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Ultra Premium Services, LLC v. OFS International, LLC

United States District Court, S.D. Texas, Houston Division

November 7, 2019

Ultra Premium Services, LLC, Plaintiff,
OFS International, LLC, et al., Defendants.


          Christina A. Bryan United States Magistrate Judge

         This matter is before the Court on Defendants' Motion for Entry of Prosecution Bar (Dkt. 67). Having considered the parties' submissions, argument of counsel at a hearing on November 5, 2019, and the law, the Court grants the motion in part and enters a more limited prosecution bar than that sought by Defendants.

         I. Background

         Plaintiff filed its Original Complaint in this action on June 25, 2019 asserting causes of action against Defendants for violation of the Defend Trade Secrets Act, violation of the Texas Uniform Trade Secrets Act, and breach of contract, and seeking a temporary restraining order, a preliminary injunction, a permanent injunction and damages. An expedited trial is set for January 2020.

         The parties have exchanged, and continue to exchange, documents that contain confidential technical information such as product design drawings and specifications. An Agreed Protective Order governs the production and disclosure of confidential information in this case (Dkt. 19), but it does not include a “prosecution bar, ” a type of protective order that is “unique to patent law” and therefore governed by Federal Circuit law. In re Deutsche Bank Trust, Co., 605 F.3d 1373, 1377-78 (Fed. Cir. 2010). Inclusion of a prosecution bar in a protective order may be necessary when “even the most rigorous efforts of the recipient of [confidential] information to preserve confidentiality . . . may not prevent inadvertent compromise.” Deutsche Bank, 605 F.3d at 1378. Defendants seek a prosecution bar because “[t]hrough discovery in this case, it has come to [Defendants'] attention that [Plaintiff's] litigation counsel are also [Plaintiff's] primary patent counsel.” Dkt. 67 at 1. Plaintiff opposes entry of a prosecution bar in any form.

         II. Analysis

         As an initial matter, Plaintiff objects to the timing of Defendants' motion. Plaintiff's counsel has already received information designated “attorneys' eyes only” pursuant to the Agreed Protective Order in this case without being put to the choice of continuing to represent Plaintiff in this litigation or continuing with patent prosecution activities. While the timing of Defendants' motion eliminates Plaintiff's ability to choose the role it prefers for counsel, Plaintiff made a choice to have patent prosecution counsel represent it in this litigation despite the known risk presented by patent prosecution work involving the same type of threaded connections at issue in this suit.[1] From the inception of this fast-tracked case Plaintiff has been in a better position than the Defendants to know the scope of its counsels' patent prosecution activities. Plaintiff has cited no authority, and the Court has found none, holding that a party waives the right to seek a prosecution bar by not seeking it in an initial agreed protective order. Therefore, the timing of Defendants' motion does not preclude this Court's consideration of the standards for prosecution bars under Deutsche Bank and other relevant authorities and the facts in the record.

         A. Allocation of Burdens

         As explained in Eon Corp. IP Holdings, LLC v. AT & T Mobility LLC, 881 F.Supp.2d 254, 256-56 (D.P.R. 2012), district courts are split on how to allocate the burden of proof when deciding a motion for entry of a prosecution bar. Most courts apply a two-step inquiry: first the moving party must show, on a counsel-by-counsel basis, an unacceptable risk of inadvertent disclosure; and second the court must balance that risk against the potential harm to the non-movant. Id. at 255 and n.2 (gathering cases). A minority of courts utilizes a different two-step inquiry: first, the movant must show the prosecution bar is reasonable given the information at issue, the scope of activities to be barred and their subject matter, and the duration of the bar; and second, the court weighs the need for the prosecution bar “against the potential injury to the party deprived of its counsel of choice.” Id. at 256 (citing Applied Signal Tech., Inc. v. Emerging Mkts. Commc'ns, Inc., No. 09-02180, 2011 WL 197811 (N.D. Cal. Jan. 20, 2011)). The minority view shifts the burden to the non-movant to seek, on a counsel-by-counsel basis, an exemption to the bar. Id. One problem with the majority view is that early in litigation it is unlikely that the proponent of a prosecution bar has sufficient information about opposing counsel's involvement in competitive decision-making to show good cause. Id.

         As far as the Court is aware, neither the Fifth Circuit nor district courts in the Southern District of Texas have taken a side in the split described above. In this case, as explained in more detail below, the Court's conclusion is the same whether the burden is on Defendants to show competitive decision-making or on Plaintiff to show lack thereof.

         B. Competitive Decision-making

         There is no dispute that Plaintiff has or expects to have patent applications pending before the U.S. Patent Office regarding threaded connections, and that two of Plaintiff's litigation attorneys, C. Eric Hawes and Neil Ozarkar, have a history of representing Plaintiff in the prosecution of patent applications. The determination of an unacceptable risk of inadvertent disclosure and the need for a prosecution bar turns on the extent to which Hawes and Ozarkar are involved in “competitive decision-making” in connection with patent prosecutions for Plaintiff. Deutsche Bank, 605 F.3d at 1378 (citing U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468 (Fed. Cir. 1984)).

         Representing a party in patent prosecutions alone does not make counsel a competitive decision-maker for purposes of a prosecution bar. Deutsche Bank, 605 F.3d at 1379. Because of the wide-range of patent prosecution activities, it is important for the Court “to examine all relevant facts surrounding counsel's actual preparation and prosecution activities, on a counsel-by-counsel basis. Id. at 1380. The nature and extent of attorney involvement in prosecution activities may fall into one of three categories:

1. Minimal attorney engagement in patent prosecution (by, for example, “reporting office actions or filing ancillary paperwork”) [which] gives rise to a ...

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