Eastman Kodak Company v. Agfa-Gevaert N.V

Full title: EASTMAN KODAK COMPANY, Plaintiff, v. AGFA-GEVAERT N.V. and AGFA…

Court: United States District Court, W.D. New York

Date published: Dec 4, 2003

02-CV-6564 (W.D.N.Y. Dec. 4, 2003)

Opinion

02-CV-6564

December 4, 2003

DECISION AND ORDER

JONATHAN FELDMAN, Magistrate Judge

Relevant Factual Background

This is a patent infringement case brought by Eastman Kodak Company ("Kodak") against Agfa-Gevaert ("Agfa"). Pursuant to a Stipulation and Protective Order agreed to by the parties, certain information produced during discovery may be designated as "Confidential" or "Highly Confidential." Under the terms of the stipulated agreement (Docket #12), materials that are subject to this designation may not be disclosed to an outside expert or consultant without first identifying the expert or consultant to the other side and allowing opposing counsel the opportunity to object.

Agfa served notice on July 18, 2003 that it intended to disclose confidential and highly confidential information to Richard Hailstone, a former Kodak employee who has been retained by Agfa as a consultant for purposes of this litigation. Pursuant to the terms of the Stipulation and Protective Order, Kodak objected and brought the instant motion pursuant to Federal Rule of Civil Procedure 26 (c)(7) seeking to preclude Agfa from disclosing confidential material to Hailstone.

Oral argument was heard on October 31, 2003 and following that proceeding, the parties requested an evidentiary hearing. The Court conducted a hearing on November 17, 2003. Thereafter, the parties submitted additional briefing. (Docket ##22, 25). Having considered the testimony adduced at the hearing as well as the parties' respective submissions, I hereby grant Kodak's motion.

Discussion

Federal courts have the inherent power to disqualify an expert from participating in litigation.¹ Popular, Inc. v. Popular Staffing Servs. Corp., 239 F. Supp.2d 150, 152 (D.P.R. 2003). Expert disqualification may be appropriate when "a party retains expert witnesses who previously worked for an adversary and who acquired confidential information during the course of their employment."Space Systems/Loral v. Martin Marietta Corp., 1995 WL 686369 at *2 (N.D. Cal. Nov. 15, 1995). In determining whether to disqualify an expert based on a prior relationship with the adversary, a court must undertake the following two-step inquiry: (1) Did the adversary have a confidential relationship with the expert; (2) Did the adversary disclose confidential or privileged information to the expert that is relevant to the current litigation? Greene, Tweed of Delaware v. DuPont Dow Elastomers, LLC, 202 F.R.D. 426, 428 (E.D. Pa. 2001). The burden is on the party who seeks disqualification of an expert to establish that a confidential relationship exists and that the confidentiality has not been waived. Id., 202 F.R.D. at 429 ("The party who seeks disqualification of an expert has the burden of showing the existence of confidentiality and its non-waiver").

1 Kodak's moving papers do not expressly move to disqualify Hailstone as an expert but rather seek a protective order precluding confidential documents being disclosed to him. However, both Kodak and Agfa agree that the legal analysis applicable to expert disqualification controls the issuance of the protective order Kodak seeks here. Moreover, it seems apparent that, as a practical matter, an order precluding Hailstone from receiving confidential materials in this case would severely limit, if not nullify his usefulness as a consultant or expert to Agfa. Nevertheless, in it's post-hearing brief (Docket #22), Kodak argued that "the lack of candor displayed by Mr. Hailstone in connection with this motion" requires his "complete disqualification" from this case. Because complete disqualification of Hailstone was not sought in Kodak's initial moving papers and is being raised for the first time in Kodak's post-hearing brief, this Court declines to order such relief. If Kodak wants the Court to order the complete disqualification of Hailstone, it should file a supplemental motion and allow Agfa to properly respond.

1. Existence of a Confidential Relationship: There is no question (and indeed the parties do not dispute) that the first element has been satisfied here. While Hailstone is currently an RIT professor, he previously worked at Kodak for eighteen (18) years during which time he unquestionably had access to confidential proprietary information belonging to Kodak. Thus, Kodak had a "confidential relationship" with Hailstone and, in fact, even today Hailstone is obligated to abide by the terms of an employment agreement he entered into with Kodak that prevents him from disclosing to the outside world any classified company confidential information acquired during his employment with Kodak.² 2. Disclosure of Confidential Information Relevant to the Lawsuit: The critical question then is whether Hailstone received confidential information "that is relevant" to the current patent litigation during his lengthy employment with Kodak. See Wang Laboratories, Inc. v. C.F.R. Assocs., 125 F.R.D. 10, 13 (D. Mass. 1989) (emphasis added). Without getting too technical, three of the patents at issue here, the `425, `426 and `520 patents, relate to tabular grain film emulsions. (For ease of reference, these patents will be referred to as the "T-Grain" patents). During the time period that Hailstone worked for Kodak, Kodak scientists were developing and perfecting film emulsions which utilized tabular microcrystals or tabular grains to absorb light during the film exposure process. The tabular shaped crystals had several advantages over other types of film emulsion grains including: (1) improved image quality, (2) better image sharpness in radiological films and (3) reduced production costs due the need for less silver in film coatings. Kodak alleges that its research and development efforts resulted in obtaining the three T-Grain patents in 1982.

2 In his employment agreement, Hailstone promised, in relevant part, that "I will not, either during my employment by Kodak or thereafter, disclose to anyone or make any use of classified company information which I have acquired, or may acquire during my employment relating to any of the business of Kodak, except as such disclosure or use may be required in connection with my work as an employee of Kodak".See Exhibit A, Docket 15.

Hailstone worked at Kodak from 1972 to 1990. The portion of Hailstone's Curriculum Vitae ("CV") pertaining to his Kodak employment substantiates Kodak's claim that he was involved with the development of T-Grain technology. (Exhibit B, Docket #15). According to his CV, between 1981 and 1982 Hailstone worked in Kodak's London, England laboratories conducting "studies of the mechanism of latent image formation intabular photographic microcrystals." (emphasis added). Between 1982 and 1990, Hailstone's CV specifies that he was a Kodak senior scientist and was involved in evaluating "photographic emulsions having tabular microcrystals." (emphasis added). During his eighteen year career, Hailstone's CV asserts that he was involved with the issuance of "over 50 technical reports." Some of the reports Hailstone co-authored specifically pertained to silver halide tabular grain technology and, indeed, are among the confidential and highly confidential documents being produced by Kodak in response toAgfa's discovery requests.

Despite the foregoing, Agfa unshakably maintains that Hailstone "did not learn of confidential information pertaining to the patents in suit during his tenure at Kodak."See Agfa's Memorandum of Law at page 2 (Docket #17) (emphasis supplied). Hailstone himself submitted an affidavit in which he represented that "none of the work [he did during his eighteen years at Kodak] is the subject of any of the patents in suit." See Affidavit of Richard K. Hailstone (Docket #18) at ¶¶ 14, 15, 16 and 19. Hailstone further stated that during his tenure with Kodak he "was not involved with or privy to any activity with respect to the patent application that resulted in the patents in suit." Id. at SI 22. (emphasis added).

3. Summary of Hearing Testimony: In order to sort out these conflicting claims, a factual hearing was held on November 17, 2003. Hailstone testified, as did Robert Booms, one of the inventors of the `520 patent and a current director of research and development at Kodak. While much of the hearing testimony necessarily concerned technical aspects of tabular grain emulsions, as explained below, at the end of the day Agfa's insistence that Hailstone "did not learn of confidential information pertaining to the patents in suit during his tenure at Kodak" (Docket # 17 at page 2) was simply not credible.

During the mid 1970's, Kodak decided to pursue the development of high aspect ratio silver emulsions. A research group within Kodak consisting of approximately 100 scientists was formed to develop and test new film emulsions, including tabular silver halide emulsions. The research group was described by Booms as a "closed community" within Kodak and there were "steep" confidentiality restrictions applicable to the work the research community performed. Those working in the group were known as "working behind the silver curtain." While the research group itself was very closed, there was "very open sharing within that community." (Tr.³ At 77).

3 Transcript of factual hearing held on November 17, 2003, Docket #24.

Richard Hailstone was an active member of the "silver curtain" research group. Hailstone testified that at the time he began his tabular grain work at Kodak, he did not believe anyone had yet "developed a commercial tabular grain product." (Tr. 55). To be sure, Hailstone's primary responsibility was not in the creation of the emulsions, but rather in studying and measuring the efficiency of emulsions provided by other members of the research group. Nevertheless, the proof at the hearing demonstrated that as an active member of the research project, Hailstone had access to and received confidential scientific data from other members of the groups regarding the tabular grain emulsions he was testing, including information regarding the ingredients in the emulsions, the precipitation of the emulsions and the sensitization of the emulsions. Hailstone's access to Kodak's confidential scientific data regarding the particulars of the tabular grain emulsions directly contradicted Agfa's pre-hearing contention that Hailstone "was not privy to confidential information about how these [tabular grain] emulsions were made." See TOA⁴ at 31.

4 Transcript of October 31, 2003 oral argument.

Indeed, on cross-examination Hailstone was shown two confidential technical reports he authored concerning tabular grain emulsions. The first, prepared in March 1983, concerned emulsion studies Hailstone conducted in 1981 and 1982 while working at Kodak's Harrow Laboratory in England. One of the emulsions tested was precipitated by Francis Evans, one of the inventors of the `520 patent. (Tr. 58). Hailstone conceded that the report was classified at the highest level of confidentiality for emulsion research at Kodak and contained confidential details about Evans' prototype "T-Grain" emulsion. (Tr. 60-63). Hailstone also conceded that during the 1981-82 time period he was provided confidential information from Kodak about the size and coverage of the grains used in the "T-Grain" emulsions as well as confidential information on how the emulsions were sensitized. (Tr. 67-68).

The second report was co-authored by Hailstone in 1985 and also was classified at Kodak's highest level of emulsion confidentiality. Hailstone's 1985 report concerned studies of two tabular grain emulsions and contained drawings, details and descriptions of some of the precipitation procedures used to make the "T-Grain" emulsions. (Tr. 64-67). Hailstone testified that during last six months he was employed at Kodak, he attended a training course and "learned about" Kodak's procedures to make emulsions, but the training concerned cubic grain and not tabular grain emulsions. (Tr. 53). Hailstone specifically denied that he "went through any type of training with regard to tabular grain emulsions" while employed by Kodak. (Tr. 42). However, Hailstone's testimony about his training was directly and credibly contradicted by Boom, who was the supervisor of the Kodak training course Hailstone took. Boom testified that the portion of the Kodak training program Hailstone attended provided "in depth" confidential information on Kodak's "T-Grain" emulsions, including laboratory work on actually creating tabular emulsions. (Tr. 81, 114).

4. The Need for a Protective Order: Relying on Greene, Tweed of Delaware v. Dupont Dow Elastomers, L.L.C., 202 F.R.D. 426 (E.D. Pa. 2001), Agfa argues that "everybody at Kodak" has some connection to photography and in order to be disqualified Kodak must do more than demonstrate that Hailstone had "general knowledge" of photographic science. (TOA at 32). This Court agrees. But the record here demonstrates far more than ipse dixit assertions by Kodak. Hailstone was not a part-time cashier in Kodak's company store. He was a senior scientist employed by Kodak for eighteen years who was an active member of a closed group of researchers charged with developing, creating and testing "T-Grain" photographic emulsions. The work of this research group involved the use and sharing of highly confidential information about high aspect ratio silver halide tabular grains and the utilization of such tabular grains in making photographic emulsions. The record here certainly supports a finding that the work of the "Silver Curtain" research group, of which Hailstone was a member, concerned "the specific technology at issue in this lawsuit," as the court in Greene demanded.Id. at 430 (internal citation omitted). See also Wang, 125 F.R.D. 10, 11 (D. Mass. 1989) (court barred defendant from retaining former Wang employee who had developed software covered by patent in issue); cf. Vikase Corp. v. W.R. Grace Co., 1992 WL 13679 at *2-3 (N.D. 111. January 24, 1992) (court refused to disqualify expert where he had general experience from working with defendant but no experience specific to the patented products or process). See generally, Brian Burke, Disqualifying an Opponent's Expert When the Expert is Your Client's Former Employee, 66 Def. Couns. J. 69, (January 1999) (Where the "consultant's expertise is based on information he gained during his employment and that information will be used to assist the adversary, the consultant should be enjoined . . . from assisting any adversary in litigation of his former employer").

The development of the scientific technology that resulted in the "T-Grain" patents was not an instantaneous "eureka!" type discovery. Rather, as Boom's hearing testimony made clear, developing the T-Grain technology was an extended process involving a body of scientific work, with each research step providing a "building block" for the next. See generally Kofron and Boom, Kodak T-Grain Emulsions in Color Films, 49 J. Soc. Photographic Science Technology (1986) (Hearing Exhibit 9). Even after the "T-Grain" patents were applied, Kodak's "silver curtain" research group, including Hailstone, continued to study, test and analyze the tabular grains in order to improve upon this specific emulsion technology. As a member of the research group charged with developing "T-Grain" photographic emulsions, Hailstone had access to, knowledge of and training in many of the "building blocks" that produced Kodak's "T-Grain" patents. To expect Hailstone to somehow suppress that knowledge by not revealing confidential information encompassed by his employment agreement with Kodak when he has been retained by Agfa to evaluate the validity of patents pertaining to the specific technology he spent over a decade studying for Kodak is unworkable if not quixotic. Moreover, given Hailstone's extended participation in the research group that generated the tabular grain technology at issue in this action, allowing Hailstone current access to confidential Kodak information in order to evaluate the patents in issue would give an unfair advantage to Agfa.

That Hailstone's primary role within the research group was to test the performance of the "T-Grain" emulsions and not generate the emulsion itself, does not immunize him from having to account for the confidential nature of his work at Kodak. The issue in the present dispute is not whether Hailstone directly worked on the patents in issue or singlehandedly created the technology that was ultimately patented. This Court has no reason to doubt Hailstone's assertion that he never acquired sufficient confidential information while working for Kodak to "go into the laboratory and reproduce [a "T-Grain"] emulsion." (Tr. 61, 65). But the material questions are (1) whether Hailstone's work at Kodak involved confidential proprietary information that is relevant to the current litigation and (2) if so, whether use of that confidential knowledge would give him an unfair advantage in acting as a patent expert for Agfa? Based on the testimony at the hearing, the credibility of the witnesses, the documents received in evidence as part of the record and giving deference to the legal standard as set forth in this Decision and Order, the Court finds Kodak to have met its burden on both issues.⁵

5 Agfa's claim that by granting Kodak's motion "scores" of people "who had any relationship whatsoever to T-grain technology at Kodak" would also be prevented from consulting with Agfa strikes this Court as a bit hyperbolic. See Agfa's Post-Hearing Memorandum of Law at page 10 (Docket #22). This decision is, of course, fact specific. The Court's holding is limited to Agfa retaining a patent expert who (1) spent almost two decades working as a senior scientist for a litigation adversary; (2) signed a confidentiality agreement with his former employer promising never to "disclose" or "make any use" of classified company information acquired during his employment; (3) was an active member of a closed research group that was charged with developing, analyzing and testing a very specific scientific technology that ultimately resulted in that specific technology being patented; (4) was trained in, had access to and utilized confidential scientific information in performing his duties as part of the research group; and (5) now wants to serve as a patent consultant in litigation against his former employer with respect to issues relevant to the very technology he worked on for his former employer. The Court respectfully disagrees that such a holding would "be a major break from prior case law."Id.

Conclusion

There is little doubt that Richard Hailstone would be a knowledgeable and valuable witness for Agfa with respect to the patents in suit involving Kodak's "T-Grain" film emulsions. But in retaining Hailstone, Agfa assumed the risk that his knowledge of tabular grain technology was based, at least in part, on an 18 year career with Kodak during which he was a member of a closed research group charged with developing new tabular grain film emulsions. The hearing testimony confirmed that Hailstone was a member of the "silver curtain" research group, actively participated in the group's efforts to study and develop tabular grain film emulsion technology and had access to and relied upon confidential information belonging to Kodak pertaining to "T-Grain" technology. While Hailstone may not have directly worked on the patents themselves, there is a sufficient connection between the confidential information Hailstone had access to and the technology at issue in the "T-Grain" patents to mandate the issuance of a protective order. Because I find that (1) Agfa would gain an unfair advantage by providing Hailstone access to confidential and highly confidential Kodak documents in order to render an expert opinion on the validity of the "T-Grain" patents, and (2) allowing Hailstone such access would violate Hailstone's confidentiality agreement with Kodak, Kodak's motion to preclude is granted. IT IS SO ORDERED.