Though the Federal Rules of Civil Procedure are “not meant to create a routine right of direct access to a party’s electronic information system,” a federal district court recently held that the benefits of allowing the plaintiff direct access to the defendant’s entire business database outweighed the burden of producing it. [See Advanced Tactical Ordnance Systems LLC v. Real Action Paintball Inc., No. 1:12-CV-296, Doc. 222, 2013 U.S. Dist. LEXIS 25022 (N.D. Ind. Feb. 25, 2013).] The court reasoned that the information in the database was highly relevant to the plaintiff’s claims — including the plaintiff’s contention that the defendant was using hidden “metatags” referencing the plaintiff’s trademark to drive higher search engine results for the defendant’s website and thus draw the plaintiff’s potential customers to the defendant — and that the defendant failed to demonstrate how the information in its database constituted a trade secret or how its disclosure would harm the defendant’s competitive advantage.
The plaintiff, Advanced Tactical Ordnance Systems LLC (“ATO”), markets and sells irritant powder filled projectiles under the mark PepperBall®. ATO acquired the mark when it acquired all of the assets of PepperBall Technologies Inc. ATO alleges that the former Chief Operating Officer of PepperBall Technologies misappropriated the trade secrets that ATO had acquired (including powder formulas, projectile shell designs and customer lists), then conspired with another defendant, Real Action Paintball Inc. (“RAP4”), to start selling counterfeit PepperBall® projectiles around the world. ATO also alleges that the defendants misrepresented to ATO’s customers and the market generally that PepperBall Technologies was out of business and that RAP4 was the only source for PepperBall® projectiles.
Based on its allegations, ATO has brought claims for trademark infringement, deceptive comparative advertising, counterfeiting, trade dress infringement, breach of the chief operating officer’s non-disclosure agreement, trade secret misappropriation, breach of fiduciary duty and fraud against the defendants.
Plaintiff's Request for Complete Copy of Defendant’s Business Database
After obtaining a temporary restraining order against the defendants, ATO began to take expedited discovery. In its fourth set of document requests, ATO served a request seeking the production of RAP4’s OS Commerce database. RAP4 objected to ATO’s request because it sought extremely sensitive and confidential information and was “an obvious fishing expedition.” According to RAP4, the OS Commerce database is “the heart of RAP4’s business” and “its most important asset.” “It operates all aspects of RAP4’s business” and has been customized by RAP4 to implement “many day-to-day business processes that give [RAP4] a competitive advantage.” (Doc. 207-1, ¶ 10.) After RAP4 refused to produce the database, ATO filed its third motion to compel discovery in the case.
In analyzing whether ATO was entitled to a copy of RAP4’s entire database, the district court stated that Federal Rule of Civil Procedure 34 permits a party to serve a request to “inspect, copy, test or sample” any electronically stored information (ESI) “stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.” However, the advisory committee notes to Rule 34 explain that the allowance of testing and sampling of ESI “is not meant to create a routine right of direct access to a party’s electronic information system, although such access might be justified in some circumstances,” and the notes “caution courts to guard against undue intrusiveness resulting from such inspection or testing.”
The district court further evaluated the requested discovery under the concept of proportionality: “Federal Rule of Civil Procedure 26(b)(2)(C)(iii) further provides that the Court must limit discovery if it determines that ‘the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action and the importance of the discovery in resolving the issues.’”
Taking all of this into account, the district ordered RAP4 to produce a complete copy of the OS Commerce database, including all of the supporting files:
Here, although ATO’s request for RAP4’s entire OS Commerce database appears facially intrusive, the benefits of allowing ATO such direct access, under the circumstances of this case, outweigh the burden of producing it, particularly since a protective order is in place.
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Although [RAP4’s president] argues that RAP4’s business processes are proprietary in nature and that, if information about its business practices got into the hands of a competitor like ATO, it could significantly harm RAP4’s competitive advantage [Doc. 207-1, ¶ 10], neither RAP4 nor [its president] provide any information about what those business processes generally are or any explanation about how the information contained in the database—much of which appears to have already been ordered produced or to be available on RAP4’s website—constitutes a trade secret or how its disclosure would harm RAP4’s competitive advantage * * *
And RAP4’s fear that ATO or its owners could use the database to their advantage is alleviated by limiting the database to “Attorneys’ Eyes Only.” RAP4’s insistence that the database is ‘its most important asset’ and that the vast majority of the product information in the database is irrelevant to the claims here does not change this analysis.
Key Practice Points
The district court’s ruling in Advanced Tactical Ordnance Systems illustrates two key practice points. First, relevant information contained in a database is discoverable just like other forms of ESI. However, the requesting party typically is entitled to receive only the database fields that contain relevant information, not the entire database in which the information resides. To obtain a copy of an entire database like ATO did, the requesting party must make a specific showing of need or relevance. [See, e.g., The Sedona Conference®, The Sedona Conference® Database Principles: Addressing the Preservation & Production of Databases & Database Information in Civil Litigation, March 2011 Public Comment Version, at 21; High Point SARL v. Sprint Nextel Corp., No. 09-2269, 2011 U.S. Dist. LEXIS 111158, at *39-40 (D. Kan. Sep. 28, 2011) (ordering production of entire database because of questions regarding whether all responsive information from the database was produced).]
Second, many federal courts have shown a willingness to limit the scope of e-discovery under the concept of proportionality found in Rule 26(b)(2)(C)(iii). In other words, if the burdens and costs of producing the requested ESI outweigh the likely benefits of that ESI, courts are willing to prohibit or at least limit the extent of the requested discovery, or in some cases even apportion some or all of the costs of the requested discovery, especially if the responding party has offered reasonable alternatives and has already produced related information. However, courts will not consider limiting discovery unless the party objecting to the discovery can introduce evidence specifying what the burden and expense of producing the requested ESI is and further can establish that such burden and expense outweighs the potential importance of the information to the parties’ claims and defenses. [See, e.g., Chen-Oster v. Goldman, Sachs & Co., 285 F.R.D. 294, 305-308 (S.D.N.Y. 2012) (ordering production of information from certain databases in putative employment discrimination class action because information was central to the plaintiffs’ claims, the amount in controversy was substantial, and the defendant exaggerated the burdens of extracting the information, but also holding that the burden of extracting information from an older database outweighed the benefit).]