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Federal Circuit Addresses Standard for Filing Under Seal

Publications / Jul 12, 2020

Article by Clyde Shuman

In a precedential decision, the U.S. Court of Appeals for the Federal Circuit addressed the standard for filing documents with a court under seal. In Uniloc 2017 LLC, et al. v. Apple, Inc., Appeal No. 2019-1922, the Court affirmed in orders of the U.S. District Court for the Northern District of California denying Uniloc’s motions to seal its confidential information and that of related entities. However, the Court vacated the district court’s orders denying Uniloc’s motion to seal the confidential information of Uniloc’s licensees and other third parties.

By way of background, Uniloc sued Apple for patent infringement. Apple moved to dismiss for lack of subject matter jurisdiction, arguing that Uniloc had granted its creditor a license with the right to sublicense in the event of default. According to Apple, because Uniloc had defaulted on its loan, the creditor had the right to license the asserted patents, including to Apple.

Apple’s motion to dismiss referenced material that Uniloc had designated as highly confidential under a protective order, and Uniloc moved to seal this material. Uniloc asked the district court to seal most of the materials in the parties’ underlying briefs, including citations to case law and quotations from published opinions. It also asked the court seal twenty-three exhibits—including matters of public record—in their entireties.

Intervenor Electronic Frontier Foundation (“EFF”) contacted counsel for Uniloc, asserting that Uniloc’s proposed redactions were excessive and saying it would move to intervene if the documents at issue were not re-filed in a manner consistent with the public’s right to access. Uniloc refused to revise its requests, and EFF moved to intervene, specifically to oppose Uniloc’s sealing motions.

The district court denied Uniloc’s motions in full, stating that Uniloc had failed to provide “a compelling reason to justify sealing.” Per the court, Uniloc’s “generalized assertion of potential competitive harm fail[ed] to outweigh the public’s right to learn of the owner-ship of the patents-in-suit—which grant said owner the right to publicly exclude others.” Moreover, Uniloc’s request to seal covered an “astonishing” amount of material, including, e.g., portions of Apple’s motion to dismiss “that simply quote[d] Federal Circuit law.” As such, Uniloc’s motion “far from narrowly tailored as required by” the relevant local rule.

Moving for reconsideration, Uniloc said it was willing to make public more than ninety percent of the material it had originally sought to seal. Uniloc also submitted declarations from several of its third-party licensees, who said disclosure of their confidential information, including license terms, would cause significant competitive harm. Uniloc also argued that the court should seal a table disclosing the names of its third-party licensees, the dates of their licenses, and the amounts paid. Uniloc also sought to seal or redact: (1) information related to its relationship with its creditor; (2) materials about a proprietary software platform; and (3) financial information pertaining to Uniloc and its related entities.

The district court denied Uniloc’s motion for leave to file for reconsideration and its accompanying revised motion to seal. Inter alia, the court concluded that Uniloc had failed to provide “sufficient justification” for redacting or sealing the information identified in its revised request, stating that its “supposed risk of . . . generalized competitive harm in future negotiations from disclosure did not . . . compellingly outweigh the public’s interest in accessing this information.”

The district court recognized that Uniloc’s third-party licensees had “some interest in redacting licensing information.” However, per the court, this did “not surmount the hurdle of showing a compelling reason to seal.”

On appeal, the Federal Circuit began by reiterating the strong presumption in favor of public access to documents filed with a court. Per the Court (quoting the Ninth Circuit’s decision in Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016)), “The presumption of access is ‘based on the need for federal courts, although independent—indeed, particularly because they are independent—to have a measure of accountability and for the public to have confidence in the administration of justice.’”

With respect to the sealing orders at issue, the Court separately considered the “two broad classes of materials” Uniloc sought to shield: (1) Uniloc’s own confidential information and that of its related entities; and (2) the confidential information of third parties.

As for Uniloc’s materials and those of related entities, the Court held that, because Uniloc failed to comply with either the relevant local rule for filing under seal or the local rule governing motions for reconsideration, the district court did not abuse its discretion in denying Uniloc’s motions to seal its confidential information and that of its related entities.

Inter alia, the Court found it “[s]ignificant[ ]” that the local rule on sealing specifically requires filing of “a declaration . . . establishing that all of the designated material is sealable.” The Court found that Uniloc sought to seal entire documents based on no more than perfunctory assertions that the documents “contain[ed] sensitive, confidential and proprietary information related to financial data, licensing terms and business plans with respect to various Uniloc entities” and that “disclosure of this extremely sensitive information would create a substantial risk of serious harm to the Uniloc entities.” Per the Court, the district court had ample support for its determinations that Uniloc’s declarations were insufficient to support its motion to seal and that its request was “far from narrowly tailored as required by” the rule.

The Court rejected Uniloc’s argument that its offer to make public more than ninety percent of the materials it originally sought to seal, meant that the district court abused its discretion in refusing to grant its new, narrower request to seal. The Court found that Uniloc failed to meet any of the requirements for reconsideration under the local rule.

The Court also rejected Uniloc’s argument that “[c]ourts within the Ninth Circuit regularly find compelling reasons to seal documents containing valuable, competitive business information” because such information qualifies as a trade secret, and that the district court here abused its discretion in deviating from this practice. As a threshold matter, Uniloc’s original sealing request was “grossly excessive” and its flouting of the relevant local rule “particularly flagrant.”

Further, even assuming that some of the materials Uniloc sought to file under seal qualified as trade secrets, the “dispositive question” was whether the district court abused its discretion in denying Uniloc’s motion to reconsider, where the motion failed to meet the requirements of the local rule, and where its motion to seal was, “indisputably, neither narrowly tailored nor adequately supported.”

The Court also rejected Uniloc’s further argument that the district court erred in refusing to redact the specific dollar amounts and financial terms in certain agreements because Apple’s motion to dismiss “‘did not directly depend’” on this information. Instead, the Court noted that, under Ninth Circuit law, the district court was not required to seal any information that was not “directly relevant” to its ruling on Apple’s motion to dismiss. All filings were presumptively accessible, and it was Uniloc’s duty to provide compelling reasons to seal.

The Court likewise rejected Uniloc’s argument that it should have been given the opportunity to submit a revised, more narrowly tailored motion to seal, saying that the fact that other courts, under other circumstances, permitted litigants to submit revised sealing requests did not mean that the district court was required to do so here.

Citing the local rule, the Court said, “A district court does not abuse its discretion simply because it elects to strictly enforce its local procedural rules.” Further, per the Court, “In denying Uniloc’s sweeping motion to seal, the district court sent a strong message that litigants should submit narrow, well-supported sealing requests in the first instance, thereby obviating the need for judicial intervention.” The Court concluded that there was no abuse of discretion in denying requests to seal its confidential information and that of its related entities.

As for the confidential information of Uniloc’s licensees and other third parties, the Court concluded that the district court failed to make findings sufficient to allow it to adequately assess whether the lower court “properly balanced the public’s right of access against the interests of the third parties in shielding their financial and licensing information from public view.” There was no indication in the record that the lower court assessed whether any of the third-party information was “protectable as a trade secret or otherwise entitled to protection under the law,” quoting the local rule. The Court vacated those portions of the district court’s orders denying sealing or redaction of the confidential information of third parties and remanded for particularized determinations as to whether and to what extent, the materials of each of these parties should be made public.