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Chembio Diagnostic Systems, Inc. v. Saliva Diagnostic Systems

July 14, 2006

CHEMBIO DIAGNOSTIC SYSTEMS, INC., PLAINTIFF,
v.
SALIVA DIAGNOSTIC SYSTEMS, INC., DEFENDANT.



The opinion of the court was delivered by: E. Thomas Boyle United States Magistrate Judge

MEMORANDUM OPINION AND ORDER

Before the Court are two motions: (1) one by defendant Saliva Diagnostic Systems, Inc. ("Saliva Diagnostic Systems" or "SDS" or "defendant"), for an order compelling the plaintiff to produce certain documents and (2) a cross-motion by plaintiff, Chembio Diagnostic Systems, Inc. ("Chembio" or "plaintiff") for a protective order pursuant to Rule 26(c). Defendant SDS also seeks sanctions in the form of costs and fees incurred in pursing its motion to compel. The substance of the motions significantly overlap.

I. BACKGROUND

A. The Disputed Discovery

Plaintiff, Chembio, and defendant, SDS, are competitors in the field of rapid, on-site testing for HIV and other infectious diseases. (Declaration of Lawrence Siebert, CEO and President of Chembio Diagnostics, Inc. "(Siebert Decl.") ¶23.) Chembio sells rapid diagnostic test kits for various infectious diseases, including a rapid test for HIV sold under the trademark "Sure Check HIV." (Siebert Decl. ¶ 4.) The Sure Check HIV device is a single-use, self-contained closed system for the collection, processing and analysis of a blood sample for the detection of HIV antibodies. (Id. ¶ 7.) Sure Check HIV is one of Chembio's two HIV tests that are now pending FDA approval. (Mem. in Supp. of Pl.'s Mot. for a Protective Order under Rule 26(c) ("Pl.'s Mem.") at 2.) The defendant, SDS, sells a product called the "Saliva Hema-Strip" (the "Hema-Strip device"). (Declaration of Mo Bodner, COO of SDS, in Response to the Rule 56.1 Statement of Chembio Diagnostic Systems ("Bodner Decl."), Annexed to Kaplan Decl. as Exh. E, ¶ 2.) Defendant claims that the plaintiff's device is an exact copy of SDS's Saliva Hema-Strip. (Id.) For a period of time that concluded in early 2003, Chembio and SDS had a business relationship that involved SDS's Hema-Strip. (Declaration of Leo Ehrlich, CFO of SDS ("Ehrlich Decl.") ¶ 2.) The relationship terminated in the first half of 2003, and Chembio and SDS are now competitors. (Siebert Decl. ¶ 23.)

On March 18, 2004, Chembio filed the complaint herein seeking declaratory judgment that the plaintiff's Sure Check HIV barrel device did not infringe the defendant's U.S. Patent No. 5,935,864 ("'864 patent"), or in the alternative, that the '864 patent is invalid or unenforceable. (Pl.'s Complaint at 5-6.) SDS has filed counterclaims for the infringement of the '864 patent. (Def.'s Answer and Counterclaim.) The '864 patent, which through assignment is enforceable by SDS, describes a device which obtains a liquid specimen. ('864 Patent, annexed to Pl.'s Mot. as Exh. D.) The '864 patent is discussed in further detail infra, Part B.

In November 2004, defendant SDS propounded its first set of interrogatories and first set of document requests to plaintiff Chembio. (Defendant Saliva Diagnostic System Inc's First Set of Interrogatories and First Set of Document Requests to Plaintiff Chembio Diagnostic Systems, Inc. ("Def.'s First Set of Interrogatories and Document Requests"), dated November 10, 2004.)

In late December 2004, plaintiff responded, objecting to many of the defendant's requests on the ground that they are not relevant to a claim or defense in this action, and that they constitute protected trade secrets. (See Pl.'s Objections and Responses to Defendant's First Set of Interrogatories and Document Requests ("Pl.'s Objections and Responses"), annexed to Def.'s Mot. to Compel as Exh. C. See also Pl.'s Opp'n at 2; Siebert Decl. ¶¶ 32-35.)

On January 26, 2006, the Court approved a Stipulation and Order Governing the Protection and Exchange of Confidential Material, signed by both parties. (See Order by the undersigned, dated January 24, 2006.) The stipulation provides that certain highly sensitive information may be designated by the producing party as "Highly Confidential-- Counsel Only," which may only be disclosed to counsel of record for the parties and members or staff of the firm, outside consultants or experts not objected to by the producing party, the Court, and outside services companies or jury consulting services. (Stipulation and Order Governing the Protection and Exchange of Confidential Material at 3, 6-7, annexed to Decl. of Jeffrey Kaplan as Exh. F.)

On February 13, 2006, defendant filed its letter motion to compel, seeking responses to its document requests, and arguing that SDS permitted Chembio unfettered access to all requested, non-privileged documents, and produced the same categories of documents that Chembio now refuses to produce. (Letter Motion from Jeffrey I. Kaplan to the undersigned ("Def.'s Mot. to Compel"), dated February 13, 2006, at 1.) Defendant argues that Chembio repeatedly led defendant to believe that the documents would be produced, and that it was not until the defendant's copy service arrived at Chembio's offices for the documents that defendant was informed that Chembio had retained new counsel, Daniel Burke ("Burke"), and that Burke objected to the reciprocal production of documents.*fn1 (Id. at 2.) The categories of documents which defendant seeks to compel, and for which plaintiff seeks a protective order, can be categorized primarily as concerning either "infringement discovery" or "damages discovery." The parties summarized the requests as follows: (1) all FDA files, including trials and evaluations, concerning the Hema Strip and Sure Check HIV products; (2) documents relating to the production of the Hema Strip/Sure Check HIV product; (3) summaries of FDA trials and evaluations and advertising, packaging, etc. for the two products; (4) and research and development ("R&D") relating to the Hema Strip/Sure Check HIV product (together, the "infringement discovery"); and (5) documents relating to distributors and/or sales representatives for the two products, as well as invoices and customer summaries; and (7) product cost documents (together, the "damages discovery"). (Def.'s Letter Mot. to Compel, Exh. D.)

Defendant argues that the infringement discovery is relevant to its infringement counterclaim because the sought-after discovery goes directly to the operation of the Chembio device, the results of testing it, and how it performs. (Def.'s Letter Mot. to Compel at 2.) Defendant argues in particular that it seeks the testing data Chembio provided to the FDA because SDS believes this testing data will contradict the results of the testing data that Chembio has produced from testing conducted specifically for this litigation. (Id. at 3.)

The plaintiff objects to the production of the infringement discovery documents on the ground that they are not relevant to a claim or defense in this action, and that they constitute protected trade secrets. (Pl.'s Opp'n at 2.; Siebert Decl. ¶¶ 32-35.) Plaintiff states: "[u]nlike the documents already produced, the remaining Chembio FDA related documents, detailed manufacturing protocols, correspondence with vendors, and manufacturing costs information" are not relevant to a claim or defense in this action. (Pl.'s Opp'n at 2.)

On February 24, 2006, Chembio filed its motion for a protective order. Chembio specifically objects to producing and requests a protective order that disclosure or discovery not be had relating to: (1) Chembio's application for premarketing approval now pending before the U.S. Federal and Drug Administration, including supporting information, evaluations and clinical trials, except to the extent it is directly related to documents already photocopied and provided to SDS's counsel; (2) all chemistry and details relating to Chembio's test strip; (3) Chembio's manufacturing protocols; (4) Chembio's manufacturing costs; and (5) Chembio's vendors, including communications between Chembio and its vendors. (Memorandum in Support of Plaintiff's Motion for a Protective Order Under Rule 26(c) ("Pl.'s Mem. in Supp."), at 1, 10.) Chembio claims that it has produced to SDS the discovery relevant to this case, including: (1) all of Chembio's sales of its Sure Check HIV test kit; (2) specifications, engineering drawings, testing and experiments for Chembio's accused Sure Check HIV plastic sampler, its lower filter and its upper filter; (3) all advertising; (4) all packaging and inserts; (5) documents relating to experiments conducted with and without the filters; (6) actual product samples, and (7) manufacturing and quality control documents which had been submitted to the FDA relating to the positioning of Chembio's filters during the manufacture and the inspections to perform proper placement. (Id. at 11.)

B. The '864 Patent

Plaintiff Chembio seeks a declaratory judgment that the '864 patent is not infringed by Chembio's Sure Check HIV device, or in the alternative, that the '864 patent is invalid or unenforceable. SDS has counterclaimed for patent infringement. Because the present discovery dispute ...


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