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 covenant of good faith and fair dealing, fraudulent inducement, and negligent misrepresentation. The order addressed administrative motions to seal portions of the parties’ summary-judgment motions, oppositions, reply, declarations, and related exhibits. It did not rule on the merits of those claims or on the summary-judgment motions themselves.

The court explained that judicial records generally carry a strong presumption of public access. Because the records were connected to summary-judgment motions and therefore more than tangentially related to the underlying claims, the parties had to show compelling reasons, supported by specific facts, to justify sealing. The requests also had to be narrowly tailored under Civil Local Rule 79-5. Confidential designations under a protective order, standing alone, were not enough.

Rulings on Hon Hai’s Motion Regarding Its Partial-Summary-Judgment Filing

The court granted sealing of a damages figure on page 2, line 19, because it was based on royalty rates and pricing terms. It denied without prejudice Hon Hai’s requests to seal Exhibit 1 and Exhibit 2 in their entirety. The court found that portions of Exhibit 1 containing royalty calculations and alleged amounts owed could be sealed, but the exhibit also addressed deadlines for royalty reports and therefore could not be sealed entirely. Portions of Exhibit 2 might contain protected trade-secret information, but Hon Hai had not justified sealing the entire email chain. The court granted sealing of Exhibit 3 in its entirety because it contained a table with confidential royalty-rate and pricing information.

Rulings on Microsoft’s Motion Regarding Its Summary-Judgment Filing

The court granted Microsoft’s requests to seal specified damages figures and numbers of units sold in its summary-judgment motion and in page 2, line 23 of the Declaration of Ryan Banks. It also granted sealing of the highlighted portions of Exhibits 2, 3, and 4 to that declaration. Those materials contained potential-damages calculations, royalty-rate information, and confidential information about Hon Hai and its subsidiaries’ internal business operations.

The court denied without prejudice Microsoft’s requests to seal Exhibits 5 and 6 in their entirety. Those exhibits were licensing agreements involving Microsoft, Hon Hai subsidiaries, and Open Invention Network. Although they might contain sealable proprietary information, Microsoft’s requests were not narrowly tailored, particularly because the summary-judgment motion quoted the agreements at length without redaction.

Rulings on Microsoft’s Opposition and Second Banks Declaration

The court granted Microsoft’s requests to seal two portions of its opposition that quoted pricing terms, royalty rates, and guaranteed minimum payment terms. It denied without prejudice Microsoft’s requests to seal Exhibits 2 through 6 to the Second Banks Declaration in their entirety. The attached 2013 and 2014 royalty reports could be sealed in their entirety, but Microsoft had not shown that all of the accompanying emails were sealable.

Rulings on Hon Hai’s Opposition and Supporting Exhibits

The court granted sealing of specified portions of Hon Hai’s opposition that stated damages figures based on pricing terms, royalty rates, and accrued interest. It denied without prejudice Hon Hai’s requests to seal Exhibits 1 through 4 and 6 through 8 in their entirety. Some portions of Exhibit 1 contained confidential internal business information and information about particular customers, but Hon Hai had not shown that every page was sealable. Exhibits 2 through 4, which were licensing agreements, could contain proprietary information, but the requests were too broad. Hon Hai also had not adequately explained why Exhibit 6, Exhibit 7, or Exhibit 8 could be sealed in full.

The court granted sealing of Exhibit 16 in its entirety because it contained a table with confidential trade-secret information about royalty rates and pricing terms.

Microsoft’s Reply

The court granted Microsoft’s motion to seal page 6, line 28 of its reply. The disputed text contained a confidential potential-damages calculation based on royalty rates and pricing terms.

Required Filings and Disposition

The court granted in part and denied in part Hon Hai’s motions concerning its partial-summary-judgment filing and opposition. It granted in part and denied in part Microsoft’s motions concerning its summary-judgment filing, opposition, and supporting materials. The court denied without prejudice the portions of those administrative motions that were too broad, allowing renewed motions. It required Microsoft to file properly redacted public versions of its summary-judgment motion, opposition, reply, and certain exhibits, and required both parties to file renewed administrative motions to seal by August 27, 2020.

Judge Lucy H. Koh’s order concerned public access to court records and the handling of confidential business information. It did not decide who would prevail on the breach-of-contract claims or Hon Hai’s counterclaims.