Sapphire supplier wants to expose details of its deal with Apple

Apple's confidentiality agreements go too far, put other creditors at a disadvantage, GT Advanced Technologies argues

GT Advanced Technologies, the company that was to supply Apple with scratch-resistant sapphire, has asked a federal bankruptcy court to make public confidential information that would describe its partnership with Apple and explain how GT collapsed.

Previously, those documents had been filed in redacted form by GT. But in a motion made on Friday, GT asked the court to order it to file unredacted versions of several documents.

"GTAT believes that, in the interest of their creditors, equity holders, and other stakeholders, as well as to ensure an open, transparent, and fair process in these Chapter 11 cases, unredacted versions of the Supplemental First Day Declaration, the Motion to Reject, the Wind Down Motion, and the Motion to Expedite, should be filed," GT's lawyers wrote.

"Although institutions like Apple frequently desire to keep their entire business operations confidential, that position creates significant logistical problems in the Chapter 11 context," GT continued in its motion. "While parties may have a legitimate interest in protecting their trade secrets because disclosure of the 'secret sauce' reduces the value of a business, many times the information for which protection is sought does not require the level of protection requested."

GT said it had struck out parts of those documents it has filed so far because it was afraid Apple would penalize it under the terms of the confidentiality agreements it signed with the Cupertino, Calif. company last year. According to GT, each violation of those agreements would require it to pay Apple $50 million.

To avoid those penalties, GT requested that the court order it to file unredacted versions of the documents.

"The Confidentiality Agreement, however, does permit the recipient of Confidential Information to disclose such information 'to the extent required by law,'" GT said (emphasis in original).

GT contended that the confidentiality Apple demanded would put other creditors at a disadvantage because only Apple would have the complete picture. "Blanket confidentiality for all matters relating to one party in the Chapter 11 case risks allowing that party to have disproportionate control over the case," GT asserted.

If the court does not grant its motion, said GT, the alternative was to let it file unredacted versions of the documents under a court seal of secrecy.

But GT argued most strenuously that it was in everyone's interest -- except, presumably, Apple -- to make public the details of its dealings with Apple. "The Court should carefully and skeptically scrutinize whether the confidentiality required under GTAT's agreements with Apple require sealing the [documents]," GT said.

Apple has not filed a rebuttal to GT's motion -- it has until the end of business on Tuesday -- but it would almost certainly argue against publicizing its business partnership.

While GT's motion said nothing about other motives -- not a surprise -- GT may want to take the cover off Apple's practices to retaliate against its partner. In other Friday filings, for example, GT claimed its agreements with Apple "imposed oppressive and burdensome terms and obligations on GTAT" and that it should be freed of those agreements because they were eating into what cash it had to the tune of $1 million per day.

In that second filing, GT also implied that it would, once it had reorganized using Chapter 11, take other actions against Apple. "GTAT believes that it has many claims against Apple arising out of its business relationship with Apple," the company said.

GT announced it was filing for Chapter 11 on Oct. 6, surprising investors, creditors, and according to Apple, even its partner. Last year, the two companies struck a deal under which Apple would provide a $578 million interest-free loan so that GT could purchase equipment to produce large quantities of sapphire material.

GT was also to lease an Apple-owned facility in Mesa, Ariz.

At the time of its signing, the deal triggered speculation that Apple would use the sapphire as touch display covers for its iPhone, particularly the then-anticipated larger-screen model. While that didn't come to pass -- according to tear-down experts, both the iPhone 6 and 6 Plus used Corning's Gorilla Glass 3 instead -- the mid- and top-tier Apple Watch lines are to use sapphire as their face-covering crystals.

The bankruptcy court has scheduled a hearing on Wednesday to discuss a number of GT's motions, including the one that would submit unredacted versions of the documents GT into the public record.

Copyright © 2014 IDG Communications, Inc.

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