Sioux Pharm, Inc. and Sioux Biochemical, Inc. v. Eagle Laboratories, Inc. Bio-Kinetics Corporation And Dana Summers
865 N.W.2d 528
| Iowa | 2015Background
- Sioux Pharm sued Eagle Labs and individuals for alleged trade-secret misappropriation after a former Sioux Pharm employee was caught stealing an SOP manual during a break-in; both parties produced SOPs under a stipulated protective order.
- The stipulated protective order allowed two tiers: "CONFIDENTIAL" (attorneys, parties, experts, witnesses with affidavits) and "ATTORNEYS’ EYES ONLY" (AEO) (only court personnel, attorneys, outside experts; not the parties themselves), and provided procedures for challenging designations.
- Eagle Labs moved to redesignate certain Sioux Pharm SOPs from AEO to confidential, arguing defendants needed access to prepare their defense and offering only conclusory assertions (no affidavits or evidentiary showing); Eagle Labs had chosen not to retain an expert to save costs.
- The district court ordered Sioux Pharm to identify SOPs alleged misappropriated and to produce unredacted copies redesignated from AEO to confidential so the defendants (Den Hoed and Summers) could view them; Sioux Pharm sought interlocutory review.
- The Iowa Supreme Court held the district court abused its discretion because the record and the order lacked adequate reasoning: the court did not explain whether it found the materials misclassified as AEO or properly AEO but nonetheless modified the protective order after only conclusory arguments by Eagle Labs.
Issues
| Issue | Plaintiff's Argument (Sioux Pharm) | Defendant's Argument (Eagle Labs) | Held |
|---|---|---|---|
| Whether Sioux Pharm must produce unredacted SOPs | Sioux Pharm resisted full unredacted production to protect trade secrets | Eagle Labs said unredacted SOPs are necessary for defense and comparison | Court: Sioux Pharm must produce complete unredacted SOPs because close textual comparison is necessary to litigate the claim |
| Whether district court may redesignate AEO materials to confidential | AEO protection appropriate; redesignation not justified by bald allegations or defendants' choice not to hire an expert | Redesignation needed so defendants (including decision-makers) can prepare defense without hiring outside experts | Court: Remanded — redesignation may be appropriate but district court abused discretion because it failed to articulate sufficient reasons; court must determine AEO qualification first and then, if modifying, balance factors per Comes |
| Proper standard/burden for challenging AEO designation | Producing party bears burden to defend its AEO designation under the stipulated order | Challenging party can seek modification based on need to defend; economic hardship argued but not supported | Court: Producing party bears burden to justify AEO; challenger must present particularized need—conclusory assertions and cost-based choices insufficient |
| Scope of appellate review and required findings | District court need not provide detailed findings beyond its balancing conclusion | Appellate review requires a record showing reasons for redesignation so reviewable | Court: Trial court must articulate specific findings and analysis (identify trade secrets, weigh defendants’ need vs. harm) to permit meaningful appellate review |
Key Cases Cited
- E.I. du Pont de Nemours Powder Co. v. Masland, 244 U.S. 100 (1917) (trial judge has discretion to limit revelation of trade secrets)
- Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) (disclosure destroys property interest in trade secrets)
- Seattle Times Co. v. Rhinehart, 467 U.S. 20 (1984) (trial court has broad latitude to craft protective orders)
- Mediacom Iowa L.L.C. v. Inc. City of Spencer, 682 N.W.2d 62 (Iowa 2004) (discovery rulings reviewed for abuse of discretion; protective-order balancing principles)
- Farnum v. G.D. Searle & Co., 339 N.W.2d 384 (Iowa 1983) (discovery rules liberally construed to disclose relevant information; protective-order criteria)
- Comes v. Microsoft Corp., 775 N.W.2d 302 (Iowa 2009) (when modifying protective orders courts should balance interests, consider reliance, and avoid presumptions)
- Paycom Payroll, LLC v. Richison, 758 F.3d 1198 (10th Cir. 2014) (AEO restrictions are routine in trade-secret litigation to prevent disclosure to competitors)
- Brown Bag Software v. Symantec Corp., 960 F.2d 1465 (9th Cir. 1992) (courts may deny in-house counsel access when they participate in competitive decisionmaking)