In Silicon Genesis Corp. v. EV Grp. E.Thallner Gmbh, No. 22-cv-04986-JSC (N.D. Cal. Oct. 18, 2023), California District Judge Jacqueline S. Corley found that Defendant violated the Protective Order by using confidential information Plaintiff produced in this action to file an Austrian lawsuit against Plaintiff, ruling that Defendant must return documents used, issuing monetary sanctions and prohibited Defendant from using these and other documents in any other litigation.

Case Background

In this case over Plaintiff’s claim that Defendant failed to pay royalties owed under a patent licensing agreement, Defendant filed a complaint against Plaintiff in the Commercial Court of Vienna, alleging Plaintiff violated the parties’ 2016 Non-Disclosure Agreement by sharing EVG’s confidential documents with third parties, “to unduly obtain advantages in the license fee audit under the [patent licensing agreement].”

The lawsuit identified only one document as having been improperly shared. In this action, Plaintiff produced the Gemini^®FB Technology Description Defendant’s Austrian complaint alleged Plaintiff improperly shared as one of several attachments to a cover email Plaintiff’s president and CEO, Ted Fong, sent to KPMG. Plaintiff designated and produced the email correspondence and attachments as “CONFIDENTIAL” under the Protective Order. Likewise, Plaintiff designated as “CONFIDENTIAL” and produced to Defendant an email from Ted Fong to Sensiba with the Gemini^®FB Technology Description attached.

The parties had a Protective Order which stated:

A Receiving Party may use Protected Material that is disclosed or produced by another Party or by a Non-Party in connection with this case only for prosecuting, defending, or attempting to settle this litigation. Such Protected Material may be disclosed only to the categories of persons and under the conditions described in this Order.

The Protective Order further required each Receiving Party to return all Protected Material to the Producing Party or destroy such material and certify in writing its return or destruction.

On September 20, 2023, Plaintiff filed an application for a temporary restraining order and order to show cause why (1) Defendant should not be held in contempt of court for violating the Protective Order and (2) a preliminary anti-suit injunction should not issue to enjoin EVG’s Austrian suit. The Court converted Plaintiff’s application for a temporary restraining order to a motion for a preliminary injunction and set it for in-person hearing on October 17. The parties subsequently jointly filed a letter notifying the Court Defendant dismissed the Austrian action against Plaintiff without prejudice. The Court then vacated the preliminary injunction hearing as moot, but still held a hearing on Plaintiff’s motion for contempt sanctions on October 17.

Judge’s Ruling

Judge Corley stated: “A party’s violation of a specific and definite court order constitutes civil contempt…SiGen, as the party moving for civil contempt sanctions, bears the burden of proving EVG’s violation of the Protective Order by clear and convincing evidence…The Court may not hold EVG in contempt if the challenged conduct appears to be based on a good faith and reasonable interpretation of the Protective Order.”

Continuing, she said: “SiGen has met its burden. The plain language of the Protective Order precludes the use outside this litigation of confidential material produced in this litigation…So, the Protective Order unambiguously forbids EVG from using SiGen’s confidential material produced in this litigation to launch a foreign action. Yet, that is precisely what EVG did.”

Judge Corley added: “EVG does not deny using SiGen’s confidential material as the basis for its Austrian lawsuit. Instead, it urges it complied with the Protective Order because ‘[t]he Austrian complaint does not attach any discovery material marked ‘Confidential’ or bates stamped by either party from this action.’…But this argument misses the point. EVG used SiGen’s confidential information to file the Austrian lawsuit. The lawsuit itself admits to such use. And, EVG identifies no other basis for its lawsuit other than SiGen’s confidential information—the Ted Fong emails—produced in this lawsuit. Clear and convincing evidence proves EVG’s violation of the Protective Order… EVG identifies nothing in the Order’s language suggesting EVG could use confidential emails produced in this action to sue SiGen in another action. Moreover, the unrebutted evidence EVG told SiGen it sued SiGen in Austria because it was willing to escalate the parties’ dispute ‘on principle,’…shows EVG’s improper purpose in its misuse of the confidential material produced in this litigation. There is nothing ‘technical’ about EVG’s violation. It was not done in good faith. And it was a blatant violation of the Protective Order.”

So, Judge Corley granted Plaintiff’s motion for monetary contempt sanctions and prohibited Defendant “from using the email correspondence between Ted Fong and KPMG, the email correspondence between Ted Fong and Sensiba, and any accompanying attachments produced by SiGen to launch any other litigation against SiGen or for any other purpose outside this litigation.” She also ruled that Defendant must return the documents used and must sign and file a declaration that all copies were returned and that defendant didn’t possess any copies of these documents in any form.

So, what do you think? Was it a correct call to rule that Defendant must return the documents used and that Defendant was prohibited from using the documents in any other litigation – ever? Please share any comments you might have or if you’d like to know more about a particular topic.

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