Patent Damages
16Aug/12Off

CDCA compels production of IBM cross-licenses and outbound licenses

On August 3, 2012, in Richard C. Williamson v. Citrix Online, LLC, et al., CV 11-02409-AHM (JEMx) (C.D. Cal.), Magistrate Judge McDermott granted the plaintiff’s motion to compel defendant IBM to produce outbound licenses and cross-licenses incorporated into, or used in or with, the accused technology (web conferencing) in response to document requests and an interrogatory.  In an earlier ruling, the court denied plaintiff’s motion to compel, but had based its decision on cases cited by IBM for the first time in a supplemental memorandum to which plaintiff had not responded.  But the denial was without prejudice.  Plaintiff filed its own supplemental memorandum, responding to IBM’s supplement, and then IBM responded to plaintiff.  On further review, the court granted plaintiff’s motion to compel.

IBM relied on two Georgia-Pacific factors in support of denial of the motion, while plaintiff relied on five such factors to demonstrate the requested agreements are relevant to damages, including the market value of the patent-in-suit as a generator of sales of non-patented items (convoyed sales).  In its responsive pleading, IBM did not address these five factors.

The court initially recognized that the standard for discoverability is broader than that for admissibility at trial, suggesting that while discoverable, the agreements may not ultimately get into the record at trial.  The court stressed the liberal construction of relevance and the “extremely broad” scope of discovery under the Federal Rules.

The court then addressed the Federal Circuit decisions cited by IBM:  Lucent, 580 F.3d 1301, 1327-28, and ResQNet, 594 F.3d 860, 869.  The court observed that IBM’s reliance on these decisions was somewhat misplaced, because they addressed the question of admissibility rather than discoverability.  The court also recognized that admissibility in those cases was fact-specific and that they did not set forth a per se rule of admissibility.  Slip op. at 2 (citing Metso Minerals, Inc. v. Powerscreen Int’l Distribution Ltd., 833 F. Supp. 2d 282, 310-12 (E.D.N.Y. 2011) (expert may rely on licenses other than those covered by the patents to glean insight into defendant’s licensing approach)).

The court also addressed the only discoverability case relied on by IBM:  Biax Corp. v. Nvidia, Corp., 271 F.R.D. 200, 213-15 (D. Colo. 2010).  Biax had relied on Lucent and ResQNet to deny discoverability of cross-licenses, but according to Judge McDermott had done so without any discussion of the different legal standards.   The Judge also cited two cases from the NDCA, post-Lucent and post-ResQNet, in which cross-licenses were deemed relevant for discovery purposes:  Barnes and Noble, Inc. v. LSI Corp., 2012 WL 1564734, at *3 (N.D. Cal. May 2, 2012) (“While cross-licenses may be different in structure than licenses that simply provide for royalty payments, both are relevant for discovery purposes and may lead to the discovery of admissible evidence”); Atmel Co. v. Authentic Inc., 2008 WL 276393, at *1-*2 (N.D. Cal. Jan. 31, 2008) (compelling production of cross-licenses).

The court then turned to the facts at issue.  It rejected IBM’s assertion that the requested cross-licenses and outbound agreements involve different technologies and different structures from the hypothetical license.  It found persuasive the five un-rebutted Georgia-Pacific factors on which plaintiff had relied.

Perhaps most interesting for future litigants, the court rejected IBM’s attempt to distinguish Barnes & Noble.  There, the court had ordered production only of comparable cross- and outbound licenses.  However, here, IBM had apparently failed to produce a declaration under oath on the comparability of the license agreements requested by plaintiff, and the court concluded that it “would be left to take IBM’s bare word that they have no relevance even for discovery purposes.”  Slip op. at 3.  Clearly, the court was not persuaded by IBM’s attorney argument regarding the comparability of the licenses at issue.

Finally, the court reasoned that its ruling was not unfair to IBM.  According to the court, IBM had initially agreed to produce the licenses, only later to change its mind.  The court also rejected IBM’s undue burden argument because it did not produce a declaration to quantify the time, money, and procedure to produce the documents.  Slip op. at 3 (citing In re Toys R Us-Delaware, Inc. v. Fair and Accurate Credit Transactions Act (FACTA) Litigation, 2010 WL 4942645, at *6 (C.D. Cal. July 29, 2010)).

For another case interpreting relevance broadly as to license agreements, see an SDCA decision that was addressed in another blog entry:  http://patent-damages.com/?s=sdca.

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