Heraeus Kulzer, GmbH v. Biomet, Inc.

• Decision Date: 01 February 2018
• Docket Number: No. 17-1674,17-1674
• Parties: HERAEUS KULZER, GMBH, Plaintiff-Appellant, v. BIOMET, INC., et al., Defendants-Appellees, and Esschem, Inc. Intervenor-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

881 F.3d 550

HERAEUS KULZER, GMBH, Plaintiff-Appellant,

v. BIOMET, INC., et al., Defendants-Appellees,andEsschem, Inc. Intervenor-Appellee.

No. 17-1674

United States Court of Appeals, Seventh Circuit.

Argued January 9, 2018

Decided February 1, 2018

Susan M. Gerber, Attorney, Jones Day, Cleveland, OH, Lawrence D. Rosenberg, Attorney, Jones Day, Washington, DC, Meghan Sweeney Bean, Attorney, Jones Day, Detroit, MI, for Plaintiff–Appellant.

Mark F. Criniti, Attorney, Ladue, Curran & Kuehn LLC, South Bend, IN, Michael P. Kornak, Dylan Smith, Attorneys, Freeborn & Peters LLP, Chicago, IL, for Defendants–Appellees.

Mark D. Boveri, Attorney, Krieg Devault, LLP, Mishawaka, IN, Mary F. Platt, Attorney, Fineman Krekstein & Harris, PC, Philadelphia, PA, for Intervenor–Appellee.

Before Flaum, Kanne, and Rovner, Circuit Judges.

Flaum, Circuit Judge.

Plaintiff-appellant Heraeus Kulzer, GmbH ("Heraeus") brought this action in the Northern District of Indiana under 28 U.S.C. § 1782. That statute allows a party to file a petition in a federal district court to obtain discovery for use in a foreign proceeding. Here, Heraeus sought to obtain discovery from defendants-appellees Biomet, Inc. and Biomet Orthopedics, LLC (collectively, "Biomet") to use in its trade secret misappropriation case against Biomet in Germany. Biomet produced discovery subject to a series of stipulated protective orders that limited Heraeus’s ability to use or disseminate certain discovery materials outside of the German proceeding and this § 1782 action.

After obtaining discovery from Biomet and submitting it to the German court, the German court ruled in Heraeus’s favor and enjoined Biomet from manufacturing or distributing any products developed using the misappropriated information. In its ruling, the German court cited and quoted several documents that were produced in this § 1782 proceeding and thus subject to the stipulated protective orders.

Suspicious that Biomet was continuing to sell products made with Heraeus’s trade secrets outside of Germany, Heraeus subsequently brought actions in several other European countries to enforce the German judgment. Heraeus also filed three motions to modify the district court’s protective orders in this § 1782 action. In those motions, Heraeus asked the district court to exclude the documents that the German court relied on from the scope of the protective orders and/or to impose restrictions on Biomet’s internal use of those documents. Heraeus claims that these modifications are necessary so it may submit those documents to the foreign tribunals presiding over the European enforcement proceedings and protect its trade secrets. The district court denied all three motions.

Because Heraeus failed to timely appeal the district court’s first and second orders denying the requested relief, we conclude that we lack jurisdiction to review those orders now. With respect to the district court’s third and final order, we hold that the district court did not abuse its discretion by denying Heraeus’s request to impose restrictions on Biomet’s internal use of the documents it produced.

I. Background

A. The Alleged Trade Secret Misappropriation

Heraeus is a German company that specializes in the development and production of bone cements used in joint replacement surgery. Heraeus began developing and producing bone cements in the 1950s.

In the early 1970s, Heraeus contracted with Merck KGaA ("Merck"), a German pharmaceutical company, to distribute its bone cements. To help Merck obtain regulatory approval for its bone cements, Heraeus gave Merck confidential information. Merck was contractually obligated to use that information solely for the purpose of obtaining regulatory approval and to protect the information from disclosure.

In 1997, Merck entered into a joint venture with Biomet. In 2004, Merck sold its joint venture shares to Biomet without telling Heraeus. When Heraeus found out, it stopped delivering its bone cements to Biomet.

When the distribution relationship between Biomet and Heraeus ended in 2005, Biomet began manufacturing and selling bone cements that directly compete with Heraeus’s products. After dominating the bone cement market for fifty years, Heraeus began losing its market share.

Heraeus sued Biomet in courts throughout Europe, alleging that Biomet developed its bone cements with Heraeus’s proprietary information. Heraeus also claims that Biomet used the allegedly misappropriated information to help Esschem, Inc. ("Esschem")—a chemical company in Pennsylvania—create the copolymers that Biomet uses in its bone cements.

B. The § 1782 Action

On December 30, 2008, Heraeus sued Biomet in Germany for trade secret misappropriation. Shortly thereafter, Heraeus commenced this proceeding in the Northern District of Indiana under 28 U.S.C. § 1782 to obtain discovery from Biomet.¹ In relevant part, that statute provides that "[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal." 28 U.S.C. § 1782(a).

The Indiana district court initially denied the petition, but on appeal we reversed and remanded for the district court to oversee and manage the discovery process. See Heraeus Kulzer, GmbH v. Biomet, Inc. , 633 F.3d 591, 599 (7th Cir. 2011) [hereinafter Heraeus I ].

C. Stipulated Protective Orders

On remand, Biomet agreed to produce responsive discovery materials pursuant to an amended protective order, which was agreed to by the parties and entered by the district court. In recognition of the "highly competitive" bone cement industry, and to protect Biomet’s trade secrets, that protective order allows Biomet to designate discovery materials as confidential. Once materials are designated as confidential, Heraeus may only use them in the German proceedings and in this § 1782 action, and may only disclose them to authorized individuals specified in the protective order. The amended protective order states that it does not "prevent the Biomet Respondents from disclosing or using in any manner or for any purpose their own Confidential Information."

In August 2011, the district court allowed Esschem to intervene to protect its interests because some of the discovery materials produced contained communications between Esschem and Biomet. After Esschem intervened, the parties agreed to, and the district court entered, a second amended protective order. That protective order allowed Heraeus to use certain documents in the German proceedings provided that the documents were treated as confidential by the German courts.

The district court periodically entered additional protective orders to address particular concerns as they arose. Each successive protective order supplemented prior protective orders.²

D. The German Judgment

Meanwhile, Heraeus submitted the discovery it obtained in this § 1782 proceeding to the German court as evidence to support its trade secret misappropriation claims against Biomet. On June 5, 2014, the German court held that Biomet misappropriated Heraeus’s trade secrets and used them to guide Esschem in creating the copolymers that Biomet uses in its bone cements.³ In its ruling, the German court described and quoted nine documents, which the parties refer to as the "Cited Documents." Those documents contain correspondence between Biomet and Esschem employees about laboratory tests performed on some of Heraeus’s bone cement products. The German court determined that portions of this correspondence contained Heraeus’s trade secrets. Accordingly, it enjoined Biomet from manufacturing, offering, or distributing any bone cement products developed using the misappropriated information.

E. European Enforcement Proceedings

Heraeus claims that, despite the German court’s injunction, Biomet continues to sell bone cement products that were made using misappropriated information in other European countries. Accordingly, Heraeus filed proceedings in several European countries—France, the Netherlands, Austria, Italy, Belgium, Finland, Denmark, Norway, and the United Kingdom—to enforce the German judgment.⁴

F. The District Court Excludes the German Judgment from the Protective Orders' Restrictions

Because the German judgment described and quoted portions of discovery materials that were subject to the protective orders, Heraeus asked the district court to clarify whether the German judgment was itself subject to the protective orders. To the extent it was, Heraeus asked the district court to exclude the German judgment from the scope of the protective orders so it could use the judgment in the European enforcement proceedings.

The district court granted Heraeus’s motion on September 8, 2014. In doing so, it found "good cause for the continued protection of Heraeus’s trade secrets and recogniz[ed] Heraeus’s strong interest in enforcing the terms of the Judgment and protecting its trade secrets." Accordingly, the district court excluded the German judgment from the restrictions imposed by the protective orders so Heraeus could submit the judgment to foreign tribunals "as needed to enforce its rights and protect its trade secrets from further use or misappropriation."

G. Heraeus’s First Motion to Modify the Protective Orders

Heraeus eventually determined that it would also need to submit the Cited Documents to some of the tribunals presiding over the European enforcement proceedings. However, the parties were operating under the seventh amended protective order, which expressly covered the Cited Documents and thus imposed restrictions on Heraeus’s ability to use the documents.

On July 21, 2015, Heraeus moved to modify the protective orders to exclude the nine Cited Documents. Heraeus argued that case-by-case amendments to the protective orders were no longer "workable" because "Heraeus needs the flexibility to submit the Cited Documents as appropriate and to react quickly to...