Sioux Pharm, Inc. and Sioux Biochemical, Inc. v. Eagle Laboratories, Inc. Bio-Kinetics Corporation And Dana Summers , 865 N.W.2d 528 ( 2015 )


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  •                IN THE SUPREME COURT OF IOWA
    No. 13–1525
    Filed June 26, 2015
    SIOUX PHARM, INC. and SIOUX BIOCHEMICAL, INC.,
    Appellants,
    vs.
    EAGLE LABORATORIES, INC.; BIO-KINETICS CORPORATION; and
    DANA SUMMERS,
    Appellees.
    Appeal from the Iowa District Court for Sioux County, Duane E.
    Hoffmeyer, Judge.
    Plaintiff appeals interlocutory ruling compelling disclosure of trade
    secrets   to   competitor.      REVERSED      AND    REMANDED        WITH
    INSTRUCTIONS.
    Anthony L. Osborn and Jeana L. Goosmann of Goosmann Law
    Firm, PLC, Sioux City, for appellants.
    Matthew J. Connealy and Daniel L. Hartnett of Crary, Huff,
    Ringgenberg, Hartnett & Storm, P.C., Sioux City, for appellees.
    2
    WATERMAN, Justice.
    In this case involving claims for misappropriation of trade secrets,
    we have before us an interlocutory appeal on a discovery issue.          In
    particular, the plaintiffs ask us to review a district court order requiring
    the redesignation of the plaintiffs’ standard operating procedures (SOPs)
    from “attorneys’ eyes only” to “confidential.” The underlying protective
    order allowed each party to designate highly sensitive proprietary or
    trade-secret information whose disclosure to another party in the case
    would cause severe competitive damage as “attorneys’ eyes only.” Under
    this designation, only court personnel, attorneys, and outside experts
    could review the material.    The district court removed the “attorneys’
    eyes only” designation for any of plaintiffs’ SOPs alleged to have been
    misappropriated, converted, or used without authorization by the
    defendants.    With the modification, these materials would remain
    confidential and not disclosed to the public, but would be disclosed to
    the defendants themselves.
    Plaintiffs urge that the district court abused its discretion in
    issuing the order.    On appeal, we agree that the court abused its
    discretion.   The defendants did not argue below that the plaintiffs
    improperly designated materials under the order and did not provide any
    basis for modifying the order other than conclusory assertions and a
    statement that they, unlike the plaintiffs, had elected not to hire an
    expert in order to save money. On this record, these grounds are not
    enough. We conclude that while the district court may have had other
    valid grounds for ordering redesignation, this is not apparent from the
    terms of the order, and therefore, we must reverse and remand. In short,
    removing the “attorneys’ eyes only” designation may be appropriate, but
    the court’s rationale for doing so is insufficient. Accordingly, we reverse
    3
    the district court’s ruling and remand for further consideration in light of
    a number of factors discussed in this opinion, including (1) the
    standards set forth in the stipulated protected order for designation of
    material as “attorneys’ eyes only”; (2) the need for defendants, in addition
    to their attorneys and experts, to have access to the materials to properly
    defend the plaintiffs’ claims; and (3) the potential harm to the plaintiffs
    that would result from disclosure of the materials to the defendants.
    I. Background Facts and Proceedings.
    This litigation involves a battle between the two domestic
    producers    of    chondroitin    sulfate,   Sioux    Pharm,    Inc.    and
    Eagle Laboratories, Inc., and other individuals and entities named in the
    litigation, hereinafter referred to collectively as Sioux Pharm and
    Eagle Labs, respectively.
    Chondroitin sulfate is a component of dietary supplements for joint
    health. Sioux Pharm, located in Sioux Center, makes the product from
    bovine trachea and other ingredients.        Its manufacturing processes
    utilize chemical and biological research, unique procedures, specialized
    tools, machinery, hardware, and software. Sioux Pharm restricts access
    to its manufacturing facilities and requires its employees to sign
    confidentiality agreements. Sioux Pharm’s expert testified Sioux Pharm’s
    processes differ substantially from the processes known in the public
    domain, its proprietary methods are worth approximately $4.4 million,
    and its processes have changed significantly since 2003 when two
    individuals at the center of this dispute resigned.
    Robert Den Hoed and Dana Summers are former employees of
    Sioux Pharm.      Den Hoed left his job with Sioux Pharm in 2001 and
    launched Eagle Labs in 2003.       Den Hoed is the president, CEO, and
    majority owner of Eagle Labs.            Summers left his position with
    4
    Sioux Pharm in 2003 and became the secretary for Eagle Labs.
    Eagle Labs began producing chondroitin sulfate in 2005 and is
    Sioux Pharm’s only domestic competitor.
    Eagle Labs is a small business with no more than four employees,
    including Den Hoed and Summers, operating out of a small building
    behind Den Hoed’s family home. By contrast, Sioux Pharm occupies a
    40,000-square-foot facility and estimates that its operation is ten times
    larger than Eagle Labs’.
    On March 1, 2012, Summers contacted Sioux Pharm and asked to
    visit the plant, but his request was refused.                  Two nights later,
    Sioux Center police received a call reporting a suspicious red truck
    parked by the Sioux Pharm facilities.            Officers investigating the call
    found the truck outside and an exterior door propped open with a
    wrench.     The officers caught Summers breaking into Sioux Pharm.
    Summers had a set of six keys to Sioux Pharm in his pocket, including a
    master key, and the officers found another master key in the parking lot
    near Summers’s truck.          The officers searched Summers’s truck and
    found a white binder that turned out to be an SOP manual.                       After
    changing his story several times, Summers admitted that he had stolen
    the manual that night. He was charged with burglary in the third degree
    in   violation   of   Iowa    Code    sections    713.1    and    713.6A     (2011).
    Sioux Pharm alleges that the break-in was an act of deliberate corporate
    espionage, while Eagle Labs claims that Summers acted on his own,
    without its knowledge or authorization. 1
    1Evidence regarding the break-in, including a police report and the judgment
    entry in Summers’s criminal case, was submitted in the course of the subsequent
    litigation between Sioux Pharm and Eagle Labs and relied upon by the district court in
    various pretrial rulings. As the district court found,
    5
    On March 8, Sioux Pharm filed this civil action claiming trade-
    secrets    violations    against    Eagle    Labs,    Bio-Kinetics     Corporation,
    Summers, Den Hoed, and John Ymker, a partner in Eagle Labs.
    Sioux Pharm’s petition alleged that Eagle Labs misappropriated trade
    secrets, intentionally interfered with contracts and prospective business
    advantage, and engaged in civil conspiracy. In later amendments to the
    petition, Sioux Pharm added claims of unfair competition.
    With respect to its trade-secret claims, Sioux Farm broadly alleged
    in Count I that it
    utilize[s] trade secrets in the form of secret chemical and
    biological research, secret systems, secret procedures, secret
    software programs, secret specialized hardware, and secret
    specialized tools, machinery and production processes, all of
    which allow Plaintiffs to produce a variety of unique, highly
    specialized products . . . with efficiency and precision.
    Sioux Pharm further alleged that the above trade secrets were the result
    of significant efforts and expenditures by the plaintiffs, they provide
    substantial advantages over competitors, and plaintiffs own the trade
    secrets.    According to the petition, Sioux Pharm undertook “very
    deliberate steps” to ensure that outsiders such as the defendants had no
    access to Sioux Pharm facilities and SOPs, including limiting access to
    the facilities and requiring plaintiffs’ employees to sign confidentiality
    agreements. The petition alleged that the defendants obtained the trade
    secrets    through      physical   intrusion   into   the    plant   and    through
    theft/review of Sioux Pharm’s SOP manual and trade secrets.
    Upon the filing of the petition, Sioux Pharm obtained an ex parte
    order from the district court authorizing Sioux Pharm to seize the
    _________________________
    Defendant Summers is an officer and employee of the defendant Eagle
    Laboratories and was . . . caught [burglarizing] the plaintiff’s place of
    business and had a notebook of the plaintiffs’ SOPs in his pickup truck.
    6
    computer and telephone equipment of Eagle Labs and to engage in a
    walk-through of the Eagle Labs facility.     Pursuant to the court order,
    Sioux Pharm seized the equipment, engaged in the “walk through,” and
    took various photographs on March 13, 2012. In its answer, Eagle Labs
    specifically denied all of Sioux Pharm’s allegations relating to trade
    secrets.
    The parties also filed discovery motions. First, Eagle Labs sought a
    protective order on March 15 to protect any trade-secret information
    acquired during the walk-through. The district court ruled that all such
    information could only be reviewed by attorneys for the parties working
    together. Sioux Pharm, in turn, filed a motion on June 4 seeking greater
    access to the material, but agreeing that a protective order was necessary
    to protect the trade secrets of each party.      The parties subsequently
    agreed to, and the district court entered, a stipulated protective order on
    August 6.
    The stipulated protective order allows each party to designate
    materials as “confidential” or “attorneys’ eyes only” (AEO):
    The designation of ‘CONFIDENTIAL’ by the Producing Party
    constitutes the representation that it reasonably and in good
    faith believes the Discovery Material constitutes or discloses
    confidential, non-public, and/or protective information
    under Iowa law. The designation of ‘ATTORNEYS’ EYES
    ONLY’ by the Producing Party constitutes the representation
    that it reasonably and in good faith believes the designated
    material constitutes or discloses confidential, non-public,
    and/or proprietary information containing highly sensitive
    proprietary, financial, or trade secret information, which
    would cause severe competitive damage if disclosed to
    another party to this action.
    Under the terms of the order, confidential information may be disclosed
    only to attorneys, court personnel, parties, experts, and witnesses—with
    the latter three groups required to execute a prior agreement to be bound
    7
    by the terms of the order. AEO material—unlike confidential material—
    may not be disclosed to the parties themselves. The order also restricts
    use of confidential and AEO “to the purposes of this litigation and . . .
    not . . . any other purpose.”
    The stipulated protective order defines AEO information as follows:
    “Attorneys’ Eyes Only” information means confidential,
    non-public, and/or proprietary information containing highly
    sensitive proprietary, financial, or trade secret information,
    which would cause severe competitive damage if disclosed to
    another party to this action, provided in any form
    whatsoever in this action . . . .
    Additionally, the stipulated protective order allows any party to
    challenge an AEO or confidential designation and seek redesignation.
    The party must first ask the producing party in writing to redesignate. If
    that request is not granted within five days, the requesting party may
    seek redesignation from the court. The order states, “In connection with
    any such motion, the burden shall be [on] the Producing Party to defend
    the appropriateness of the designation as Confidential or Attorney’s Eyes
    Only. Any such objections to such designations shall be made in good
    faith.” The order further provides:
    If the Court upon motion finds that the challenged
    document or deposition testimony is improperly designated
    and the Producing Party was not acting in good faith in
    refusing consent to disclosure, voluntary withdrawal of
    designation or voluntary re-designation, the Court may grant
    relief as appropriate under Iowa Rule of Civil Procedure
    1.517.
    The stipulated protective order also contains a general provision
    allowing amendments:
    This Protective Order may be amended with respect to
    specific Discovery Materials without leave of Court by the
    agreement of counsel for the Producing Party and Receiving
    Party in the form of a Stipulation filed in this case. This
    Protective Order shall remain in full force and effect
    8
    indefinitely until modified, superseded or terminated on the
    record by written agreement of the Parties or by order of this
    Court.    This Court shall retain jurisdiction during the
    pendency of this action and thereafter to enforce this
    Protective Order and to grant relief for any violation thereof.
    Nothing contained in this Protective Order shall be
    construed to affect or govern the scope of discovery in this
    action, or to preclude any Party from moving this Court for
    further order or relief.
    The district court entered a scheduling order that required
    Sioux Pharm to designate experts no later than 210 days before trial or
    by March 15, 2013, and Eagle Labs to designate experts no later than
    150 days before trial or by May 17, 2013.                  Trial was scheduled for
    October 15, 2013.
    Sioux      Pharm’s      petition    initially     alleged   that   Eagle   Labs
    misappropriated trade secrets solely in the break-in of March 3, 2012.
    Eagle Labs chose not to designate any experts, concluding that Den Hoed
    and Summers could adequately explain the origin of their SOPs and no
    experts were necessary to defend the allegations based on the break-in.
    Both parties produced their SOPs under the AEO designation, and
    Sioux Pharm heavily redacted portions of its SOPs. 2                     In a second
    amended petition filed April 23, 2013, Sioux Pharm added claims against
    Summit    Nutritionals       International,    Inc.     and   Federal    Laboratories
    Corporation for unfair competition and related claims.
    On May 10, 2013, Eagle Labs moved for leave to file counterclaims
    against Sioux Pharm. Eagle Labs asserted that Sioux Pharm trespassed
    on its property when its representatives entered the property of
    Eagle Labs pursuant to an ex parte temporary restraining order issued in
    the case. According to Eagle Labs, while the court authorized a “short
    walk-through,” the Sioux Pharm representatives, including its principal
    2Eagle   Labs also made redactions to its SOPs.
    9
    officers, trespassed on the property by engaging in an examination of
    property and facilities that far exceeded the scope of the district court’s
    order. Eagle Labs also claimed that if trade secrets were in fact involved
    in the process of the manufacture of chondroitin sulfate, as Sioux Pharm
    alleged, then Sioux Pharm misappropriated Eagle Labs’ trade secrets
    through its inspection of Eagle Labs’ facilities that exceeded the scope of
    the district court’s order.
    On June 7, the district court ordered two separate trials—one for
    Sioux Pharm’s trade-secrets claim and one for its unfair competition
    claim. The unfair competition component of the case is not at issue in
    this appeal. 3 The court also denied Eagle Labs’ motion for leave to file a
    counterclaim.      Subsequently, the district court denied Sioux Pharm’s
    August 7 motion to file another amended complaint, adding allegations
    that Eagle Labs had copied Sioux Pharm’s SOPs before the March 3,
    2012 break-in.        On October 4, the district court granted summary
    judgment dismissing trade-secret claims against Den Hoed and Ymker
    individually.
    Although both sides produced SOPs under the AEO designation,
    Eagle Labs contests the trade-secret status of Sioux Pharm’s SOPs. In
    particular, Eagle Labs contends at least some of Sioux Pharm’s SOPs
    lack trade-secret status based on disclosures made and positions taken
    by plaintiff Sioux Biochemical, Inc. in prior litigation against Cargill, Inc. 4
    3In a separate appeal, we affirmed the district court’s ruling that Summit is
    subject to personal jurisdiction in Iowa. Sioux Pharm v. Summit Int’l, 
    859 N.W.2d 182
    ,
    197 (Iowa 2015).
    4Approximately, a decade before, plaintiff Sioux Biochemical, Inc. had sued
    Cargill for misappropriation of trade secrets. See Sioux Biochem., Inc. v. Cargill, Inc.,
    
    410 F. Supp. 2d 785
    (N.D. Iowa 2005). In the lawsuit, Sioux Pharm’s president and co-
    owner, Dr. Allen Kramer, attested that Cargill had converted and disclosed “step-by-
    step details” of his company’s manufacturing method. Sioux Pharm responds that its
    SOPs evolved after that and were not the same in 2012 as the SOPs in the earlier Cargill
    10
    Sioux Pharm, through affidavit, asserts the SOPs at issue in this case
    remain protected trade secrets. The district court, after it entered the
    stipulated protective order, has made no findings that the specific SOPs
    sought by Eagle Labs either contain trade secrets or do not.
    On September 3, Eagle Labs filed a motion to have Sioux Pharm’s
    SOPs redesignated from AEO to confidential. In its motion, Eagle Labs
    said it would be “impossible for Defendants to adequately prepare their
    case for trial unless the above-referenced information [i.e., the SOPs] is
    redesignated from AEO to ‘confidential.’ ”           Eagle Labs added that
    redesignation “would permit Defendants’ counsel the opportunity to
    share this information with their clients so that evidence can be
    developed to address the allegations being made by Plaintiffs.”             In the
    same motion, Eagle Labs also offered to redesignate its own SOPs (which
    it had previously designated AEO) from AEO to confidential. Eagle Labs
    did not submit any affidavit or other evidence in support of its motion.
    Sioux Pharm filed a resistance to Eagle Labs’ motion for
    redesignation. Sioux Pharm’s resistance also was not supported by any
    affidavit or other evidence specific to the motion. The resistance made
    the point that Eagle Labs was not contesting the AEO designation under
    the protective order. According to Sioux Pharm, since the materials had
    been   properly   designated,    and    the   defendants    had    stolen    from
    Sioux Pharm, the protective order should not be modified to drop the
    AEO designation. Eagle Labs also filed a motion to compel Sioux Pharm
    to produce unredacted SOPs.
    Following hearings, the district court granted both motions by an
    order entered September 23. The order required Sioux Pharm to identify
    _________________________
    litigation. The district court denied Eagle Labs’ request that it grant summary
    judgment on the ground that the asserted trade secrets were in the public domain.
    11
    which specific SOPs have been misappropriated and produce unredacted
    copies of those SOPs designated “confidential” rather than AEO.         The
    court’s order stated:
    The court has determined the plaintiff must identify
    which specific SOPs have been misappropriated, converted
    or used without authorization. These must be disclosed by
    October 1, 2013 after a series of discovery disputes. The
    court finds these identified SOP classifications should be
    changed to that of “confidential” for purposes of this case
    only.
    The court in conducting its balancing of the various
    priorities, finds that this action is necessary to do justice
    and to allow the defendants to appropriately understand and
    prepare their trial defense strategy.
    Sioux Pharm filed an application for interlocutory appeal and request for
    immediate stay as well as a motion for reconsideration on September 27.
    On September 30, the district court denied Sioux Pharm’s motions for a
    stay and for reconsideration, pointing out that Sioux Pharm “made
    several recent efforts to clarify and (in the court’s opinion) efforts to
    expand the scope of discovery beyond the pleadings that would add
    issues and result in trial being continued.”   The district court ordered
    Sioux Pharm to produce unredacted copies of every SOP it claimed
    Eagle Labs misappropriated, without the AEO designation. This would
    allow Den Hoad and Summers to review them.             The district court
    explained:
    Conceivably, if Plaintiffs are making their disclosure in good
    faith, there would be few, if any, surprises because Plaintiffs
    have had the opportunity to see and compare the SOPs of
    both parties prior to its disclosure. This eliminates a generic
    allegation of theft or misappropriation and helps the court in
    defining what is admissible evidence at trial . . . not a
    scattergun approach that may lead to efforts to admit
    inadmissible or irrelevant evidence that would result in any
    jury verdict being set aside.
    This disclosure then allows the defendants to view and
    ultimately understand what it is that they have allegedly
    12
    misappropriated, converted or used without authorization.
    This method allows them to assist their attorneys in their
    defense. Absent disclosures, the defendants do not know
    which SOP the plaintiffs will present evidence on as
    misappropriated, converted or used without authorization
    and essentially would result in “trial by ambush.”
    On October 31, we granted Sioux Pharm’s application for
    interlocutory appeal, which placed its disclosure obligations on hold. We
    retained the appeal.
    II. Standard of Review.
    As a general proposition, we review a district court’s discovery
    ruling for abuse of discretion.     Mediacom Iowa L.L.C. v. Inc. City of
    Spencer, 
    682 N.W.2d 62
    , 66 (Iowa 2004).        A district court abuses its
    discretion “when the grounds underlying a district court order are clearly
    untenable or unreasonable.” 
    Id. “ ‘
    “A ground or reason is untenable . . .
    when it is based on an erroneous application of the law.” ’ ”       Office of
    Citizens’ Aide/Ombudsman v. Edwards, 
    825 N.W.2d 8
    , 14 (Iowa 2012)
    (quoting In re Gianforte, 
    773 N.W.2d 540
    , 544 (Iowa 2009)).
    In the context of trade-secret litigation, from the beginning, the
    cases have stressed the role of the district court judge in balancing the
    interests of the parties when determining the circumstances of
    disclosure.   Justice Oliver Wendell Holmes in one of the leading early
    trade-secret cases emphasized that “it will rest in the judge’s discretion
    to determine whether, to whom, and under what precautions, the
    revelation should be made.”       E.I. du Pont de Nemours Powder Co. v.
    Masland, 
    244 U.S. 100
    , 103, 
    37 S. Ct. 575
    , 576, 
    61 L. Ed. 1016
    , 1019
    (1917); see also Centurion Indus., Inc. v. Warren Steurer & Assocs., 
    665 F.2d 323
    , 326 (10th Cir. 1981). More recently, it has been said that the
    nature of disclosure in a trade-secret case “ ‘is singularly within the
    discretion of the district court,’ ” Dove v. Atl. Capital Corp., 
    963 F.2d 15
    ,
    13
    19 (2d Cir. 1992) (quoting Galella v. Onassis, 
    487 F.2d 986
    , 997 (2d Cir.
    1973)), and that “[t]he unique character of the discovery process requires
    that the trial court have substantial latitude to fashion protective
    orders,” Seattle Times Co. v. Rhinehart, 
    467 U.S. 20
    , 36, 
    104 S. Ct. 2199
    ,
    2209, 
    81 L. Ed. 2d 17
    , 29 (1984). According to authorities, the balancing
    of competing rights of the parties poses “a very difficult decision,” see
    Peter F. Daniel, Protecting Trade Secrets from Discovery, 30 Tort & Ins.
    L.J. 1033, 1042 (1995), that requires “liberal discretion” in the hands of
    the trial judge, see Robert A. Matthews Jr., 6 Annotated Patent Digest
    § 41:120, at 41-258 (2008).
    III. Analysis.
    A. Production of Unredacted SOPs.         We begin by addressing a
    preliminary matter. The order that Sioux Pharm has appealed requires
    Sioux Pharm to produce unredacted SOPs. Sioux Pharm has appealed
    this issue, but just barely. Its total briefing on this issue consists of the
    following paragraph:
    Believing it had no other option, and in a desperate
    attempt to avoid the full disclosure of its SOPs to
    Defendants, Sioux Pharm reluctantly offered during oral
    argument to produce unredacted SOPs (which could not be
    viewed by Defendants themselves, because they would
    remain AEO). However, Sioux Pharm only offered to do so if
    absolutely necessary to avoid producing redesignated
    “Confidential” SOPs (which Defendants could view). To be
    clear, Sioux Pharm does not want to be forced to unredact
    its SOPs, either, even if such redactions might hinder
    Sioux Pharm’s prosecution of this lawsuit.
    To the extent this is an argument against producing unredacted SOPs,
    we are not persuaded. Sioux Pharm must produce complete, unabridged
    versions of the SOPs to allow the defendants to defend the case fairly.
    Because Sioux Pharm contends its case turns at least in part on
    similarities between each party’s SOPs in content, font, margins, and
    14
    formatting, counsel for Eagle Labs cannot fairly prepare a defense
    without seeing the SOPs allegedly misappropriated. When claims hinge
    on a close textual comparison of each side’s SOPs containing detailed
    technical information and alleged trade secrets, there is simply no
    alternative to the production of unredacted SOPs. Although both sides
    apparently made redactions, the stipulated protective order makes no
    provision for redaction of documents produced with the AEO designation.
    Redactions under these circumstances violate the basic principle that
    “our discovery rules are to be liberally construed to effectuate the
    disclosure of relevant information.”     Farnum v. G.D. Searle & Co., 
    339 N.W.2d 384
    , 389 (Iowa 1983).
    We now turn to the fighting issue on appeal: whether the district
    court abused its discretion in ordering the SOPs (which would be
    unredacted) reclassified from AEO to confidential.
    B. AEO Designations in Protective Orders—Some Relevant
    Principles. “[T]here is no true privilege against discovery of trade secrets
    or other confidential information.” Mediacom 
    Iowa, 682 N.W.2d at 66
    .
    Yet, once a trade secret is disclosed to a competitor and litigation
    adversary, it may be too late to grant an adequate remedy to the holder
    of the secret—the disclosure destroys the value of the secret data. See
    Ruckelshaus v. Monsanto Co., 
    467 U.S. 986
    , 1011, 
    104 S. Ct. 2862
    ,
    2877, 
    81 L. Ed. 2d 815
    , 838 (1984) (“Once the data that constitute a
    trade secret are disclosed to others, or others are allowed to use those
    data, the holder of the trade secret has lost his property interest in the
    data.”); Air Prods. & Chems., Inc. v. Johnson, 
    442 A.2d 1114
    , 1129 (Pa.
    Super. Ct. 1982) (noting that disclosure of trade secrets in open court
    would “defeat the entire purpose of the action”). The Iowa legislature in
    15
    the Uniform Trade Secrets Act has directed courts to preserve trade
    secrets in litigation by reasonable means:
    In an action brought under this chapter, a court shall
    preserve the secrecy of an alleged trade secret by reasonable
    means, including but not limited to granting protective
    orders in connection with discovery proceedings, holding
    in-camera hearings, sealing the records of the action, and
    ordering a person involved in the litigation not to disclose an
    alleged trade secret without prior court approval.
    Iowa Code § 550.7.    Nevertheless, “a trade secret must and should be
    disclosed if the disclosure is relevant and necessary to the proper
    presentation of a plaintiff’s or defendant’s case.”   Mediacom 
    Iowa, 682 N.W.2d at 66
    .
    Once a district court has found information sought in discovery is
    a trade secret, it must determine whether good cause exists for a
    protective order. 
    Id. at 67.
    The court should employ three criteria:
    “ ‘[T]he harm posed by dissemination must be substantial
    and serious; the restraining order must be narrowly drawn
    and precise; and there must be no alternative means of
    protecting the public interest which intrudes less directly on
    expression.’ ”
    
    Id. at 68
    (quoting 
    Farnum, 339 N.W.2d at 389
    –90). The district court is
    to “strike a balance between the policy favoring discovery and free
    expression on one side and a party’s interest in avoiding commercial
    damage and preventing an abuse of discovery on the other.”        
    Farnum, 339 N.W.2d at 390
    .       After the court has weighed the harm from
    disclosure against the need for the information, the court “must issue an
    appropriate protective order to safeguard the rights of the parties.”
    Highway Equip. Co. v. Cives Corp., No. C04–0147, 
    2007 WL 1612225
    , at
    *3 (N.D. Iowa 2007). A court has broad discretion to craft the terms of
    the protective order under rule 1.504.       Iowa R. Civ. P. 1.504(1)(a)(7)
    (“[The court] [m]ay make any order which justice requires to protect a
    16
    party or person from annoyance, embarrassment, oppression, or undue
    burden or expense, including . . . [t]hat a trade secret . . . not be
    disclosed or be disclosed only in a designated way.”).
    Litigation over protective orders arises in various contexts.
    Sometimes the issue is whether a protective order should be modified so
    that third parties may gain access to the material. In Comes v. Microsoft
    Corp, we considered a request by plaintiffs in a Canadian antitrust
    litigation against Microsoft to gain access to confidential materials from
    the Iowa litigation. See Comes v. Microsoft Corp., 
    775 N.W.2d 302
    , 304–
    05 (Iowa 2009).    After reviewing caselaw from federal appellate courts
    and elsewhere regarding modification of protective orders to allow third-
    party access to litigation discovery designated as confidential, we said:
    After considering the various approaches other courts
    have taken to address requests to modify protective orders,
    we conclude the soundest approach is to balance the
    interests at stake, taking into account the reasons for the
    issuance of the protective order in the first place and
    whether the legitimate interests of the parties can still be
    protected with the suggested modification. The court should
    also consider to what extent the party opposing modification
    has reasonably relied on the terms of the protective order
    and whether the party would have relied on the protective
    order had the suggested modification initially been included
    in it. In a case such as this one, the court should consider
    the value of the interests of the party seeking modification,
    as well as any public interest in judicial economy and public
    disclosure, if appropriate.       The court should consider
    whether the party seeking modification is attempting to
    circumvent discovery or evidentiary restrictions in some
    other jurisdiction. Because each situation in which a party
    or third party seeks modification will be different, we will not
    try to list all the considerations the district court may take
    into account when making its decision, but the court should
    fully and fairly consider all the circumstances supporting the
    modification, as well as the circumstances mitigating against
    it, and not employ any presumption for or against
    modification.
    17
    
    Id. at 309–10.
    We concluded by expressly disavowing any presumption
    against the modification of protective orders. 
    Id. at 310.
    Although the principles of Comes apply here, this case involves a
    different issue than the Comes case.               Here, the question is whether
    materials that have been designated AEO under a stipulated protective
    order    that    permits   this   redesignation      should   be   reclassified   as
    confidential.     We recognize that in trade-secret litigation, “courts often
    issue protective orders limiting access to the most sensitive information
    to counsel and their experts.” Tailored Lighting, Inc. v. Osram Sylvania
    Prods., Inc., 
    236 F.R.D. 146
    , 148 (W.D.N.Y. 2006); see also Safe Flight
    Instrument Corp. v. Sundstrand Data Control, Inc., 
    682 F. Supp. 20
    , 22
    (D. Del. 1988) (collecting cases). The United States Court of Appeals for
    the Tenth Circuit recently stated:
    “The disclosure of confidential information on an ‘attorneys’
    eyes only’ basis is a routine feature of civil litigation involving
    trade secrets. The purpose of this form of limited disclosure
    is to prevent a party from viewing the sensitive information
    while nevertheless allowing the party’s lawyers to litigate on
    the basis of that information.”
    Paycom Payroll, LLC v. Richison, 
    758 F.3d 1198
    , 1202–03 (10th Cir.
    2014) (quoting In re City of New York, 
    607 F.3d 923
    , 935–36 (2d Cir.
    2010) (emphasis omitted) (citing Fed. R. Civ. P. 26(c)(1)(G))).
    The main concern of parties seeking to impose AEO restrictions is
    fear    that    dissemination     of   sensitive    information,   particularly   to
    decision-makers of its competitors, would threaten serious competitive
    harm.     Even when the decision-makers of the opposing party act in
    complete good faith, courts assert that they will simply not be able to
    compartmentalize what they learn. See BASF Corp. v. United States, 
    321 F. Supp. 2d 1373
    , 1380 (Ct. Int’l Trade 2004); see also F.T.C. v. Exxon
    Corp., 
    636 F.2d 1336
    , 1350 (D.C. Cir. 1980) (“[I]t is very difficult for the
    18
    human mind to compartmentalize and selectively suppress information
    once learned, no matter how well-intentioned the effort may be to do
    so.”); McAirlaids, Inc. v. Kimberly-Clark Corp., 
    299 F.R.D. 498
    , 501 (W.D.
    Va. 2014) (noting that proposed protective order allowing “technical
    advisors” to examine documents was insufficient because “they would be
    required to separate their own thoughts and ideas from their competitors’
    thoughts and ideas in all future endeavors,” which would be difficult, if
    not impossible). As a result, even though it may be completely innocent,
    competitive   decision-makers    could     subconsciously   use     sensitive
    information against the disclosing party’s interest. See, e.g., 
    McAirlaids, 299 F.R.D. at 501
    (holding that “proposed protective order creates an
    unacceptable risk of inadvertent disclosure”). The caselaw uniformly and
    sensibly holds, all other things being equal, that the risk of harm from
    disclosure to a competitor is generally greater than the risk of harm
    related to disclosure to a noncompetitor. See Am. Standard Inc. v. Pfizer
    Inc., 
    828 F.2d 734
    , 741 (Fed. Cir. 1987) (noting “[c]ourts have presumed
    that disclosure to a competitor is more harmful than disclosure to a
    noncompetitor”); see, e.g., 
    BASF, 321 F. Supp. 2d at 1381
    ; Medtronic
    Sofamor Danek, Inc. v. Michelson, No. 01–2373–GV, 
    2002 WL 33003691
    ,
    at *3–4 (W.D. Tenn. Jan. 30, 2002).
    On the other hand, the opposing party seeking disclosure, even if a
    competitor,   may    claim   that     disclosure   of   documents    to   its
    decision-makers is necessary to allow it to litigate effectively.         For
    example, in In re Wilson, 
    149 F.3d 249
    , 252–53 (4th Cir. 1998), the
    Fourth Circuit upheld a bankruptcy court decision to allow at least some
    disclosure of protected trade secrets to high-level employees of the
    corporation’s competitor, reasoning that though the plaintiff may suffer
    inevitable harm from disclosure, the defendant’s need to understand the
    19
    claim charged against him outweighed the potential harm of disclosing
    trade secrets to the competitor.     In some contexts, the opposing party
    may assert, for instance, that its decision-makers have unusual expertise
    in the subject matter of the litigation that might not be available to
    outside experts.   See 2 Hounds Design Inc. v. Brezinski, No. 3:13–CV–
    101–RJC–DCK, 
    2013 WL 5938073
    , at *3–4 (W.D.N.C. Nov. 5, 2013);
    Frees, Inc. v. McMillian, No. 05–1979, 
    2007 WL 184889
    , at *5 (W.D. La.
    Jan. 22, 2007); MGP Ingredients, Inc. v. Mars, Inc., 
    245 F.R.D. 497
    , 499
    (D. Kan. 2007); Medtronic, 
    2002 WL 33003691
    , at *3–4; THK Am., Inc. v.
    Nippon Seiko K.K., 
    141 F.R.D. 461
    , 462 (N.D. Ill. 1991); Bee Chem. Co. v.
    Serv. Coatings, Inc., 
    253 N.E.2d 512
    , 516–17 (Ill. App. Ct. 1969).         A
    naked contention, however, that access will affect the ability of the
    defendant to defend its case, without more, is not sufficient.           See
    
    McAirlaids, 299 F.R.D. at 500
    –02 (court refused to modify existing
    protective order based on party’s assertion that it needed its decision-
    makers to have access to documents to make an “educated business
    decision with regard to the litigation”). In order to evaluate the asserted
    need   for   further   disclosure,   the   court   must   have   a   thorough
    understanding of the contested issues in the case, how the documents
    relate to the contested issues, and how the fact-finding process would be
    aided by disclosure of the documents to the persons seeking to view the
    documents.
    There appears to be a prevailing view among courts addressing the
    issue that competitive decision-makers of direct competitors should be
    denied access to trade secrets in litigation. See Paycom Payroll, 
    LLC, 758 F.3d at 1202
    –03 (noting AEO restriction is a “routine feature”); In re City
    of New 
    York, 607 F.3d at 935
    (same); Brown Bag Software v. Symantec
    Corp., 
    960 F.2d 1465
    , 1470–71 (9th Cir. 1992) (denying in-house counsel
    20
    access to trade secrets because they were involved in decision-making);
    U.S. Steel Corp. v. United States, 
    730 F.2d 1465
    , 1468 (Fed. Cir. 1984)
    (“In a particular case, e.g., where in-house counsel are involved in
    competitive decisionmaking, it may well be that a party seeking access
    should be forced to retain outside counsel or be denied the access
    recognized as needed.”); Northbrook Digital, LLC v. Vendio Servs., Inc.,
    
    625 F. Supp. 2d 728
    , 735–36 (D. Minn. 2008) (observing that protective
    orders may be directed at a party’s outside patent-prosecution lawyers);
    Highway Equip. Co., 
    2007 WL 1612225
    , at *4 (ruling that in-house
    counsel could not view designated materials); Safe 
    Flight, 682 F. Supp. at 22
    (collecting cases in which trade secrets were revealed only to opposing
    party’s trial attorneys and independent experts).
    In Safe Flight, plaintiff’s president, Leonard Greene, asked to act as
    his own expert because of his position as a “preeminent aeronautic
    engineer, having received more than sixty aeronautic 
    patents.” 682 F. Supp. at 21
    . Greene argued that he was uniquely qualified and that
    without his review his attorneys would be unable to make the right
    decisions. 
    Id. The court
    disagreed, noting that Greene would inevitably
    retain some of what he learned from the disclosures that would guide his
    future research, and he had not investigated using outside experts. 
    Id. at 22.
      In a similar case, the plaintiff’s president and inventor of the
    patent   at   issue,   sought   access   to   “highly   confidential”   material
    designated for attorneys’ eyes only so he could testify as an expert.
    Tailored 
    Lighting, 236 F.R.D. at 147
    . The court found the “substantial
    risk of competitive injury that attends disclosure of such trade secret
    information to the opposing party’s president” outweighed the plaintiff’s
    inconvenience and expense in hiring outside expert. 
    Id. at 149.
                                            21
    The court in Safe Flight, however, did allow defendant to use
    in-house   counsel   to   review      confidential   materials   because    those
    attorneys were “segregated” from competitive 
    decision-making. 682 F. Supp. at 23
    . The court noted that lawyers are officers of the court and
    bound by obligations of professional responsibility preventing any misuse
    of the confidential information.         
    Id. We, too,
    have recognized that
    “[a]lthough a strong tradition of loyalty exists between a lawyer and
    client, a lawyer is also an officer of the court who is bound by a code of
    professional conduct.”    Wemark v. State, 
    602 N.W.2d 810
    , 816 (Iowa
    1999); see also State v. Walker, 
    804 N.W.2d 284
    , 294 (Iowa 2011)
    (quoting Wemark to uphold right of an inmate to private conference with
    attorney   notwithstanding     jail    rules   restricting   access   to   prevent
    smuggling of contraband). Even when courts explicitly credit a party or
    in-house counsel with integrity and good faith, they recognize that
    human nature makes misuse of trade secrets by a competitor too
    tempting to risk. See Brown 
    Bag, 960 F.2d at 1471
    (“The magistrate had
    to consider, however, not only whether the documents could be locked
    up . . . , but also whether Brown Bag’s counsel could lock-up trade
    secrets in his mind, safe from inadvertent disclosure . . . .”); U.S. Steel
    
    Corp., 730 F.2d at 1467
    (claiming that trade-secret information is so
    potent that “its nature and volume place it beyond the capacity of anyone
    to retain in a consciously separate category” (internal quotation marks
    omitted)); Safe 
    Flight, 682 F. Supp. at 22
    (explicitly crediting Greene as a
    man of “great moral fiber”).
    The cases cited by Eagle Labs compelling disclosure arise in
    different factual contexts. In Bee Chemical, the issue was whether the
    trial judge properly entered an initial order granting the plaintiff access
    in discovery to defendants’ formulas; the alternatives were access or no
    22
    
    access. 253 N.E.2d at 514
    . By contrast, this case involves the question
    of redesignation of documents from AEO to confidential under a
    stipulated order that had been previously entered. There were no tiers of
    protection involved or available in Bee Chemical.
    THK America, Inc. likewise involved what the terms would be for an
    initial protective order, not the implementation or modification of a
    stipulated protected order that had previously been 
    entered. 141 F.R.D. at 462
    . An American company and its Japanese parent company were
    suing the defendant for patent infringement. 
    Id. There was
    no dispute
    that only persons employed by the American company could review the
    defendant’s materials in question. 
    Id. The issue
    was whether persons
    with a past or present affiliation with the Japanese parent company also
    could review the materials.    
    Id. The court
    responded by fashioning a
    protective order that allowed certain key employees of the Japanese
    parent company also to view the materials because otherwise the
    litigation would become “one-sided.” 
    Id. In two
    additional cases Eagle Labs cites, the parties were not direct
    competitors.   See MGP Ingredients, 
    Inc., 245 F.R.D. at 502
    (“Thus, the
    risk of anyone abusing his or her knowledge of confidential information
    appears to be small.”); Medtronic, 
    2002 WL 33003691
    , at *3 (“Finally,
    unlike many of the cases relied upon by Medtronic, including Safe Flight,
    [defendants] are not directly in competition with Medtronic.”).
    C. Did the District Court Abuse Its Discretion? We now turn to
    the question of whether the district court abused its discretion in
    ordering the redesignation of the SOPs from AEO to confidential.
    Redesignation should not be required merely because Sioux Pharm
    alleges the SOPs were purloined by Eagle Labs. Sioux Pharm argues it is
    unsure which specific SOPs were stolen.         Sioux Pharm may allege
    23
    misappropriation of a collection of trade secrets if it has a good-faith
    basis for that allegation without 100% certainty as to which specific ones
    were taken. See Nike, Inc. v. Enter Play Sports, Inc., ___ F.R.D. ___, ___,
    
    2015 WL 1319241
    , *3–4 (D. Or. March 24, 2015) (declining to require
    plaintiff   to   more     specifically     identify   trade     secrets   allegedly
    misappropriated by defendant, noting to do so would place plaintiff in a
    “catch-22” in light of the uncertainty over what defendant actually had
    taken). A party uncertain whether its trade secret was stolen should not
    have to reveal the secret to the thief to find out.
    Redesignation    also    should    not   be   ordered    merely   because
    Eagle Labs chose not to retain an expert. See Tailored Lighting, 
    Inc., 236 F.R.D. at 149
    (“[T]he burden of that cost [of hiring an outside expert]
    simply does not outweigh the substantial risk of competitive injury that
    attends disclosure of such trade secret information to the opposing
    part[ies] . . . .”). At a September 17 hearing, one of the defense counsel
    said:
    Plaintiffs’ position essentially forces us to go out and hire our
    own expert because only our own expert who is a nonparty
    under the terms of the protective order can look at AEO
    materials produced by the Plaintiffs.
    At the September 23 hearing, one of the defendants’ counsel
    stated, “Our clients specifically chose not to retain an expert to limit
    costs in this litigation.”      Eagle Labs did not argue that experts were
    unavailable; 5 it simply maintained that for economic reasons as a small
    company it chose not to hire one. Eagle Labs offered no evidence of what
    its cost of hiring an expert would be in the context of its overall litigation
    costs, nor did it disclose anything about its actual financial resources. If
    5SiouxPharm used an expert who prepared a report following a comparison of
    both sides’ SOPs. This report is part of the record on appeal.
    24
    a mere assertion of economic hardship were by itself a sufficient ground
    for requiring the other side’s AEO materials to be reclassified as
    confidential, AEO status would have little security.
    So, the question becomes, what would be a good reason for
    redesignation. One obvious answer would be when the material does not
    qualify for AEO treatment under the existing stipulated order because it
    is   not    “confidential,    non-public,     and/or     proprietary    information
    containing highly sensitive proprietary, financial, or trade secret
    information, which would cause severe competitive damage if disclosed to
    another party to this action.”
    The parties’ stipulated protective order expressly authorizes parties
    to make an objection to confidential or AEO designation and authorizes
    the court to resolve the objection, with the burden resting on the party
    claiming protected status “to defend the appropriateness of the
    designation.” 6 This placement of the burden coincides with the approach
    courts have generally taken when confronted with blanket protective
    orders     that    allow   parties   unilaterally   to   designate     materials   as
    confidential or AEO. In re Parmalat Sec. Litig., 
    258 F.R.D. 236
    , 245–46
    (S.D.N.Y. 2009) (granting motion to strike confidential designation when
    party made only minimal showing of economic value and the harm that
    would result from disclosure and thus failed to meet its burden of
    showing good cause to keep the documents sealed); In re Zyprexa
    Injunction, 
    474 F. Supp. 2d 385
    , 416 (E.D.N.Y. 2007) (noting that in
    challenges to designations under umbrella protective orders, “the burden
    of establishing that there is good cause to protect the designated
    materials rests at all times with the party seeking protection”); In re
    6Further, the order provides that if the court determines a designation was not
    made in good faith, it may award sanctions.
    25
    Providian Credit Card Cases, 
    116 Cal. Rptr. 2d 833
    , 840 (Ct. App. 2002)
    (explaining that party proposing sealing or continuing protective order
    has the burden of proving the matter is a trade secret in order to
    overcome the presumption in favor of disclosure).
    However, in this case, Eagle Labs did not dispute below that the
    materials had been properly designated as AEO, and there was evidence
    in the record (such as the affidavit of Sioux Pharm’s president and
    co-owner) supporting such a designation. Nor does the district court’s
    order indicate that the court found the materials had been misclassified.
    As we have already discussed here, and at more length in Comes,
    courts also have the authority to modify stipulated protective orders. In
    Comes, we explained that in deciding whether to modify an order “the
    court should fully and fairly consider all the circumstances supporting
    the modification, as well as the circumstances mitigating against 
    it.” 775 N.W.2d at 310
    .          Obviously, two salient factors are the need for the
    defendants personally to have access to the materials to defend properly
    the plaintiffs’ claims and the harm to the plaintiffs that would result from
    disclosure of the materials to the defendants.                 Another legitimate
    consideration, which may have entered into the district court’s calculus,
    was whether the defendants were going to see the plaintiffs’ full SOPs
    anyway when the case went to trial in a few weeks. 7
    7The   stipulated order provides,
    This Protective Order does not limit the right of a Party to offer
    Confidential or Attorneys’ Eyes Only information into evidence at
    hearings or at trial, or to use it for any other lawful hearing or trial
    purpose including but not limited to impeachment. Any party may move
    the Court for an Order that the evidence be received in camera or under
    other conditions to prevent unnecessary disclosure.
    As we have said, “ ‘There can be no blinking the fact that there is a strong societal
    interest in public trials.’ ” Iowa Freedom of Info. Council v. Wifvat, 
    328 N.W.2d 920
    ,
    922–23 (Iowa 1983) (quoting Gannett Co., Inc. v. DePasquale, 
    443 U.S. 368
    , 383, 
    99 S. Ct. 2898
    , 2907, 
    61 L. Ed. 2d 608
    , 623 (1979)). Yet, our courts are required to
    26
    The problem here is that the party seeking reclassification made
    only a conclusory argument for doing so, and the court did not set forth
    its reasoning for ordering reclassification in any detail. The district court
    cited    its   own     “balancing      of   the    various     priorities”    and     found
    reclassification “necessary to do justice and to allow the defendants to
    appropriately understand and prepare their trial defense strategy.” This
    language leaves it unclear whether the court ordered reclassification
    because it found the SOPs did not meet the protective order’s standards
    for AEO treatment or because it was deciding to modify the protective
    order.     Assuming the latter to be the case, this language also leaves
    unanswered whether the district court simply agreed with Eagle Labs’
    ipse dixit argument about the unfairness of requiring it to hire an outside
    expert or whether the court had other, more persuasive grounds for
    modifying the order.
    _________________________
    “preserve the secrecy of an alleged trade secret by reasonable means, including but not
    limited to . . . holding in-camera hearings.” Iowa Code § 550.7. Protection of trade
    secrets at trial is entitled to great weight in this balancing approach. See Richmond
    Newspapers, Inc. v. Virginia, 
    448 U.S. 555
    , 600 n.5, 
    100 S. Ct. 2814
    , 2840 n.5, 
    65 L. Ed. 2d 973
    , 1005 n.5 (1980) (Stewart, J., concurring in judgment).
    We have limited access to judicial proceedings in appropriate cases. For
    example, juvenile court proceedings may be closed to the public upon the motion of any
    party or on the court’s own motion. See In re A.M., 
    856 N.W.2d 365
    , 380 (Iowa 2014)
    (citing Iowa Code § 232.92). Witnesses are routinely sequestered during the testimony
    of other witnesses under Iowa Rule of Evidence 5.615. In trade-secret litigation, the
    parties can be excluded from the courtroom when the trade secrets are presented. See,
    e.g., Stamicarbon, N.V. v. Am. Cyanamid Co., 
    506 F.2d 532
    , 542 (2d Cir. 1974) (allowing
    trade-secrets portion of a trial to be held in camera); Air Prods. & 
    Chems., 442 A.2d at 1129
    (allowing counsel and an expert to participate in hearing without the party); State
    ex rel. Ampco Metal, Inc. v. O’Neill, 
    78 N.W.2d 921
    , 926–27 (Wis. 1956) (allowing the
    trade-secrets portion of the trial to proceed in camera). As a commentator observed, “It
    would be of little practical value to file a lawsuit to protect the confidentiality of a trade
    secret if the secret became part of the publicly available court record and was thereby
    lost.” 1 Michael D. Scott, Scott on Computer Information Technology Law § 6.17, at 6-45
    to 6-47 (3d ed. 2015) (also noting court can restrict attendance at trial and seal
    transcript to protect trade secrets upon a proper showing).
    27
    A district court abuses its discretion when it exercises its
    discretion for reasons that are clearly untenable. See Mediacom 
    Iowa, 682 N.W.2d at 66
    . Here, the party advanced only insufficient grounds
    for a course of action.          Although the record may contain sufficient
    grounds, the district court did not specify its reasons for acting. In this
    situation, we are constrained to hold the court abused its discretion. For
    this reason, we must reverse and remand for further proceedings
    consistent with this opinion. On remand, the district court should first
    determine whether the SOPs qualify for AEO status under the protective
    order (unless Eagle Labs concedes this point). If so, the court should
    then consider modification. This consideration should be based on the
    factors outlined in Comes.              Particular weight should be given to
    Eagle Labs’ need for its own personnel personally to have access to
    Sioux Pharm’s SOPs, while recognizing that it is not enough for
    Eagle Labs simply to argue that its employees need access because it
    elected not to designate an expert for economic reasons. 8 Weight also
    must be given to the harm that would befall Sioux Pharm if its SOPs
    were disclosed to a direct competitor.
    In this case, the district court stated that it engaged in a
    balancing, but did not expressly engage in the analysis of the risk of
    harm that might be caused by further disclosure or the impact that the
    failure to allow more disclosure would have on Eagle Labs’ ability to
    litigate. The lack of a more detailed order makes it difficult for this court
    to engage in meaningful appellate review.                 Cf. Pansy v. Borough of
    Stroudsburg, 
    23 F.3d 772
    , 789 (3d Cir. 1994) (emphasizing that in order
    “[t]o facilitate effective appellate review of a district court decision of
    8The   court can reopen the deadline for expert disclosure if need be.
    28
    whether to grant or modify an order of protection or confidentiality, a
    district court should articulate on the record findings supporting its
    judgment”); Mediacom 
    Iowa, 682 N.W.2d at 68
    (finding trial court abused
    its discretion when it made no factual findings regarding whether
    information sought constituted trade secrets). On remand, the district
    court should give due regard to the two competing considerations in this
    case that drive in the opposite direction.
    Our ruling should not be construed as criticism of the district
    court. From our review of the record, we are impressed by the court’s
    careful, even-handed, hands-on management of the case. At the same
    time, both in seeking and in opposing the redesignation of Sioux Pharm’s
    SOPs, the parties made generally conclusory arguments.         As often
    happens, the arguments became more focused when the parties got to
    our court.   Nevertheless, in trade-secret litigation between two direct
    competitors, the stakes are high, and any order regarding the
    confidentiality status of alleged trade secrets must be carefully drawn.
    That order should give due account to the terms of the protective order
    and the considerations set forth in Comes.
    IV. Disposition.
    For these reasons, we reverse the district court’s orders of
    September 23 and 30, 2013.            We remand the case for further
    proceedings consistent with this opinion.
    REVERSED AND REMANDED WITH INSTRUCTIONS.
    All justices concur except Appel and Wiggins, JJ., who concur
    specially, and Hecht, J., who takes no part.
    29
    #13–1525, Sioux Pharm, Inc. v. Eagle Labs., Inc.
    APPEL, Justice (concurring specially).
    I concur with the court’s opinion.
    On remand, the district court should give due regard to the two
    competing considerations in this case which drive in opposite directions:
    the risk of harm to Sioux Pharm that might be caused by additional
    disclosures and Eagle Labs’ need for further disclosure to effectively
    defend its interests in the litigation.
    As pointed out by the court, the district court and the parties on
    remand should avoid generalizations in favor of specific evidentiary
    showings and articulated reasoning. To some extent, the shortcomings
    in the district court’s order may have been a result of sequencing. At
    this stage of the litigation, the trade secrets of the parties should be
    identified with particularity first, with consideration of further disclosure
    occurring after such identification has been made. Without identification
    of the underlying trade secrets, the district court is not in the best
    position to do the necessary balancing on a particularized basis.        See
    Foltz v. State Farm Mut. Auto. Ins. Co., 
    331 F.3d 1122
    , 1131 (9th Cir.
    2003) (stating the party asserting confidentiality bears the burden of
    showing that specific prejudice or harm will result for each particular
    document it seeks to protect); Baxter Int’l, Inc. v. Abbott Labs., 
    297 F.3d 544
    , 547–48 (7th Cir. 2002) (denying confidentiality where parties failed
    to show what specifically was confidential and give reasons why
    confidential treatment should be accorded).
    The district court in this case, however, ordered Sioux Pharm to
    identify with particularity its Standard Operating Procedures (SOPs) that
    Eagle Labs allegedly misappropriated. If Sioux Pharm complies with this
    order first, the district court will then be in a better position to examine
    30
    each identified SOP that is allegedly a trade secret misappropriated by
    Eagle Labs (and any other documents for which disclosure is sought) and
    make the necessary particularized findings with respect to the balancing
    of the parties’ competing interests.
    Wiggins, J., joins this special concurrence.
    

Document Info

Docket Number: 13–1525

Citation Numbers: 865 N.W.2d 528

Filed Date: 6/26/2015

Precedential Status: Precedential

Modified Date: 1/12/2023

Authorities (30)

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Stamicarbon, N v. V. American Cyanamid Company , 506 F.2d 532 ( 1974 )

Ronald E. Galella v. Jacqueline Onassis, John Walsh, and ... , 487 F.2d 986 ( 1973 )

Guy O. Dove, Iii, Spargos Mining Nl v. Atlantic Capital ... , 963 F.2d 15 ( 1992 )

in-re-jon-s-wilson-debtor-cook-group-incorporated-wilson-cook-medical , 149 F.3d 249 ( 1998 )

john-a-pansy-v-borough-of-stroudsburg-harold-a-bentzoni-kathryn-mikels , 23 F.3d 772 ( 1994 )

brown-bag-software-a-california-corporation-formerly-telemarketing , 960 F.2d 1465 ( 1992 )

American Standard Inc. v. Pfizer Inc. And Howmedica, Inc., ... , 828 F.2d 734 ( 1987 )

Federal Trade Commission v. Exxon Corporation , 636 F.2d 1336 ( 1980 )

BASF Corp. v. United States , 28 Ct. Int'l Trade 414 ( 2004 )

U.S. Steel Corporation v. The United States and U.S. ... , 730 F.2d 1465 ( 1984 )

In Re Providian Credit Card Cases , 96 Cal. App. 4th 292 ( 2002 )

Baxter International, Incorporated v. Abbott Laboratories , 297 F.3d 544 ( 2002 )

debbie-foltz-consumer-action-united-policyholders-texas-watch , 331 F.3d 1122 ( 2003 )

Farnum v. GD Searle & Co. , 339 N.W.2d 384 ( 1983 )

Bee Chemical Co. v. Service Coatings, Inc. , 116 Ill. App. 2d 217 ( 1969 )

Mediacom Iowa, L.L.C. v. Incorporated City of Spencer , 682 N.W.2d 62 ( 2004 )

Wemark v. State , 602 N.W.2d 810 ( 1999 )

Safe Flight Instrument Corp. v. Sundstrand Data Control Inc. , 682 F. Supp. 20 ( 1988 )

Sioux Biochemical, Inc. v. Cargill, Inc. , 410 F. Supp. 2d 785 ( 2005 )

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