STATIC MEDIA LLC v. LEADER ACCESSORIES LLC

Static Media sued Leader for infringing design patent D771,400 for a stadium seat. The district court granted Leader’s motion for summary judgement of noninfringement.  This appeal concerns an alleged violation of a protective order issued by the district court. Static also sued another party, OJ Commerce, alleging infringement of the D400 patent. OJ and Leader decided to enter into a Joint Defense Group (“JDG”) to be governed by a Joint Defense Agreement (“JDA”) and OJ signed a Written Assurance agreeing not to use any information or documents shared except for the purposes of the Static-Leader action pursuant to the terms of the Protective Order in that case. Leader sent OJ two deposition transcripts and related exhibits (including Static’s licensing and royalty agreements and sales and revenue information). Only a few of the pages in those documents were marked confidential pursuant to the protective order. In negotiations between Static and OJ, OJ used the royalty agreements obtained from Leader to assess a settlement proposal from Static, and revealed that OJ had a JDA with Leader.  Static moved for discovery sanctions and an order holding Leader and its counsel in civil contempt, alleging that Leader violated the protective order by disclosing the confidential documents to OJ. A magistrate judge found Leader in civil contempt for violating the protective order and the district court affirmed, ordering Leader to pay Static’s attorney’s fees and a $1,000 sanction.  The CAFC finds that Static failed to prove by clear and convincing evidence that Leader knew or should have known OJ would use the confidential information in the Static-OJ action, and that there is no sufficient basis for finding that Leader should have known that OJ would independently decide to violate the protective order. The CAFC further concludes that when read in context, there is doubt as to whether the protective order barred Leader’s disclosure to develop a joint defense strategy, and that it was unreasonable to view the protective order as clearly prohibiting the disclosure of confidential documents to develop a joint defense strategy when the recipient is also a signatory to the protective order. Accordingly, the CAFC reverses. Judge Reyna dissents because in his view Leader’s belief that the disclosed information would be used only for the purposes of the Static-Leader litigation was unreasonable and a violation of the protective order. 

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