PTAB Protective Order Has Teeth, Bites Violator

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Protective orders in inter partes review proceedings really can be enforced. In One World Technologies, Inc. v. Chervon (HK) Ltd., the Patent Trial and Appeal Board found that a patent owner violated the IPR protective order by producing confidential information from the IPR in a co-pending parallel district court action involving the same parties, who were represented by counsel from the same law firms on either side. The Board imposed sanctions on the patent owner, both to warn others about violating protective orders, and to instill confidence in protective orders and in the Board’s power to protect confidential information in this and other IPRs. 

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Protective orders are used in litigation to protect parties’ confidential information from public disclosure, or use for any purposes other than the litigation itself. District courts often have default protective orders with commonly-used language that identifies what qualifies as “confidential” information and how parties and the court are to designate, treat, and use such information. Parties can ask the court to enter the default protective order or a modified version. 

The Patent Trial and Appeal Board also has a default protective order for inter partes review proceedings. As in district court, protective orders are not automatically entered in IPRs. Rather, a party wanting a protective order must ask the Board to approve and enter one. Only upon approval and entry of a protective order can a party be assured that confidential information submitted in an IPR will be protected from public disclosure.

Although patent litigators are accustomed to dealing with protective orders in patent cases, a common question from clients is “what happens if a party violates a protective order?” Fortunately, violations are relatively rare. And, we know historically that district courts have imposed sanctions on parties and attorneys for violating protective orders. But because IPRs are still relatively new, there has not been a lot of history from which to see how the Board treats protective order violations.

In April 2021, however, the Board issued one such decision and showed its willingness to enforce protective orders in IPRs, at least in this case, and issued a warning to anyone in an IPR involving a protective order. One World Technologies[1] involved four related IPR proceedings, three patents, and two parties who were also fighting each other in district court in parallel patent infringement litigation involving the same patents. The petitioner in the IPRs was the defendant in the litigation.

In January 2021, the patent owner in the IPRs took the petitioner’s (i.e., patent challenger’s) corporate president’s deposition. During the deposition, the petitioner designated the transcript as confidential and then marked the transcript accordingly. Shortly thereafter, the patent owner filed the confidential transcript under seal in the four IPRs with an accompanying motion to seal. The parties in the IPRs – most importantly, the patent owner -- agreed to be bound by the Board’s default Protective Order. 

Subsequently, the patent owner produced a copy of the same transcript in the district court litigation and designated it with the highest level of confidentiality allowed under the district court protective order. The patent owner’s counsel then deleted the confidential transcript from the production in the district court litigation and replaced it with a redacted version.  Counsel for the petitioner in the IPRs was from the same law firm as counsel for defendant in the district court litigation.

Within days, the petitioner moved for sanctions in the IPRs, accusing the patent owner of violating the governing protective order by having produced the confidential transcript from the IPRs in the district court litigation, and, thereby, having used the transcript for an improper purpose outside of the IPRs.

The Board concluded the patent owner violated the protective order in the IPRs by producing the unredacted confidential transcript in the district court litigation. According to the Board, by producing the transcript in the district court litigation, the patent owner used that information for a purpose other than the inter partes review proceedings. That was a violation. And, according to the Board, the patent owner’s violation of the default Protective Order “adversely affect[ed] discovery before the Board.”

The Board was not swayed by the fact that the defendant’s litigation counsel was from the same law firm as petitioner’s counsel for the IPRs. The Board first noted that the petitioner’s power of attorney in the IPRs was limited to three specific attorneys, not the entire law firm. Then, the Board explained that the salient issue was not whether the patent owner did not reasonably protect the confidentiality of the produced transcript, but whether the patent owner improperly used information protected by the Board’s protective order, by using protected information obtained in the IPRs for a purpose other than in the IPR proceedings. According to the Board, producing the transcript in the litigation was an improper “use” of information produced and protected by the terms of the default Protective Order.

The Board also found that the petitioner suffered harm as a result of the production of the transcript for at least two reasons. First, according to the Board, by producing the transcript, the protected information became “untethered” from the Board’s control. The fact that there was another protective order governing the district court litigation did not matter. As the Board noted, it has “no control of that order or the protection it provides,” and “unauthorized production of protected information under our control wrests that control from us.”

Second, the Board recognized that “misuse of protected information erodes Petitioner’s ongoing confidence that we will protect its confidential information in our proceedings,” and that “an unsanctioned misuse of protected information reduces the faith other parties will have that the Board can protect these parties’ confidential information.”

As a result, and after evaluating the requested sanctions, the Board imposed sanctions on the patent owner. The sanctions required the patent owner to withdraw the unredacted index of the deposition transcript from production in the litigation, to identify those individuals with access to, or who received, protected information, including the timing of access or receipt, and to identify any individuals that had agreed to be bound by the protective order and when they had so agreed.

With this decision, the Board has shown that it does take protective orders seriously and that parties in IPRs can rest assured that the Board will handle violations of protective orders with swift and meaningful justice.