CAFC reverses Judge Koh on sealing issue in Apple v. Samsung
from Apple v. Samsung
In these consolidated appeals, Apple Inc. and Samsung Electronics Company, Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications Ameri- ca, LLC (collectively “Samsung”) challenge orders of the U.S. District Court for the Northern District of California denying requests to seal various confidential exhibits attached to pre-trial and post-trial motions. See Apple, Inc. v. Samsung Electronics Co., No. 11-CV-01846, 2012 WL 3283478 (N.D. Cal. Aug. 9, 2012) (“August Order”); Apple, Inc. v. Samsung Electronics Co., No. 11-CV-01846, 2012 WL 5988570 (N.D. Cal. Nov. 29, 2012) (“November Order”) (collectively “Unsealing Orders”). Because the district court abused its discretion in refusing to seal the confidential information at issue in the appeals, we reverse and remand.
Background of the problem
The trial drew an extraordinary amount of attention from the public and the media, leading some to dub it “The Patent Trial of the Century.”1 Consistent with the extraordinary level of interest in the case, the press was given extraordinary access to the judicial proceedings. Unlike many patent trials, which often contain mountains of sealed exhibits and occasionally have closed courtroom proceedings, the district court explained to the parties before the trial that “the whole trial is going to be open.” J.A. 3. Consequently, the district court agreed to seal only a small number of trial exhibits. And shortly after the close of business each day, the parties, by order of the court, provided the press with electronic copies of every exhibit used at trial that day. Similarly, most exhibits attached to pre-trial and post-trial motions were ordered unsealed.
The unusual posture:
These appeals are unique in that neither the appellant, Apple, nor the cross-appellant, Samsung, opposes the other party’s requested relief. In addition, Reuters, which intervened in the proceedings below, chose not to participate in the appeals.
The First Amendment Coalition (“Coalition”), whose members include print and broadcast media organizations such as the Los Angeles Times, Associated Press, and Wired.com, moved to intervene in the appeals so that it could represent its members’ interests and provide view- points in favor of the Unsealing Orders. This court denied the Coalition’s motion to intervene but granted leave to file a brief amicus curiae.
The collateral order doctrine:
Here, the Unsealing Orders are interlocutory orders, which ordinarily would not be immediately appealable. Apple and Samsung assert, however, that we have jurisdiction under the collateral order doctrine. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949).
The collateral order doctrine is a “narrow exception” to the final judgment rule that permits the appeal of “trial court orders affecting rights that will be irretrievably lost in the absence of an immediate appeal.” Richardson- Merrell, Inc. v. Koller, 472 U.S. 424, 430-31 (1985). “To fall within the exception, an order must at a minimum satisfy three conditions: It must [1] ‘conclusively deter- mine the disputed question,’ [2] ‘resolve an important issue completely separate from the merits of the action,’ and [3] ‘be effectively unreviewable on appeal from a final judgment.’” Id. at 431 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468 (1978)).
We agree with Apple and Samsung that these three conditions are satisfied.
Access to judicial records:
The broad issue before us is whether the district court abused its discretion in ordering the unsealing of the documents Apple and Samsung seek to seal. We begin by reviewing “the common law right of access to judicial records.” Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). (...)
“Historically, courts have recognized a ‘general right to inspect and copy public records and documents, includ- ing judicial records and documents.’” Id. (quoting Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978)). “This right extends to pretrial documents filed in civil cases.” Id.
Although the common law right of access is not abso- lute, the Ninth Circuit “start[s] with a strong presump- tion in favor of access to court records.” Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003). “A party seeking to seal judicial records can over- come the strong presumption of access by providing ‘sufficiently compelling reasons’ that override the public policies favoring disclosure.” In re Midland, 686 F.3d at 1119 (quoting Foltz, 331 F.3d at 1135). “That is, the party must articulate compelling reasons supported by specific factual findings that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.” Kamakana, 447 F.3d at 1178-79 (alterations omitted) (internal quotation marks omitted). (...)
One factor that weighs in favor of sealing documents is when the release of the documents will cause competi- tive harm to a business. For example, the Supreme Court explained in Nixon that “the common-law right of inspec- tion has bowed before the power of a court to insure that its records” do not “serve as . . . sources of business infor- mation that might harm a litigant’s competitive stand- ing.” Nixon, 435 U.S. at 598. (...)
see also Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1162 (9th Cir. 2011) (“The publica- tion of materials that could result in infringement upon trade secrets has long been considered a factor that would overcome this strong presumption.”). The Ninth Circuit has adopted the Restatement’s definition of “trade secret.” Clark v. Bunker, 453 F.2d 1006, 1009 (9th Cir. 1972); see also In re Elec. Arts, Inc., 298 F. App’x 568, 569-70 (9th Cir. 2008) (nonprecedential). According to the Restate- ment, “[a] trade secret may consist of any formula, pat- tern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Restatement (First) of Torts § 757, cmt. b. Con- sequently, in In re Electronic Arts, for example, the Ninth Circuit held that a district court had abused its discretion in refusing to seal “pricing terms, royalty rates, and guaranteed minimum payment terms” found in a license agreement because such information “plainly falls within the definition of ‘trade secrets.’” 298 F. App’x at 569
Why to disclose the information?
The First Amendment Coalition responds that Apple and Samsung have failed to establish that these docu- ments contain trade secrets because, for the reasons stated by the district court, the parties have not shown that they will suffer competitive harm from public disclo- sure. On the other side of the scale, the Coalition asserts that the public has a strong interest in the financial information in question. In addition to the reasons relied on by the district court, the Coalition cites declarations submitted to the district court by Reuters and the Elec- tronic Frontier Foundation (“EFF”). For example, a Reuters representative explained that major media out- lets were closely following “the case’s strategic impact on the companies, including financial risks for shareholders.” Coalition Br. 22. And an EFF representative explained that the financial data surrounding the “development, sale, and production” of smartphones and tablets “provide powerful tools to many groups, including EFF, who work diligently to ensure those consumer’s interests are taken into account in manufacturing and pricing decisions.” Id.
As to the district court
In particular, it seems clear that if Apple’s and Samsung’s suppliers have access to their profit, cost, and margin data, it could give the suppliers an advantage in contract negotiations, which they could use to extract price increases for components. See J.A. 3630 ¶ 8. This would put Apple and Samsung at a com- petitive disadvantage compared to their current position. Significantly, although the district court recognized this part of the parties’ argument, it failed to discuss the argument in its analysis.
Note footnote 4
Even if we were to conclude definitively that Ap- ple’s and Samsung’s confidential financial information qualified as trade secrets, it would not necessarily end the analysis. We do not read Ninth Circuit precedent as creating a blanket rule that the “compelling reasons” standard is necessarily met whenever a document con- tains a trade secret. Rather, the court still must weigh the interests of the party who wishes to seal the trade secret against the interests of the public. See Kamakana, 447 F.3d at 1179 (explaining that “[i]n general,” the release of trade secrets provides “‘compelling reasons’ sufficient to outweigh the public interest in disclosure and justify sealing court records” (emphases added)).
Conclusion
We recognize the importance of protecting the public’s interest in judicial proceedings and of facilitating its understanding of those proceedings. That interest, how- ever, does not extend to mere curiosity about the parties’ confidential information where that information is not central to a decision on the merits. While protecting the public’s interest in access to the courts, we must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest. For the reasons set forth above, we hold that the district court abused its discretion in refusing to seal the particular documents that Apple and Samsung challenge in these appeals.
In these consolidated appeals, Apple Inc. and Samsung Electronics Company, Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications Ameri- ca, LLC (collectively “Samsung”) challenge orders of the U.S. District Court for the Northern District of California denying requests to seal various confidential exhibits attached to pre-trial and post-trial motions. See Apple, Inc. v. Samsung Electronics Co., No. 11-CV-01846, 2012 WL 3283478 (N.D. Cal. Aug. 9, 2012) (“August Order”); Apple, Inc. v. Samsung Electronics Co., No. 11-CV-01846, 2012 WL 5988570 (N.D. Cal. Nov. 29, 2012) (“November Order”) (collectively “Unsealing Orders”). Because the district court abused its discretion in refusing to seal the confidential information at issue in the appeals, we reverse and remand.
Background of the problem
The trial drew an extraordinary amount of attention from the public and the media, leading some to dub it “The Patent Trial of the Century.”1 Consistent with the extraordinary level of interest in the case, the press was given extraordinary access to the judicial proceedings. Unlike many patent trials, which often contain mountains of sealed exhibits and occasionally have closed courtroom proceedings, the district court explained to the parties before the trial that “the whole trial is going to be open.” J.A. 3. Consequently, the district court agreed to seal only a small number of trial exhibits. And shortly after the close of business each day, the parties, by order of the court, provided the press with electronic copies of every exhibit used at trial that day. Similarly, most exhibits attached to pre-trial and post-trial motions were ordered unsealed.
The unusual posture:
These appeals are unique in that neither the appellant, Apple, nor the cross-appellant, Samsung, opposes the other party’s requested relief. In addition, Reuters, which intervened in the proceedings below, chose not to participate in the appeals.
The First Amendment Coalition (“Coalition”), whose members include print and broadcast media organizations such as the Los Angeles Times, Associated Press, and Wired.com, moved to intervene in the appeals so that it could represent its members’ interests and provide view- points in favor of the Unsealing Orders. This court denied the Coalition’s motion to intervene but granted leave to file a brief amicus curiae.
The collateral order doctrine:
Here, the Unsealing Orders are interlocutory orders, which ordinarily would not be immediately appealable. Apple and Samsung assert, however, that we have jurisdiction under the collateral order doctrine. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949).
The collateral order doctrine is a “narrow exception” to the final judgment rule that permits the appeal of “trial court orders affecting rights that will be irretrievably lost in the absence of an immediate appeal.” Richardson- Merrell, Inc. v. Koller, 472 U.S. 424, 430-31 (1985). “To fall within the exception, an order must at a minimum satisfy three conditions: It must [1] ‘conclusively deter- mine the disputed question,’ [2] ‘resolve an important issue completely separate from the merits of the action,’ and [3] ‘be effectively unreviewable on appeal from a final judgment.’” Id. at 431 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468 (1978)).
We agree with Apple and Samsung that these three conditions are satisfied.
Access to judicial records:
The broad issue before us is whether the district court abused its discretion in ordering the unsealing of the documents Apple and Samsung seek to seal. We begin by reviewing “the common law right of access to judicial records.” Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). (...)
“Historically, courts have recognized a ‘general right to inspect and copy public records and documents, includ- ing judicial records and documents.’” Id. (quoting Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978)). “This right extends to pretrial documents filed in civil cases.” Id.
Although the common law right of access is not abso- lute, the Ninth Circuit “start[s] with a strong presump- tion in favor of access to court records.” Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003). “A party seeking to seal judicial records can over- come the strong presumption of access by providing ‘sufficiently compelling reasons’ that override the public policies favoring disclosure.” In re Midland, 686 F.3d at 1119 (quoting Foltz, 331 F.3d at 1135). “That is, the party must articulate compelling reasons supported by specific factual findings that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.” Kamakana, 447 F.3d at 1178-79 (alterations omitted) (internal quotation marks omitted). (...)
One factor that weighs in favor of sealing documents is when the release of the documents will cause competi- tive harm to a business. For example, the Supreme Court explained in Nixon that “the common-law right of inspec- tion has bowed before the power of a court to insure that its records” do not “serve as . . . sources of business infor- mation that might harm a litigant’s competitive stand- ing.” Nixon, 435 U.S. at 598. (...)
see also Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1162 (9th Cir. 2011) (“The publica- tion of materials that could result in infringement upon trade secrets has long been considered a factor that would overcome this strong presumption.”). The Ninth Circuit has adopted the Restatement’s definition of “trade secret.” Clark v. Bunker, 453 F.2d 1006, 1009 (9th Cir. 1972); see also In re Elec. Arts, Inc., 298 F. App’x 568, 569-70 (9th Cir. 2008) (nonprecedential). According to the Restate- ment, “[a] trade secret may consist of any formula, pat- tern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Restatement (First) of Torts § 757, cmt. b. Con- sequently, in In re Electronic Arts, for example, the Ninth Circuit held that a district court had abused its discretion in refusing to seal “pricing terms, royalty rates, and guaranteed minimum payment terms” found in a license agreement because such information “plainly falls within the definition of ‘trade secrets.’” 298 F. App’x at 569
Why to disclose the information?
The First Amendment Coalition responds that Apple and Samsung have failed to establish that these docu- ments contain trade secrets because, for the reasons stated by the district court, the parties have not shown that they will suffer competitive harm from public disclo- sure. On the other side of the scale, the Coalition asserts that the public has a strong interest in the financial information in question. In addition to the reasons relied on by the district court, the Coalition cites declarations submitted to the district court by Reuters and the Elec- tronic Frontier Foundation (“EFF”). For example, a Reuters representative explained that major media out- lets were closely following “the case’s strategic impact on the companies, including financial risks for shareholders.” Coalition Br. 22. And an EFF representative explained that the financial data surrounding the “development, sale, and production” of smartphones and tablets “provide powerful tools to many groups, including EFF, who work diligently to ensure those consumer’s interests are taken into account in manufacturing and pricing decisions.” Id.
As to the district court
In particular, it seems clear that if Apple’s and Samsung’s suppliers have access to their profit, cost, and margin data, it could give the suppliers an advantage in contract negotiations, which they could use to extract price increases for components. See J.A. 3630 ¶ 8. This would put Apple and Samsung at a com- petitive disadvantage compared to their current position. Significantly, although the district court recognized this part of the parties’ argument, it failed to discuss the argument in its analysis.
Note footnote 4
Even if we were to conclude definitively that Ap- ple’s and Samsung’s confidential financial information qualified as trade secrets, it would not necessarily end the analysis. We do not read Ninth Circuit precedent as creating a blanket rule that the “compelling reasons” standard is necessarily met whenever a document con- tains a trade secret. Rather, the court still must weigh the interests of the party who wishes to seal the trade secret against the interests of the public. See Kamakana, 447 F.3d at 1179 (explaining that “[i]n general,” the release of trade secrets provides “‘compelling reasons’ sufficient to outweigh the public interest in disclosure and justify sealing court records” (emphases added)).
Conclusion
We recognize the importance of protecting the public’s interest in judicial proceedings and of facilitating its understanding of those proceedings. That interest, how- ever, does not extend to mere curiosity about the parties’ confidential information where that information is not central to a decision on the merits. While protecting the public’s interest in access to the courts, we must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest. For the reasons set forth above, we hold that the district court abused its discretion in refusing to seal the particular documents that Apple and Samsung challenge in these appeals.
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