Oasis Medical, Inc. v. Biocia Inc., et al Case No. CV 21-08879-SPG (AGRx) United States District Court, C.D. California Filed December 16, 2022 Counsel Mark D. Kachner, Knobbe Martens Olson and Bear LLP, Los Angeles, CA, Ben Kaito Shiroma, Los Angeles, CA, Michael K. Friedland, Knobbe Martens Olson and Bear LLP, Irvine, CA, Nicholas Andrew Belair, Knobbe Martens Olson and Bear LLP, San Francisco, CA, for Oasis Medical, Inc. Kelly Doyle Dahan, David H. Ben-Meir, Rebecca Lawlor Calkins, Norton Rose Fulbright US LLP, Los Angeles, CA, for Biocia Inc., et al. Damien P. Lillis, Lillis Pitha LLP, San Francisco, CA, Martin L. Pitha, Lillis Pitha LLP, Newport Beach, CA, for Biocia Inc., et al. Rosenberg, Alicia G., United States Magistrate Judge Proceedings: ORDER RE: (1) DEFENDANTS I-MED PHARMA USA INC., I-MED PHARMA INC., AND ILAN HOFMANN'S JOINT MOTION FOR PROTECTIVE ORDER (Dkt. No. 128); AND (2) DEFENDANTS' MOTION TO AMEND THE PROTECTIVE ORDER (Dkt. No. 126) *1 Case is called. Counsel state their appearances. I. Defendants' Motion for Protective Order (Dkt. No. 128) A. Procedural History In the Order dated November 7, 2022, the Court narrowed the term “Other Accused Artificial Tears Products” in Plaintiff's discovery requests to mean: “eye drop formulations containing active and inactive components, including but not limited to glycerin, hyaluronan, lipids, vitamins and other components for the treatment of dry eye conditions and diseases and/or use during or following surgery” during the period January 1, 2017 to the present. (Order, Dkt. No. 118.) The Court rejected Defendants' request for a further limitation to responsive products that a Defendant contemplated marketing or selling in the United States. The Court found that “Defendants' proposed limitation is not workable because the issue of whether a Defendant contemplated marketing or selling a responsive product in the United States is one of the hotly contested issues in this case.” (Id.) At a further hearing on November 18, 2022, Defendants requested the opportunity to brief the issue further. The Court agreed, stating that any briefing should explain in concrete terms Defendants' proposed limitation(s) and how Defendants proposed to search for and produce responsive information in response to Plaintiff's discovery requests at issue in Paragraph 1 in the November 7 Order. (Order, Dkt. Nos. 121, 122.) Defendants thereafter filed a motion for protective order. (Dkt. No. 128.) Plaintiff filed an opposition. (Dkt. No. 129-131.) Defendants filed a reply. (Dkt. No. 133.) The matter came on for hearing. B. Factual Background Plaintiff Oasis Medical, Inc. (“Oasis”) has been a licensed distributor of Biocia, Inc. (“Biocia”) since at least April 2007. (Second Amended Complaint (“SAC”) ¶ 36, Dkt. No. 98.) On January 19, 2017, Oasis and Biocia executed the Core Technology Licensing Agreement (“CTLA”), which exclusively licensed Biocia's Core Technology to Oasis within the United States and its territories. The term “Core Technology” was defined as “eye drop formulations containing active and inactive components, including but not limited to glycerin, hyaluronan, and other components beneficial for treating dry eye conditions.” (Id. ¶¶ 41-42; CTLA, Art. I & ¶ 2.5, Dkt. No. 18-1.) The CTLA also provided Oasis with a right of first refusal and last refusal in the United States and its territories to “Future Biocia Technology,” which is defined as “BIOCIA eye drop formulations that are in research and development at the time this Agreement is executed, or in the future, which contain active and inactive components, including but not limited to, glycerin, hyaluronan, lipids, vitamins, and/or other components to be disclosed in the future, and/or any procedure or method of use for the treatment of dry eye conditions and diseases and/or use during or following surgery.” (SAC ¶¶ 43-45; CTLA, Art. I & Art. 2A, Dkt. No. 18-1.) Oasis alleges tortious interference with contract, common law inducement to breach a contract, tortious interference with prospective economic relations, and unfair competition. (SAC ¶¶ 140-190.) Defendants are I-MED Pharma USA Inc. (“I-Med USA”), I-MED Pharma Inc. (“I-Med Canada”) and Mr. Hofmann. Defendant Hofmann is alleged to be an executive and/or member of the Board of Directors of Biocia, I-Med USA and I-Med Canada. (Id. ¶ 57.) *2 In brief summary, Oasis alleges that I-Med Canada announced its “expansion into the United States.” (Id. ¶ 73.) On November 5, 2021, I-MED Canada issued a press release announcing that it “is bringing the world's most innovative dry eye product portfolio to the U.S. market.” Specifically, the press release stated: “I-MED Pharma USA will sell directly to eye care professionals throughout the United States” products that included I-DROP artificial tears and I-DROP MGD. (Id. ¶ 69.) According to the SAC, Biocia denied I-Med Canada's request to distribute I-DROP product lines in the United States. (Id. ¶ 79.) Oasis alleges that I-DROP artificial tears fall within the term “Core Technology” in the CTLA. (Id. ¶ 85.) Oasis further alleges that I-DROP MGD falls within the term “Future Biocia Technology” in the CTLA. Defendant Hofmann “allegedly altered the concentrations of the ingredients in the Biocia MGD Formulation to create a Clone MGD formulation for I-Med Canada and I-Med USA (“Clone MGD”). The SAC alleges that Clone MGD is “the same as or substantially the same as the Biocia MGD Formulation.” (Id. ¶¶ 80-81.) Oasis claims that Clone MGD is Future Biocia Technology within the meaning of the CTLA and, therefore, Oasis has a right of first and last refusal in the United States and its territories. (Id. ¶¶ 83, 90-91.) The District Court's order granting Plaintiff's motion for preliminary injunction contains a more detailed version of the facts. (Dkt. No. 83.) C. Analysis “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). “District courts have broad discretion in determining relevancy for discovery purposes.” Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005). A party from whom discovery is sought may move for a protective order. “The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1). As relevant here, the order may forbid the discovery and “inquiry into certain matters,” or limit the scope of discovery to certain matters. Fed. R. Civ. P. 26(c)(1)(A), (D). The discovery requests at issue[1] contain two defined terms that are relevant to the discovery dispute: (1) “Biocia I-Drop Products” and (2) “Other Accused Artificial Tears Products.” The term “Biocia I-Drop Products” is defined to mean I-Drop PUR, LipiPUR, I-Drop MGD Premium, and any other artificial tears product with formulations licensed from Biocia and sold by I-Med Canada prior to this Action, including prototypes. As discussed above, the Court narrowed the second term, “Other Accused Artificial Tears Products,” to mean: “eye drop formulations containing active and inactive components, including but not limited to glycerin, hyaluronan, lipids, vitamins and other components for the treatment of dry eye conditions and diseases and/or use during or following surgery” during the period January 1, 2017 to the present. (Order dated November 7, 2022, Dkt. No. 118.) Together, these two defined terms encompass products that would fall within the CTLA if marketed, sold or distributed within the United States and its territories. Whether Defendants contemplated marketing, selling or distributing Other Accused Artificial Tears Products in the United States and its territories is a hotly contested issue in this Action. Defendants ask that the Court re-define the term “Other Accused Artificial Tears Products” to mean: “Any artificial tears product that [Defendant] I-MED Canada contends was developed in whole or in part by I-MED Canada for sale into the United States, and for which I-MED Canada contends Biocia owns no rights.” (Proposed Order, Dkt. No. 128-2 (emphasis added).)[2] *3 Despite being given the opportunity to brief the issue, Defendants again do not explain why Oasis should be required to accept Defendants' contention without discovery or cross-examination. The discovery requests listed in Defendants' motion appear directly relevant to Defendants' apparent defense that it did not develop the Other Accused Artificial Tears Product for sale into the United States, and is therefore important, if not critical, to resolving the core issues in this case. Nor do Defendants explain how the burden or expense of the requested discovery outweigh its likely benefit. Fed. R. Civ. P. 26(b)(1)-(2). The District Court's order granting Oasis' motion for preliminary injunction foreshadowed the need for discovery on such topics: [Defendants] insist that I-Med does not intend to sell any Biocia products in the United States, and that the “I-DROP MGD” that it announced in its press release is its own independently developed product. I-Med is entitled to develop its own eye drop formula, but it is not entitled to use “Biocia eye drop formulations,” which the CTA defines as Future Biocia Technology, in the United States without first providing Oasis first and last refusal rights. There is no way for the Court to actually determine which side's version of the facts is true before discovery, or perhaps trial. (Dkt. No. 83 at 15.) The District Court went on to note Oasis' circumstantial evidence in support of its position. (Id.) Defendants' motion also does not address how Defendants' proposed modification to the definition of Other Accused Artificial Tears Products would apply to specific discovery requests in practice. As discussed at oral argument, some discovery requests listed in Defendants' motion specifically address Defendants' plans in the United States and, therefore, should not be objectionable. Other discovery requests call for production of documents for example, scientific comparisons between Biocia eye drop formulations and I-Med's Other Accused Artificial Tears Products that may not distinguish between countries on the face of the documents at least in the earlier stages of product development. For these reasons, Defendants' motion for protective order is DENIED. II. Defendants' Motion to Modify the Existing Protective Order On March 11, 2022, the Court issued a protective order upon agreement of the parties. (Dkt. No. 108; see Dkt. No. 101.) At a discovery conference on November 7, 2022, the parties advised the Court that Defendants made certain documents available only for inspection and objected to producing electronic or hard copies of such documents. The court ordered counsel to confer about Defendants' requests for additional protections and to file either a joint stipulation for an amended protective order or, if the parties could not agree, a joint stipulation that contained each side's proposed amendments and argument. (Order, Dkt. No. 122.) The parties did not reach agreement and filed a joint stipulation regarding Defendants' proposed first amended protective order. (Dkt. No. 126.) The matter is appropriate for adjudication without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. A court may issue a protective order “requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specific way.” Fed. R. Civ. P. 26(c)(1)(G). The court “must balance the risk ... of inadvertent disclosure of trade secrets to competitors against the risk ... that protection of ... trade secrets impaired prosecution of [plaintiff's] claims.” Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992). Factors include the nature of the claims, the sensitivity of the information at issue, the potential damage of inadvertent disclosure, and the party's opportunity to develop its case through alternative procedures. Id. at 1470-71. Protective orders are common in litigation between competitors to prevent or mitigate a risk of competitive harm. See generally Nutratech, Inc. v. Syntech International, Inc., 242 F.R.D. 552, 555 (C.D. Cal. 2008) (discussing risk of competitive harm from disclosure to competitor). A court has broad discretion to determine the degree and type of protection afforded in a protective order. Phillips v. GMC, 307 F.3d 1206, 1211 (9th Cir. 2002). *4 The existing protective order already contains a provision for designation of information as “attorneys eyes only.” (Dkt. No. 108 ¶ 7.2.) The attorneys eyes only designation is appropriate for information “that the Designating Party believes in good faith has significant competitive value such that unrestricted disclosure to others would create a substantial risk of serious harm.” (Id. ¶ 2.4.) Disclosure is limited to (1) outside counsel of record and their employees “to whom it is reasonably necessary to disclose the information for this Action”; (2) experts and their colleagues, advisors and staff “who are actively assisting in the preparation, evaluation, or trial of this Action, to whom disclosure is reasonably necessary for this Action,” subject to additional requirements; (3) the court and its personnel; (4) court reporters; (5) professional jury or trial consultants and professional vendors; (6) the author, recipient, custodian or other person having knowledge of the information; and (7) a mutually agreed mediator or settlement officer. (Id. ¶ 7.2.) Prior to disclosure to an expert, the Receiving Party must disclose detailed information about the expert to the Designating Party as specified in the protective order including the expert's curriculum vitae and current employment; a list of the cases in which the expert has provided written or oral testimony within the past three years; a list of all companies for whom the expert has consulted within the past three years; identification of any past relationship between the expert and a party to this case; and the expert's agreement to be bound by the protective order. The Designating Party has the opportunity to object to the disclosure and, if the matter cannot be resolved by the parties, to submit the matter to the court for adjudication. (Id. ¶ 7.3.) Defendants propose to amend the protective order by adding a third category for “competitive business information” to be defined as “extremely sensitive” information “representing product information, formulas, ingredients, communications identifying formulas, or testing that define or otherwise describe in detail the design, study, testing and structure of products, disclosure of which to an Opposing Party would place the Designating Party at a competitive disadvantage.” (Proposed ¶ 2.5.) Production of this third category of information would be limited to inspection on a secured computer, without internet access or network access to other computers, in a secured room at an office of the Designating Party's counsel or another mutually agreed location. The Receiving Party would be prohibited from copying, removing, or transferring any portion of the information to any recordable media or device, and the Producing Party would monitor the Receiving Party to ensure that no prohibited copying, removal or transfer occurred. The Receiving Party could request paper copies only to the extent paper copies are “reasonably necessary” for court filings, pleadings, expert reports or other papers, but for no other purpose including reviewing the information. Such a request for paper copies would appear futile in any event because the Receiving Party would be prohibited from making electronic images of the paper copies or from converting information in the paper copies into an electronic format. (Proposed ¶ 8.) In addition, disclosure of this third category of information would be limited to two outside counsel and one paralegal for the Receiving Party, all of whom would be identified by name. (Proposed ¶ 7.3.) Defendants do not explain why the protections in the existing protective order are insufficient, and why the proposed modifications are necessary. “[T]he party seeking protection bears the burden of showing specific prejudice or harm will result if no protective order is granted.” Phillips, 307 F.3d at 1210-11. Defendants argue that, “[s]hould Oasis be granted access to the I-Med Defendants' confidential trade secrets, the damage to the I-Med Defendants would be incalculable.” (Jt. Stip. at 5.) However, as discussed above, the existing protective order does not permit Oasis access to information designated “attorneys eyes only.” Disclosure is limited to outside counsel and experts who are vetted through detailed mandatory disclosures. Defendants do not explain the risk from disclosure to outside counsel and certainly do not identify any risk that would justify limitations on how opposing counsel staffs this litigation. Defendants do not explain the risk from disclosure to experts who pass muster under the existing protective order. Nor can the Court discern any such risk that would warrant limitations on the opposing experts' ability to work with the formulations and ingredients. As discussed above, this case will likely involve comparisons of pertinent Biocia eye drop formulations with Defendants' I-Drop Products and Other Accused Artificial Tears Products to determine whether they are substantially the same or sufficiently similar. (Order, Dkt. No. 83 at 15.) It is not apparent how Oasis' experts could effectively conduct such comparisons under the terms and conditions in the proposed protective order. Defendants' proposed restrictions would appear to put Oasis' experts at a disadvantage vis-a-vis Defendants' witnesses and experts. Moreover, the prohibition on converting the designated information into an electronic format would effectively prevent experts from preparing written reports and prevent counsel from electronically filing any document that contained information from the proposed third category even under seal. *5 Absent a showing that the existing protective order is insufficient to protect Defendants' sensitive and proprietary information, or justification for the proposed amendments, Defendants' motion to amend the protective order is DENIED at this stage of the proceedings. III. Order Accordingly, IT IS ORDERED that: 1. Defendants' motion for protective order is DENIED. (Dkt. No. 128.) 2. Defendants' motion to amend the existing protective order is DENIED. (Dkt. No. 126.) 3. Counsel shall confer regarding a deadline for completion of document productions in January 2023 in light of the discovery cut-off date. (To the extent the parties are engaged in mediation, counsel may wish to prioritize production of documents necessary for participation in meaningful settlement discussions.) Footnotes [1] The discovery requests at issue Request for Production Nos. 5, 9-11, 14-16, 18-19 and 31 to I-Med Canada; Request for Production Nos. 5, 9, 14-17 and 30 to I-Med USA; Request for Production Nos. 5-10, 14, 19 and 24 to Hofmann; Interrogatory Nos. 1-2 to I-Med Canada; and Interrogatory No. 3 to Hofmann. [2] This Order addresses only the request for relief in Defendants' motion. The Court expresses no view as to the proportionality of the discovery requests at issue on any other basis.