Protective Orders Put at Risk by New Bill

By Kevin E. Noonan --

Lost in all the hubbub over the America Invents Act (S. 23 and H.R. 1249, collectively "the patent reform bill"), Congress is considering another pair of bills (one in each House) that could have an equally deleterious effect on enforcing valuable patents.  Identified as S. 623 (introduced by Senator Herb Kohl (D-WI), joined by Senators Lindsey Graham (R-SC) and Patrick Leahy (D-VT)) and H.R. 592 (introduced by Representative Gerald Nadler (D-NY)), the bills are called the "Sunshine in Litigation Act," and are intended to prevent courts from granting protective orders in certain cases.

Specifically, the bills require a ban on protective orders for any civil action "in which the pleadings state facts that are relevant to the protection of public health or safety," adding Section 1660 to Title 28, U.S. Code, Chapter 111.  The bills constitute a Congressional "thou shalt not" for an order "otherwise authorized under rule 26(c) of the Federal Rules of Civil Procedure restricting the disclosure of information obtained through discovery, an order approving a settlement agreement that would restrict the disclosure of such information, or an order restricting access to court records."  Such a protective order would be permitted only after a court makes "independent findings of fact" that "such [an] order would not restrict the disclosure of information which is relevant to the protection of public health or safety" or that "the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information or records in question" and "the requested order is no broader than necessary to protect the confidentiality interest asserted."  In addition, the bills would prohibit any protective order (except for an order approving a settlement agreement) from continuing in place after final judgment is entered, unless the court "makes a separate finding of fact" at that time that the requirements of the statute balancing the private interest in secrecy with the public's "right to know" (based on the effect of the information on "public health or safety") continue to favor the protective order.  A party that is the "proponent" of the protective order would bear the burden of establishing the requirements of the statute.  Stipulation between the parties would not overcome the onus placed on the court for independent fact-finding (and the presumption against entering or maintaining a protective order) before such an order could be put into place.  The bills also provide that "[t]he provisions [thereof] . . .  shall not constitute grounds for the withholding of information in discovery that is otherwise discoverable" under the Federal Rules of Civil Procedure.

The bills contain similar provisions prohibiting a court from enforcing any provisions in a settlement agreement between private parties that would prohibit any party from disclosing "the fact that such a settlement was reached or its terms" (except the amount of money damages) or from "discussing a civil action, or evidence produced in the civil action, that involves matters relevant to the protection of public health or safety."  Unless, of course, the court makes the independent factual findings that the public's right to know is outweighed by the parties' private interest in that information remaining secret.  Moreover, the bills create a rebuttable presumption that a party's interest in "personally identifiable information" that relates to "financial, health or similar information of an individual outweighs the public interest in disclosure."

In a separate provision, each of the bills would prevent a court from giving effect to an order "to the extent that such provision or such order prohibits or otherwise restricts a party from disclosing any information relevant to such civil action to any Federal or State agency with authority to enforce laws regulating an activity relating to such information."  Information disclosed to such an agency could remain confidential "to the extent provided by law," there not being any intention to abrogate other statutory protections.

The motivation for introducing these bills is products liability litigation, specifically in instances where companies have imposed non-disclosure provisions in settlement agreements.  Senator Kohl (at left) made the case in these terms when he introduced the Senate version of the bill on March 17th.  In remarks entered into the Congressional Record, the Senator stated that the bill was intended to "curb the ongoing abuse of secrecy orders in Federal courts . . . [that] keep[s] important health and safety information hidden from the public."  He characterized his "bipartisan" bill as a "commonsense measure" that is "an important step to improving transparency in our courthouses by requiring judges to consider public health and safety before permitting secrecy agreements."  This problem "most often arises in product liability cases," the Senator said, citing "a long history" of "tobacco companies, automobile manufacturers, pharmaceutical companies, medical device manufacturers, and others," and enumerated several purported instances, including automobile accidents caused by defective Bridgestone/Firestone tires; Toyota's recall of over 8 million cars due to sudden unintended acceleration problems; clinical studies about the harmful side effects of AstraZeneca's antipsychotic drug, Seroquel; explosions of "side saddle" fuel tanks in General Motors pickup trucks; and even the possibility of secrecy orders in cases stemming from the BP oil spill in the Gulf of Mexico last year.  The Senator recounted as "typical" an individual plaintiff suing a large corporation and being coerced into agreeing to keep the corporation's culpability secret as a condition for a financial settlement necessary to compensate the individual for medical and other damages caused by a defective product.  While this outcome may be adequate for the individual plaintiff, it is "the American public [that] incurs the loss because they remain unaware of critical public health and safety information that could potentially save lives," the Senator said.  Similar sentiments can be found in press releases and on the websites of the other sponsors of the House and Senate bills.

Regardless of whether the protections of these bills are necessary or will be sufficient to achieve the sponsors' goals, one immediate consequence of these provisions will be to put pharmaceutical and biotechnology companies at risk in any litigation.  Frequently, protective orders are entered in cases involving these companies to prevent disclosure of trade secrets, including technical know-how and valuable business information regarding prospective new uses and avenues of research.  Biotech and pharma patentees have a legitimate interest in keeping such information secret, but the nature of their businesses could easily be characterized as involving "public health."  The bill contains no definitions limiting the application of its provisions to products liability lawsuits, regardless of its sponsors' protestations of their intent; the case law is replete with decisions invoking the principle that the intent of an individual Member of Congress, even a sponsor, in introducing litigation is not dispositive on the scope of the bill when enacted into law.  The bill also provides the opportunity for manipulation by litigants, insofar as the threat of litigation (and the disclosure mandated by the Federal Rules not trumped by the provisions of this proposed statute) could be used to obtain an advantage over patentee plaintiffs.  This makes the bill particularly dangerous for biotech and pharma companies, since the multiple interests (especially the interest in lower drug costs regardless of the actual costs of developing such drugs) make the ultimate decision fraught with political consequences that overshadow the disputes and issues between private party litigants that might otherwise limit the  extent of any public interest in disclosure of such private information.

The effective date of the statute is 30 days after enactment and will apply only to actions commenced thereafter and apply to protective orders or settlement agreements entered on or after that date.  The Senate bill is slated to be marked up on Thursday, May 5th by the Senate Judiciary Committee for passage to the floor for a vote.

Comments

[Skeptical]

"Biotech and pharma patentees have a legitimate interest in keeping such information secret, but the nature of their businesses could easily be characterized as involving 'public health.'"

I do not see the problem - Yes, certain items can be characterized as involving "public health", but there is still a balancing of which of those items must meet the reason for putting them into the sunshine. If that blance tips in favor of disclosure, then the fact that certain companies would like to keep them secret is overcome by society's needs.

Som esecrets should not be kept, regardless of what the secret-keepers' desires are.

[Kevin E. Noonan]

Dear Skeptical:

Perhaps. But it would be more certain if the bill either defined the types of "civil actions" to which it was intend to apply, or simply say "in civil actions for products liability." I think the certainty would help.

Thanks for the comment.

[6]

"provisions will be to put pharmaceutical and biotechnology companies at risk in any litigation. "

Dear jebus. Finally.

"Frequently, protective orders are entered in cases involving these companies to prevent disclosure of trade secrets,"

So long as the trade secrit isn't that your product kills people etc. then I think you should be fine under this bill.

"Biotech and pharma patentees have a legitimate interest in keeping such information secret, but the nature of their businesses could easily be characterized as involving "public health.""

So in other words, their business can be termed "public health" and they should be allowed to keep public health secrit.

Mhmmm, you'll forgive me if I'm not convinced.

"The bill also provides the opportunity for manipulation by litigants, insofar as the threat of litigation (and the disclosure mandated by the Federal Rules not trumped by the provisions of this proposed statute) could be used to obtain an advantage over patentee plaintiffs. "

And thank g od for that. It is almost as if we have miraculously somehow grown a government for the people by the people.

"This makes the bill particularly dangerous for biotech and pharma companies, since the multiple interests (especially the interest in lower drug costs regardless of the actual costs of developing such drugs) make the ultimate decision fraught with political consequences that overshadow the disputes and issues between private party litigants that might otherwise limit the extent of any public interest in disclosure of such private information."

Whew boy, things are getting juicy!

I'm glad we have such a glowing endorsement for the bill from an industry insider like yourself!