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Phishme, Inc. v. Wombat Security Technologies, Inc.

United States District Court, D. Delaware

September 18, 2017

PHISHME, INC., Plaintiff,
v.
WOMBAT SECURITY TECHNOLOGIES, INC., Defendant.

          MEMORANDUM ORDER

          CHRISTOPHER J. BURKE, UNITED STATES MAGISTRATE JUDGE.

         Pending before the Court in this patent infringement action is Plaintiff PhishMe, Inc.'s ("Plaintiff or "PhishMe") letter motion seeking to modify the Protective Order entered in this case ("Motion"). (D.I. 93, 96) The Motion is opposed by Defendant Wombat Security Technologies, Inc. ("Defendant" or "Wombat"). For the reasons discussed below, the Court DENIES Plaintiffs Motion.

         I. BACKGROUND

         On June 1, 2016, Plaintiff commenced Civil Action Number 16-403-LPS-CJB[1] against Defendant; the operative complaint in that case now alleges that Defendant infringes United States Patent No. 9, 398, 038. (D.I. 1; D.I. 16) Defendant has, inter alia, asserted Lanham Act and state law counterclaims in that case related to another PhishMe patent, U.S. Patent No. 9, 356, 948 (the '"948 patent"). (D.I. 18)[2] In its counterclaims, Defendant has alleged (and for our purposes, there really is no dispute) that it and Plaintiff are direct competitors in the market for, inter alia, cyber security awareness and training software for organizations. (Id. at 8 at ¶ 1; id. at 10-11 at ¶¶ l 1-19; id. at 12 at ¶ 29; id at 29 at ¶ 155; see also D.I. 99 at 1; D.I. 103, ex. 2 ("Tr.") at 25 (Wombat's counsel noting that the parties are "vigorous competitors")) On June 28, 2017, Chief Judge Leonard P. Stark referred the case to the Court to hear and resolve all pre-trial matters, up to and including the resolution of case-dispositive motions. (D.I. 85)

         A jointly-proposed Protective Order was entered by the Court in Civil Action Number 16-403-LPS-CJB on November 1, 2016. (D.I. 24) That Protective Order, at issue here, requires that, inter alia, there be three levels of protection for confidential information: (1) "CONFIDENTIAL Material, " which up to three of each party's employees, officers or directors can access; (2) "ATTORNEY'S EYES ONLY ['AEO'] Material, " with access restricted to a smaller group of persons, including outside counsel (but not including any party employees, officers or directors); and (3) "Prosecution Bar Material, " with access restricted to outside counsel and further conditioned on forbearance from certain patent prosecution activities. (D.I. 24 at 2-4, 9-13; D.I. 96 at l)[3] To date, Wombat has produced a significant amount of AEO Material to PhishMe, including documents reflecting Wombat's business and products, financial position, strategic planning, competitive intelligence, and customer contract negotiations. (D.I. 99 at 2-3; D.I. 105 at 2 & ex. 1; Tr. at 25) Indeed, it appears that a significant amount of the documents that each side has produced to the other in this case have been designated as AEO Material. (D.I. 96, ex. 4 at ¶6; Tr. at 15, 25)[4]

         On June 16, 2017, Plaintiff commenced a second case against Defendant, alleging infringement of U.S. Patent Nos. 9, 591, 017 and 9, 674, 221. That action-Civil Action No. 17-769-LPS-CJB-was also referred to the Court to hear and resolve all pre-trial matters, up to and including the resolution of case-dispositive motions. (Civil Action No. 17-769-LPS-CJB, D.I. 9) Thereafter, Civil Action No. 17-769-LPS-CJB was consolidated with Civil Action No. 16-403-LPS-CJB by joint stipulation and by order of the Court. (D.I. 86) The Protective Order at issue here thus applies to both of the consolidated cases.

         On July 19, 2017, the parties notified the Court of the instant Motion. (D.I. 93) With the Motion, Plaintiff asks the Court to modify the Protective Order to permit one in-house counsel of Plaintiff to access AEO Material: Plaintiffs General Counsel, Secretary and Chief Privacy Officer Shane McGee, who joined Plaintiff (and took on each of those roles) on October 31, 2016. (D.I. 96 at 1; see also id, ex. 2 at 10; id., ex. 4 at ¶ 3; D.I. 103, ex. 1 at ¶ 1) The parties thereafter filed letter briefs in support of their positions. (D.I. 96; D.I. 99) The Court held a teleconference to address the Motion on August 10, 2017. Following the teleconference, the Court ordered that the parties may file one additional submission apiece that addressed certain issues raised during the teleconference. Each side then submitted supplemental materials, and the briefing was closed on August 18, 2017. (D.I. 103; D.I. 105)

         II. DISCUSSION

         A. Legal Standards

         Federal Rule of Civil Procedure 26(b)(1) permits, with certain limits, "discovery regarding any nonprivileged matter that is relevant to any party's claim or defense[.]" Fed.R.Civ.P. 26(b)(1). A producing party may ask the Court to minimize its burden to turn over discoverable information by ordering that a protective order be issued, to protect it from "annoyance, embarrassment, oppression, or undue burden or expense[.]" Fed.R.Civ.P. 26(c)(1). One such order can allow that "a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way[, ]" id, to, inter alia, an attorney for one of the parties, see Blackbird Tech LLC v. Serv. Lighting & Elec. Supplies, Inc., Civil Action No. 15-53-RGA, 2016 WL 2904592, at *1 (D. Del. May 18, 2016). A party seeking a modification to a protective order (here, Plaintiff) regarding an attorney's access to otherwise protected information carries the burden of demonstrating "good cause" for the modification. Cf. In re Deutsche Bank Trust Co. Ams., 605 F.3d. 1373, 1378 (Fed. Cir. 2010); Pansy v. Borough of Stroudsburg, 23 F.3d 772, 790 (3d Cir. 1994); Apeldyn Corp. v. AU Optronics Corp., Civil Action No. 08-568-SLR, 2012 WL 2368796, at *2 (D. Del. June 13, 2012); Phillips Petroleum Co. v. Rexene Prods. Co., 158 F.R.D. 43, 46 (D. Del. 1994); Cytosport, Inc. v. Vital Pharm., Inc., No. CIV. S-08-2632 FCD/GGH, 2010 WL 728454, at *1 & n.3 (E.D. Cal. Mar. 2, 2010); see also (Tr. at 18).

         The United States Court of Appeals for the Federal Circuit[5] has stated that in determining whether good cause has been shown to support modification to a protective order of the type at issue here, a court must first consider whether the modification would bring with it an "unacceptable risk of inadvertent disclosure" or competitive misuse of confidential information. In re Deutsche Bank, 605 F.3d. at 1378-79 (citation omitted).[6] The Court must then "balance" that risk against the potential harm to the moving party, were the modification not to be adopted, and were it to thus face restrictions on its right to have the benefit of counsel of its choice. Id. at 1380.

         B. Discussion

         1. Unacceptable Risk of Inadvertent Disclosure or Competitive Misuse

         In assessing whether a proposed modification of a Protective Order would present an unacceptable risk of inadvertent disclosure or competitive misuse of confidential information, it would be error to deny access solely because of an in-house counsel's "general position"; instead, "the factual circumstances surrounding each individual counsel's activities, association, and relationship with a party ... must govern any concern for inadvertent or accidental disclosure." U.S. Steel Corp. v. United States, 730 F.2d 1465, 1467-68 (Fed. Cir. 1984); see also Boehringer Ingelheim Pharm., Inc. v. Hereon Labs. Corp., Civ. A. No. 89-484-CMW, 1990 WL 160666, at *1 (D. Del. Oct. 12, 1990). This decision will turn, then, on a fact-intensive inquiry into whether affected counsel (here, Mr. McGee) participates in "competitive decisionmaking" at PhishMe. U.S. Steel Corp., 730 F.2d at 1467-68; In re Deutsche Bank, 605 F.3d at 1378. The Federal Circuit has defined "competitive decisionmaking" as "counsel's activities, association, and relationship with a client that are such as to involve counsel's advice and participation in any or all of the client's decisions (pricing, product design, etc.) made in light of similar or corresponding information about a competitor." U.S. Steel Corp., 730 F.2d at 1468 n.3; see also In re Deutsche Bank, 605 F.3d at 1378-79.

         Here, the parties focus much of their briefing on whether Mr. McGee, in fact, participates in competitive decisionmaking. The Court will similarly reserve much of its focus for this issue. In addressing that question, it makes sense to first assess what we know about Mr. McGee's responsibilities at PhishMe (drawn from two declarations that Mr. McGee has submitted and a few other materials of record):

• Mr. McGee states that, in his role as General Counsel, he is "responsible for all of PhishMe's legal affairs and provide[s] advice and counsel to the company on legal, compliance, and privacy matters." (D.I. 96, ex. 4 at ¶ 3) He reports directly to Rohyt Belani, PhishMe's Chief Executive Officer ("CEO"). (Id.)
• Mr. McGee avers that while he "participate[s] in evaluating whether other companies are infringing PhishMe's intellectual property rights and in formulating enforcement strategies [, ]" he is "not authorized, however, to make the ultimate decisions on whether and on what terms to license PhishMe's intellectual property, including the patents PhishMe has asserted against Wombat, or on whether to enforce PhishMe's patents against entities it believes infringe[, ]" or as to whether initiate or settle litigation. (Id. at ¶¶ 4-5) PhishMe's CEO and its Board of Directors ("Board") make those "ultimate decisions [.]" (Id. at ¶ 4)
• Mr. McGee also manages PhishMe's "outside patent prosecution counsel in the prosecution of patent applications and in post-issuance proceedings related to PhishMe's patents." (Id. at ¶ 5)
• Additionally, Mr. McGee supervises two other in-house attorneys and a barrister-in-training. (Id. at ¶ 3) One of those two attorneys, inter alia, reviews and drafts contracts, developing contractual language based on terms negotiated by ...

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