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When Ben Franklin observed in “Poor Richard’s Almanac” that “an ounce of prevention is worth a pound of cure,” he could not possibly have been thinking of 21st century litigation. But 21st century litigators must surely be thinking of old Ben when they embark upon commercial litigation. By its nature, commercial litigation involves secrets, or at least sort-of secrets, or at very least wanna-be secrets. Two commercial entities that hate one another enough to end up in court hate more the thought of disclosing their business plans, customer lists, employee rosters, trade secrets and what have you (the technical business term for “anything”). They insist upon protective orders to prevent disclosure of the corporate family jewels. And if an ounce of protection is good, well then, a ream must be better. ATTORNEYS ENHANCE DETAILS, BUT NOT EFFECTIVENESS When was the last (or first) time you saw a one-ounce protective order? We start with the simple notion — capable of being written in a single sentence — such as, “The parties mutually agree that they shall not use any materials disclosed to them in discovery and not already public knowledge in any manner whatsoever except to conduct this litigation.” But if an ounce of language is nice, our twisted legal minds reason, more must be better. Like a Scrabble game, we build on more words, often at funny angles, until we have filled up the board. Protective orders nowadays run page after page. They have one level of protection for ordinary secrets (the enemy can see them, but has to promise not to use them), another for mortal secrets (a few select agents of the enemy can see them, but then we have to kill them) and another for venal secrets (the enemy can’t see them at all, but their lawyers can, so long as they don’t understand what they’re seeing). Come on. Who are we kidding? Do these protective orders really protect? Or do we get the same answer that Edwin Starr gave to his own question: “War! What is it good for?” — “Absolutely nothing”? OK, even we are not that cynical. Protective orders offer protection. But we are somewhat cynical. Protective orders, no matter how fat we make them, offer mere ounces of protection. And if we do not realize that these orders are inadequate to the task, we are lulled into a hopelessly false sense of security. (If the phrase “Maginot Line” does not conjure for you the image we hope to create here, go back to your World War II history). You cannot rely on a protective order, no matter how cleverly crafted, to protect your client’s confidences. In certain litigation, the notion of “protective order” is an oxymoron. “I have repeatedly warned counsel in this matter that should there be any unauthorized breaches of the Court’s Protective Order and the Court can trace these breaches to a source, that sanctions will be in order. This is a civil case. Sanctions can be quite substantial in a civil case.” Jones v. William Jefferson Clinton, 1999 U.S. Dist. Lexis 5282 (E.D. Ark. 1999). Right. Sanctions can be quite substantial. Especially when the President of the United States, in a rather public setting, irritates, well, no, infuriates, a federal judge. So the sanction for willful contempt was $1,202 plus attorney fees. Jones v. Clinton, 36 F. Supp. 2d 1118, 1135 (E.D. Ark. 1999). Let’s get real. The cases that impose substantial sanctions are few and far between. A PROTECTIVE ORDER MAY NOT PROVIDE MUCH PROTECTION You represent SuperSecret Engineering Systems Co., the well-known supplier of left-handed flugel nuts. The market in the United States alone is one billion units a year. Until now, the three major suppliers all have had roughly the same manufacturing cost, a buck a nut. The retail price is $1.50 per nut, a nice comfortable profit. But SuperSecret has developed a new process that will drop the cost to 50 cents; SuperSecret can cut the sales price to $1.00, capturing the entire market and $500 million a year in pure profit. It can do that, that is, if it can keep its process a secret. So when Doug Argrave, SuperSecret’s director of engineering, leaves abruptly to join SuperSecret’s chief competitor, CopyClone Industries, there is a corporate “uh-oh.” You pull an all-nighter and get the TRO motion on file the next day. You claim perfidy by Argrave and by CopyClone. You get a preliminary injunction. You also get a counterclaim from CopyClone for unfair competition and abuse of process and illegal alliteration. Litigation is joined. Discovery is begun. And you put in place the most state-of-the-art, fully loaded with all the bells and whistles, protective order ever conceived by lawyer. SuperSecrets’ secrets are safe. Life is good. Is it? Step back. When SuperSecret came to you, it knew it had a problem. Argrave might be about to spill the secrets to CopyClone. You may have prevented that. Maybe. But what you have done for almost sure is assure — whether or not CopyClone knew the secrets before the litigation — that CopyClone will learn those secrets as a result of the litigation. And SuperSecret may not be able to do a thing about CopyClone using its no-longer-secret secrets. The rub is that you are not really all that sure how much Argrave knew or was able to convey, and you are not all that sure that he actually turned over whatever he did know. What you can be sure of is that, during the course of the litigation, the other side will seek full discovery into the details of your trade secrets. What may or may not have been given up by your former employee will certainly be turned over to the other side in discovery. And all you have standing between you and the loss of $500 million in annual profits is a few pieces of paper with the words “Protective Order.” How good is that paper? Courts generally start with the notion, when imposing sanctions, that the least onerous sanction available to redress the problem ought to be imposed. U.S. ex rel. Koch v. Koch Indus., 197 F.R.D. 488 (N.D. Okla. 1999). What is the likelihood, then, that a court will enter a $500 million sanction, even if you can prove with crystal clarity that there has been a breach of a protective order? More likely, the court will impose a fine of several thousand or tens of thousands of dollars, a price CopyClone would gladly pay for a share of that $500 million profit. Even if you could find a court with the courage to enter real damages, based upon real injuries, you would have the burden of proving those injuries. Unless CopyClone acts like an idiot, and leaves a paper trail of admissions, chances are that the other side will use your trade secrets in a way that inserts some ambiguity into whether there was an actual theft or honest independent development. If so, your ability to prove real damages may not exist. EVEN HONEST PEOPLE CAN LET SECRETS SLIP Well, you say, I can make sure that nothing given up in discovery ever reaches the business people at CopyClone, simply with the common expedient of including in the Protective Order a level of “attorneys’ eyes only.” CopyClone’s cretinous business people might violate the protective order, you say, but you can rely on an attorney’s instinct for self-preservation of her license not to disclose matters to her client. You say. Trying to isolate disclosure to attorneys may not work. No matter how much you try to restrict access to attorneys’ eyes only, the problem is that attorneys seldom have sufficient eyesight to interpret technical documents; courts understand that the attorneys may require some ability to share even the most sensitive materials with their clients in order to understand them. So they will beg for some relief and you can’t presume that the court will hold them to a strict “attorneys’ eyes only.” Lest you think we are sounding alarms because we have no faith in the honesty of the CopyClones of the real world, hold up. If you are dealing with liars and criminals, you have little hope. But it doesn’t take a thief; you can almost as easily lose confidences shared with honest people. The lawyer or consultant who receives a confidence under a protective order is human. He may know it is a secret that must not be revealed or used; he may honestly try to keep the secret. But human nature being what it is, with the passage of time, he will only know that he knows something; he will forget how he came to know it, and he is prone, however unwittingly, to disclose it. The only way to keep a secret is to not tell it. And a protective order is a mechanism designed to tell secrets to others. Don’t get us wrong. We don’t mean to suggest that we think you should not bother to get protective orders. You should. You should also carry an umbrella during a hurricane; just don’t assume it will guarantee that you won’t get wet. So maybe, just maybe, before you start drafting that TRO motion to commence litigation, you ought to counsel SuperSecret and make sure that it fully understands the possible implications of escalating the problem and the limitations of protective orders. WHAT HAPPENS TO SECRETS REVEALED IN ARBITRATION? More and more, commercial litigants turn to alternate dispute resolution to avoid the delay and expense of litigation. Arbitrations are, generally, faster and less costly and give the parties an opportunity to select arbitrators or mediators with specialized backgrounds who are better able to understand and resolve particularized disputes. When we enter these ADR forums, we bring with us the baggage of our litigation experience. And we assume that a protective order is just as good in an arbitration proceeding as in a court proceeding. Bad assumption. Whatever substance these orders may have when entered by a judge, they are less so when entered by a rent-a-judge. When a judge enters an order, she expects it to be carried out. She may or may not be upset about the disclosure of some piece of information from one corporate entity to another, but she is unlikely to forgive someone who contemptuously disobeys her own order. When parties to an arbitration enter a protective order, it is simply a contractual undertaking. It may be entered by an arbitrator, it may be notarized, the arbitrator might even put a gold seal on it, but the arbitrator is simply a person chosen by contractual agreement to resolve disputes, and arbitrators have no power of contempt. If you can prove a violation of an arbitrator’s protective order during the course of the arbitration proceedings, you can present that breach as part of the claim in the arbitration; and the arbitrator, like the judge, is likely to be irritated by a breach of his order. That irritation could lead to an additional award in the arbitration. But the more likely scenario is that you will not learn of a breach until the arbitration is concluded, at which point your only remedy is likely to be to commence a separate arbitration for that breach. A COURT CAN’T ‘SANCTION’ A BREACH OF CONTRACT You can attempt to enlist the aid of the courts as part of an arbitrator-entered protective order, agreeing to submit any claims for breach of the protective order to a court for possible injunctive or monetary relief. But a court faced with a breach of an arbitrator’s order has no authority to enter sanctions. What is there to sanction? There is no court order which has been breached, so no basis for judicial contempt. See Poliquin v. Garden Way Inc., 154 F.R.D. 29 (D. Maine 1994). All a court can do when faced with the breach of an arbitrator-entered protective order is assess whether there has been a breach of contract and award contract damages. You can try to up the ante, of course, by inserting penalty provisions in an arbitration protective order. But that won’t work because contractual attempts to impose penalties are not enforceable. Farmers Export Co. v. Prois, 799 F.2d 159 (5th Cir. 1986). Here is the point. We rely too much on protective orders, whether they come by the ounce or the pound. When you review the bidding on whether to institute litigation, one of the factors you and your client need to consider is whether the litigation will come with the potential cost of forcing you to turn secrets over to your litigation adversary. Jerold S. Solovy and Robert L. Byman are Fellows of the American College of Trial Lawyers and partners at Chicago’s Jenner & Block. They can be reached at [email protected]and [email protected].

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