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6 February 2018Americas

US court denies discovery extension to European proceedings

The US Court of Appeals for the Seventh Circuit has rejected a German dental company’s request to modify protective orders due to an untimely appeal.

The Seventh Circuit delivered its judgment on Thursday, February 2.

Heraeus Kulzer develops bone cement for joint replacement surgeries, and contracted with healthcare company Merck KGaA in the 1970s to distribute its bone segments.

Merck KGaA sold joint-venture shares to Biomet, a medical device manufacturer that is now part of Zimmer Biomet, in 2004 without informing Heraeus. Heraeus then ceased delivery of products to Warsaw-based Biomet, which subsequently started to manufacture its own bone cement in competition with Heraeus.

In December 2008, Heraeus filed a trade secret misappropriation complaint against Biomet in Germany, as well as in the US District Court for the Northern District of Indiana, to obtain discovery under 28 USC section 1782 from Biomet.. Section 1782 operates to assist foreign tribunals in obtaining evidence via discovery in matters of international arbitration.

The Indiana district court denied the section 1782 request but, in January 2011, the Seventh Circuit reversed the decision and ordered the district court to oversee the discovery process.

Biomet agreed to produce material in response to an amended protective order, which “limited Heraeus’ ability to use or disseminate certain discovery materials outside of the German proceeding” as well as the action in Indiana. The content was therefore only to be used in actions in the Northern District of Indiana and Germany.

The German court issued an injunction against Biomet.

Heraeus believed that Biomet was “continuing to sell products made with Haraeus’ trade secrets outside of Germany”, and filed suit in several European countries to enforce the ruling. It filed three motions in the Indiana district court to modify the section 1782 protective order there, as it sought to rely on the discovery material in Europe.

All of Heraeus’ motions were denied and another protective order was agreed with regard to the European enforcement proceedings. Heraeus alleged that this agreement did not come to fruition and petitioned the district court to modify the orders.

The petition was unsuccessful, and Heraeus appealed.

The Seventh Circuit upheld the decision of the district court. Of the three motions Heraeus had filed, the Seventh Circuit elected to only rule on the final one, holding that Heraeus had failed to appeal in time in relation to the other two.

Heraeus claimed that the district court had erred in placing the burden of showing good cause to modify the protective order on Heraeus.

The Seventh Circuit disagreed: it confirmed that the burden falls on the party seeking modification of the protective order, and that Heraeus did not meet that burden. It also affirmed the lower court’s ruling that Biomet was not using the eighth protective order to obstruct the proceedings in Europe.

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