Illumina, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF ILLUMINA, INC.

AND GRAIL, INC.

Docket No. 9401. Order, August 24, 2021 Order directing general counsel to enforce two nonparty subpoenas. ORDER DIRECTING GENERAL COUNSEL TO ENFORCE NONPARTY SUBPOENAS On August 4, 2021, Respondents filed a motion requesting that the Chief Administrative Law Judge (“ALJ”) certify to the Commission, pursuant to Commission Rule 3.38(c), 16 C.F.R. § 3.38(c), Respondents’ request for court enforcement of two subpoenas for documents and testimony to nonparty Caris Life Sciences, Inc. (“Caris”). Caris opposed the Motion, asserting that (1) Respondents waited too long to bring the Motion, risking prejudice to Caris in potentially having to comply with the subpoenas in a short time frame; (2) the information demanded by the subpoenas was unnecessarily broad; and (3) collecting and producing the necessary documents and disclosing Caris’s confidential information to a competitor would be unduly burdensome. On August 16, 2021, the ALJ granted Respondents’ Motion, certifying their request for court enforcement of the subpoenas and recommending that court enforcement be sought. Having reviewed the parties’ filings and the ALJ’s certification and recommendation, we direct the General Counsel to seek enforcement of the subpoenas in federal district court. 1 I. BACKGROUND This dispute arises in the context of the Commission’s challenge to the proposed acquisition of Respondent GRAIL, Inc. (“GRAIL”) by Respondent Illumina, Inc. (“Illumina”). The following summary is based on allegations in the administrative complaint brought under Section 5 of the FTC Act, 15 U.S.C. § 45, and Section 7 of the Clayton Act, 15 U.S.C. § 18. 2 1 We use the following abbreviations for citations to the pleadings: Motion: [Sealed] Respondents’ Motion to Certify to the Commission a Request Seeking Court Enforcement of Document and Testimony Subpoenas Issued to Caris Life Sciences (Aug. 4, 2021) Opposition: Non-Party Caris Life Sciences, Inc.’s [Sealed] Response to Respondents’ Motion to Certify to the Commission a Request Seeking Court Enforcement of Document and Testimony Subpoenas Issued to Caris Life Sciences (Aug. 10, 2021) Goswami [Sealed] Declaration of Sharonmoyee Goswami, attached to Motion (Aug. 3, 2021) Decl.

ALJ Order: Order Granting Motion for Certification to the Commission of Request for Court Enforcement of Nonparty Subpoena (Aug. 16, 2021) 2 In addition to this administrative proceeding, Complaint Counsel also brought a parallel action in federal court seeking a preliminary injunction against the transaction. See Case No. 3:21-cv-800-CAB-BGS (S.D. Cal.), transferred from Case No. 21-cv-873 (D.D.C.). Complaint Counsel have since voluntarily dismissed that action. ILLUMINA, INC. 287 Interlocutory Orders, Etc.

According to the Complaint, GRAIL is a diagnostics company that is "racing against several other fums" to develop and commercialize a cancer screening test that relies on blood samples to detect a range of cancers. Complaint ,i,i 2-4, 21. Such tests, known as "multi-cancer early detection" ("MCED") tests, are poised to revolutionize how cancer is detected and treated. Id. ,nf 1-2. If they achieve their promise, MCEDs will allow for earlier and more successful treatment of various cancers, potentially saving thousands oflives. Id. ,i,i 3-4. The Complaint alleges that GRAIL's proposed acquirer, Illumina, is a dominant supplier of next-generation genetic sequencing platfonns ("NGS platfonns") that are essential inputs to the development and commercialization of MCED tests. Id. ,i,i 3, 5-6. According to the Complaint, both GRAIL and its rivals with MCED tests in development rely on Illumina's NGS platfo1m to sequence the sho1i fragments of DNA in the bloodstream that may reveal the presence of cancer. Id. ,i 5. Once Illumina acquires GRAIL, the Complaint alleges, Illumina's incentives as a supplier will change. Specifically, Illumina allegedly will gain the incentive to disadvantage GRAIL's MCED competitors who pose a threat to GRAIL by raising their costs for NGS or other1w ise disrnpting their effo1is to develop and commercialize their products. Id. ,i,i 11-12. GRAIL' s MCED competitors, the Complaint alleges, lack alternative NGS suppliers to whom they could tum in the event that Illumina engages in these tactics. Id. ,i 13. If Illumina follows through on its changed incentives, the transaction allegedly would cause reduced innovation in MCED tests, as well as potentially higher costs and reduced quality and choice in such tests. Id. 14. Of aiiicular relevance to the sub oenas at issue here the Com laint alle es that Respondents raise a number of defenses to the Complaint, including asse1iing that the proposed transaction will accelerate, not retai·d, the development of blood-based cancer screening tests. Answer at 1. Respondents asse1i that GRAIL's test is unique in that no other company has publicly disclosed a test in development that can identify such a broad range of cancers in asymptomatic patients. Id. at 3. Further, Respondents state that "[t]here are no 'rivals' to GRAIL" because "no NGS-based cancer screening tests have been launched on the mai·ket an here in the world." Id. Res ondents s ecificall den the Com laint's alle ation that Id. ,I72.

II. DISCOVERY TAKEN OF CARIS Some discove1y of Caris has occurred. In December 2020, before any case was filed, Complaint Counsel served a Civil Investigative Demand on Cai·is. Motion at 3 · Goswaini Deel. Ex. 1. In res onse to the CID Caris asse1ied that VOLUME 172 Interlocutory Orders, Etc.

Goswami Deel. Ex. 3 at 3. 3 During the pre-filing investigation, Complaint Counsel convened an investigational hearing of Dr. David Spetzler Caris's President and Chief Scientific Officer at which Dr. S etzler testified under oath that . Goswanu Dec. Ex. 2. By rule, Respondents' counsel did not attend the investigational hearing and were not able to crossexamine Dr. Spetzler. 4 Respondents' counsel received copies of the CID response and the investigational hearing transcript after the Complaint was filed. On April 8, 2021, Respondents issued a subpoena duces tecum to Caris in the parallel district comi action. Goswami Deel. Ex. 4. The sub oena sought, inter alia, documents relating to Respondents re-served the subpoena m t e a 1strabve procee mg a er t e vo untaiy 1srmssal of the federal case. Goswami Deel. Ex. 17. In the inte1vening four months, the paiiies met and confer1Ted re eatedl in an effort to resolve dis utes over the sco e of the sub oena. In total Cai-is states that Opposition at 3. Cans asse1is t at . . e produced. Goswami Deel. Ex. 14 p. 1; Opposition at 3, 8-9.

On May 21, 2021 , Respondents se1ved an administrative subpoena for a deposition of Dr. Spetzler. Goswaini Deel. Ex. 18. The deposition has not yet taken place, and Cai·is's counsel has stated that Caris would not onl withhold the res onsive doclllllents but would forbid Dr. S etzler from testifying on the topic Goswaini Deel. Ex. 23 (Emails, S. Jones to S. Goswami et a ,. to S. Jones et al. (Jun. 22, 2021)).

III. RESPONDENTS' MOTION TO CERTIFY, CARIS'S RESPONSE, AND THE ALJ'S ORDER Facing an impasse on both subpoenas, Respondents filed the Motion seeking certification to the Cominission for enforcement. Res ondents' Motion ex lained that the Complaint referenced and asse1ied that Motion at 1. -~ ne tat but declined to cooperate with Respondents in their effo1is to validate and flesh out this m ation. Motion at 2-4.l! 3 Caris also appears to have produced certain documents in response to the CID, with copies produced to Respondents. However. Res ondents' counsel characterized the documents as Goswami Deel. Ex. 10 at 2.

See Collllllission Rule 2.7(f)(3), 16 C.F.R. § 2.7(f)(3) ("For investigational hearings [ for] oral testimony, the hearing official shall exclude from the hearing room all persons other than the person being examined, counsel for the person being examined, Commission staff, and any stenographer or other person recording such testimony."). ILLUMINA, INC. 289 Interlocutory Orders, Etc.

fu response to Respondents' Motion, Caris asserted that Respondents had refused reasonable attempts at compromise regarding the scope of their requests and had instead chosen to file an "eleventh hour" Motion nine business days before ti·ial. Opposition at 1-2. Caris also claimed · · · excessive, paiticularly with regai·d t Res on an e requests wou reqmre Cans to con uct tnne-consUillillg document seai·c es on an expedited basis. Id. at 8-9. Finally, although Caris acknowledged the existence of a protective order covering proprietaiy infonnation of non-paities, Cai·is asserted that Respondents had demonsti·ated a lack of concern about the terms of this order by improperly supplying confidential Caris documents to a GRAIL-affiliated consultant. Opposition at 5.

The ALJ granted the Motion and recommended that the Commission seek enforcement of the subpoenas, as narrowed to the scope that Respondents' counsel indicated willingness to accept during the meet-and-confer process with Cai·is. 5 Under that narrowed sco e the sub oenas would cover 1 the production of documenta1 material sufficient to laint alleges Caris to be is among those entities whose ability to compete w1 a ege y ea verse ya ecte y t e acqmsition. Id. at 4. Regai·ding timeliness, the ALJ detennined that, while it would have been better for Respondent to have filed eai·lier, the record revealed that the pa1ties were actively attempting to reach agreement on documents, and then on deposition topics, up until impasse was finally reached on August 2, 2021, with the Motion filed two days later. Id. at 5. Regarding alleged burden, the ALJ's reasoning was twofold. On the matter of the alleged protective order violation, Respondents had denied violating the order and had represented, among other things, that the consultant subsequently destroyed the materials; that he would not rely on them for any opinions; and that, except for outside counsel, Respondents had not received the material provided to the consultant. Id. Finally, as to Caris's concerns about the document seai·ch, the ALJ found that Caris's assertions of burden were concluso1y and did not go beyond the imposition on subpoenaed paities that "is to be expected and is necessa1y in fortherance of the agency's legitimate inqui1y and the public interest." Id. at 5-6, quoting FTC v. Dresser Indus., Inc., Misc. No. 77-44, 1977 WL 1394 at *5 (D.D.C. Apr. 26, 1977). 5 See, e.g., Goswami Deel. Ex. 23 p. 1 (Email, S. Goswami to S. Jones et al., Jun. 22, 2021 ); Goswami Deel. Ex. 24 p. 4 (Email, S. Goswami to S. Jones et al., Jun. 8, 2021). VOLUME 172 Interlocutory Orders, Etc.

IV. ANALYSIS The subpoenas, as nanowed seek docume · is close to competing with GRAIL. The materials that Caris seeks to withhold e p resolve this dispute. Therefore, we agree with the ALJ's conclusions. Caris's objection that the materials include confidential and trade secret info1mation does not candy the day. The traditional solution to confidentiality issues is for materials to be produced to outside counsel under a protective order similar to that in place here. See FTC v. Dresser Indus., 1977 WL 1394 at *5 ("The mere fact that some of the subpoenaed material may be confidential does not, however, excuse compliance with the subpoena"; FTC protective order deemed adequate); Dean v. Anderson, No. 01-2599-JAR, 2002 WL 1377729, at *3 (D. Kan. June 6, 2002) ("[I[t is well settled that confidentiality does not act as a bar to discovery and is generally not grounds to withhold documents from discove1y. Confidentiality concerns in many cases may be addressed with an appropriate protective order.") (citations omitted); Barrington v. Mortage IT, Inc., No. 07-61304-CIV, 2007 WL 4370647, at *1 (S.D. Fla. Dec. 10, 2007) (accord); Aquastar Pool Prod. Inc. v. Paramount Pool & Spa Sys., No. CV-19-00257-PHXDWL, 2019 WL 250429, at *4 (D. Ariz. Jan. 17, 2019) ("Paramount is not entitled to withhold those materials [that contain confidential info1mation] from Aquastar because a protective order is ah-eady in place that will prevent Aquastar from misusing the info1mation."); FTC v. Rockefeller, 441 F. Supp. 234, 242 (S.D. N.Y. 1977), ajfd 591 F.2d 182 (2d Cir. 1979) (stating that an objection to a subpoena on grounds that it seeks confidential infonnation "poses no obsta.cle to enforcement"). As for the claimed protective order infraction, we concur with the ALJ. As far as the record before us shows, a violation of the protective order may not have occmTed; Caris' s materials apparently were not disclosed to Respondents' personnel, and the documents have since been destroyed and will have no impact on the case. Opposition Ex. 3.

Finally, we are unpersuaded by Caris's argument that Respondents are baned from enforcing the subpoenas by their delay or by having taken putatively unreasonable positions in meet-and-confer negotiations. Respondents' counsel met and confened with Caris numerous times, reasonably compromising and reducing the scope of their requests down to what appears to be a minimum. See, e.g., Goswami Deel. Ex. 12 at 1 (Email, S. Goswami to S. Jones et al. (May 21 2021 statin that "we have a clear need for at least some documents sufficient to describe document"

disagreed that any of the requested info1mation regarding relevant, and stated that Caris would not only withhold the responsive ILLUMINA, INC. 291 Interlocutory Orders, Etc.

Dr. Spetzler from testifying on the topic. Goswami Deel. Ex. 23 (Emails, S. Jones to S. Goswami et al. (Jun. 17 and 22, 2021 )). While we agree with the ALJ that Respondents could usefully have declared an impasse and brought the Motion earlier, we also note (as he did) that under Commission Rule 3.44(c), the evidentiaiy record remains open until three business days after the conclusion of trial, unless supplementation is required. Furthennore, under Commission Rule 3.51(e), "At any time from the close of the heai·ing record pmsuant to§ 3.44(c) until the filing of his or her initial decision, an Administrative Law Judge may reopen the proceeding for the reception of fmiher evidence for good cause shown." Thus, there ai·e multiple mechanisms by which Caris's evidence can enter the trial record. We conclude that it is appropriate to seek enforcement of the subpoenas.

Accordingly, IT IS HEREBY ORDERED that the General Counsel take appropriate action to enforce in federal disti·ict comi (1) Respondents' subpoena duces tecum to Caris Life Sciences Inc. naiTowed to cover documents sufficient to describe to be completed within one week of the disti·ict comi's order and the deposition of Dr. Spetzler to take place promptly thereafter.

By the Commission.

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