Microsoft Corporation v. Hon Hai Precision Industry Co., Ltd.

Background

Microsoft Corporation and Microsoft Licensing GP sued Hon Hai Precision Industry Co., Ltd. for breach of contract. Hon Hai asserted counterclaims for breach of the implied duty of good faith and fair dealing, fraudulent inducement, and negligent misrepresentation. The opinion addresses two administrative motions to seal: Microsoft’s request concerning two exhibits attached to its motion to dismiss or strike, and Hon Hai’s request concerning three portions of its opposition brief.

Legal standard

The court began with the strong presumption that judicial records should be open to the public. Because the materials concerned motions more than tangentially related to the claims, the parties had to show “compelling reasons” to seal them. The court also required narrowly tailored requests that sealed only material protected by law, such as trade secrets.

Microsoft’s motion

Microsoft sought to seal an entire draft Confidential Patent License Agreement and correspondence between the parties. Microsoft argued that the documents contained confidential business information, royalty amounts and terms, descriptions of the final agreement, and settlement discussions.

The court found the request overbroad because it covered large amounts of material that was not sealable, including generic definitions, introductory language, broad summaries of contractual obligations, and allegations already publicly presented in the parties’ filings. The court also noted that Microsoft’s proposed sealing of a rejected most-favored-nation provision was weak because the provision did not identify specific royalty rates, was not included in the final agreement, and had been relied on by the court in granting Microsoft’s motion to dismiss. The court further found Microsoft’s claim about harm to its bargaining position too general and conclusory to justify sealing each requested portion.

The court DENIED Microsoft’s motion to seal two exhibits without prejudice. It stated that Microsoft could file a renewed, narrower request limited to material that qualified for protection, and that any renewed motion had to be filed by March 6, 2020.

Hon Hai’s motion

Hon Hai sought to seal three specific portions of its opposition brief that substantively discussed royalty rates and pricing terms in the Confidential Patent License Agreement. The court determined that pricing terms, royalty rates, and guaranteed minimum payment terms in patent licensing agreements may constitute trade secrets and may be sealed when compelling reasons support protection.

The court GRANTED Hon Hai’s motion to seal the following portions of its opposition: page 7, lines 18–20; page 20, lines 6–7; and page 20, lines 8–10.

Disposition

The order granted in part and denied in part the parties’ motions to seal without prejudice, as reflected in the specific rulings: Microsoft’s motion was denied without prejudice, and Hon Hai’s motion was granted.