Federal Circuit Lacks Jurisdiction Over Interlocutory Appeal Of Order Denying In-House Counsel Access To Opposing Party’s Source Code
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  • Federal Circuit Lacks Jurisdiction Over Interlocutory Appeal Of Order Denying In-House Counsel Access To Opposing Party’s Source Code

    On December 29, 2022, the Court of Appeals for the Federal Circuit dismissed an interlocutory appeal of an order by the District of Utah maintaining the confidentiality of defendant’s source code and denying access by plaintiff’s in-house counsel.  Modern Font Applications LLC v. Alaska Airlines, Inc., No. 2021-1838 (Fed. Cir. Dec. 29, 2022).  The Federal Circuit found that the district court decision did not satisfy the factors of the collateral order doctrine so as to permit interlocutory review because the order would be reviewable after a final judgment.

    Plaintiff Modern Font Applications LLC (“MFA”), a patent licensing and assertion entity, sued Alaska Airlines, Inc. (“Alaska”) and sought Alaska’s source code in discovery.  Alaska designated the code “CONFIDENTIAL INFORMATION – ATTORNEYS’ EYES ONLY” under the governing protective order, which meant that MFA’s in-house counsel could not access it.  After MFA challenged Alaska’s designations, Alaska moved to maintain the confidentiality designations, and MFA moved to amend the protective order to permit access by in-house counsel.  The district court granted Alaska’s motions to maintain the confidentiality designations and denied MFA’s motion to amend the protective order, finding that MFA’s in-house counsel was a “competitive decisionmaker” by virtue of his licensing activities and the fact that MFA’s “entire business model revolves around the licensing of patents through litigation with the assistance of its in-house counsel.”

    MFA filed an interlocutory appeal, invoking the collateral order doctrine.  Although the Federal Circuit’s appellate patent jurisdiction is generally limited to “final” decisions, under the collateral order doctrine, the court may review decisions that (1) are conclusive, (2) resolve important questions separate from the merits, and (3) are effectively unreviewable on appeal from a final judgment in the underlying action.  The Court found that MFA’s appeal must be dismissed at least for failure to meet the third factor.

    The Court rejected MFA’s argument that, without an interlocutory appeal, it would be irreparably prejudiced financially, in its ability to effectively evaluate and prosecute its claims, and by the exclusion of one of its key strategists and analysts from large portions of the case.  First, the Court found that, merely because MFA would be unlikely to secure reversal of a final decision based on the alleged prejudice, the district court order was not “effectively unreviewable.”  The Court also found it unclear that MFA would suffer any prejudice at all, given that it could hire outside counsel and experts to support its technical analysis, and further noted that any evaluation of the possible prejudice would be intertwined with the merits, thus violating the second requirement of the collateral order doctrine.  The Court further found that financial hardship was not enough to ignore the collateral order doctrine.  The Court contrasted MFA’s arguments with interlocutory appeals of orders unsealing information, where the harm of confidential information becoming public could not be undone later.

    Judge Newman dissented, arguing that the Court’s authority to review the district court’s ruling was not a matter of appellate jurisdiction, but rather of appellate discretion.  Judge Newman further argued that it would have been better to exercise that discretion to review and resolve the confidentiality and protective order issues before trial.
    CATEGORIES: JurisdictionProcedure