In re Violation of Rule 28(d).

• Decision Date: 29 March 2011
• Docket Number: Miscellaneous Docket No. 976.
• Parties: In re VIOLATION OF RULE 28(D).
• Court: U.S. Court of Appeals — Federal Circuit

635 F.3d 1352

79 Fed.R.Serv.3d 370

98 U.S.P.Q.2d 1144

In re VIOLATION OF RULE 28(D).

Miscellaneous Docket No. 976.

United States Court of Appeals, Federal Circuit.

March 29, 2011.

Before DYK, PROST, and MOORE Circuit Judges.

DYK, Circuit Judge.

In this order we address whether counsel for Defendants–Appellants Sun Pharmaceutical Industries, Ltd. and Caraco Pharmaceutical Laboratories, Ltd. (collectively “Sun”) should be sanctioned for the extensive use of improper confidentiality markings in the briefs filed by Sun contrary to Rule 28(d) of the Federal Circuit Rules. We conclude that the use of such markings was improper, and we impose sanctions on counsel in the amount of $1,000.

I

Some background regarding the underlying litigation is necessary to understand the context of the sanctions order. In 2007, Sanofi–Aventis U.S. LLC (“Sanofi”) sued Sun and other generic drug manufacturers alleging the infringement of Sanofi's patent, which claimed the colorectal cancer drug oxaliplatin. By mid–2009, Sanofi and Sun reached a settlement and entered into a license agreement. The license agreement set forth a specific “Launch Date” (the later of August 9, 2012, or the date on which Sun received final FDA approval for its generic version of oxaliplatin) on which Sun would be granted “a non-exclusive license ... to make, have made, import, market, offer for sale, and sell the Licensed Products in the Territory.” J.A. 235–36. The license agreement also permitted Sun to market its generic drug prior to the Launch Date, but only if other generic manufacturers were also on the market. Section 3.5 of the license agreement provided:

In the event that, during the term of the Licensed Patents and without Sanofi's permission, any defendant in the Consolidated Eloxatin Patent Litigation sells a generic version of a Sanofi NDA Product in the Territory prior to a Final Court Decision (“ At–Risk Launch ”), [Sun] will have the option of selling its Generic Equivalent prior to the Launch Date.

J.A. 237 (emphasis added). But the license agreement also provided that Sun would stop selling under certain circumstances:

Should Sun exercise such an option and a Court subsequently enters a decision(s) enjoining each such At–Risk Launch product(s), Sun agrees that Sun will not sell its Generic Equivalent from the time the Court enters an injunction(s) against each such At–Risk Launch Product(s) until the Launch Date.

J.A. 237–38 (emphases added).

Also part of the settlement agreement was a proposed consent judgment which enjoined Sun from making, using, or selling generic oxaliplatin except in the limited circumstances provided for in the license agreement. J.A. 229.

In sum, if other defendants were on the market prior to a “Final Court Decision” in the underlying infringement suit, Sun would also be permitted to market its version of the generic drug before the Launch Date. But if “a Court subsequently enter[ed] a decision(s) enjoining” each of the other defendants from selling its version of the generic drug, Sun would also be enjoined. J.A. 237–38.

Shortly after Sanofi and Sun reached an agreement regarding settlement, the district court denied summary judgment of invalidity but granted summary judgment of non-infringement. Sanofi–Aventis U.S. LLC v. Sandoz, Inc., No. 07–CV–2762, 2009 WL 1741571, at *1 (D.N.J. June 18, 2009). Sanofi then refused to deliver a fully executed version of the settlement documents to Sun. As a result, the consent judgment was never entered by the district court.

Following at-risk launches by other defendants, Sun launched a licensed version of generic oxaliplatin pursuant to Section 3.5 of the license agreement. Sanofi subsequently reached settlement agreements with the other defendants, each of which included a proposed consent order with a specific provision enjoining the defendants from further sales of generic oxaliplatin from June 30, 2010 until August 9, 2012. These orders were entered by the district court on April 14, 2010.

Sanofi then sought to stop further sales by Sun. Sanofi requested that the court enter a revised version of the original consent judgment enjoining Sun from continuing to sell its generic version of oxaliplatin. See J.A. 467. Sun opposed entry of the revised consent judgment, arguing that it did not reflect the terms of the license agreement. The district court entered the revised version of the consent judgment proposed by Sanofi, which provided:

If all other defendants are enjoined as of June 30, 2010, or on some later date, then Sun ... [is] hereby enjoined as of June 30, 2010, or that later date, from manufacturing, using, offering to sell, or selling within the United States, or importing into the United States, the oxaliplatin for injection defined by ANDA No. 78–818.

J.A. 473 (emphasis added). Sun appealed the revised consent judgment to this court.

On appeal, Sun argued that the revised consent judgment was inconsistent with the license agreement. Sun argued that injunctions entered pursuant to a consent decree “are not ‘decision(s)’ of the court”; therefore, such injunctions did not trigger the provision of the license agreement requiring Sun to stop marketing its generic drug. Appellant's Br. 24. After oral argument, we issued a non-precedential opinion concluding that Section 3.5 of the license agreement was ambiguous because it was unclear “whether a ‘decision’ includes a consent judgment and injunction resulting from a settlement between parties or whether it requires an injunction issued by a court following a decision on the merits.” Sanofi–Aventis U.S. LLC v. Sandoz, Inc., No.2010–1338, 405 Fed.Appx. 493, 498, 2010 WL 5393659, at *4 (Fed.Cir. Dec. 22, 2010). We vacated the revised consent judgment and the resulting injunction, and remanded to the district court to resolve the ambiguity in the license agreement. Id. at *6.

II

In the briefing on the merits of the appeal, both parties marked as confidential discussion of aspects of the license and settlement agreements. At oral argument we questioned whether such confidentiality markings were appropriate under Rule 28(d) of the rules of this court and Rule 26 of the Federal Rules of Civil Procedure. Following argument, Sun submitted a motion to modify the protective order to remove the confidentiality designations. We granted the motion. Sanofi–Aventis U.S. LLC v. Sandoz, Inc., No.2010–1338, 405 Fed.Appx. 493, 494–95, 2010 WL 5393659, at *1 (Fed.Cir. Dec. 21, 2010).

At oral argument we did not suggest that marking the license and settlement agreements as confidential was itself sanctionable. But we raised the question of whether counsel for Sun had violated our rules by marking confidential those parts of its briefs that set forth Sun's legal argument. Examples of the confidentiality markings contained in the brief submitted by Sun are included in an Addendum to this opinion. With few exceptions, the legal argument in Sun's brief was entirely marked confidential. Following oral argument, we issued a show-cause order, which provided in pertinent part:

The brief submitted by Defendants–Appellants contains extensive confidentiality markings pertaining to case citations, direct quotations from published opinions of the cases cited, and legal argument, none of which appear to fall under the protective order entered by the district court. It thus appears that Defendants–Appellants marked material as confidential in violation of the rules of this court.

Accordingly,

IT IS ORDERED THAT:

Within 14 days of this order, Defendants–Appellants are ordered to show cause why this court should not impose sanctions for the violation of Federal Circuit Rule 28(d) due to the improper use of confidentiality markings.

Sanofi–Aventis v. Sandoz, Inc., No.2010–1338, slip op. at 1–2 (Fed.Cir. Dec. 7, 2010). In response to the show-cause order, Sun did not admit to any error, but attempted to justify the use of such extensive confidentiality markings by arguing:

Sun did not intend to be overzealous in designating material as confidential, but was concerned that citation to certain case law would have revealed to a reader key terms contained in, and facts about, the Settlement and License Agreements.... Absent designation of this material as confidential, Sun was concerned that the discussion of the case law and other authority itself would effectively divulge the terms of the agreements that had been filed under seal and were, therefore, governed by the Protective Order.

Defendants–Appellants Sun Pharm. Indus., Ltd. and Caraco Pharm. Labs., Ltd.'s Response to December 7, 2010, Order at 3–4, Sanofi–Aventis v. Sandoz, Inc., No.2010–1338 (Fed.Cir. Dec. 20, 2010). In granting the motion to remove the confidentiality markings, we made clear that “[t]he granting of Sun's unopposed motion does not resolve the pending Show Cause Order concerning possible sanctions.” Id. at 3 n. 1.

III

In determining whether our rules were violated, some background is helpful. There is a strong presumption in favor of a common law right of public access to court proceedings. See Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597–99, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978). In Nixon, the Supreme Court specifically recognized the existence of “a general right to inspect and copy public records and documents, including judicial records and documents.” Id. at 597, 98 S.Ct. 1306 (citations omitted). Similarly, in United States v. Corbitt, 879 F.2d 224, 228 (7th Cir.1989), the Seventh Circuit recognized that “[t]his [common law] right of access establishes, as a general matter, that court files should be open to the public for inspection and copying.” In Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 579, 100 S.Ct. 2814, 65 L.Ed.2d 973 (1980), the Supreme Court also recognized a First Amendment right of public access to court proceedings.

Though the presumption of public access to judicial proceedings and records is strong, it “is not absolute.” Nixon, 435...