Case of the Day: Heraeus Kulzer, GmbH v. Biomet, Inc.

Germany is one of the jurisdictions most implacably opposed to U.S.-style pretrial discovery in civil cases, or so it seems to me. Hence the irony of Heraeus Kulzer, GmbH v. Biomet, Inc., No. 09-2858 (7th Cir. Jan. 24, 2011), our case of the day, where a German firm suing an American firm in Germany for theft of trade secrets, sought to take discovery under the judicial assistance statute. The case is noteworthy primarily because the opinion (by Judge Posner) is lucid and to the point—not always the case when courts are considering issues of international judicial assistance!

Hereaus manufactures “bone cement” used in orthopedic surgery. It claimed that in the 1970s, it gave confidential information to Merck, its distributor, to allow Merck to obtain regulatory approvals for its product. In 1998 Merck and Biomet, another bone cement manufacturer, entered a joint venture. Hereaus’s claim was that Biomet had used the relationship with Merck to steal Hereaus’s trade secrets and create a new bone cement that was comparable to Hereaus’s product. Heraeaus sought discovery under the statute in Indiana, where Biomet was located.

Judge Posner gives some thought to the purposes of the statute. Discovery in the U.S. is broader than in most or all foreign countries. Why should foreign litigants be able to take advantage of our procedures when American litigants pursuing claims abroad may find their claims stymied by foreign limitations on discovery? The drafters of the statute wanted to “set[] an example to encourage foreign countries to enlarge discovery rights in their own legal system.” There has not been an enormous amount of progress on that front, at least in Germany! But Judge Posner put this puzzle to the side, as he found the statute clearly applicable to the case and thus found that Hereaus was entitled to discovery as long as it was not abusing the statute in some way.

One potential abuse is seeking discovery in a U.S. court that the party could have sought in the foreign court, in order to multiply the proceedings. That plainly wasn’t the case here—Judge Posner points out that without U.S.-style discovery, Heraeus could not possibly prove its case (which raises the question of comity: does the statute not give an unfair advantage to German firms accusing American firms of trade secret theft, while American firms making the same accusation against German firms are hamstrung by the limitations on documentary discovery in Germany?). Another potential abuse is that German courts, because they do not use juries in civil cases and do not have well-developed exclusionary rules of evidence, are ill-equipped to exclude from evidence the deluge of documents that a typical American discovery request can pry loose. Yet another potential abuse is threat of asymmetrical warfare: Heraeus might be empowered to impose enormous costs on Biomet without fear of retaliation in kind.

But Judge Posner found that none of these abuses existed in the case before him. If any of them were real threats, Biomet could have asked the German court to limit or bar Heraeus’s efforts to take discovery in the U.S., or to condition Heraeus’s right to take discovery on giving Biomet reciprocal rights. But Heraeus hadn’t done so. Moreover, Heraeus had refused to meet with Biomet to discuss limiting the scope of its discovery requests.

That’s not to say that once the court decides that discovery is permissible under the statute, anything goes. The Seventh Circuit remanded the case for consideration of objections to the scope and burdensomeness of the request under Rule 26, that is, under the ordinary rules of procedure that apply in domestic actions.

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