Unreported / Non-Citable
Background
X1 Discovery, Inc. sued Microsoft Corporation in the Central District of California, and that lead case was consolidated through the claim construction phase with three related actions against ASUSTeK Computer, Acer, and Dell Technologies (collectively, the OEM Actions). The consolidated cases involve patents directed to computer software, and the parties anticipated that discovery would require production of highly sensitive materials, including computer source code, unreleased product designs, technical specifications, customer and pricing lists, license and settlement agreements, and business and strategic plans.
The parties jointly stipulated to a protective order and submitted it to the court for approval. On October 15, 2026, United States Magistrate Judge John D. Early entered the order, finding good cause to protect the confidential, proprietary, and private information likely to be exchanged. The order applies to all four consolidated actions and to any party or non-party that produces discovery material in them.
The Court’s Holding
The court entered a comprehensive protective order establishing three tiers of confidentiality designations: CONFIDENTIAL, CONFIDENTIAL – ATTORNEYS' EYES ONLY, and HIGHLY CONFIDENTIAL SOURCE CODE. The order restricts the use of protected material to prosecuting, defending, or settling the litigation and expressly bars its use for any business or competitive purpose or in any other legal or administrative proceeding, including proceedings before the Patent Trial and Appeal Board or the International Trade Commission. Access to attorneys'-eyes-only material is limited to outside counsel, experts, court personnel, and similar categories, excluding the receiving party's own officers, directors, and house counsel. Source code receives the most restrictive treatment, with review permitted only on a stand-alone, non-networked computer in a secure room, subject to page limits on printouts, prohibitions on electronic devices, and logging requirements.
The order also imposes a prosecution bar prohibiting individuals who review attorneys'-eyes-only or source code material from participating in patent preparation or prosecution related to the subject matter for two years after their last access, and a development bar restricting technical experts from related commercial product development work. Notably, the order addresses modern data-handling concerns: it prohibits entering protected material into publicly accessible machine translation or generative artificial intelligence services, while permitting the use of closed, vetted AI tools under specified safeguards. It also bars litigation funders from receiving any protected material. The order emphasizes that it does not itself entitle parties to file materials under seal, reiterating that Local Civil Rule 79-5 and Ninth Circuit standards—good cause for non-dispositive motions and compelling reasons for dispositive motions or trial—govern any sealing request.
Key Takeaways
- The protective order establishes a three-tier confidentiality system, with the most restrictive tier reserved for computer source code, which may be reviewed only on isolated computers in secure facilities under strict printing and access limits.
- Individuals who review highly sensitive material face a two-year prosecution bar from patent preparation or prosecution work related to the reviewed subject matter, and technical experts face a related development bar on commercial product work.
- The order expressly prohibits uploading protected material to publicly accessible generative AI tools such as ChatGPT, classifying such uploads as unauthorized disclosures, while permitting closed, vetted AI tools that meet specified confidentiality requirements.
- Litigation funders are categorically denied access to any protected material produced in the action, with the term applied broadly to include their employees, counsel, consultants, and agents.
- The order underscores that a confidentiality designation alone does not justify filing under seal; parties must satisfy Local Civil Rule 79-5 and Ninth Circuit precedent requiring good cause or compelling reasons supported by competent evidence.
Why It Matters
This order illustrates how courts in patent litigation are adapting longstanding protective order frameworks to address emerging technology risks, including the use of generative artificial intelligence in legal work and the involvement of third-party litigation funders. By expressly addressing AI tools and machine translation services, the order provides a model for managing confidential discovery in an era of cloud-based processing.
The order also reinforces the Ninth Circuit's strong presumption of public access to judicial records, making clear that stipulated confidentiality designations do not automatically translate into sealed court filings. Parties must independently satisfy the applicable sealing standard with specific evidentiary support, and the order's protections terminate at trial absent compelling reasons shown to the trial judge.