US Court issues protective order provisions in case against Interactive Brokers

A lawsuit targeting Interactive Brokers LLC, Interactive Brokers Group, Inc., and Thomas A. Frank continues at the Connecticut District Court, with the latest point of disagreement between the parties in this case being the access to source code materials.

The lawsuit is brought by a former client of the brokerage – Robert Scott Batchelar. He and a purported class of customers of Interactive Brokers LLC claim they were harmed by alleged “flaws” in the computerized system used by the brokerage to close out (i.e., liquidate) positions in customer brokerage accounts that have margin deficiencies. Whereas Batchelar argues that he is entitled to a comprehensive review of the source code materials, the defendants insist that a Supplemental Protective Order has to be issued by the Court.

The parties have presented to the Court a dispute about their proposed stipulated protective order. On July 26, 2019, Hon. Vanessa L. Bryant issued an Order. The document, seen by FinanceFeeds, includes a set of protective order provisions issued by the Court.

The Court states that the parties’ Supplemental Protective Order shall include the following language under Paragraph 5(a)(ii) (“Scope”):

Accordingly, no Source Code Qualified Person, including any Expert, shall 1) divulge all or any portion of Defendant’s Source Code or 2) testify or advise any person in connection with Defendants’ Source Code, disclosed pursuant to an order of this Court, in any separate matter, pre- litigation matter, action, investigation, mediation, arbitration or any other proceeding, except pursuant to an independent disclosure order of the court or other adjudicator presiding over such proceeding.

Second, the Court finds that attorneys employed by or affiliated with the law firm of the plaintiff’s counsel who are working on this case may review Interactive Brokers’ source code provided that they are working at the direction and under the supervision of an attorney of record in this case and they need to review Interactive Brokers’ source code to assist in the representation of the plaintiff in and for this case.

Further, the parties’ Supplemental Protective Order shall include the following language under Paragraph 3(b) (“Source Code Qualified Persons”):

“Source Code Qualified Persons” shall refer to Plaintiff’s Agent(s), who have been retained by Plaintiff or its Outside Counsel of Record to assist Plaintiff in prosecuting this Action. Source Code Qualified Persons shall only include the following: (1) Outside Counsel of Record in this Action who have filed an appearance in this Action for Plaintiff, and office personnel, support staff (i.e., persons or entities that provide litigation support services), legal assistants, paralegals, and associates, who are employed by the same firm as that of Outside Counsel of Record in this Action to the extent necessary and solely to assist Outside Counsel of Record to prosecute Plaintiff’s claims in this Action; (2) Outside Attorneys retained by Outside Counsel of Record to assist Outside Counsel of Record in prosecuting Plaintiff’s claims in this Action, directly for Outside Counsel of Record in this Action who have filed an appearance in this Action for Plaintiff, solely to the extent necessary and exclusively to assist Outside Counsel of Record to prosecute Plaintiff’s claims in this Action; and (3) Outside Consultants or Outside Experts (collectively, “Experts” or “Expert”) retained by Outside Counsel of Record solely to the extent necessary and exclusively to assist Outside Counsel of Record to prosecute Plaintiff’s claims in this Action. “Outside Consultants” herein shall refer to testifying and consulting experts.

Let’s recall that, on May 1, 2019, Albert Lukazik, a Software Engineering Department Head, Senior Technology Manager, and Information Security Officer for Interactive Brokers LLC and Interactive Brokers Group, Inc., filed a Declaration in support of defendants’ objection to produce source code materials.

In his Declaration, Lukazik stresses that the source code is one of Interactive’s foundational assets and incorporates its trade secrets and know-how accumulated over a period of more than 20 years. The source code is comprised of approximately 600,000 lines of code and it refers to various subsystems within Interactive’s trading system. If access to Interactive’s source code were made public, the brokerage’s competitors would potentially be able to replicate aspects of Interactive’s margin liquidation system, Mr Lukazik noted.

Such access could potentially also allow customers to improperly utilize Interactive’s trading platform in a manner that may result in heightened trading and liquidity risks to IB LLC and IBG, based on their improperly-gained knowledge of the source code, Mr Lukazik said.