JAMES A. TEILBORG, Senior District Judge.
Pending before the Court are four motions to seal filed by Plaintiff GoDaddy.com LLC ("GoDaddy") and three motions to seal filed by Defendants.
It has long been recognized that the public has a general right of access "to inspect and copy . . . judicial records and documents." Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597 (1978). This right of access extends to all judicial records except those that have "traditionally been kept secret for important policy reasons," namely grand jury transcripts and certain warrant materials. Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). Nevertheless, "the common-law right of inspection has bowed before the power of a court to insure that its records" do not "serve as . . . sources of business information that might harm the litigant's competitive standing." Nixon, 435 U.S. at 598.
"Unless a particular court record is one traditionally kept secret, a strong presumption in favor of access is the starting point." Kamakana, 447 F.3d at 1178 (quotation omitted). A party seeking to seal a judicial record bears the burden of overcoming this presumption by either meeting the "compelling reasons" standard if the record is a dispositive pleading, or the "good cause" standard if the record is a non-dispositive pleading. Id. at 1180.
What constitutes a "compelling reason" is "best left to the sound discretion of the trial court." Nixon, 435 U.S. at 599. The Court must "balance the competing interests of the public and the party who seeks to keep certain judicial records secret." Kamakana, 447 F.3d at 1179. If the Court decides to seal certain judicial records after considering these interests, "it must base its decision on a compelling reason and articulate the factual basis for its ruling, without relying on hypothesis or conjecture." Id. Generally, "compelling reasons sufficient to outweigh the public's interest in disclosure and justify sealing court records exist when such court files might have become a vehicle for improper purposes, such as the use of records to gratify private spite, promote public scandal, circulate libelous statements, or release trade secrets." Id. (quotation omitted).
In the business context, a "trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." In re Elec. Arts, Inc., 298 F. App'x 568, 569-70 (9th Cir. 2008) (quoting Restatement (First) of Torts § 757, cmt. B (1939)). As this Court has observed in the past, "because confidentiality alone does not transform business information into a trade secret, a party alleging trade secret protection as a basis for sealing court records must show that the business information is in fact a trade secret." PCT Int'l Inc. v. Holland Elecs. LLC, 2014 WL 4722326, at *2 (D. Ariz. Sept. 23, 2014) (quotation omitted). In other words, "[s]imply mentioning a general category of privilege, without any further elaboration or any specific linkage with the documents, does not satisfy the burden." Kamakana, 447 F.3d at 1184.
Similarly, the less-stringent "good cause" standard requires a "particularized showing" that "specific prejudice or harm will result" if the information is disclosed. Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1130 (9th Cir. 2003) (quotation omitted); see Fed. R. Civ. P. 26(c). Thus, "[b]road allegations of harm, unsubstantiated by specific examples of articulated reasoning" is not enough to overcome the strong presumption in favor of public access. Beckman Indus., Inc. v. Int'l Ins. Co., 966 F.2d 470, 476 (9th Cir. 1992).
The parties move to seal documents appended to both dispositive and non-dispositive motions. Because different standards apply to each type of motion, see Kamakana, 447 F.3d at 1180, the Court will analyze each motion individually.
The parties ask the Court to seal various documents filed in conjunction with RPost's motion to amend its infringement contentions. (Docs. 240, 246). The Court finds that the underlying motion was merely a procedural request by RPost for leave to amend its infringement contentions on the eve of the discovery deadline. See (Doc. 226). Thus, the motion was a non-dispositive motion that was not "more than tangentially related to the merits of a case." Accordingly, the "good cause" standard for sealing treatment applies. See Kamakana, 447 F.3d at 1180; Auto Safety, 2016 WL 142440, at *6.
The Court concludes that the need for expedited resolution of these motions constitutes "good cause" to seal the documents. Also pending before the Court are cross motions for summary judgment and a Daubert motion that all must be briefed and decided prior to August 22, 2016, the firm trial date set for this case. For this reason, the Court will permit these documents to be filed under seal.
The parties also moved to seal numerous documents appended to dispositive motions. See (Docs. 259, 262, 269, 275, 277). The Court will review each motion in turn.
On March 1, 2016, GoDaddy filed a Motion to Preclude Testimony of Defendants' Damages Expert Gregory Smith Redacted ("Motion to Preclude") pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). (Doc. 266).
The parties seek to seal these documents because they contain "sensitive business information" regarding (1) the "financial performance of the accused products," (2) "operating margins and sales information" of GoDaddy, (3) "RPost's damages expert royalty calculation by specific percentage," (4) "confidential RPost licensing negotiations with Authentix," and (5) "product marketing survey results commissioned by GoDaddy." See (Docs. 262 at 1-2; 277 at 1-2). The parties assert that "[w]ith no allowance for the sealing of the [documents], GoDaddy and RPost sensitive proprietary information would be revealed, without providing any additional benefit to ensuring the public interest's understanding of the judicial process." (Docs. 262 at 2; 277 at 2). The parties also note that the documents have been designated as "Confidential or Highly Confidential under the Protective Order." (Id.)
Although GoDaddy and RPost contend that a showing of "good cause" permits the Court to seal these documents, see (id.), the Ninth Circuit holds that Daubert motions closely associated with the merits of a summary judgment motion are subject to the "compelling reasons" standard. See In re Midland Nat'l Life Ins. Co. Annuity Sales Prac. Litig., 686 F.3d 1115, 1120 (9th Cir. 2012) ("In re Midland"). In this case, GoDaddy moves to preclude the entire testimony of RPost's damages expert, (Doc. 266), while also moving for summary judgment on the issue of damages under the theory that RPost's damages expert is the only evidence of RPost's damages, (Doc. 257 at 31). Thus, GoDaddy would not be entitled to summary judgment on the issue of damages if the Court denies its Daubert motion. Accordingly, the Court finds that GoDaddy's Daubert motion is closely associated with the merits of its summary judgment motion, and, in order to seal the documents, the parties must show "compelling reasons" that overcome the "strong presumption in favor of access." See In re Midland, 686 F.3d at 1120.
GoDaddy seeks permission to redact multiple portions of its Motion to Preclude. (Doc. 266). Although GoDaddy did not file a non-redacted version of this motion, it is apparent from the filed Motion to Preclude that GoDaddy seeks to redact three types of information: (1) the royalty rate percentage proposed by RPost's damages expert, Mr. Smith, (2) marketing survey results of a survey commissioned by GoDaddy, and (3) generic financial information of GoDaddy. See (Doc. 266). According to GoDaddy, the royalty rate percentage is "sensitive proprietary information," while the survey results and financial information are "of a very sensitive nature." (Doc. 262 at 1).
The Court finds that GoDaddy's generalized statement that this information is "sensitive" does not demonstrate that "specific prejudice or harm will result" if the material is publicly filed. See Foltz, 331 F.3d at 1130. Similarly, GoDaddy does not substantiate its "broad allegation of harm" with "specific examples or articulated reasoning." See Beckman, 966 F.2d at 476. Unlike other situations where courts have permitted a party to file a royalty rate under seal, see In re Elec. Arts, Inc., 298 F. App'x at 569 (sealing a document that reflected a royalty rate that was part of a licensing agreement between a party and a third entity), the royalty rate in this case is simply Mr. Smith's proposed royalty rate and does not reflect an actual term of an enforceable agreement between the parties. In fact, Mr. Smith's proposed royalty rate is the element of his report that GoDaddy predominantly challenges as unreliable under Daubert, see (Doc. 266), thereby ensuring public interest in the information, see Kamakana, 447 F.3d at 1178-79 (noting that the main public policy favoring disclosure is the "public interest in understanding the judicial process"). Moreover, Mr. Smith's royalty rate cannot be considered GoDaddy's trade secret because it is RPost's proposed rate to calculate damages. Finally, should Mr. Smith's expert report withstand GoDaddy's Motion to Preclude, GoDaddy is undoubtedly aware that the royalty rate will be brought to the jury's attention at trial—in unsealed format. For these reasons, the proposed royalty rate does not overcome the strong presumption of public access, and the Court will not permit GoDaddy to redact this information.
Likewise, the Court is not persuaded that the "very sensitive nature" of GoDaddy's marketing survey or generic financial information constitutes a compelling reason that justifies redaction. Aside from its blanket statement that the survey and financial data constitutes "very sensitive" information which, if revealed publicly, could potentially cause harm, GoDaddy has not demonstrated what "specific prejudice or harm will result" if the information is not redacted. See Foltz, 331 F.3d at 1130. Because the Court is precluded from hypothesizing or assuming that a compelling reason exists, see Kamakana, 447 F.3d at 1179, GoDaddy will not be permitted to redact this information.
GoDaddy seeks to seal Exhibit 1 to its Motion to Preclude. (Doc. 262 at 1). After review of the exhibit, which is an expert report of David R. Perry explaining why he believes that Mr. Smith's damages report is flawed, the Court is not persuaded that the information warrants sealing under the compelling reasons standard. Namely, GoDaddy does not provide a "particularized showing" that "specific prejudice or harm will result" if the excerpts from Mr. Perry's report are publicly disclosed, see Foltz, 331 F.3d at 1130, nor does the report constitute a trade secret, see In re Elec. Arts, Inc., 298 F. App'x at 569-70. Thus, the Court will not permit this exhibit to be filed under seal.
GoDaddy also seeks to seal sixty-nine full pages of RPost's supplemental expert report and accompanying appendices. Reflected in the sixty-nine pages is a hodgepodge of information that clearly does not warrant sealing under the compelling reasons standard. For example, GoDaddy asks the Court to seal multiple pages of Mr. Smith's academic and professional background, in addition to material that GoDaddy publicly disclosed in its Securities and Exchange Commission ("SEC") Forms S-1 and 10-Q. As to the revenue data for certain products, GoDaddy did not make a "particularized showing" that "specific prejudice or harm would result" if such information was publicly disclosed. See Foltz, 331 F.3d at 1130. Nor is the Court persuaded that such revenue information is a sealable trade secret. GoDaddy's explanations for sealing are generalized in nature, do not show that any measures outside of this litigation have been taken to secure confidentiality, and lack substantiation with specific examples or articulated reasoning. See (Doc. 262 at 1-2). More specificity is required. See Foltz, 331 F.3d at 1130; Beckman, 966 F.2d at 476. Finally, for the reasons set forth above, Mr. Smith's proposed royalty rate does not warrant sealing treatment.
The Court will, however, allow the parties to file under seal the documents detailing the express terms and conditions of RPost's prior settlement agreements that are currently lodged at Docket No. 263-1 at ¶¶ 56-62, 87, and Supplemental Exhibit 6. The Court is satisfied that (1) release of this information would result in an invasion of the privacy interests of third parties, (2) RPost would suffer competitive harm if this material were made public, and (3) compelling reasons exist to file this information under seal. See In re Elec. Arts, Inc., 298 F. App'x at 569 (finding compelling reasons to seal the pricing terms, royalty rates, and guaranteed minimum payment terms found in a licensing agreement). More specifically, the Court is satisfied that disclosing the terms of these agreements would put RPost at a stark disadvantage in future negotiations for similar agreements.
This exhibit contains excerpts of Mr. Smith's deposition regarding the following topics: (1) Mr. Smith's apportionment of damages, (2) the proposed running royalty rate by the prior owner of the Feldbau Patent, and (3) the GoDaddy-commissioned market survey. Again, GoDaddy has not elaborated or explained why this information should be sealed, and the Court is not persuaded that compelling reasons exist to do so. See Kamakana, 447 F.3d at 1184 ("Simply mentioning a general category of privilege, without any further elaboration or any specific linkage with the documents, does not satisfy the burden."). Whether Mr. Smith properly apportioned damages is an issue that GoDaddy strongly disputes, see (Doc. 266), and thus, the public has a high interest in this information to understand the judicial process. In the absence of compelling reasons as to why this information merits sealing, the Court will not authorize Exhibit 4 to be sealed.
RPost seeks to seal an exhibit to the First Hudnell Declaration, which contains excerpts of Mr. Perry's expert report analyzing Mr. Smith's proposed royalty rate. For the reasons stated above, the Court will not permit this exhibit to be filed under seal.
GoDaddy argues that the redacted portions of Exhibits 16, 17, and 23 to Mr. Hudnell's Declaration in support of RPost's motion for summary judgment ("Second Hudnell Declaration") should be sealed because the exhibits contain "information regarding non-public, confidential internal GoDaddy business practices, the parties' commercial relationship with a third party, revenue and sales performance information about the accused email marketing products, and certain of the parties' pre-suit communications regarding the amount of settlement offers that are in effect GoDaddy's trade secrets." (Doc. 275 at 1-2).
Because these documents are appended to a dispositive motion, GoDaddy must overcome the strong presumption of access to judicial records by setting forth compelling reasons. After review of the proposed redactions, the Court concludes that none of the redactions are justified under the compelling reasons standard. GoDaddy has not explained why the documents' generalized summaiy of GoDaddy's internal practices is so imperative to the company's competitive stature such that GoDaddy's interest in the information overcomes the strong presumption of public access to judicial records. Nor is the Court convinced that any of the documents constitute sealable trade secrets. Consequently, the Court ORDERS as follows:
GoDaddy moves to seal several exhibits attached to its Statement of Facts ("SOF Exhibits"). (Doc. 269). GoDaddy contends that the SOF Exhibits "contain exceipts of confidential deposition testimony and expert reports discussing the parties' non-public financial information, secret information about the parties' respective products at issue in this case, and GoDaddy technical trade secrets information." (Id. at 1). Beyond broadly claiming that disclosure of the SOF Exhibits would "potentially caus[e] each party competitive harm," (Doc. 269 at 4), GoDaddy does not illuminate what "specific prejudice or harm" the parties would incur if the information was filed publicly, see Foltz, 331 F.3d at 1130.
The Court finds that GoDaddy has not satisfied its burden of showing compelling reasons that overcome the strong presumption in favor of public access to judicial records and ORDERS as follows:
For the reasons set forth above,
Auto Safety, 2016 WL 142440, at *9. Whether Auto Safety will be reheard by the Ninth Circuit en banc is unknown as of the date of this Order.
