In re POSCO (Fed. Cir. 2015)
On writ of mandamus, the Federal Circuit has vacated N.J. District Court Judge Chesler’s decision to allow confidential documents disclosed in the U.S. patent case to be used in the somewhat parallel actions in Japan and Korea.
The underlying infringement action here involves Nippon Steel suing the Korean company POSCO for infringing its patents covering a grain-oriented electrical steel strip having high magnetic flux density. (See., e.g., Patent No. 7,442,260). Additionally, Nippon Steel sued POSCO in Japan for trade secret infringement and POSCO filed a declaratory judgment action in Korea asking for a no-infringement holding.
In the U.S. lawsuit, the district court entered a discovery protective order that disclosed confidential materials ‘be used by the receiving Party solely for purposes of the prosecution or defense of this action.’ U.S. discovery rules require much more extensive disclosures than do those in Korea or Japan. Thus, when POSCO disclosed “several million pages of documents containing confidential information” in the U.S. lawsuit, Nippon Steel looked to use some of those documents in the foreign courts. In particular, Nippon Steel asked for, and the district court granted, a modification of the protective order that would allow it to use about 200 pages of documents relating to POSCO’s manufacturing process in the foreign court actions. POSCO then petitioned for a writ of mandamus to stop the disclosure.
Here, the district court relied upon the Third Circuit precedent of Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994), which holds that a “party seeking to modify the order of confidentiality must come forward with a reason to modify the order. Once that is done, the court should then balance the interests, including the reliance by the original parties to the order, to determine whether good cause still exists for the order.” Based upon that holding, the district court determined that the foreign court proceeding was sufficient justification for the modification.
In its mandamus decision, the Federal Circuit found that Pansy should not be controlling but that the court should also consider 28 U.S.C. § 1782 and Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) when determining whether to allow disclosure of confidential protected information to a foreign court.
Section 1782 provides that a U.S. district court “may order” disclosures for use in a foreign tribunal. In Intel, the Supreme Court recognized that a district court should consider “comity and parity concerns” when deciding whether to grant disclosure. In particular, there is a recognized concern that parties will “abuse” the U.S. discovery process and “attempt to circumvent foreign proof-gathering restrictions.”
On remand, the district court will “conduct the proper assessment giving due consideration to the Intel factors.”
Why is this a proper motion in the U.S. court? Shouldn’t this be being debated in the foreign court (whose “sensibilities” are at stake)…?
Because there was a protective order on the discovery material that was issued by a US court. Using it in a foreign court without getting that protective order changed would have resulted in contempt of court and heavy penalties in the US. Why would you argue a US protective order in a foreign court?
They aren’t arguing that the foreign court should accept it, they are arguing they should be allowed to modify the US protective order to allow them to use it in a foreign court.
That’s for the foreign court to decide – as Ned points out, this is a conflict of law issue, and the issue is NOT in a U.S. court.
I think you are both right – on the one hand, the U.S. action is about the scope of the protective order which is only U.S. law; while, on the other hand, whatever happens here may very well frustrate another jurisdiction’s standards for scope of discovery.
Would foreign courts (outside the shared common law systems) even care about the documents? Or, are they kinda like the FRE – if you can find it (without breaking rules?) and it fits within the FRE, you can bring it in, and they just control civil procedure discovery requests a lot more?
Readers, try to imagine a world where there are two zones, each with its own legal system, one Zone with English notions of equity and the other lacking any such notion. In the English law Zone, they have something called “discovery”. In the other Zone (let’s call it the “Civil Law” zone) they have no conception of anything like that. Instead, what they have is “This is mine to know, and yours to find out. If you can”. For examples, turn to Europe. The Mainland has no notion of discovery, but The British Isles do.
Now suppose that Japan and Korea are in the Civil Law Zone. Nippon knows what POSCO is doing, but only thanks to the fruits of US discovery. If it tells the court in Japan the fruits of discovery it is in contempt of the US court. Unsurprisingly, it does not want to treat the US court with contempt, so it asks the court in the USA for permission to show the material to the judge in Japan.
Why should the US court give permission? If Japan sees no need for discovery, who is the US court to know better?
link to en.wikipedia.org
Max, good summary.
The Japanese company ought to sue the Korean company in the United States for trade secret misappropriation.
Help me Ned. You imagine a “trade secret” that has been misappropriated. Why should you imagine that? Where’s your basis?
Or are you advocating that JP should simply allege it and then use US discovery to go on a fishing expedition through POSCO files to find the evidence they seek, of patent infringement?
That reminds me of the French saisi contrefacon route beloved of DuPont’s James Forster, for accumulating enough evidence to pursue a patent infringement action.
Imagine?
Max, if the Japanese company sued the Korean company in the United States for trade secret misappropriation rather than fighting it out in Japan and Korea, they can get all the discovery they wanted in the United States.
This case will be very important for multinational companies that tend to file suits in various countries, simultaneously.
Dae, indeed.
Do you agree with the court here that generous US discovery rules should not be used to end-rule law and policy outside the US?
As long as you have a non-frivolous case in the U.S., and your lawsuits in the other jurisdictions are related, I don’t see the problem with modifying the order. That still does not guarantee that it will be admitted in the foreign jurisdiction, that is a matter for their courts to decide.
Really a conflicts of law issue where foreign law applies.
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