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Judge Rakoff Sanctions Patentee for Sharing Confidential Documents with Counsel in Overseas Trade Secret Case

On December 7, 2020, United States District Court Judge Jed S. Rakoff (S.D.N.Y.) denied Plaintiff SIMO Holdings Inc.’s (“SIMO”) motion to use four confidential documents in a related trade secret dispute pending in Shenzhen, China, and instead imposed a $40,000 sanction on SIMO for disclosing the confidential documents to Chinese counsel.

SIMO sued defendants uCloudlink Network Technology Limited and its U.S. subsidiary uCloudlink (America), Ltd. (“uCloudlink”) in 2018 for patent infringement and, in a trial last year, prevailed.  During discovery, uCloudlink produced confidential documents and information allegedly stolen from SIMO’s Chinese subsidiary, Shenzhen Skyroam Technology Co. Ltd. (“Skyroam”), which forms the basis of the pending trade secret dispute in China. 

SIMO requested “confirmation” from the Court that the Protective Order does not preclude SIMO’s U.S. counsel from sharing four confidential documents with Skyroam’s Chinese counsel.  Simo argued that an “Investigation Assistance Order” issued by the Shenzhen Intermediate People’s Court allowed it to share the documents under the Protective Order.  In explaining the request’s procedural history, SIMO highlighted the importance of cross-border coordination, noting that in November 2018, SIMO’s U.S. counsel shared the confidential documents with Skyroam’s Chinese counsel to develop the strategy for the theft of trade secret theft litigation.

Judge Rakoff first noted that the Protective Order in the case provided that it was “not to be construed as authorizing a party to disobey a lawful order of another court.”  For that reason, disclosures made pursuant to the Shenzhen Court’s Order – which issued November 9, 2020, and expired November 24, 2020 – were permissible. However, that Order did not authorize the November 2018 disclosure to Chinese counsel.  SIMO argued that it was permissible under the Protective Order, which permitted disclosure to “counsel retained specifically for this action” and to those “retained by a party to serve as an expert witness or otherwise provide specialized advice to counsel in connection with this action.” 

Skyroam’s Chinese counsel, Judge Rakoff found, was neither.  First, the Chinese counsel were not retained for this action, and there “is no indication in the record that the [Chinese attorneys] were even licensed to practice law outside of China.”  Second, Judge Rakoff held that “if individuals providing ‘specialized advice’ in one lawsuit can include attorneys identifying potential bases and defendants for another lawsuit – or attorneys assessing whether one lawsuit might affect another – [the protective order’s] limitation to lawyers retained in ‘this action’ becomes meaningless.”

As the disclosure of the four documents was a violation of the protective order, Judge Rakoff imposed a sanction of $40,000 – $10,000 for each of the four documents – on SIMO.

The case is SIMO Holdings Inc. v. Hong Kong uCloudlink Network Technology and uCloudlink (America), Ltd., No. 18-cv-5427 (JSR) (S.D.N.Y.).