Wednesday, November 10, 2010

Everybody can publicize discovery but the parties

Pamlab, L.L.C. v. Brookstone Pharmaceuticals, L.L.C., 2010 WL 4363870 (E.D. La.)

Plaintiffs sued defendant for false advertising and unfair competition under federal and state law. Plaintiffs invented Metanx, an orally-administered prescription medical food for the dietary management of endothelial dysfunction in patients with diabetic peripheral neuropathy. Brookstone distributes Folast, a competing vitamin supplement that delivers folate through a mixture named Xolafin. Plaintiffs alleged that, though Folast isn’t a generic equivalent of Metanx, Brookstone falsely told national pharmaceutical databases that Folast has the same ingredients as Metanx and may be substituted for Metanx. In fact, plaintiffs alleged, Folast doesn’t contain the same form of folate in the same amount as Metanx.

Plaintiffs moved to remove the “highly confidential” designation from defendants’ discovery responses to plaintiffs’ requests for admission. The designation is limited to information that a party believes in good faith may cause it competitive harm. Plaintiffs argued that the requests addressed only the fact that one of the defendants hadn’t performed certain tests on Brookstone products. Plaintiffs contended that there was no legitimate business interest in withholding these admissions—the public had a right to know whether the products were “manufactured in accordance with good manufacturing procedures” and whether their shelf lives were established by testing. Thus, they maintained, “the only reason to designate these admissions as confidential is because such admissions would seriously undermine defendants' relationship with its customers and contradict defendants' media campaign.”

Defendants, unsurprisingly, argued that plaintiffs planned to use this information to obtain an unfair advantage, and only sought to remove the highly confidential designation from specific responses—the ones in which the testing defendant “admits that it follows good manufacturing practices.” Moreover, “plaintiffs know that the testing that it seeks through its requests for admission is not required for medical food manufacturers.” What testing the defendant does and doesn’t perform is non-public and proprietary; plaintiffs would use the fruits of discovery for promotional, not legal, purposes.

In response, plaintiffs argued that there was no showing that the admissions revealed confidential strategic plans, marketing plans, or research and development information. Public disclosure is the rule and confidentiality is the exception in judicial proceedings. Moreover, in the absence of good cause to restrict disclosure, a party can publicize discovery materials. Potential embarrassment isn’t good cause.

Resolution required balancing the public’s right of access against any interests favoring nondisclosure. There is a presumption of access which the party seeking secrecy must overcome, and a showing that the information would harm the company’s reputation is insufficient.

Here, defendants argued only that disclosure would embarrass them and injure them economically. This “generic” allegation didn’t rise to showing a trade secret or proprietary information, and didn’t outweigh the public interest in “an open and honest judicial process.”

The magistrate judge hesitated over one consideration, however. Both parties alleged negative campaigning by the other. Defendants argued that plaintiffs would take the admissions, disseminate them, and win in the market before “a jury of the parties' peers” could weigh the evidence. Thus, good cause existed for a protective order “given the potential for widespread dissemination of discovered information to the public.” The order would preclude dissemination of information gained through discovery.

This compromise would work well, the court found, by protecting the right of the public to an open judicial system. “Should any member of the public decide that he or she wants to research the underlying nature of this suit, he or she has the right do so.” But the parties would be free from negative campaigning while the suit was pending.

This strikes me as a really interesting result, but I’m not sure what to say about it. Any thoughts?

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