`34995
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF DELAWARE
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`_______________________________
`GENENTECH, INC. and CITY OF
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`HOPE,
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`AMGEN, INC.
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`Defendant.
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`_______________________________)
`GENENTECH, INC. and CITY OF
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`HOPE,
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`Plaintiffs,
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`AMGEN, INC.
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`Defendant.
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`_______________________________)
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`Civ. No. 17-1407- CFC, Consol.
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`Civ. No. 18-924-CFC
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`REPORT AND RECOMMENDATION OF SPECIAL MASTER
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`Rodney A. Smolla, Special Master
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`District Court Judge Colm Connolly assigned these consolidated matters to
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`the Special Master in a Memorandum Order entered on March 30, 2020. The District
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`Court’s order broadly instructed the Special Master to determine whether the sealed
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`
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`Case 1:18-cv-00924-CFC-SRF Document 558 Filed 09/02/20 Page 2 of 16 PageID #:
`34996
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`redacted filings of the parties comply with the legal principles that govern the sealing
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`of documents filed in federal judicial proceedings as established by the Supreme
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`Court of the United States, the United States Court of Appeals for the Third Circuit,
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`and the Federal Rules of Civil Procedure.
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`This Report and Recommendation: (1) describes the process through which
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`the duties of the Special Master were completed; (2) briefly summarizes the
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`applicable legal principles governing sealing; (3) recites the legal positions on the
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`issues taken by the parties and explains the Special Master’s approval and
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`endorsement of their positions; and (4) concludes with a recommended order
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`detailing the mechanics of how the parties should comply with this Report and
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`Recommendation, to ensure that all material that should be unsealed is unsealed, and
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`all that should remain sealed remains sealed.1
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`A separate Sealed Appendix is filed contemporaneously with this Report and
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`Recommendation. That Sealed Appendix contains a document-by-document
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`review, in which the nature of every retained sealing or partial redaction is described,
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`and the legal basis justifying continued sealing or redaction is succinctly explained.
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`
`
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`1 The recitation of law in this Report and Recommendation has been kept short.
`The Court is well-familiar with the controlling principles. The parties, through the
`initial guidance provided by the Special Master, and as evidenced in their thorough
`subsequent briefing, are as well. There is no disagreement as to the guiding legal
`principles.
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`
`2
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`Case 1:18-cv-00924-CFC-SRF Document 558 Filed 09/02/20 Page 3 of 16 PageID #:
`34997
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`I. The Process
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`
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`The Parties and the Special Master agreed on a process for streamlining the
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`review ordered by Judge Connolly and mandated by Third Circuit precedent. It may
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`well serve as a useful model for future similar undertakings. The Special Master
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`issued an Interim Order providing legal guidance to the parties regarding the nature
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`of material that should not be sealed, and the nature of material that could justifiably
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`be sealed, and the nature of the factual showing required to justify sealing. The
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`Parties then engaged in their own self-review of all previously sealed material,
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`engaging in a self-critique in which material previously filed under seal was
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`voluntarily designated for unsealing. As to filings that, in whole or in part, should
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`in either Party’s view remain sealed, the Parties submitted to the Special Master the
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`proffered legal and factual justifications. This process undoubtedly saved a great
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`deal of time and expense. Even so, between them the Parties still submitted several
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`hundred principal documents or attached exhibits for which continued sealing was
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`urged, in whole or in part. As to those documents, the Special Master considered
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`the Parties’ legal submissions and the Parties’ application of law to fact as to each
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`document. As required by Third Circuit precedent, each specific sealing and
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`redaction was reviewed by the Special Master.
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`3
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`II. The Applicable Legal Principles
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`A. The Three Tiers of Review
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`Three discrete bodies of
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`law govern
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`the principles pertaining
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`to
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`confidentiality, sealing, and redactions of documents in federal court litigation.
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`They apply in ascending orders of scrutiny.
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`First, there are principles governing the issuance of protective orders in federal
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`litigation. These principles emanate from Rule 26(c) of the Federal Rules of Civil
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`Procedure, and the attendant gloss courts have applied to the application of Rule
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`26(c). See Pansy v. Borough of Stroudsburg, 23 F.3d 772, 783-92 (3d Cir. 1994).
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`Second, federal courts recognize a common-law right of access to judicial
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`records. “The existence of a common law right of access to judicial proceedings and
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`to inspect judicial records is beyond dispute.” Publicker Industries, Inc. v. Cohen,
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`733 F.2d 1059, 1066 (3d Cir. 1984). There is a “presumption in favor of access to
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`‘public records and documents, including judicial records and documents.’” Bank of
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`America National Trust & Savings Association v. Hotel Rittenhouse Associates, 800
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`F.2d at 343, quoting Nixon v. Warner Communications, Inc., 435 U.S. 589, 597
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`(1978).
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`Third, “the public and the press have a First Amendment right of access to
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`civil trials.” In re Avandia Marketing Sales Practices & Product Liability Litigation,
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`924 F.3d 662, 673 (3d Cir. 2019), citing Publicker, 733 F.2d at 1070. “[T]he First
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`4
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`Amendment, independent of the common law, protects the public’s right of access
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`to the records of civil proceedings.” Republic of Philippines v. Westinghouse
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`Electric Corporation, 949 F.2d 653, 659 (3d Cir. 1991), citing Publicker, 733 F.2d
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`at 1070. “The First Amendment right of access requires a much higher showing than
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`the common law right to access before a judicial proceeding can be sealed.” In re
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`Cendant Corp., 260 F.3d 183, 198 n. 13 (3d Cir. 2001). Any restriction on the First
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`Amendment right of public access is “‘evaluated under strict scrutiny.’” Avandia,
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`924 F.3d at 673, quoting PG Publishing Company v. Aichele, 705 F.3d 91, 104 (3d
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`Cir. 2013).
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`Of these three, it is the middle tier, the common-law access right, that is
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`principally in play in this Report and Recommendation.
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`B.
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`The Common-Law Right of Access
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`1. The Avandia Guidance
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`While not purporting to articulate exhaustively what substantive showings
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`will justify sealing or redacting a judicial record and what showings will not, the
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`Third Circuit’s landmark ruling in Avandia did provide substantial guidance.
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`Avandia confirmed the long-standing truism that the presumption of public access is
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`“‘not absolute.’” Avandia, 924 F.3d at 672, quoting Bank of America, 800 F.2d at
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`344. The presumption of public access may be overcome.
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`5
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`The critical divide is the distinction between material containing palpable
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`trade secrets or proprietary business practices that will produce present commercial
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`and competitive harm, on the one hand, and vague, conclusory assertions of
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`commercial or competitive harm, or assertions that in fact appear grounded in
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`reputational interests and embarrassment, on the other. A party’s “‘vague assertions
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`that the transcript contains secretive business information, and that disclosure would
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`render [it] at a tactical disadvantage’ [are] insufficient to overcome that strong
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`presumption.” Avandia, 924 F.3d at 676, quoting LEAP Sys., Inc. v. MoneyTrax,
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`Inc., 638 F.3d 216, 221-22 (3d Cir. 2011). The touchstone is the persuasive
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`demonstration of specific, concrete, particularized of harm.
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`2. The Publicker Categories
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`The Third Circuit’s 1984 opinion in Publicker, decided some 25 years prior
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`to Avandia, endures as one of the most important substantive guides to what material
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`may justifiably remain sealed. In a paragraph describing situations in which sealing
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`could be justified, the Third Circuit postulated three categories: one involving “the
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`content of the information at issue,” a second “the relationship of the parties,” and
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`the third “the nature of the controversy.” Publicker, at 733 F.2d at 1073.
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`The Third Circuit then offered examples. For “the content of the
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`information,” it used as an example “safeguarding a trade secret.” Id. For the
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`“relationship of the parties,” it posited a suit by a client to prevent a lawyer from
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`6
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`disclosing confidential information protected by the attorney-client privilege. Id.
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`The Third Circuit then gave as an example of “the nature of the controversy,” a
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`passage which reads in its entirety: “A similar situation would be presented where
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`there is a binding contractual obligation not to disclose certain information which to
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`the court seems innocuous but newsworthy; in that situation unbridled disclosure of
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`the nature of the controversy would deprive the litigant of his right to enforce a legal
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`obligation.” Id. at 1073-74.
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`3. The Carve-Out for Discovery Motions
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`In Leucadia, Inc. v. Applied Extrusion Technologies, Inc., 998 F.2d 157 (3d
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`Cir. 1993), the Third Circuit held that the common-law right of access did not attach
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`to discovery motions. In excluding “discovery motions,” Leucadia relied heavily
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`on the fundamental principle that underlying discovery material itself is not a judicial
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`record. There is no common law right of access to “raw discovery.” Id. at 157. If
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`in the course of discovery, disputes arise, parties may file “discovery motions”
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`seeking the intervention of a court to resolve the disputes. Those motions may
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`require attachment of “raw discovery” materials, such as excerpts from depositions
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`or interrogatory answers. The core learning of Leucadia is that the common-law
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`right of access does not attach to such motions, or their exhibits containing raw
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`discovery, because this would have the effect of converting material that is normally
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`not a “judicial record” into material that is. The key passage in Leucadia thus
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`7
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`explained that “a holding that discovery motions and supporting materials are
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`subject to a presumptive right of access would make raw discovery, ordinarily
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`inaccessible to the public, accessible merely because it had to be included in motions
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`precipitated by inadequate discovery responses or overly aggressive discovery
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`demands.” Id. at 157.
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`4. The Procedural Requirements
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`Avandia contemplates a rigorous process of judicial review. The right of
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`access must not be demoted to “a mere formality.” Avandia, 924 F.3d at 676. To
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`ensure that proper weight is given to “the public’s strong interest in the openness of
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`judicial records,” a District Court must engage in “a document-by-document
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`review.” Id. Casual, superficial review does not suffice. “Again, the strong
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`presumption of openness inherent in the common law right of access ‘disallows the
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`routine and perfunctory closing of judicial records.’” Id., citing In re Cendant Corp.,
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`260 F.3d at 193-94.
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`The substantive and procedural standards that must be met to overcome the
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`presumption of access are onerous by definition and design. The party seeking to
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`seal judicial records must satisfy “a heavy burden.” Miller v. Indiana Hospital, 16
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`F.3d 549, 551 (3d Cir. 1994). The party seeking to have a record sealed “must show
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`that ‘the material is the kind of information that courts will protect and that
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`disclosure will work a clearly defined and serious injury to the party seeking
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`8
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`Case 1:18-cv-00924-CFC-SRF Document 558 Filed 09/02/20 Page 9 of 16 PageID #:
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`closure.’” Avandia, 924 F.3d at 677-78, quoting Miller, 16 F.3d at 55. In granting a
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`sealing order, a “District Court should articulate ‘the compelling[,] countervailing
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`interests to be protected,” make “specific findings on the record concerning the
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`effects of disclosure, and provide[ ] an opportunity for interested third parties to be
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`heard.’” Avandia, 924 F.3d at 677-78, quoting In re Cendant Corp., 260 F.3d at 194.
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`“‘In delineating the injury to be prevented, specificity is essential.’” Id. Generalized
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`incantations that secrecy is required to prevent competitive or commercial harm are
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`not enough to carry the movant’s burden. “‘Broad allegations of harm, bereft of
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`specific examples or articulated reasoning, are insufficient.’” Id.
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`The factfinding required by district courts must be careful and meticulous in
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`order to vindicate the rights of the public and the integrity of the judicial process
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`itself, notwithstanding the private interests or preferences of the litigants, even when
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`they are in agreement. “‘[C]areful factfinding and balancing of competing interests
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`is required before the strong presumption of openness can be overcome by the
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`secrecy interests of private litigants.’” Avandia, 924 F.3d at 677-78, quoting
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`Leucadia, 998 F.2d at 167.
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`
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`The Third Circuit’s Avandia opinion mandates a “document-by-document”
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`review of the claimed propriety of sealing. “[I]t must be clear from the record that
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`the district court engaged in a particularized, deliberate assessment of the standard
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`as it applies to each disputed document.” Id.
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`9
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`III. The Submissions of the Parties
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`A. Genentech’s Legal Arguments
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`
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`Genentech grounds its claims for continued sealing or redaction of certain
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`designated materials on its need to retain the confidentiality of proprietary trade
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`secrets or other competitively sensitive information. Such material is at the core of
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`that type of material that is routinely treated as overcoming the common-law
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`presumption of access. The revelation of trade secrets, or of other competitively
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`sensitive information that may not meet the formal definition of “trade secret,” but
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`nonetheless is shown to be of the nature that would work palpable competitive harm
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`on a party, is precisely the type of material most likely to successfully rebut the
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`presumption favoring access. As the Supreme Court observed in Nixon v. Warner
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`Communications, “courts have refused to permit their files to serve as … sources of
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`business information that might harm a litigant’s competitive standing.” Nixon, 435
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`U.S. at 598. So too, the Third Circuit has recognized that “[d]ocuments containing
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`trade secrets or other confidential business information may be protected from
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`disclosure.” Leucadia, 998 F.2d at 166. Thus “[d]espite the presumption, courts may
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`deny access to judicial records, for example, where they are sources of business
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`information that might harm a litigants competitive standing.” Littlejohn v. Bic
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`Corp., 851 F.2d 673, 678 (3d Cir. 1988), citing Nixon, 435 U.S. at 598.
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`10
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`B. Amgen’s Legal Arguments
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`Amgen groups its proffered retained sealings and redactions into four
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`categories:
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`(1)
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`Sensitive and proprietary manufacturing and trade secret information;
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`(2)
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`Sensitive and confidential material reflecting commercial and regulatory
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`intelligence, planning and/or strategy;
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`(3)
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`Sensitive and proprietary legal information, including privileged material
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`produced in response to the Court’s waiver orders; and
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`(4)
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`Sensitive and confidential pre-litigation material reflecting the parties’
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`substantive exchanges during the non-public pretrial exchanges under the Biologics
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`Price Competition and Innovation Act (“BPCIA”), 42 U.S.C. § 262.
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`
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`Sealing of material is legally justified under all four of these categories.
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`The first two categories identified by Amgen are essentially alternative
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`phrasings to the same principles relied upon by Genentech. They fall well within
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`the confines of the types of material that the Third Circuit has identified as
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`appropriate for sealing under the standards of Publicker, Avandia, and related cases.
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`As to the third category, confidential legal information is the sort of
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`relationship-based exception to the common-law access rule specifically described
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`in Publicker.
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`And the final category, confidential exchanges arising from the BPCIA
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`11
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`Case 1:18-cv-00924-CFC-SRF Document 558 Filed 09/02/20 Page 12 of 16 PageID
`#: 35006
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`process, is an extraneously imposed confidentiality obligation—imposed by
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`Congress, after all—carrying even greater weight than Publicker’s recognition that
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`contractual obligations may justify sealing or redaction. The BPCIA is a process
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`prescribed by Congress to streamline biosimilar product litigation through
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`negotiations directed at identifying patents to litigate or license. The Act by its terms
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`treats these exchanges as confidential. 42 U.S.C. § 262(l)(1)(C) (“No person that
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`receives confidential information . . . shall disclose any confidential information to
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`any other person or entity, including the reference product sponsor, without the prior
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`written consent of the [biosimilar] applicant.”).
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`On top of these four substantive justifications, much of the material
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`designated for continued sealing or redaction by both parties falls squarely within
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`the carve-out for discovery motions and accompanying attachments recognized in
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`Leucadia.
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`C. Factual Documentation
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`
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`Both Genentech and Amgen provided comprehensive and persuasive factual
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`explanation and documentation as to why the material each identified as appropriate
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`for sealing does in fact meet the criteria summarized above. Both parties submitted
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`numerous, lengthy, and detailed factual declarations by highly placed and expert
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`employees within their respective companies. Those substantial declarations
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`explained generally, and with reference to specific documents in the record, the
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`12
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`#: 35007
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`factual predicate for continued sealing. The positions and qualifications of those
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`declarants, as well as the substance of their presentations, are discussed as germane
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`in the Sealed Appendix.
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`
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`In generic terms, without broaching reference to specific redacted or sealed
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`material, the submissions of the parties were in alignment in describing the intensely
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`competitive scientific and business arena in which they compete. Both have
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`persuasively established the justification for sealing various docket entries and
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`accompanying exhibits. The proffered justifications include, among others, trade
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`secrets, proprietary scientific research, highly sensitive manufacturing information,
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`the confidential terms of settlement and license agreements, business intelligence,
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`regulatory strategies, and confidential legal information.
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`The parties have documented how the information contained in their proposed
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`sealings and redactions, if disclosed, would visit upon them present commercial and
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`competitive harm. In revealing sensitive and confidential business information to
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`their competitors, they would be supplying those competitors with information
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`regarding their knowledge, operations, capabilities, and strategies.
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`In some instances, the prospect of harm is linear and direct. Competitors in
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`the highly-competitive biologics marketplace could use Amgen’s or Genentech’s
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`own research to the competitors’ competitive advantage to more effectively develop
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`and manufacture products.
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`13
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`#: 35008
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`In other instances, the harm is less linear and direct, but still entirely real.
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`Both parties, as many in the industry, are constantly involved in litigation.
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`Revelation of the terms of settlement agreements, which are among the documents
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`for which continued sealing is often sought, could place the parties at a demonstrable
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`disadvantage in navigating and negotiating other litigation contests with competitors
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`in the same pharmaceutical space.
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`
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`The parties have established that in the highly competitive pharmaceutical
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`industry environment, even seemingly minor pieces of information about a
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`pharmaceutical company can be valuable to its competitors. So too, both parties have
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`demonstrated that they go to extraordinary lengths to safeguard the integrity of their
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`confidential information, both through the firewalls they impose to protect the
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`information from outsiders, and the closely guarded “need to know” protocols they
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`impose internally on their own employees.
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`
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`One size does not fit all in describing the specific nature of the proposed
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`redactions. In some instances the material reflects commercial intelligence—
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`research and strategic analysis of factors such as anticipated market share and
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`penetration, sales volume, or pricing and discount strategy. These competitive
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`assessments include inward-facing judgments on the parties’ own capacities as well
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`as outward-facing judgments on the capacities of others. The proffered redactions
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`also include information on the approaches of the parties to interfacing with
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`14
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`#: 35009
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`government regulators in their highly regulated industry. The parties each expend
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`substantial resources in conceptualizing how best to secure regulatory approval of
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`their products. Public revelation of those strategies could undercut the effectiveness
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`of those efforts, or provide competitors with value information they could exploit to
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`their own advantage.
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`In sum, the parties have engaged in appropriate self-restraint and self-scrutiny
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`in placing into the public domain much of the material previously filed under seal.
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`Having carefully scrutinized the sealings and redactions they seek to maintain, the
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`Special Master approves and recommends continued sealing and redaction, as
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`detailed more specifically in the accompanying Sealed Appendix.
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`IV. Recommended Order
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`
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`This litigation has been expansive, and the mechanics of executing the
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`operational directives of this Report and Recommendation are fraught with the
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`potential for inadvertent error. The guiding principles are simple enough:
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`(1) Any document previously sealed that is now to be unsealed in its entirety
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`should be unsealed.
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`(2) Any document previously sealed in its entirety that is now to continue to
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`be sealed in its entirety should remain sealed.
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`(3) Any document previously sealed in its entirety, or redacted in part, which
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`is now to retain some justifiable redactions, but narrowed from the prior entire
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`15
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`sealing or redacted sealing, should be re-filed in its new form, with only the approved
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`narrowed redactions continued.
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`
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`To implement these principles, the Parties have already conferred with the
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`Clerk of the Court. As a result of that consultation, this Report and Recommendation
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`recommends to the Court that the Parties be ordered to meet and confer and file a
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`joint submission to the Clerk of Court, in the form of an Appendix (as opposed to
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`document-by-document re-filings), with a courtesy copy to the Special Master, that
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`will: (1) identify those filings that were previously sealed in whole or in part that
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`should now be entirely unsealed; (2) identify those documents previously sealed that
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`are now to be continued to be sealed in their entirety; and (3) compile in the one
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`Appendix filing new versions of all documents previously filed entirely under seal
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`or with redactions, in their new form, with the redactions narrowed as approved by
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`the Special Master as listed in the Sealed Appendix, with the appropriate previously
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`sealed or redacted material now public, and the continued and approved material
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`redacted.
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`16
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