 548 (D.N.J. 2006) (citing Pharm. Sales & Consulting Corp. v. J.W.S. Delavau Co., 106 F.Supp.2d 761, 764 (D.N.J. 2000)). While a magistrate judge's decision typically is entitled to deference, "a magistrate judge's legal conclusions on a non-dispositive motion will be reviewed de novo." Eisai, 629 F.Supp.2d, 434.

B. Analysis

Whirlpool appeals two aspects of Judge Salas' rulings below. First, Whirlpool appeals Judge Salas' decision that LG's responses to Requests for Admissions ("RFAs") were appropriate. Second, Whirlpool appeals Judge Salas' determination that certain portions of the Sung Hoon Chung deposition are confidential. This Court finds that Judge Salas did not abuse her discretion in finding LG's responses were appropriate and should not be deemed admitted and on several of the confidentiality designations, but disagrees with Judge Salas' application of the law when dealing with three of the passages designated as confidential.

1.RFA Responses

According to Federal Rule of Civil Procedure 36, (1) Scope. A party may serve on any other party a written request to admit, for purposes of the pending action only, the truth of any matters within the scope of Rule 26(b)(1) (4) Answer. If a matter is not admitted, the answer must specifically deny it or state in detail why the answering party cannot truthfully admit or deny it. A denial must fairly respond to the substance of the matter; and when good faith requires that a party qualify an answer or deny only a part of a matter, the answer must specify the part admitted and qualify or deny the rest. The answering party may assert lack of knowledge or information as a reason for failing to admit or deny only if the party states that it has made reasonable inquiry and that the information it knows or can readily obtain is insufficient to enable it to admit or deny.

(6) Motion Regarding the Sufficiency of an Answer or Objection. The requesting party may move to determine the sufficiency of an answer or objection. Unless the court finds an objection justified, it must order that an answer be served. On finding that an answer does not comply with this rule, the court may order either that the matter is admitted or that an amended answer be served.

In other words, a response is proper if it "fairly respond[s] to the substance of the matter." A partial denial is proper if "good faith requires the party qualify an answer or deny only party of the matter," and if it specifies the portions of the RFA that it agrees with and the portions that it denies.

Here, Whirlpool's RFA Nos. 64-66, 69, 70, and 72 request that LG admit that "LG did not Disclose [a certain reference] to the United States Patent and Trademark Office in connection with the prosecution of [certain patent applications]." Whirlpool defined "Disclose" to mean "bringing a patent, publication, application, or other information to the attention of the United States Patent and Trademark Office during the pendency of a patent application by listing the patent, publication, application, or other information in an Information Disclosure Statement submitted to the United States Patent and Trademark Office." (Whirlpool RFA at 4).

LG responded as follows:

LGE obejcts [sic] to the definition of the term "Disclose." Without waiving and except as objected to in the foregoing objections and General Objections, LGE responds that the [certain reference], contained in Exhibit A2, was not listed in an Information Disclosure Statement submitted to the United States Patent and Trademark Office during the prosecution of the [certain patent] applications. Except as stated in its response, LGE denies this request.

(LG's response to RFA at 25-29). Essentially, LG agreed that no person raised the references to the patent office; however, it objected to the definition of "disclose."

Judge Salas was well within her discretion to find that this was an appropriate response. LG's response fairly responded to the substance of the matter by explaining that the references were not listed in an Information Disclosure Statement ("IDS") and thus were not directly considered by the Patent Office. Further, Judge Salas' determination that LG could parse portions that it admitted and portions it would not admit was not an abuse of discretion.

While LG's response splits a hair pretty finely, it had good reason to be careful. The word "disclose" implies a duty to disclose. However, LG itself had no such duty -- it was only the people involved in the patent prosecution that had such a duty. See 37 C.F.R.1.56(c). Further, a person is only under such a duty to disclose to the PTO if the material is known to such person and is material to patentability. See 37 C.F.R.1.56(a) (". . . a duty to disclose to the Office all information known to that individual to be material to patentability . . ."). LG's admission that the people involved in the prosecution of this patent did not provide these references in an IDS does not also require LG to imply that it should have provided them. LG admitted these statements to the extent that was appropriate and Whirlpool may use that admission at trial. As such, Judge Salas did not abuse her discretion when she found that these responses were appropriate. See Eisai Co., 629 F.Supp.2d at 433--34.*fn2

2.Confidentiality Designations of the Chung Deposition

However, in light of LG's burden to show that the designated portions of the deposition were confidential, it clearly failed to make such a showing on some of the passages designated. "In order to override the common law right of access, the party seeking the closure of a hearing or the sealing of part of the judicial record bears the burden of showing that the material is the kind of information that courts will protect and that disclosure will work a clearly defined and serious injury to the party seeking closure." In re Cendant Corp., 260 F.3d 183, 194 (3d. Cir. 2001) (internal quotations omitted). "In delineating the injury to be prevented, specificity is essential. Broad allegations of harm, bereft of specific examples or articulated reasoning, are insufficient." Id. (internal citations and quotations omitted). In determining access, "[t]he strong common law presumption of access must be balanced against the factors militating against access. The burden is on the party who seeks to overcome the presumption of access to show that the interest in secrecy outweighs the presumption." Id.

LG's argument in an attempt to carry this burden was manifestly insufficient, as it consisted entirely of "[b]road allegations of harm, bereft of specific examples or articulated reasoning," which is insufficient under Third Circuit law. See In re Cendant Corp., 260 F.3d at 194. The only argument LG advanced to carry its burden of showing harm was that:

Whirlpool's request is contradicted by the transcript itself, which plainly reveals LGE's nonpublic and internal "trade secrets [and] other confidential or proprietary information, including . . . strategic, research, [and] development . . . information." (Joint Letter Brief, D.E. 116 at 7). This is exactly the type of broad statement of harm that is insufficient to carry the burden of harm -- LG cites no specific harm, but merely conclusorily states that the transcript "plainly reveals" the confidential information.

The declarations supporting these statements in LG's motion to seal and in its letter to Judge Salas fare somewhat better, but in some cases the confidential issues alleged are not borne out in the passages designated. Jae-Oak Kho's declaration in support of a discovery letter to Judge Salas states that

The portions of [the deposition] that were designated confidential and/or proprietary to LGE -- specifically, highly-sensitive information concerning design and/or research information relating to the development of LGE's French door refrigerators, including the contributions of specific LGE personnel to such work and the areas of respective expertise. Such information is highly confidential.*fn3

(D.E. 99-2 at ¶7). The Court agrees that information concerning the design of commercial embodiments would create prejudice if disclosed to the public. Further, the Court agrees that the contributions and areas of expertise of people working on the project might ease the burden of a competitor attempting to reverse engineer LG's refrigerators because the competitor would know what type of team it should assemble. However, in several of the passages, these concerns are not borne out.

a. Passage 1

The statements, and context where necessary, are reproduced below. The statements that LG designated as confidential are highlighted, whereas the ...


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