Opposition Brief — EDAP, S. A. v. Richard Wolf GmbH

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No. 91-1862 JUL 2 1991

IN THE

Supreme Court of the United States

OFFWE OF THE =

Ocroser Term, 1991

EDAP, S.A.,

Petitioner,

vs.

RICHARD WOLF GmbH and RICHARD WOLF

MEDICAL INSTRUMENTS CORP.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION —

WILLIAM SCHURTMAN

Counsel of Record

Grecory F. Hauser

WALTER, CONSTON, ALEXANDER

& GREEN P.C.

90 Park Avenue

New York, New York 10016

(212) 210-9400

Counsel for Respondents

QUESTIONS PRESENTED

1. Whether the Court of Appeals for the Federal Circuit, the

District Court for the Northern District of Illinois, and the

Magistrate below all erred in determining that petitioner should

not be permitted to take respondents’ confidential documents

produced in pre-trial discovery pursuant to a protective order

in this action and to use them in another action, to which

respondents are not parties, after petitioner had expressly agreed

to return or to destroy those documents following the conclu-

sion of this action, after respondents had relied on that agree-

ment in producing the documents and in settling this action,

and where it would be difficult for respondents to protect their

interests under a protective order in the second action to which

they are not parties?

2. Whether public policy requires that petitioner, after in-

ducing respondents to settle this action in reliance on a protec-

tive order that required petitioner to return or to destroy

respondents’ confidential documents, and after breaching the

protective order and settlement agreement by refusing to do so,

should now be entitled to a modification of the protective order

allowing petitioner to invade respondents’ privacy, to retain those

documents, which had not been introduced into evidence, and

to use them in another action, to which respondents are not par-

ties, in an effort to sustain the validit of petitioner’s patent?

TABLE OF CONTENTS

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I. The Writ of Certiorari Should Be Denied

Because No Important Question of Federal

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II. The Decisions Below Were Not Contrary

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III. The Decisions Below Were Not Clearly

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TABLE OF AUTHORITIES

CASES

In re “Agent Orange” Product Liability

Litigation, 104 F.R.D. 559 (E.D.N.Y. 1985) ...

In re Air Crash Disaster, 130 F.R.D. 634 (E.D.

EN, 5.0 0g 55 ee S46 SWEDE EE AT RASS Ks

American Tel. and Tel. Co. v. Grady, 594 F.2d

594 (7th Cir.), cert. denied, 440 U.S. 971

Ae eee pe Cae e eee ies Cewek

Cover v. Schwartz, 133 F.2d 541 (2d Cir. 1942) .

Federal Deposit Ins. Co. v. Ernst & Ernst, 677

FoF fe SS er ey errr

GAF Corp. v. Eastman Kodak Co., 415 F. Supp.

SP Re EE ea pcs caw na kc e ee ke ase

H.L. Hayden Co. v. Siemens Medical Systems,

106 F.R.D. 551 (S.D.N.Y. 1985), app. denied,

FOU We CN, GD bc kc esc ce ccep cece

Martindell v. Intl Tel. and Tel. Corp., 594 F.2d

FA er ee eer ne

McLaughlin v. Fellows Gear Shaper Co., 102

P.Ro. Gee Oe DD. Pi. FE oo ons cen ccwcns

Meyer Goldberg, Inc. v. Fisher Foods, 823 F.2d

PE IR 54s crude cals ced casewss

Micro Motion, Inc. v. Kane Steel Co., 894 F.2d

SR GS cn ons 6 bie e pee edie

Page

14

15, 18

14, 18

11-12

16

15, 16

15, 16

10-11,

15, 16

16

19-20

Page

Olympic Refining Co. v. Carter, 332 F.2d 260

(9th Cir.), cert. denied, 379 U.S. 900 (1964)... 14

Omega Homes, Inc. v. Citicorp Acceptance Co.,

es I OD 6 iA wee ca deb eeces cue ees 15, 16

Phillips Petroleum Co. v. Pickens, 105 F.R.D. 545

SE ED os os ce davunsadeeees trends 14

Public Citizen v. Liggett Group, 858 F.2d 775 (Ist

Cir. 1988), cert. denied, 488 U.S. 1030 (1989) . 19

Seattle Times Co. v. Rhinehart, 467 U.S. 20

YS hike a 6464 teEROCES eee dah eeeees one 9-10, 11,

21

Sinclair & Carroll Co. v. Interchemical Corp.,

et eee 11, 12

Societe Nationale Industrielle Aerospatiale v.

United States District Court, 482 U.S. 522

RR SR RGR Sein re ani Neo a6 ee a 16

State of Louisiana v. United States, 656 F. Supp.

1310 (W.D. La. 1986), aff'd, 832 F.2d 935,

reh'g denied, 836 F.2d 1346 (5th Cir. 1987),

cert. denied, 485 U.S. 1033 (1988) ........... 15

Struthers Patent Corp. v. Nestle Co., 558 F.

Supp. 747 (D.N.J. 1981) ............6....0-6- 6n.

Tavoulareas v. Washington Post Co., 111 F.R.D.

GE a ws chee vce epennees sae es 11, 15,

16, 18-19

Ex Parte Uppercu, 239 U.S. 435 (1915) ......... 12-13

Wilk v. American Medical Assoc., 635 F.2d 1295

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Vii

Page

STATUTES AND RULES

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TREATY

The Hague Convention on the Taking of

Evidence Abroad in Civil or Commercial

Matters, opened for signature June 1, 1970, 23

U.5.7. Gee Cees. OOO. WOOO ............. 16

No. 91-1862

IN THE

Supreme Court of the United States

Ocroser Term, 1991

EDAP, S.A..,

Petitioner,

vs.

RICHARD WOLF GmbH and RICHARD WOLF

MEDICAL INSTRUMENTS CORP.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

| Respondents Richard Wolf GmbH and Richard Wolf Medical

~~~ Instruments Corp. (hereinafter collectively “Wolf”) submit this

brief in opposition to the petition of EDAP, S.A. (“EDAP”),

for « writ of certiorari to the United States Court of Appeals

for the Federal Circuit, which affirmed per curiam the order

of the United States District Court for the Northern District of

Illinois overruling EDAP’s objections to the decision of the

Magistrate below that denied EDAP’s motion to modify a pro-

tective order.

i nein

ADDITIONAL RULE INVOLVED

Petitioner has omitted to set out the authority pursuant to

which the protective order at issue was entered, namely, Federal

Rule of Civil Procedure 26(c):

Protective Orders. Upon motion by a party or by the

person from whom discovery is sought and for good

cause shown, the court in which the action is pending

or alternatively, on matters relating to a deposition,

the court in the district where the deposition is to be

taken may make any order which justice requires to

protect a party or person from annoyance, embarrass-

ment, oppression, or undue burden or expense, in-

cluding one or more of the following: (1) that the

discovery not be had; (2) that the discovery may be

had only on specified terms and conditions, including

a designation of the time or place; (3) that the

discovery may be had only by a method of discovery

other than that selected by the party seeking discovery;

(4) that certain matters not be inquired into, or that

the scope of the discovery be limited to certain mat-

ters; (5) that discovery be conducted with no one pre-

sent except persons designated by the court; (6) that

a deposition after being sealed be opened only by order

of the court; (7) that a trade secret or other confiden-

tial research, development, or commercial informa-

tion not be disclosed or be disclosed only in a

designated way; (8) that the parties simultaneously

file specified documents or information enclosed in

sealed envelopes to be opened as directed by the court.

If the motion for a protective order is denied in

whole or in part, the court may, on such terms and

conditions as are just, order that any party or person

provide or permit discovery. The provisions of Rule

37(a)(4) apply to the award of expenses incurred in

relation to the motion.

STATEMENT OF THE CASE

EDAP’s Statement of the Case fails to mention the central

fact that EDAP induced Wolf to settle this action without disclos-

ing that EDAP did not intend to meet its obligation under the

protective order at issue to return or to destroy Wolf's confidential

and proprietary documents. Instead, EDAP’s actions show that

it meant all along to retain and to use the documents in its

separate California lawsuit against another competitor,

Diasonics. These circumstances are discussed in detail in the

opinion of the Magistrate below. (A7-13:)

In September 1989, Wolf and EDAP negotiated a comprehen-

sive settlement of a bitter and hard-fought international patent

dispute, which had been litigated in the United States and several

European countries. Wolf had won many of the battles; for ex-

ample, it had prevailed at a trial in England, where the High

Court of Justice ruled in the alternative either that Wolf had

not infringed EDAP’s patent or that, if infringed, the patent

was invalid. Wolf had also defeated actions in Italy and the

Netherlands, in which EDAP sought preliminary injunctions,

and had won dismissal of an attempted criminal action for

patent infringement in Switzerland.

Several years of unrelenting and exceedingly costly world-wide

litigation, however, had taken their toll. Faced with the cost and

risks of a lengthy jury trial in the United States, to say nothing

of subsequent appeals and possible further litigation in other

countries, as well as the risk that such court proceedings would

reveal confidential Wolf information to competitors, Wolf de-

cided in 1989 to settle the dispute on a worldwide basis and prior

to the trial in the U.S. action.

One of Wolf's major concerns was to retrieve the many con-

fidential documents which, as a party, it had been required to

produce during pre-trial discovery in the U.S. litigation. Wolf

had produced these documents pursuant to a protective order.

The protective order was not a blanket order, rather, it provided

' References to A ____ are to the Appendix to the Petition.

that the parties could protect selected, individual documents,

interrogatory responses or pages of deposition transcripts by

designating them either “Confidential” or “Sensitive Confiden-

tial.” The order limited the former designation to proprietary

technical or research and development data and the latter to

proprietary financial information.

Beginning in early 1988, Wolf had produced to EDAP over

35,000 pages of documents, and fourteen of its employees and

attorneys gave dozens of volumes of deposition testimony. Wolf

designated only a fraction of this as “Confidential” or “Sensitive

Confidential.”

The protective order also provided, in paragraph 14:

Within thirty (30) days after final termination of

this case, receiving counsel shall return all originals,

copies and samples of materials containing CON-

FIDENTIAL INFORMATION or SENSITIVE CON-

FIDENTIAL INFORMATION in his possession,

custody or control to counsel for the party who has

provided them in discovery or certify destruction

thereof.

On December 30, 1988, months before the negotiations

leading to the settlement between Wolf and EDAP had begun,

Diasonics had served on EDAP a document request in their

separate California litigation that sought Wolf's documents pro-

duced to EDAP in the Illinois action. Yet, at no time during (or,

for that matter, before) the settlement negotiations did EDAP

disclose this to Wolf, as the Magistrate found in her opinion

below (A10).

The consent judgment, dated October 12, 1989, expressly pro-

vided, in paragraph five (A8):

The Amended Protective Order, . . . heretofore

stipulated by all parties and entered by the Court in

this action, shall remain in effect, and documents and

other information produced or otherwise given

pursuant to said Amended Protective Order shall re-

main subject to said Order. Jurisdiction of this Court

is reserved with respect to the provisions of said

Amended Protective Order.

It was not until December 29, 1989 — more than two months

after entry of the consent judgment — that EDAP disclosed for

the first time that a full year before it had received the docu-

ment request from Diasonics. It was not until January 16, 1990,

that Wolf was informed that EDAP had not proceeded with the

required destruction or return of Wolf's confidential documents

and that Diasonics and EDAP would seek to modify the pro-

tective order to allow the use of those documents in the Califor-

nia action. The actual motion to modify the protective order

was made on January 22, 1990. This was well after Wolf's at-

torneys had already destroyed the confidential documents pro-

duced to them by EDAP.?

When EDAP initially joined Diasonics’ motion for a modifica-

tion of the protective order, its principal argument was that

EDAP was required to produce the Wolf documents in the

California action pursuant to a discovery request by Diasonics,

and that EDAP therefore found itself between “Scylla and

” EDAP mentioned only in passing that it also wanted

to use the Wolf documents for its own purposes.’

The district court referred the motion to the Magistrate, who

had spent approximately two years supervising the numerous

discovery battles between Wolf and EDAP, had approved the

confidentiality order, and was thoroughly familiar with the par-

ties, the documents and prior problems with enforcing the con-

fidentiality order against EDAP.* At the Magistrate's direction,

* The bulk of Wolf's destruction had taken place on December 7 and 8, 1989.

* As the district court noted (A4): “EDAP’s motion ambiguously requests per-

mission to ‘use and produce’ the Wolf discovery materials to Diasonics.”

* For a time, an attorney for EDAP, William A. Drucker, had been precluded

from access to Wolf's confidential documents because, inter alia, another

(Footnote continued)

EDAP provided a list of the Wolf confidential documents and

deposition transcripts that EDAP wished to use in the Califor-

nia litigation. The list included virtually all of those materials,

comprising approximately three thousand pages. EDAP did not

elaborate on its conclusory, blunderbuss claim that the

documents it listed were all relevant to the issues in the California

action.

After extensive briefing and oral argument, the Magistrate

denied the motion on the grounds that neither EDAP nor

Diasonics had shown sufficient cause to modify the protective

order (A7-13).

EDAP promptly filed objections to the Magistrate’s order.

Diasonics did not join the objections, and EDAP’s position then

became clear: It had retained Wolf’s confidential documents not

to comply with Diasonics’ discovery request but solely for EDAP’s

own use in litigating against Diasonics.‘

In its decision, the district court concluded that the

Magistrate's order was not clearly erroneous or contrary to law

and overruled EDAP’s objections (A3-6). The United States

Court of Appeals for the Federal Circuit affirmed per curiam

(Al-2). In addition, on March 19, 1991, the Federal Circuit

denied EDAP’s petition for rehearing and suggestion for rehear-

ing in banc and, on April 8, 1991, denied EDAP’s petition to

vacate and/or stay the court of appeals’ mandate pending this

Court’s action on the present petition for a writ of certiorari.

federal court had previously held that he had acted in bad faith with regard

to document discovery. See Struthers Patent Corp. v. Nestle Co., 558 F. Supp.

747, 756-66 (D.N.J. 1981). In addition, the district court admonished the lead

attorney for EDAP for providing a list of Wolf's confidential documents to

EDAP’s counsel in the English case. Thus, the Magistrate referred to her “con-

cern, based on experience in the case, that certain persons with EDAP or

representing it could not be trusted to abide even by a protective order.” (A12.)

* The district court stated (A4): “The Court understands Diasonics’ needs, but

now that Diasonics has dropped from consideration, the court’s focus should

be only on EDAP’s interest in using and producing the Wolf materials.”

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The Declarations of the Attorneys for Diasonics and Wolf

In its Statement of the Case, EDAP relies on the declarations

of two Diasonics attorneys who claim that, in telephone con-

versations in October 1989 with Wolf's attorneys, the latter were

informed by Diasonics of the outstanding document request and

gave assurances that they would maintain “documents from the

Chicago lawsuit” for Diasonics’ use in the California case.

To begin with, the alleged communications with Diasonics’

attorneys are now irrelevant to this proceeding since Diasonics

did not join in the objections to the Magistrate’s decision and

was not a party to the appeal below.

Even if relevant, the declarations of Diasonics’ attorneys are

contradicted by the declarations of Wolf’s attorneys and their

notes of the telephone conversations in question. Mr. Panitch,

the Wolf attorney with whom Diasonics’ counsel first spoke by

telephone, declared that “I . . . understood that no [document]

demand had yet been made on [counsel for EDAP]. . . . I made

no promises to Mr. Taylor regarding document retention.” Mr.

Schwarze, with whom Diasonics’ attorneys next spoke, declared

that “I do not recall Messrs. Taylor, Reagin and Halvorson ever

telling me that Diasonics had served any document request on

EDAP for Wolf documents”, and his contemporaneous notes of

the conversation say: “Interested in prior art, not documents

covered by Protective Order.”

Both sets of declarations were before the fact finder, the

Magistrate, who found that Wolf's version of the relevant events

was the better supported (A9-10) and that neither EDAP nor

Diasonics was entitled to access to the Wolf documents. Both

sets of declarations were also before the district court, which

affirmed the Magistrate’s decision, and the court of appeals,

which affirmed the district court.

Finally, there is no dispute that the first mention to Wolf by

EDAP of Diasonics’ document request did not come until

December 29, 1989.

SUMMARY OF THE ARGUMENT

This Court and lower federal courts have made clear that the

making and enforcement of protective orders are necessary to

the proper functioning of pre-trial discovery under the Federal

Rules of Civil Procedure, inter alia, to protect the privacy in-

terests of litigants and third-party witnesses from undue inva-

sion and to facilitate the complete preparation of civil disputes

for trial. EDAP’s unsuccessful attack on the enforcement of the

protective order below, if sanctioned now, would betray those

policies as well as Wolf's reliance on that order. There is also

no support in the policies underlying the patent laws to justify

the invasion of Wolfs privacy that EDAP seeks in the interest

solely of searching out potential evidence that could at best go

only to secondary indicia of the validity of EDAP’s patent.

The case law on which EDAP relies is inapplicable because

the decisions each involved modification of a protective order

in one action to allow production of protected materials in a

second to which the producing party from the first action was

also a party. Wolf is not, however, a party to the second action

by EDAP against Diasonics. There is significant precedent

among the federal courts for refusal to modify a protective order

when the modification would allow use of the protected

materials for other than a second civil litigation to which the

producing entity is also a party. This authority is particularly

applicable in cases such as Wolf's, where it has demonstrated

reliance on the terms of the protective order both in producing

the materials to EDAP and in settling its suit with EDAP.

As the Magistrate below found (and as affirmed by the district

court and court of appeals), EDAP induced Wolf's reliance and

violated the protective order, the settlement agreement, and the

consent judgment in not disclosing prior to the settlement

EDAP’s desire to use Wolf's confidential materials in the Califor-

nia action and in not returning or destroying those documents

as required by the protective order. The Magistrate also found

that disclosure of the documents would expose Wolf to serious

competitive risk. The record amply supports those findings.

EDAP’s bad faith and violation of the order and of its agreement

Wietuhekbh age

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should not now give it greater rights against Wolf than if there

had been no such prior dealings, particularly since it would be

difficult if not impossible for Wolf to police use of its materials

in the California action. The writ should be denied.

ARGUMENT

I. The Writ of Certiorari Should Be Denied Because No

Important Question of Federal Law Is Presented

EDAP invokes the policies underlying the Federal Rules of

Civil Procedure and the patent laws in support of its petition

for review by this Court. In actuality, the three decisions below

— all denying petitioner’s application and its successive albeit

unsuccessful appeals — properly served and applied those

policies.

The lower courts’ enforcement of the protective order against

EDAP and refusal to allow the use of Wolfs confidential pretrial

discovery materials beyond the present action were completely

consistent with the Federal Rules of Civil Procedure. This Court

has explained their underlying policy and how they should be

applied in the case of a protective order:

. . . pretrial depositions and interrogatories are not

public components of a civil trial. . . . Therefore,

restraints on discovered, but not yet admitted, infor-

_ mation are not a restriction on a traditionally public

source of information.

Rule 26(c) [authorizing protective orders] furthers

a substantial governmental interest . . . . Liberal

discovery is provided for the sole purpose of assisting

in the preparation and trial, or the settlement, of

litigated disputes. Because of the liberality of discovery

permitted by Rule 26(b)(1), it is necessary for the trial

court to have the authority to issue protective orders

conferred by Rule 26(c). It is clear from experience

10

that pretrial discovery by depositions and inter-

rogatories has a significant potential for abuse. This

abuse is not limited to matters of delay and expense;

discovery may also seriously implicate privacy interests

of litigants and third parties.

Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33, 34-35 (1984).

Petitioner remarkably ignores this decision, although it was a

point of argument in the court of appeals and it speaks directly

to the dispute now before this Court.

Pretrial discovery in this action was massive in scope, present-

ing the “significant potential for abuse” of which this Court spoke

in Seattle Times v. Rhinehart. The scope of discovery implicated

directly Wolf's interest in maintaining the privacy of its con-

fidential and proprietary research, engineering and financial

information concerning its lithotriptor, especially since the

lithotripsy market is intensely competitive. To suggest, as peti-

tioner does, that the Federal Rules of Civil Procedure and their

underlying policies should force Wolf to disclose those materials

to still another competitor, in an action in which Wolf will be

unable adequately (if at all) to monitor or to object to their use

or further disclosure, flies in the face of the policy that supports

the protective order on which Wolf relied in producing those

materials and in settling its action with EDAP.

Petitioner’s suggestion that the general proscription of Rule

1 of the Federal Rules of Civil Procedure somehow overcomes

these concerns turns the actual matter on its head, as the Court

of Appeals for the Second Circuit has explained:

. . . the vital function of a protective order issued

under Rule 26(c), F.R.Civ.P. . . . is to “secure the just,

speedy, and inexpensive determination” of civil

disputes, Rule 1, F.R.Civ.P., by encouraging full

disclosure of all evidence that might conceivably be

relevant. This objective represents the cornerstone of

our administration of civil justice. Unless a valid Rule

26(c) protective order is to be fully and fairly en-

forceable, witnesses relying upon such orders will be

deiaatts er

11

inhibited from giving essential testimony in civil litiga-

tion, thus undermining a procedural system that has

been successfully developed over the years for disposi-

tion of civil differences.

Martindell v. Intl Tel. and Tel. Corp., 594 F.2d 291, 295 (2d

Cir. 1979). And, as a district court noted in a decision relied

upon by petitioner:

The Federal Rules create a statutory presumption in

favor of open discovery. This presumption serves the

public interest of assuring the integrity of the judicial

process. This purpose is not served, however, by the

disclosure of materials obtained through pretrial pro-

cesses and not relied upon by the Court. Cf. Seattle

Times, supra, 467 U.S. at 33, 104 S.Ct. at 2208.

Tavoulareas v. Washington Post Co., 111 F.R.D. 653, 660 (D.D.C.

1986) (additional citations omitted; emphasis added).

EDAP’s attempted appeal to the policies underlying the patent

laws, and even the patent clause of the Constitution, similarly

inverts those policies. EDAP relies heavily on this Court’s deci-

sion in Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S.

327 (1945); there are three infirmities in EDAP’s approach.

First, as made clear in a Second Circuit case that this Court’s

decision cited (see id. at 330), the public interest at stake was

not in the general validity of patents, but rather in the invalida-

tion of patents that should not have been issued:

Indeed, since the public is affected, there is much to

be said for a decision in such a case as to the invalidi-

ty of the alleged patent monopoly (either alone or in

conjunction with a decision of non-infringement)

whenever the issue of invalidity is before the court and

the evidence warrants such a decision. For a decision

as to invalidity will tend to discourage suits against

others based on that patent, and mere threats of patent

12

suits, due to the expense of defending such litigation,

may often prevent lawful competition which will be

in the public interest; the desirability of a decision as

to invalidity is especially important because it is the

general rule that the government cannot bring suit

to have a patent declared invalid... .

Cover v. Schwartz, 133 F.2d 541, 545 (2d Cir. 1942) (footnote

omitted). Second, to underline this, Sinclair & Carroll was in

fact a decision invalidating the patent at issue. Third, the deci-

sion predated by seven years the enactment of section 103 of

title 35 of the U.S. Code, which introduced the objective stand-

ard of non-obviousness for patentability that is applicable in

EDAP’s suit against Diasonics. It is not only inversion but in-

appropriate for EDAP to invoke authority fostering the invalida-

tion of patents to support its continuing effort to invade Wolf's

privacy for the sole purpose of shoring up the validity of EDAP’s

patent.

II. The Decisions Below Were Not Contrary to Law

Petitioner begins its legal arguments by relying on this Court’s

decision in Ex Parte Uppercu, 239 U.S. 435 (1915). In Uppercu,

however, unlike the present case, there was no protective order

prior to the settlement of the prior action, there was no evidence

that in ent ring into the settlement the parties relied on the order

sealing the court record, the lower court’s order sealed the en-

tire record indiscriminately, the person producing the materials

at issue was a party to one of the two subsequent litigations,

and all of the parties in both subsequent litigations had been

* It should be noted that EDAP’s patent does not pertain to the ground-breaking

innovation that the petition implies (at 4 n. 5). There were lithotriptors in

existence and on the market for some time before EDAP’s was developed, and

EDAP’s is not yet approved by the FDA for marketing in the United States.

At best, EDAP’s patent, if valid, covers an incremental improvement to

technology pioneered and developed by several others. Thus, EDAP’s elaborate

efforts to establish its patent’s validity is in pursuit of a private property in-

terest rather than a public interest of any note. The self-serving and irrele-

vant suggestions in the petition that Wolf copied EDAP’s invention were belied

by the record below and are not worthy of further response.

13

involved in the initial litigation in which the record was sealed.

In direct contrast, EDAP and Wolf had negotiated and stipulated

to a selective protective order prior to producing the materials

at issue, Wolf relied on the terms of that order — including the

requirement of the materials’ return or destruction — in pro-

ducing the materials and in settling the action, Diasonics had

no involvement with this action, and Wolf is not a party to

EDAP’s suit against Diasonics.

Wolf in effect has a privilege pursuant to the explicit terms

of the protective order to object to its materials’ use in another

litigation and to insist on their return or destruction. Cf. Ex Parte

Uppercu, 239 U.S. at 440. The order, well within the authority

of Fed. R. Civ. P. 26(c), is also therefore an “exception . . . to

the general rule” that EDAP would rely upon. Ex Parte Upper-

cu, 239 US. at 440.

In its claim that the Federal Circuit’s decision below was con-

trary to the applicable law of the Seventh Circuit, EDAP relies

primarily on Wilk v. American Medical Assoc., 635 F.2d 1295

(7th Cir. 1980). In Wilk, several chiropractors had sued the AMA

and other defendants in the United States District Court for the

Northern District of Illinois for a conspiracy under the antitrust

laws to boycott chiropractors and for monopolization. The

defendants obtained a protective order, and there was exten-

sive discovery subject to the protective order. Id. at 1296.

The State of New York brought a separate parens patriae an-

titrust action against the AMA and most of the other Wilk defen-

dants in the United States District Court for the Eastern District

of New York. Several Wilk defendants moved to transfer the New

York case to Illinois. The Multi-District Panel denied the motion

on the ground that a transfer would delay the trial of the II-

linois case, where discovery had been virtually completed, but

contemplated that the discovery in the Illinois case would be

available for use in the New York action. Id. at 1296-97.

The State of New York moved to intervene in the Wilk ac-

tion for the purpose of modifying the protective order to allow

access to the discovery in the Illinois case. The Illinois court

14

found that the intervenor had failed to meet the requirement

of American Tel. and Tel. Co. v. Grady, 594 F.2d 594 (7th Cir.),

cert. denied, 440 U.S. 971 (1979), that protective orders may only

be modified for the benefit of collateral litigants when “excep-

tional circumstances” are present. Wilk, 635 F.2d at 1297. The

Court of Appeals for the Seventh Circuit reversed. It distin-

guished Grady on the ground that Grady really stood for the

proposition that “a collateral litigant has no right to obtain

discovery materials that are privileged or otherwise immune

from eventual involuntary discovery in the collateral litigation.”

Wilk, 635 F.2d at 1300.

Petitioner’s heavy reliance on Wilk is misp!aced for several

reasons, each of which is itself a ground for denying the peti-

tion, as a number of decisions of the lower federal courts show:

1. The defendants in Wilk who resisted the modification of

the protective order in the Illinois action were also defendants

in the New York action. In essence, they wanted to put their

adversary in New York to the trouble and expense of duplicating

the discovery that these same defendants had produced in

Illinois.

Wilk understandably held in the name of efficiency that such

a duplication should be unnecessary where the information

sought is discoverable in any event as a matter of right by sim-

ple notice under Fed. R. Civ. P. 26 et seg. Other cases relied

upon by petitioner present a similar pattern. See Olympic Refin-

ing Co. v. Carter, 332 F.2d 260, 261 (9th Cir.), cert. denied,

379 U.S. 900 (1964); Phillips Petroleum Co. v. Pickens, 105 F.R.D.

545, 546 (N.D. Tex. 1985); see also In re “Agent Orange” Pro-

duct Liability Litigation, 104 F.R.D. 559, 562 (E.D.N.Y. 1985)

(those seeking access to discovery materials were actually plain-

tiffs in the same class action in which the protective order had

been entered).

In the case at bar, Wolf is not a defendant in the California

action. In essence, EDAP argues that Wolf's participation in the

first litigation effectively waived Wolf's rights as a third-party

witness in any other litigation to which EDAP — but not Wolf

te

15

— is a party and that EDAP should have the right to use Wolf's

court-protected materials in any such litigation. This is not an

effort to achieve efficiency but an attempt by EDAP to avoid

the discovery safeguards to which a third-party witness has a

justifiable right as a stranger to the second lawsuit.

In contrast to the distinguishable authorities relied upon by

EDAP, the federal courts have often refused to modify a pro-

tective order to allow access to materials produced by a party

under that order when the materials were later sought for a pur-

pose other than use in another civil litigation to which the pro-

ducing entity was once again a party. See Martindell v. Int

Tel. and Tel. Corp., 594 F.2d 291, 295-97 (2d Cir. 1979); In re

Air Crash Disaster, 130 F.R.D. 634, 636-40 (E.D. Mich. 1989);

Tavoulareas tv. Washington Post Co., 111 F.R.D. 653 (D.D.C.

1986); State of Louisiana v. United States, 656 F. Supp. 1310,

1321-22 (W.D. La. 1986), aff'd, 832 F.2d 935, reh’g denied, 836

F.2d 1346 (5th Cir. 1987), cert. denied, 485 U.S. 1033 (1988);

H.L. Hayden Co. v. Siemens Medical Systems, 106 F.R.D. 551

(S.D.N.Y. 1985), app. denied, 797 F.2d 85 (2d Cir. 1986); GAF

Corp. v. Eastman Kodak Co., 415 F. Supp. 129 (S.D.N.Y. 1976).

2. Wilk did not involve a situation, such as the one at bar,

where EDAP settled its case with Wolf with the understanding

that the protective order would remain in force and that con-

fidential documents would be destroyed or returned. As soon

as their settlement had been signed and implemented and Wolf

had destroyed EDAP’s confidential documents, EDAP tried to

renege on its agreements by moving to modify the protective

order to allow EDAP to use the Wolf documents in the Califor-

nia lawsuit to which Wolf is not a party.

Unlike the motion by the State of New York in Wilk, EDAP’s

actions were a clear violation of the letter and spirit of the pro-

tective order, the settlement agreement and the consent judg-

ment. See also Omega Homes, Inc. v. Citicorp Acceptance Co.,

656 F. Supp. at 404 (“[t]he court refuses to endorse Omega’s tactic

of inducing broad disclosure under a set of ground rules and

of then avoiding any limitations on itself by asking the court

to come in and change those rules”). Wolf’s reliance on the

16

protective order in producing the materials in the first instance

and in settling the case militates against any modification of

the order. See id.; accord, Federal Deposit Ins. Co. v. Ernst &

Ernst, 677 F.2d 230, 232 (2d Cir. 1982); Martindell v. Int7. Tel

and Tel. Corp., 594 F.2d at 295-96; Tavoulareas v. Washington

Post Co., lll F.R.D. at 658-61; H.L. Hayden Co. v. Siemens

Medical Systems, 106 F.R.D. at 555; GAF Corp. v. Eastman

Kodak Co., 415 F. Supp. at 131-32.

3. As noted earlier, Wilk and Grady both held that a collateral

litigant has no right to obtain discovery materials that are

privileged or otherwise immune from discovery in the collateral

litigation. EDAP now complains that it may be difficult for

EDAP to obtain discovery against Wolf in the California action

because of the problems of obtaining discovery against a third-

party witness in Germany. EDAP’s argument, however, begs the

question.

In the Illinois case, Wolf was required to produce its confiden-

tial documents because it was the plaintiff in a declaratory judg-

ment action and its suit could have been dismissed or Wolf could

have faced a default judgment on EDAP’s counterclaim for in-

fringement if Wolf had refused to provide discovery. But, hav-

ing settled the Illinois action, Wolf is now entitled to the full

rights and protections of a third-party witness under federal civil

procedure, including the applicable provisions of the Hague

Evidence Convention.’ See, e.g., McLaughlin v. Fellows Gear

Shaper Co., 102 F.R.D. 956, 958 (E.D. Pa. 1984); cf. Societe Na-

tionale Industrielle Aerospatiale v. United States District Court,

482 U.S. 522, 546 (1987). The fact that Wolf was once a litigant

in an Illinois case that was settled should not entitle its former

adversary in Illinois, EDAP, to treat Wolf as though it were a

party to EDAP’s California case against Diasonics. In short,

EDAP’s violation of the protective order and of the settlement

agreement should not give it greater rights against Wolf than

it would otherwise have.

’ The Hague Convention on the Taking of Evidence Abroad in Civil or Com-

mercial Matters, opened for signature June 1, 1970, 23 U.S.T. 2555, T.1.A.S.

No. 7444.

Ae eh 6 i Cee tot ee

—_———w ——

~

17

4. A final factor that distinguishes this case from Wilk is that

the AMA and other defendants in Wilk, as parties to both of

the pending actions, had the ability to police compliance with

the protective orders in both. In the Illinois action below, Wolf

had the ability to police compliance with that protective order.

it would be difficult, if not impossible, for Wolf to police com-

pliance with the protective order in the California action, to

which Wolf is not even a party. There is therefore an infinitely

greater danger that Wolf's confidential data will be revealed to

employees of its two direct competitors, EDAP and Diasonics,

in the California action.

EDAP asserts that Wolf's confidential documents and deposi-

tion testimony will be disclosed only to Diasonics’ attorneys.

EDAP’s position on this, however, is plainly fallacious. If EDAP

is to use any of the Wolf information to support EDAP’s patent

at trial, then the information will necessarily be disclosed to

employees of Wolf's competitors, namely, EDAP and Diasonics,

who will have to discuss the Wolf information on the witness

stand. Moreover, either Diasonics or EDAP, or some other com-

petitor in still another litigation, could seek at any time to modify

the protective order in the California action, especially if EDAP’s

position in its petition before this Court prevails. The better posi-

tion, one that preserves both Wolf’s privacy and the integrity

of the protective order at issue, is to deny the petition.

In Micro Motion, Inc. v. Kane Steel Co., 894 F.2d 1318 (Fed.

Cir. 1990), plaintiff Micro Motion sought discovery from a third-

party witness in a patent infringement suit. The third-party

witness, K-Flow, objected. The district court ordered some but

not all of the discovery sought, and both parties appealed. The

court of appeals concluded that “Micro Motion [had] established

no right under the Federal Rules of Civil Procedure to the

discovery it requested... .” 894 F.2d at 1320.

Micro Motion asserted in its favor, as does EDAP here, that

a protective order accorded K-Flow all the protection it needed.

The Federal Circuit responded with observations equally ap-

plicable to the case at bar:

18

As an initial matter, we reject Micro Motion’s argu-

ment that the protective order, entered by the court

here, obviates K-Flow’s objections to discovery. The

protective order is not a substitute for establishing

relevance or need. . . . information supplied by

K-Flow is placed in risk of public disclosure by the

very terms of the California protective order. To il-

lustrate, the designation of material as “confidential”

by K-Flow would not be controlling. The California

court retains authority to decide what materials are

properly deemed “confidential” and what part of the

trial shall be in camera. It would be divorced from

reality to believe that either party here would serve

as the champion of its competitor K-Flow either to

maintain the confidentiality designation or to limit

public disclosure as much as possible during trial.

K-Flow would, in fact, lose all control of the situa-

tion since disclosure of its information depends on the

action by a court before whom it has no standing.

894 F.2d at 1325.

Considering that EDAP had negotiated and stipulated to the

terms of the protective order, it is interesting that EDAP fails

to mention one aspect of Seventh Circuit law that directly sup-

ports the decisions below not to modify that order. “[WJhere

a protective order is agreed to by the parties before its presen-

tation to the court, there is a higher burden on the movant to

justify the modification of the order.” American Tel. and Tel Co.

v. Grady, 594 F.2d 594, 597 (7th Cir.), cert. denied, 440 U.S.

971 (1979); see also In re Air Crash Disaster, 130 F.R.D. 634,

638-39 (E.D. Mich. 1989)(in the Sixth Circuit, the party seek-

ing modification of a protective order “has the burden of ex-

plaining why its needs outweigh existing privacy concerns” of

the producing party); Tavoulareas v. Washington Post Co., 111

F.R.D. 653, 659-60 (D.D.C. 1986) (in describing harm poten-

tially flowing from modification of protective order to allow

disclosure of confidential materials, party need not meet the

standard of particularity required where a court is considering

whether to enter the order initially, since the order is a prima

19

facie finding that harm will result from disclosure). As the

Magistrate and the district court found, and the court of ap-

peals affirmed, EDAP did not meet its burden.

Decisions from two other courts of appeal relied upon by

EDAP are easily distinguished. In Public Citizen v. Liggett

Group, 858 F.2d 775 (Ist Cir. 1988), cert. denied, 488 U.S. 1030

(1989), there was a single litigation, and a non-party sought ac-

cess on the two primary grounds that (i) “the protective order

. . . was a blanket protective order, . . . extending broad pro-

tection to all documents produced by Liggett” and (2) “the

documents that Public Citizen seeks are not documents that. . .

contain trade secrets or other specially confidential material”

and were documents that the district court had presumed “would

become public in any event.” 858 F.2d at 790-91 (first emphasis

added, second in original). Also, it should be noted that Public

Citizen was not seeking to use the documents against Liggett

in a second litigation.

The protective order here was not a blanket order and required

Wolf to designate individually which documents were “confiden-

tial” or “sensitive confidential.” In addition, the burden was on

the producing party to justify each designation that was

challenged. Wolf has maintained that these documents contain

technological trade secrets and other highly confidential

material, such as research and development data and financial

information, which had been subject to continuing protection

throughout the original action and which could be used to Wolf's

significant detriment by competitors such as EDAP and

Diasonics.

In Meyer Goldberg, Inc. v. Fisher Foods, 823 F.2d 159 (6th

Cir. 1987), the plaintiff in a second litigation against the same

defendants as in the first sought production of tape recordings

of conversations among the parties to the first litigation that

had originally been produced by the plaintiff there. Although

the defendants in the second litigation opposed production, the

plaintiff from the first litigation — the original producing par-

ty — did not. Id. at 161 and 162; see also id. at 163 (“the record

in this case nowhere reflects a confidentiality relied upon by any

20

party now before the court”). This case is totally inapposite to

the present matter, where Wolf relied on the confidentiality order

both in producing the documents and in settling this action and

has strenuously opposed production of the materials sought for

the California action.

III. The Decisions Below Were Noi Clearly Erroneous

Several potential uses of the confidential documents in the

California litigation were before the Magistrate. Diasonics’

failure to object to the Magistrate's order eliminated the issue

of its document request as well as any need for EDAP to rebut

Diasonics’ use of Wolf's documents. The denial by the Califor-

nia district court of Diasonics’ motion to assert a collateral estop-

pel defense based on the decision of the English court in favor

of Wolf (see EDAP’s petition at 7 n. 3) eliminated that concern.

The only use of the documents remaining at issue is EDAP’s

desire as plaintiff in the California action to use the Wolf

documents as evidence that EDAP’s patent is valid due to

“secondary indicia” of nonobviousness, such as long-felt need

and alleged failure by Wolf.

Magistrate Bucklo below carefully reviewed the arguments

in favor of modifying the protective order and concluded (A12):

All of the considerations favoring enforcement of the

nondisclosure terms of the protective order are ap-

plicable in this case. The parties to this case are com-

petitors. They agreed to a protective order in which

documents and other information produced by one

side would be returned or destroyed at the conclusion

of the case.

The Magistrate premised her decision on Wolf's reliance on

the protective order when it first produced those documents and

later settled the case, on EDAP’s violation of that order, and

on EDAP’s failure to show sufficient cause to modify the order.

As already related supra, there is ample evidence in the record

to support the Magistrate's conclusions and their affirmance by

the district court and court of appeals.

21

Furthermore, EDAP’s motion would have required Wolf to

surrender thousands of pages of confidential deposition

testimony and internal documents to two of its competitors for

their own litigation purposes. EDAP’s conclusory assertion that

these are all necessary for the California litigation was

unelaborated and unsupported. EDAP did not even bother in

its application below to discuss the relevance of any specific docu-

ment or deposition testimony, or even categories of documents,

much less materiality. Nor is discovery of this scope from a third-

party witness appropriate for such a secondary issue.

EDAP’s application is an attempt to clothe the “wolf” of its

violation of the protective order and settlement agreement below

in the sheep’s clothing of a self-trumpeted public interest. This

effort is disingenuous, and EDAP’s attempted invocation of a

public interest is overblown. The real public interest lies in pro-

tecting the enforceability of protective orders and thus their

reliability. As this Court said in Seattle Times Co. v. Rhinehart:

The trial court is in the best position to weigh fairly

the competing needs and interests of parties affected

by discovery. The unique character of the discovery

process requires that the trial court have substantial

latitude to fashion protective orders.

467 U.S. at 36. The trial court’s exercise of its discretion within

that latitude was affirmed by the court of appeals, and there

is no need for this Court to review, much less to disturb that

action.

22

CONCLUSION AND RELIEF SOUGHT

For the reasons stated herein, we request that EDAP’s peti-

tion be dismissed and the writ of certiorari denied.

Respectfully submitted,

WILLIAM SCHURTMAN

GREGORY F. HAUSER

WALTER, CONSTON, ALEXANDER

& GREEN, P.C.

Attorneys for Respondents

90 Park Avenue

New York, New York 10016

(212) 210-9400 ?