For businesses, often the most disconcerting aspect of modern litigation is the discovery process. Discovery is the pre-trial stage of litigation when litigants must produce information in response to opposing party requests. In both state and federal court, the standard for what information an opposing party is entitled to request and receive is broad. Litigants are frequently required to disclose intellectual property, trade secrets and other highly sensitive business information. Worse yet, when the opposing party is a competitor, the business may be required to share its most closely-guarded secrets with another business which stands to benefit from that knowledge. Businesses also face the risk that information produced in a lawsuit may be pirated and distributed in foreign countries whose own courts offer little or no means by which to remedy misappropriation. Beware: this issue may arise when a business unrelated to the litigation is served with a third party subpoena, seeking the production of sensitive information in a lawsuit to which the business is not even a party.
When asked, courts generally handle this hazard by issuing “protective orders” — orders by which the court dictates what sensitive business information must be produced and how it is to be handled by the parties to the lawsuit and the court. “What” must be produced is very fact specific. “How” a protective order protects that information varies. Some protective orders allow parties to designate certain materials as “confidential information” that can be used only for the litigation only. Others impose another layer of protection for information that is designed “attorneys’ eyes only” — meaning, of course, that the information can only be reviewed by the attorneys involved in the case, and not the opposing party’s representatives, or any other person. Generally, protective orders containing those standard restrictions are enough to safeguard a business’s sensitive information during the lawsuit and thereafter. Indeed, where a party disobeys a protective order, courts generally have jurisdiction over the offending party and can remedy a breach with fines or other sanctions.
In recent times, however, business litigants have found fault with standard protective orders. This is especially true in intellectual property disputes, which increasingly involve foreign parties located in countries wherein sensitive business information is susceptible to exploitation — even if produced pursuant to a protective order — and where enforcement of intellectual property rights is difficult at best. For example, certain countries take a more narrow approach than the United States as to what constitute protectable intellectual property. Unlike America’s common law system, civil code jurisdictions generally permit little or no discovery, so the concept of protective orders may be unfamiliar. Once in the foreign country, information produced pursuant to a purchase order may not be afforded the same protection as it is in the United States. Moreover, in some countries, piracy of intellectual property is frequent, and often considered an accepted part of doing business. Those legal and cultural differences, combined with the ease by which information can be rapidly disseminated via electronic means, has left many a litigant leery of relying on a protective order to safeguard what is often its business’s lifeblood.
Business litigants have responded to this issue by requesting that courts issue protective orders limiting distribution of information produced in a lawsuit to the United States only. In some cases, all parties to the lawsuit will have similar concerns about their respective information, and will jointly agree to seek a protective order that requires that information to remain in the United States. Where all parties request that the court enter a protective order imposing those terms, courts will generally oblige.
Where one or more party opposes another party’s request for a protective order confining production to the United States, however, courts have been reluctant to grant them. In the limited number of cases that have addressed the issue, courts have held that such concerns can be remedied with a protective order that requires any receiving person to stipulate the court has jurisdiction over and can sanction that person for violating restrictions in the protective order — even if that party is located in a foreign jurisdiction, and otherwise would not be subject to the court’s jurisdiction. In doing so, courts have rejected concerns that even if such sanctions are available, it may be nearly impossible to actually enforce them against a party in a foreign country that does not honor United States law. Instead, courts have pragmatically concluded that a bar on foreign access to information produced in American lawsuits is both unrealistic and unfeasible, given the proliferation of international business (and thus United States litigation involving foreign parties) and the impossibility of imposing meaningful borders on electronic communication. Indeed, an e-mail sent in the United States may pass through a foreign server before reaching its recipient in the United States. Courts have also pointed to the fact that outsourcing now has a place in American litigation, and therefore, a protective order that bars access to information in foreign countries prevents a litigant from utilizing the services of overseas litigation support services, such as foreign-based companies that process and review electronically-stored information produced in a lawsuit.
How can businesses protect themselves when required to produce information that they do not wish to produce or wish to keep within the United States? First, if the business is a party to the litigation, it should address the issue with the opposing party early in the case. The opposing party may have similar concerns, and if all parties agree, court will generally issue a protective order limiting the dissemination of protected information outside of the United States. It is best to have this conversation early, before the lawsuit becomes contentious and an otherwise willing opposing party may refuse to agree to such a protective order.
Second, if a business cannot obtain consent from all parties and it is necessary to unilaterally seek a protective order limiting disclosure, explain to the court the specific, unique reasons requiring such a protective order in the case. Court have made it clear that vague, generic risks of disclosure abroad is not enough to grant such relief. If the business seeking the protective order is not a party to the litigation, that is a relevant fact to present to the court, particularly in requesting limits on the material which must be produced and restrictions on how it is handled in production.
Third, consider compromise. There may not be a perfect solution, but often litigants will agree to limit the persons that are entitled to foreign access, and to make those persons accountable if the protective order is violated outside of United States borders. Push for a protective order requiring that before receiving any protected materials, a person located outside of the United States shall: (1) review the protective order issued in the case; (2) agree in writing to abide by the terms of the protective order; (3) agree in writing that failure to abide by the protective order may result in sanctions issued against that person by the court; and (4) agree, in writing, to submit to the jurisdiction of the court and appear in person for the purpose of resolving any issues concerning the protective order. Courts have issued orders containing such language — even in the face of objection from opposing parties.
Given today’s global marketplace, many businesses will end up in litigation that requires production of sensitive business information to an overseas party or competitor. The business may be a third-party served with a subpoena, requiring the production of such information in a lawsuit to which it is not even a party. In this electronic age, making such a production may present serious business risks. Before producing any information, consult with experienced counsel. There may be ways to limit that production or at least acquire an appropriate protective order.