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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe 7th Circuit Court of Appeals has ruled against a German company seeking to modify a protective order that kept confidential certain discovery documents used in European trade secrets litigation, finding the company failed to show good cause to modify the order.
In the early 1970s, Heraeus Kulzer, GmbH – a German company that develops and produces bone cements for joint replacement surgeries – began contracting with Merck KGaA to distribute the bone cements, sharing confidential information that Merck could only use to obtain regulatory approval. Then in 2004, Merck sold its shares of a joint venture to Biomet, a Wabash-based company.
Heraeus stopped delivering its products to Biomet, which responded by manufacturing its own bone cements in direct competition with Heraeus. Heraeus ten filed a trade secret misappropriation complaint in Germany and filed suit in the Northern District of Indiana to obtain discovery from its Warsaw-based competitor.
The district court initially denied that request, but the 7th Circuit ordered the lower court to oversee the discovery process in a 2011 opinion. On remand, Biomet agreed to produce discovery materials pursuant to an amended protective order, which allowed it to designate discovery materials as confidential and only to be used in the German and northern district actions. Esschem, Inc. – which was supplying materials Biomet needed to produce its bone cements – intervened, prompting a second protective order.
The district court periodically entered seven protective orders, and Heraeus submitted the discovery as part of the German case. The German court ultimately ruled in Heraeus’ favor and entered an injunction against Biomet, and Heraeus filed suit in several other European countries to enforce the German ruling.
Heraeus wanted to submit the discovery it had obtained pursuant to the protective orders as part of its other European complaints, so it moved the district court to modify the protective orders to exclude nine documents the German court referenced in its ruling. The district court denied that motion, so the parties agreed to an eighth protective order outlining how the documents cited by the German court could be used in the European enforcement proceedings.
However, Heraeus later alleged that agreement fell through and again petitioned the court to modify the protective orders. The company then filed a third motion, but each of its motions were unsuccessful.
Heraeus then filed the instant appeal of the denial of its third motion and the “underlying orders” that led to that denial, but the 7th Circuit Court of Appeals upheld the district court’s ruling on Thursday. Judge Joel Flaum initially determined the court did not have jurisdiction to review the denial of Heraeus’ first two motions to modify because the district court’s rulings on those motions were final under 28 United States Code section 1782. Thus, they were individually appealable, Flaum said, and Heraeus failed to timely file appeals.
Turning to the third denial, Heraeus argued the district court abused its discretion by applying the wrong legal test, placing the burden on Heraeus and concluding modification was not warranted under a 7th Circuit four-factor test. The appellate court, however, disagreed with each of those contentions, finding that the four-factor test used in cases such as Romary Assocs., Inc. v. Kibbi, LLC, No. 1:10-cv-376, 2012 WL 32969 at *1 (N.D. Ind. Jan. 6, 2012), applied here because the district court properly found Biomet was not using the eighth protective order to obstruct the European proceedings.
The district court also correctly determined Heraeus had the burden of showing good cause to modify the protective order because it was the party seeking modification, Flaum said. Further, the Northern District properly employed the four-part test to determined Heraeus had not met that burden and failed to prove good cause to amend the order, he said.
The case is Heraeus Kulzer, GmbH v. Biomet, Inc. and Esschem, Inc. 17-1674.
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