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AutoZone and SCO's Stipulation Regarding Confidentiality
Wednesday, November 03 2004 @ 11:00 PM EST

There is a new filing in the SCO v. Autozone case, a Stipulation and Protective Order Regarding Confidentiality setting forth how the parties are to handle confidential matters in discovery. Some of you have asked questions about how this works, and I've been trying to find the time to write about it, and now, happily, I don't have to, because I think you will see this document shows in detail how the process works, and the reasons why the parties to an action, or even a third party, might want certain things designated as confidential, to prevent the world at large from having access to the information and to prevent its misuse. The whole idea of thrashing confidentiality out in advance and setting up a system is so that both sides know how to proceed and the judge doesn't have to be bothered with endless requests to rule on how to handle such matters.

The courts are realistic about human nature -- you wouldn't even need courts or lawyers if everyone was loving and thoughtful and lived by the Golden Rule all the time, after all, would you? -- so there have to be lines drawn in the sand to cover things like how to protect a company from disclosure of its trade secrets due to thoughtlessness or actual malice.

A consultant, for example, or a former employee may need to be examined in discovery. Maybe he knows a tiny piece of the whole picture, but not the whole picture. What can the parties show him in the way of documents? What kinds of questions can be asked? Who can be in the room to hear the answers in the deposition? What about the transcript? It matters because the court assumes that some dope somewhere will blab all he or she knows to his mate, his best friends, his blog, and hence the world, no matter what the court tells them to do or not to do. Even the parties, if they feel publicity will help them, may reveal more than they should or use the information inappropriately to gain a competitive edge. If the parties liked each other, chances are there'd be no lawsuit, so how do you share necessary information in discovery and still protect yourself from the other side misusing that information? After all, it shouldn't happen that a party is sued, forced to endure discovery, found innocent of all wrongdoing, and yet finds its business ruined due to losing trade secrets.

The remedy is not to expose anyone to more than they need to be exposed to in the first place and to designate as confidential whatever one party feels needs to be kept that way by everyone, subject to challenge for inappropriate designation. The lawyers get to see it all, but they are limited as to who they can show confidential matters to, as you can see in paragraphs 5 and 6. For example, the lawyers can't use the materials in an unrelated lawsuit, just because it'd be swell and win their case over there. You can understand such a rule. Otherwise, everybody would sue innocent parties all the time, just to use the information obtained in discovery in the marketplace or in other litigation. Of course, some may try that anyhow, but this type of stipulation is designed to prevent any such strategy from being successful. If you are ever a party in a case, you may find yourself intensely grateful that courts have such a process. This stipulation is drawing those kinds of lines in the sand for AutoZone and SCO. I note it was AutoZone that drew up the Stipulation.

The Federal Rules of Civil Procedure define the kinds of things that are protectable as confidential information in Rule 26(c)(7), as you can see in paragraph 1(a) in the Definitions section of the stipulation. The Federal Rules of Civil Procedure are here and you'll find 26(c)(7) here. In other words, there are some limits on what a party can designate as confidential, but it would certainly cover "a trade secret or other confidential research, development, or commercial information", as the rule puts it. This particular stipulation amplifies the list, in paragraph 4, with things like "highly confidential business or marketing plans, strategies, or methods, including business planning or financial documents having current or future applicability, sensitive non-public information that: (i) as of the date of production, has been subject to strict internal controls limiting its dissemination within the producing party; and (ii) if improperly disclosed, is likely to cause the producing party substantial commercial harm." Either party can disclose its own confidential matters, of course, but not those of the other party.

You'll notice that the last item states that the stipulation continues even after the case is concluded. That is because not all information wants to be free. In legal matters, if information will do real harm, the law says it *doesn't* want to be free, even if we're all dying of curiosity, and it's really, really interesting, and the parties are public figures involved in a case of widespread interest. Even then, the law says that some information wants to be kept confidential.


  


AutoZone and SCO's Stipulation Regarding Confidentiality | 214 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here
Authored by: radix2 on Wednesday, November 03 2004 @ 11:17 PM EST
so PJ can find 'em

[ Reply to This | # ]

Off Topic and Links of interest here
Authored by: radix2 on Wednesday, November 03 2004 @ 11:18 PM EST
To keep things neat

[ Reply to This | # ]

Flamebait and Trolls here
Authored by: radix2 on Wednesday, November 03 2004 @ 11:19 PM EST
you know you want to...

[ Reply to This | # ]

Is Autozone sneaking away?
Authored by: bliss on Wednesday, November 03 2004 @ 11:56 PM EST


Is Autozone sneaking away from the conflict? They'll
stipulate to everything being kept quiet, SCOX is happy to
see them off in an ambiguous manner, and the parties will
agree to disagree in a quiet, cost free fashion?


I don't have a good read on Autozone's temperament on
this issue - its not their core business, they don't seem
to have the same motivation to issue a beatdown that DCX
had, so what is the scoop?





---
Information becomes fragmented, knowledge does not. What causes fragmentation in
information is scholasticism - Ramitani

[ Reply to This | # ]

Is there one of these for SCOX vs. IBM ??
Authored by: Anonymous on Thursday, November 04 2004 @ 02:35 AM EST
It seems to me with the recent "slip" *wink* *wink* in court by
reading a confidential memo by SCOX's Boise boys.... does anyone recall if there
is one of these in their suit? If so it would give us an idea of the sanctions
the Magistrate would impose, or the penalties already in place, for just such an
event.

[ Reply to This | # ]

Stipulated discovery orders
Authored by: marbux on Thursday, November 04 2004 @ 04:50 AM EST
As PJ has explained, this type of order is intended to keep corporate documents produced in discovery out of circulation. In a case where one corporation is suing another, it's kind of a trade-off: "I won't show yours if you won't show mine." The judge's signature transforming it into an order is intended to set up a procedural barrier to slow down a third party from gaining access to information you're willing to show your adversary.

I only agreed to such an order once, and never made the same mistake twice. Once the ink was dry, I soon learned that everything the other side produced was stamped "confidential," in effect requiring that most discussion of evidence in the case prior to trial had to be under seal. It also kept me from discussing evidence I wound up with that I knew would be of interest to other lawyers suing the same company in related cases. With no trading goods, I didn't get much help from them.

With a little legal research, I also learned that such orders are largely ineffective in their language specifying that producing confidential business information to the other side didn't constitute a waiver of privilege claims by disclosure.

The lynchpin of the stipulated order linked by PJ is located in paragraph 11:

Nothing in this Order, nor any production of documents or disclosure of any information pursuant to the Order, shall be deemed to have the effect of: (i) an admission or waiver, including waiver under the rules of evidence, by any party or other subscriber under this Order; altering the confidentiality or nonconfidentiality of any such information; or (3) altering any existing obligation of any party or other subscriber, or the absence of such obligation.
Although I haven't researched this for many years, the federal courts are fairly uniform in holding that such disclosures do constitute a waiver of privilege claims.

Any disclosure inconsistent with maintenance of a privilege waives the privilege. Fox v. California Sierra Financial Services, 120 F.R.D. 520, 527 (N.D. Cal. 1988); In re Sealed Case, 676 F.2d 793, 818 (D.C. App. 1982). Disclosure to an adversary in litigation is no exception to that rule. Waiver will be found as to all communications on the same subject when a client discloses confidential information, even where the disclosure is accompanied by an assertion that the privilege is not waived. Duplan v. Milliken, Inc., 397 F. Supp. 1146, 1162 (D. S.C. 1975). Disclosure of confidential information to one adversary waives the privilege to other adversaries, even when the first agreed not to disclose protected documents. In re Worlds of Wonder Securities Litigation, 147 F.R.D. 208, 211 (N.D. Cal. 1992). Parties may not pick and choose as to which adversaries they will reveal documents. Id. at 212. Waiver by disclosure of documents to an adversary waives privilege claims even where the parties agreed to keep the information confidential. Khandji v. Keystone Resorts Management, Inc., 140 F.R.D. 697, 700 (D. Colo. 1992); Chubb Integrated Systems v. Natl Bank of Washington, 103 F.R.D. 52, 60 (D. D.C. 1984) (similar).

Some of this might seem unfair, depending on the circumstance you have in mind. However, consider this: what if none of SCO's adversaries had entered into such agreements. They would then be in a position to swap documents and briefs. Consider also the situation of the tobacco companies being sued for smoking injuries. If plaintiffs' lawyers entered into those kinds of agreements with the tobacco companies, they wouldn't be able to share documents.

Being able to share discovery documents is one of the most powerful weapons available against large companies being sued in multiple related cases. Plaintiffs' firms often fund special clearing houses to facilitate the sharing of discovery documents, depositions, briefs and other important documents in closely related cases. Corporate counsel know this, and the type of stipulated order under discussion is intended to block such sharing of materials. Fortunately (in my plaintiff-biased opinion), it's generally ineffective.

[ Reply to This | # ]

The Golden Rule
Authored by: Anonymous on Thursday, November 04 2004 @ 06:36 AM EST
"you wouldn't even need courts or lawyers if everyone was loving and
thoughtful and lived by the Golden Rule all the time, after all, would
you?"

If everyone lived by the Golden Rule, we wouldn't have this litigation in the
first place...

and we wouldn't have Microsoft.

[ Reply to This | # ]

Onerous conditions on expert witnesses?
Authored by: Kevin on Thursday, November 04 2004 @ 09:18 AM EST

I read in the stipulation that disclosure of Highly Confidential Information is conditional on

[9.a.2] with the exception of work for the party contemplating such disclosure, the expert is not, and is not believed to intend to become (a) affiliated with or employed by; or (b) a provider of consulting services or business advice to, any person or entity that competes in the marketplace against the producing party ("Competitor")
Just where are outside experts expected to be found, if they can't be working for parties or their competitors? Given the broad construction of non-compete agreements that's been popular lately, I could anticipate parties arguing that even university professors are suspect. Perhaps experts must be retirees?

Continuing, "[9.b]...each such expert must execute the confidentiality acknowledgement annexed hereto as Exhibit A...." In the designated document, the expert agrees to be bound by the terms and conditions of the confidentiality agreement. This agreement appears, on its face, to be an open license for a party to make a hostile expert permanently unemployable, by asserting that such employment would result in inevitable disclosure of parties' trade secrets. (PepsiCo v Redmond, 54 F. 3d 1262 [7th Cir, 1995] is perhaps the broadest application of the "inevitable disclosure" doctrine to date.) Again, such construction would severely restrict the pool of available experts - who would agree to end a career for the sake of a single court case?

Inevitable disclosure is, of course, controversial. California's Fourth District Court of Appeal (Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443 [2002]), has held that it constitutes restraint of trade under California employment law and squarely rejects the doctrine. Few States, however, construe employees' rights as broadly as California.

Does anyone know if courts in this Circuit have taken a position on inevitable disclosure, or if any court anywhere has tried to apply it to Court-ordered confidentiality? This strikes me as law that anyone in a senior position in a high-tech field (who might be at some point called to testify as an expert) needs to know.

---
73 de ke9tv/2, Kevin (P.S. My surname is not McBride!)

[ Reply to This | # ]

Rules indeed
Authored by: Ezra_Shank on Thursday, November 04 2004 @ 11:55 AM EST
SCO stipulating to confidentiality rules reminded me of a scene in Disney's Sword in the Stone.
Madame Mim requires Merlin to agree to dueling rules and Merlin's Owl comments: "Rules, indeed. Why, she only wants rules so she can break them."

He rocked the boat, did Ezra Shank;
the bubbles mark where Ezra sank.
  o 
   o
  o
   o

[ Reply to This | # ]

'information wants to be free'
Authored by: Anonymous on Thursday, November 04 2004 @ 12:50 PM EST
"...the law says that some information wants to be kept confidential."


I find this phrasing interesting. Since information has no brain it cannot
'want'.

I presume that this odd phrasing is used based on historic precedent.
------------------
Night Flyer at work, Veritas Vincit: Truth Conquers

[ Reply to This | # ]

Welcome to the "Pajamahadeen"
Authored by: whoever57 on Thursday, November 04 2004 @ 03:06 PM EST
Wonderful item in Dan Gillmor's email today:
Dan Rather and his colleagues at CBS News, who broadcast a story about Bush based in part on questionable documents, discovered that bloggers could be adept fact-checkers,[my emphasis] or at least questioners. I'll bet no one at CBS will denigrate bloggers as those people ``in pajamas,'' as one former CBS executive did in a televised interview. (Bloggers became known in some circles as the ``Pajamahadeen.'')
I assume that Groklaw readers would also qualify as members of the Pajamahadeen.

[ Reply to This | # ]

BSF payment deal official
Authored by: Anonymous on Thursday, November 04 2004 @ 03:55 PM EST
Sco has new filing regarding the payment terms for BSF. We've been waiting...
http://ir.sco.com/edgar.cfm

[ Reply to This | # ]

Actually the information still wants to be free
Authored by: BitOBear on Thursday, November 04 2004 @ 05:36 PM EST
One of the greatest problem that RMS seems to have (In My Humble Opinion 8-) is
that people often don't quite get his points.

As far as the idea that "information wants to be free", the supporting
statement from PJs post is that the court know that someone will blab (etc).

Many people take RMS' comment to mean that people naturally want all *their*
information to be free, and then they start in with all kinds of disproofs and
counter-examples. But those statements come from bad premises.

Information wants to be free. It leaks from our mouths in our sleep, sure. And
people tell tails out of school. But the real point is that information is like
a contaigeon. If you get even a little bit of it, you will naturally and
compuslively begin to reverse-engineere that tidbit until you have come as close
as possible to the original facts.

In computer science, this is expressed by the monkey-see monkey-do effect.
Someone invents Visicalc. You see that program run and, as a programmer
yourself, you come to know what that program _must_ do, and you write Quatro.
Then someone else sees Visicalc and Quatro and comes up with Lotus or Excel.
Without so much as a sidewase glance at the code, the programs themselves
reproduced their core functions, and changed and grew. This is the central
theme to the idea that information wants to be free.

And, in fact, we sit here and surmise and ferrett about what might have been in
the confidential e-mail that SCO read in open court. In other forums we chat
about what next weeks episode of our favorite show will be. Movie sequel
scripts leak, and when they dont their fans invent possible plots anyway. The
information wants to be free and it is struggling to escape.

It is natural for Copyright and Patent and Trade Secret law to be constrained to
limited terms or liberal conditions of vacation (e.g. if it isn't secret any
more, its not a trade secret either etc). This matches the fact that no secret
is forever while paying hommage to the fact that some informaiton can die away
(usually with its possesser), so it is best to get people to write it down
somewhere. This is the real reason for the "encouraging innovation"
reasoning behind patent law.

Part of the problem with the "perpetual copyright" as implemented in
CCS or Trusted Computing is that it runs counter to how things work.

Meanwhile, we all agree that *dispite* the fact that information wants to be
free, our society is arranged around the requirement that we must fight some of
that information back into its cage. RMS doesn't go around posting photo-copies
of his credit cards on the internet. We arrange much of our business around the
fact that we have secret knowledge. You don't know my bank account number or
the PIN for my ATM card.

People, Corporations, Businesses and Charities all have some need for secret
knowledge. It is a fact of the way we have arranged our world. The rules and
stipulations on confidentiality are the courts just recognition of those
realities. They serve a useful purpose. Were they not to exist, you could
"lay someone bare" by bringing even the most frivolous of legal
actions, and that would be bad.

So information years to be free, it fights to leak out. That is as it should
be.

But so is the cage in which some of it is forced to live.

[ Reply to This | # ]
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