Apple v. Samsung: The Federal Circuit Recognizes Protection for Confidential Information That Would Harm Competitive Interests, Despite the High Profile Nature of the Litigation

The Federal Circuit has ruled that Apple Inc. and Samsung Electronics Co.’s financial and internal market research information may remain protected and need not be disclosed to the public.  As we have noted separately, U.S. District Court Judge Koh had denied both parties’ motions to seal financial and other commercial information that the parties considered confidential—motions which neither party contested—in the Apple v. Samsung smartphone and tablet patent litigation.  In the appeal of these decisions to the Federal Circuit, the parties sought to maintain information regarding profit margins, profits on specific products, unit sales, revenue, costs, and internal market research that had been attached to pre-trial and post-trial motions under seal.

Applying Ninth Circuit law, the appellate court determined that the parties had made an adequate showing that revealing the information to the public could cause them competitive harm.  While the district court did not find Apple and Samsung’s argument that suppliers could gain a competitive advantage in negotiations if the parties’ profit, cost and margin information became publicly available a compelling reason to keep the information protected, the Federal Circuit found otherwise.  The court determined that whether such information was a trade secret or not, documents may be sealed if they are “sources of business information that might harm a litigant’s competitive standing.”  The court also held that internal marketing research should be sealed because it could not be replicated and that revealing the information would give competitors an “enormous benefit—to Apple’s detriment.”  Furthermore, the court found the declarations submitted by the parties describing the measures that each party takes to keep the information confidential, and the fact that the parties sought protection only for the confidential and un-relied upon portions of the documents, to be supportive of their requests to seal the materials.

Courts are not just concerned with the public’s interest in access to the courts, but “must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest.”  In balancing the parties’ interest against the public’s interest in disclosure, the court found that the parties’ interests were strong in avoiding competitive harm, while the public’s interest was “relatively minimal” given that the evidence was never introduced at trial and there was no indication that the district court relied on the information in ruling on any pre-trial motions.  The information was not necessary for the public to understand the case, which is an element of the standard applicable when determining whether to seal court filings.  The court made clear that despite the high public interest in the litigation, the public does not have “a legally cognizable interest in every document filed” in the case, especially when the information was “not central to a decision on the merits.”  The court rejected arguments by amici curiae that contended that disclosure of the information was in the public interest because shareholders were utilizing media reports to assess financial risks and consumers were interested in manufacturing and pricing decisions.  According to the court, this type of interest is not relevant to record sealing.  Therefore, the Court concluded that Judge Koh had abused her discretion in denying the motions to seal.