PUBLIC 06 08 2018 UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION 591047 OFFICE OF ADMINISTRATIVE LAW JUDGES In the Matter of PUBLIC Otto Bock Healthcare North America, Inc. Docket No.: 9378 Respondent NON-PARTY ABILITY PROSTHETICS & ORTHOTICS’ MOTION FOR INDEFINITE IN CAMERA TREATMENT To the Honorable D. Michael Chappell Chief Administrative Law Judge Counsel for non-party Ability Prosthetics & Orthotics (“Ability”), pursuant to Rule 3.45(b) of the Federal Trade Commission’s Rules of Practice, 16 C.F.R. §3.45(b), respectfully moves this Court for indefinite in camera treatment of commercially-sensitive and confidential portions of the transcript of the April 4, 2018 deposition of Ability’s Chief Executive Officer Jeffrey M. Brandt, and for indefinite in camera treatment of the entirety of one competitiveiy- sensitivc, confidential business document designated as an exhibit to Mr. Brandt’s deposition. Respectfully submitted, White and Williams LLP 1650 Market Street, Suite 1800 Philadelphia, PA 19103-7395 Phone: 215-864-7032 Fax: 215-399-9610 Email: [email protected] Counsel for Non-Party Ability Prosthetics & Orthotics DATED: June 8, 2018 209741 14v. 1 PUBLIC UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION OFFICE OF ADMINISTRATIVE LAW JUDGES In the Matter of ) ) PUBLIC Otto Bock Healthcare North ) America, Inc. ) Docket No.: 9378 ) Respondent ) _________________________________________ ) NON-PARTY ABILITY PROSTHETICS & ORTHOTICS’ MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR INDEFINITE IN CAMERA TREATMENT Pursuant to Rule 3.45(b) of the Federal Trade Commission’s Rules of Practice, 16 C.F.R. §3.45(b), Counsel for non-party Ability Prosthetics & Orthotics (“Ability”) submits this Memorandum of Law in support of Ability’s Motion, filed this date, for indefinite in camera treatment of commercially-sensitive and confidential portions of the transcript of the April 4, 2018 deposition of Ability’s Chief Executive Officer Jeffrey M. Brandt (the “Confidential Testimony”), and for indefinite in camera treatment of the entirety of one competitively- sensitive, confidential business document (the “Confidential Document”) designated as an exhibit to Mr, Brandt’s deposition (collectively, the “Confidential Information”). Counsel for FTC and counsel for Respondent Otto Bock Healthcare North America, Inc. have stated that they do not oppose Ability’s Motion. A corresponding Statement Regarding Meet and Confer is appended to this Memorandum. Mr. Brandt’s deposition testimony was given in response to Subpoenas ad Testificandum in this matter. See Exh. A to this Memorandum (Dep, Exh. Brandt 2). Ability produced the Confidential Document at issue in response to Subpoenas Duces Tecum from the Parties. See Exh. B to this Memorandum (Dep. Exh, Brandt 3). In fact, the Confidential Document is a 20974114v,l PUBLIC spreadsheet that Ability created de novo from its internal corporate data expressly to respond to certain requests for information in the subpoenas that Complaint Counsel and Counsel for Otto Bock served on Ability. This Court signed a Protective Order Governing Confidential Material in this matter on December 20, 2017 (the Order was entered on December 28, 2017). That Order governs only the handling of Discovery Material, however, and if a Party or non-party wishes to prevent public disclosure of Confidential Material at the hearing, it must seek an order for in camera treatment of any document or transcript that a Party plans to introduce into evidence at the administrative trial of this matter. Protective Order 10. Complaint Counsel have notified Ability that they intend to offer the Confidential Testimony (Trial Exh. No. PX05149, Bates No. PX05149-001 - 106) and the Confidential Document (Trial Exh. No. PX03282, Bates No. AP0000017) into evidence in the administrative trial of this matter, currently scheduled to begin on July 10, 2018. See Exh. C to this Memorandum (Letter from Amy S. Posner, Esq, to Jeffrey Brandt c/o David Creagan, Esq. dated May 23, 2018 & Attachment A). A copy of the Confidential Testimony is Exhibit D to this Memorandum, and a copy of the Confidential Document is Exhibit E, The Confidential Testimony and the Confidential Document warrant indefinite in camera treatment because they contain sensitive and confidential information about Ability’s internal business structure, finances, practices, strategies, and contracts that, were it made public or divulged to Ability’s suppliers or competitors, would injure Ability’s capacity to compete in the market for prosthetic services. In addition, the Confidential Document also contains personal 2 - - 20974114v.l PUBLIC identifying information and consumer information that require indefinite in camera treatment.1 Therefore, Ability requests indefinite in camera treatment of portions of the Confidential Testimony and indefinite in camera treatment of the Confidential Document in its entirety. In support of its Motion, Ability relies on the Declaration of Jeffrey M. Brandt (“Brandt Declaration”), attached as Exhibit F to this Memorandum. The Brandt Declaration provides additional details about the Confidential Testimony (Exh. D) and the Confidential Document (Exh. E) for which Ability seeks in camera treatment. I. Public disclosure of the Confidential Information would seriously injure Ability’s competitiveness in the market for prosthetic services by revealing proprietary, commercially sensitive, and confidential information about Ability’s business to its suppliers, competitors, and payors. In camera treatment of information is appropriate when its “public disclosure will likely result in a clearly defined, serious injury to the person, partnership, or corporation requesting” such treatment. 16 C.F.R. §3.45(b). Here, serious competitive injury would result from public disclosure because the Confidential Information is proprietary and material to Ability’s business. See In re General Foods Corp,, 95 F.T.C. 352, 355 (1980); In re Dura Lube Corp., 1999 F.T.C. LEXIS 255, *5 (1999). Where that is the case, courts generally attempt “to protect confidential business information from unnecessary airing.” IIP. Hood & Sons, Inc,, 58 F.T.C. 1184, 1188 (1961). Indeed, it is unquestionable that “the confidential records of businesses involved in Commission proceedings should be protected insofar as possible.” Id. at 1186. Moreover, Ability is a non-party to this proceeding and is thus entitled to “special solicitude” in the consideration of its request for in camera treatment of its Confidential Information, See In re Kaiser Aluminum & Chem. Corp., 103 F.T.C. 500, 500 (1984). Among 1 The personal identifying and personally sensitive information in the spreadsheet was redacted prior to production of the document to FTC and Otto Bock, but Trial Exhibit PX03282 still contains competitively-sensitive, confidential business information of Ability that should be granted indefinite in camera treatment. 3 - - 209741 14v, 1 PUBLIC the reasons for the “special solicitude” shown non-parties is the realization that “[a]s a policy matter, extensions of confidential or in camera treatment in appropriate cases involving third party bystanders encourages cooperation with future adjudicative discovery requests.” Id. That has certainly been the case here where Ability ~ a customer of the Parties, not just a “bystander” - has cooperated with FTC Complaint Counsel and counsel for the Respondent and voluntarily produced documents and provided deposition testimony in this proceeding. All of these factors should further tip the scales toward granting indefinite in camera treatment to Ability’s Confidential Information, The Confidential Information for which Ability seeks indefinite in camera treatment is non-public and material to Ability’s competitiveness in the market for prosthetic services. As required, the Brandt Declaration (Exh. F) demonstrates the non-public nature of the Confidential Information and its materiality to Ability’s capacity to compete. See In re North Texas Specialty Physicians, 2004 FTC LEXIS 109, at *2-3 (Apr. 23, 2004). According to the Brandt Declaration, disclosure of the Confidential Information to the public, which would include Ability’s competitors and suppliers and the payors that reimburse Ability for the prosthetic services provided to patients, would cause serious competitive injury to Ability. See Exh. F, Brandt Deck 5. The Confidential Document, by itself, shows the cost of goods (“COG”) to Ability (i.e., how much Ability pays various manufacturers and suppliers for prostheses, which includes any negotiated discounts), the allowable claim (i.e., how much Medicare or private health insurers will pay Ability for the prosthetic services provided to patients), the cost to Ability of various microprocessor knees (“MPKs”) including any negotiated discounts, and Ability’s gross margin (“GM”) on each patient. Ability keeps all of that commercially-sensitive information 4 - - 20974ll4v.l PUBLIC confidential because it is material to the core of Ability’s business and capacity to compete in the marketplace. Ability’s competitors, suppliers, and payors would derive competitive advantages from knowing Ability’s Confidential Information that would injure Ability’s capacity to negotiate costs and prices, shrink its revenue and profit margins, and weaken Ability’s overall competitiveness. See Exh. F, Brandt Deck t 6. The Court should thus grant indefinite in camera treatment to the Confidential Document in its entirety. In addition, in his deposition, in answer to questions from counsel for FTC and Otto Bock, Mr. Brandt testified about the data and information in the Confidential Document. All of that testimony should likewise be granted indefinite in camera treatment. See Exh. F, Brandt Deck 11 9. Mr. Brandt’s deposition transcript also contains his testimony about Ability’s internal business affairs, past, present and future, and reveals confidential information about Ability’s management, its Board of Directors, its corporate debt and finances, Mr. Brandt’s personal thought processes in deciding whether to seek licensure or to open offices in Pennsylvania or other states, and similar non-public matters that have no relevance to the dispute before this Court but that if publicly disclosed would cause injury to Ability’s business or reputation and weaken its competitiveness. See Exh. F, Brandt Deck If 10. For these reasons, those portions of the Confidential Testimony should also be granted indefinite in camera treatment. Mr. Brandt also testified at his deposition about Ability’s relationships with the various payors (principally, Medicare and private health insurers) that reimburse Ability for the care provided to patients. Those payors are often identified by name and compared with one another as to the approaches they lake or might take to different scenarios and treatment options. Public disclosure of those comparisons could damage Ability’s relationships with the payors and 5 - - 209741 14v, 1 PUBLIC consequently injure its ability to compete with other prosthetic service providers. See Exh. F, Brandt Dec], f 11, Those portions of the Confidential Testimony should, therefore, be granted indefinite in camera treatment. II. The Confidential Information will remain competitively-sensitive in the future; therefore, indefinite in camera treatment is justified. Because the Confidential Information at issue “is likely to remain sensitive or become more sensitive with the passage of time,” In re Dura Lube Corp., 1999 FTC LEXIS *7-8, such that the need for confidentiality is not likely to decrease over time, Ability requests that it be given in camera treatment indefinitely. The Brandt Declaration (Exh. F) states why the competitive significance of the Confidential Information is unlikely to decrease over time. The information in the Confidential Document was drawn from Ability’s records for the period January 1,2016 to December 31, 2017. Ability compiled the information in a spreadsheet that it created expressly in response to the subpoenas Ability received from FTC and Otto Bock. Although the data in the spreadsheet are from the two most recent calendar years, the relationships, ratios, and percentages expressed by the data are unlikely to change for the foreseeable future. See Exh. F, Brandt Deck *| 7. Hence, the Court should grant indefinite in camera treatment to the Confidential Document and the designated portions of the Confidential Testimony.2 III. Conclusion. For all of the reasons stated in this Memorandum and in the Brandt Declaration, disclosure of the Confidential Information to the public — and consequently to Ability’s competitors, suppliers, and payors — would cause serious competitive injury to Ability. 2 Should the Court decide against granting indefinite in camera treatment, Ability respectfully asks that the period of in camera treatment granted be no less than 10 years from the date of the Court’s Order. 6 - - 20974114v.l PUBLIC Therefore, Ability respectfully requests this Court to grant indefinite in camera treatment for the Confidential Information, Respectfully submitted, ~o David J. Creagan White and Williams LLP 1650 Market Street, Suite 1800 Philadelphia, PA 19103-7395 Phone:215-864-7032 Fax: 215-399-9610 Email: [email protected] Counsel for Non-Party Ability Prosthetics & Orthotics DATED: June 8, 2018 7 - - 20974114 v. 1 PUBLIC STATEMENT REGARDING MEET AND CONFER The undersigned certifies that counsel for Non-Party Ability Prosthetics & Orthotics notified counsel for Complainant the Federal Trade Commission and counsel for Respondent Otto Bock Healthcare North America, Inc. by email on June 6, 2018 that it would be seeking in camera treatment of the Confidential Information. Both counsel for FTC and counsel for Otto Bock stated by reply email that they would not object to Ability’s Motion. Respectfully submitted, White and Williams LLP 1650 Market Street, Suite 1800 Philadelphia, PA 19103-7395 Phone: 215-864-7032 Fax: 215-399-9610 Email: [email protected] Counsel for Non-Party Ability Prosthetics & Orthotics DATED: June 8, 2018 20974134v. i PUBLIC UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION OFFICE OF ADMINISTRATIVE LAW JUDGES In the Matter of ) ) PUBLIC Otto Bock Healthcare North ) America, Inc. ) Docket No.: 9378 ) Respondent ) _________________________________________ ) [PROPOSED] ORDER GRANTING INDEFINITE IN CAMERA TREATMENT Upon consideration of non-party Ability Prosthetics & Orthotics’ Motion for In Camera Treatment, it is HEREBY ORDERED that the following document in its entirety and the designated pages and lines of the transcript of the April 4, 2018 deposition of Jeffrey M. Brandt are granted indefinite in camera treatment from the date of this Order: Trial Document Title/ Date Beginning Ending Bates No. Exhibit No. Description Bates No. PX03282 Exh. E to Memo, of Law, 00/00/0000 APO 000017 APO 000017 Ability Prosthetics & Orthotics Spreadsheet (Dep. Exh. Brandt 1) Trial Document Date Redacted Redacted Line(s) Exhibit No. Title/Description Page(s) PX05149 Exh. D to Memo, of Law, 04/04/2018 30 12 Deposition Transcript of Jeffrey Brandt (Ability Prosthetics & Orthotics) 47 12-13, 17 59 19-20 60 10-11 61 13, 23-25 62 1-3 68 3, 7 69 3-7, 23-25 70 1-3, 12 20974114v. 1