BlackBerry Limited v. Typo Products LLC

Filing 157

ORDER GRANTING BLACKBERRY'S RENEWED MOTION FOR CONTEMPT; GRANTING BLACKBERRY'S MOTION TO COMPEL by Judge William H. Orrick granting 126 Motion for Order to Show Cause and granting 125 , 145 , and 146 Administrative Motions to File Under Seal. Typo is ordered to pay BlackBerry $860,600 in sanctions, within 45 days of this order, plus attorneys' fees and costs incurred in connection with Typo's contempt. BlackBerry shall submit documentation to the Court to show the costs and attorneys' fees incurred in connection with Typo's contempt so that the Court can order costs and fees to be paid by Typo. This order also GRANTS BlackBerry's motion to compel depositions and documents. (jmdS, COURT STAFF) (Filed on 2/4/2015)

1

UNITED STATES DISTRICT COURT

2

NORTHERN DISTRICT OF CALIFORNIA

3
4

BLACKBERRY LIMITED,

Case No. 14-cv-00023-WHO

Plaintiff,
5
ORDER GRANTING BLACKBERRY’S
RENEWED MOTION FOR
CONTEMPT; GRANTING
BLACKBERRY’S MOTION TO
COMPEL

v.
6
7

TYPO PRODUCTS LLC, et al.,
Defendants.

8

Re: Dkt. No. 125, 126, 145, 146
9
INTRODUCTION
10
Plaintiff BlackBerry Limited moves for a finding that defendant Typo Products LLC is in
11
United States District Court
Northern District of California

contempt of the preliminary injunction issued in this matter involving allegations of patent and
12
trade dress infringement. Dkt. No. 126. BlackBerry’s motion is GRANTED because it
13
established that Typo, after the preliminary injunction took effect, sold enjoined products,
14
provided warranty replacements of the enjoined products, and promoted enjoined products to
15
consumers. Typo is ordered to pay BlackBerry $860,600 in sanctions, plus attorneys’ fees and
16

costs incurred in connection with Typo’s contempt.

17

This order also GRANTS BlackBerry’s motion to compel depositions and documents.

18
Dkt. No. 146.
19
20

I.

BLACKBERRY’S RENEWED MOTION FOR CONTEMPT
BACKGROUND

21
On March 28, 2014, I granted plaintiff BlackBerry’s motion for a preliminary injunction
22
barring defendant Typo from distributing its add-on keyboard for the iPhone which, BlackBerry
23
alleges, violates BlackBerry’s patents. Dkt. No. 39.
24
The preliminary injunction provided that:
25
26
27
28

Upon the posting of a bond by Blackberry, Typo Products LLC and
its officers, agents, affiliates, employees, and attorneys, and all those
persons acting or attempting to act in concert or participation with
them, ARE ENJOINED FROM:

a) making, using, offering to sell, or selling within the United
States, or importing into the United States, or marketing,
promoting, or distributing Typo Products’s Typo Keyboard
Case, which is depicted in BlackBerry’s moving papers, and
any product that is no more than colorably different from
these specified products and embodies any design contained
in U.S. Design Patent No. D685,775; and

1
2
3
4

b) making, using, offering to sell, or selling within the United
States, or importing into the United States, or marketing,
promoting, or distributing Typo Products’s Typo Keyboard
Case, and any product that is no more than colorably
different from the specified products and infringes U.S.
Patent No. 7,629,964.

5
6
7
8

Dkt. No. 39 at 24. The preliminary injunction took effect when BlackBerry posted the required

9

bond on April 15, 2014. Dkt. No. 55.
BlackBerry contends that Typo is in contempt of the preliminary injunction for selling the

10

United States District Court
Northern District of California

11

enjoined keyboards, providing warranty replacements, and promoting the enjoined keyboard.

12

BlackBerry seeks:

13

1. $2,643,000 in sanctions against Typo, reflecting disgorgement of all money
received by or owed to Typo from its violations of the preliminary injunction
and trebling of all amounts disgorged;

14
15

2. BlackBerry’s attorneys’ fees and costs incurred in pursuing the contempt and
all related discovery; and

16
17

3. An order precluding Typo’s reliance on an advice of counsel defense and a
finding that Typo willfully violated the preliminary injunction.1

18

LEGAL STANDARD
19

Civil contempt sanctions may be imposed, upon notice and an opportunity to be heard, “to

20
coerce the defendant into compliance with the court’s order, and to compensate the complainant
21
22
23
24

for losses sustained.” United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947).
A party alleging civil contempt “must demonstrate that the alleged contemnor violated the court’s
order by clear and convincing evidence, not merely a preponderance of the evidence.” In re DualDeck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993). “The contempt

25
26
27
28

1

BlackBerry moves to seal its opening and reply briefs. Dkt. Nos. 125, 145. BlackBerry has filed
redacted versions of those briefs on the publically-accessible docket. Dkt. Nos. 126, 145-4.
BlackBerry’s motions to seal are GRANTED.
2

1

need not be willful, and there is no good faith exception to the requirement of obedience to a court

2

order. But a person should not be held in contempt if his action appears to be based on a good

3

faith and reasonable interpretation of the court’s order.” Id. (internal punctuation and quotations

4

omitted).
DISCUSSION

5

The preliminary injunction took effect when BlackBerry posted the required bond on April

6
7

15, 2014. Dkt. No. 55. After that time, BlackBerry sold 1,908 enjoined keyboards to Chris

8

Yergensen in Las Vegas; sold 16,829 enjoined keyboards to customers outside of the United

9

States; provided 365 warranty replacements of enjoined keyboards; and referred six customers to
third parties to buy the enjoined keyboard. As discussed below, this conduct violated the

11
United States District Court
Northern District of California

10

preliminary injunction.

12

A. Typo sold 1,908 enjoined keyboards to Chris Yergensen in Las Vegas after the
injunction took effect.

13

Typo’s CEO, Laurence Hallier, emailed a copy of the preliminary injunction order to Chris
14
Yergensen shortly after it issued. Hallier and Yergensen are close friends and business
15

associates.2 They agreed that Typo would transfer around 4,000 keyboards to Yergensen before

16
the injunction took effect, and Yergensen would only pay Typo for the keyboards when Yergensen
17
sold them to third parties. Yergensen depo. at 69-70 [Dkt. No. 125-6]. Yergensen sold
18
approximately 1,900 keyboards, for which he paid Typo approximately $75,000 after the
19
preliminary injunction took effect. Id. at 93; Hallier depo. at 124 [Dkt. No. 125-7]. Typo
20
ultimately took back approximately 1,800 unsold keyboards from Yergensen which Yergensen
21

had been unable to sell. Hallier depo. at 118-21.3

22
23
2

24
25
26
27
28

Yergensen testified that he and Hallier have been “very close friends” for over 15 years.
Yergensen depo. at 14. Yergensen became in-house counsel at Hallier-owned Show Media in
2001 and was later general counsel for Hallier Properties until 2008. Id. at 23. Yergensen is
currently listed as General Counsel on Show Media’s website. Id. at 31. Yergensen prepared the
paperwork to set Typo up as a limited liability company and handled Typo’s annual reports.
Hallier depo. at 22-25.
3

Typo claims that several hundred of the units transferred to Yergensen are unaccounted for. See
Dkt. No. 103-2 at 6 (Typo response to interrogatory no. 6).
3

1

Typo argues that these sales did not violate the preliminary injunction because its

2

“consignment” sales to Yergensen occurred before the injunction took effect and Yergensen’s

3

sales to third parties were outside of Typo’s control. Typo is wrong. Typo’s “consignment” sale

4

to Yergensen before the injunction took effect did not transfer title of the enjoined keyboards from

5

Typo to Yergensen. See, e.g., Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2169

6

(2012) (“a consignment of goods for sale does not pass the title at any time, nor does it

7

contemplate that it should be passed”) (internal punctuation and citation omitted). Typo did not

8

sell the enjoined keyboards to Yergensen until Yergensen paid Typo for the keyboards, which was

9

after the preliminary injunction took effect. Yergensen depo. at 93; Hallier depo. at 124. Indeed,
Typo reclaimed 1,800 keyboards which Yergensen had been unable to sell, confirming that

11
United States District Court
Northern District of California

10

ownership of those keyboards never transferred to Yergensen. Typo’s sales of 1,908 keyboards to

12

Yergensen therefore violated the preliminary injunction.

13

In addition, the record shows that Hallier directed customers to Yergensen to sell the

14

keyboards in Yergensen’s possession. On one occasion, Yergensen testified, he received a phone

15

call from a man named Jordan (he did not remember his last name) who wanted to buy the

16

enjoined keyboards. Yergensen depo at 83-84. Yergensen did not know how Jordan got his

17

number. Id. at 84. Although Typo claims that it did not provide Yergensen any leads and know

18

any of its buyers, Opp. at 13, one of BlackBerry’s attorneys, Todd Briggs, figured out who Jordan

19

was (Jordan Wachtel) and contacted him. Wachtel confirmed that he had received Yergensen’s

20

contact information from Hallier. Briggs declared:

21

26

Mr. Wachtel told me that he first met Laurence Hallier and others
from Typo during the spring of 2014. He also told me that Mr.
Hallier told him he could not purchase Typo 1 products directly
from Typo but could purchase Typo 1 products from another
individual. Mr. Wachtel remembered Mr. Hallier texting him the
contact information for this individual. Mr. Wachtel stated that he
did not know this individual before Mr. Hallier provided his contact
information. Mr. Wachtel remembered communicating with this
individual and then working with Mark Evans to purchase Typo 1
products. Mr. Wachtel stated that he did not know Mr. Evans prior
to this.

27

Briggs Reply Decl. ¶ 4 [Dkt. No. 145-17]. Yergensen testified at his deposition that Evans was his

28

friend and helped with the sales of the keyboards Yergensen purchased from Typo. Yergensen

22
23
24
25

4

1

depo. at 81:4-20. At the hearing on the motion for contempt, Typo’s counsel did not dispute that

2

Hallier directed Wachtel to Yergensen to buy the enjoined keyboards.
Typo is ordered to disgorge the $75,000 in proceeds it received from its sales to Yergensen

3
4

in violation of the preliminary injunction.
B. Typo sold 16,829 enjoined keyboards “within the United States” to foreign
customers after the injunction took effect.

5
6

Typo sold 16,829 enjoined keyboards to retailers in Canada, Hong Kong, Mexico, the
7
Middle East, Singapore, Indonesia, and the United Kingdom for $748,500 after the injunction
8
went into effect. Arnold Decl., Ex. 4 at Typo00969-972 [Dkt. No. 125-9].
9
Typo contends that these sales did not violate the preliminary injunction because the
10
keyboards were sold to customers located outside the United States for resale to customers outside

United States District Court
Northern District of California

11

the United States; Typo “invoiced the sale to its customers outside the United States”; Typo

12
received payment through foreign banks; and Typo did not meet the foreign customers in the
13
United States (except for iStore, which Typo met in December 2013 (before BlackBerry’s
14
15
16

complaint was filed). Typo also argues that it “substantially complied” with the injunction
because whether these sales constitute sales and offers to sell “within the United States” “calls for
a complex factual analysis.” Opp. at 9.

17
18

I disagree. The preliminary injunction barred Typo from “offering to sell, or selling [the
enjoined keyboards] within the United States.” Dkt. No. 39 at 24. Nonetheless, Typo took

19
deliberate steps, all within the United States, to offer to sell and sell the enjoined keyboards after
20
the injunction took effect. The enjoined keyboards were located in Las Vegas when the sales were
21
negotiated. Hallier was located in the United States when he negotiated the sales. The invoices
22
were prepared in the United States. The enjoined keyboards were shipped from Las Vegas.
23
Hallier depo. at 99-100, 138-40. Typo received payment for the orders in its Wells Fargo account
24
in Las Vegas. Id. at 140. In short, all of Typo’s conduct related to the sales and offers to sell
25

occurred in the United States.4 The offers to sell and sales were therefore “within the United

26
27
28

4

I note also that the sales agreements at issue have choice-of-law provisions providing that they
are governed by United States law. Reply Ex. 7; Reply Ex. 8; Hallier depo. at 225.
5

1

States” in violation of the preliminary injunction. Cf MediaTek Inc. v. Freescale Semiconductor,

2

Inc., No. 11-cv-5341 YGR, 2014 WL 580836, at *1, 2-4 (N.D. Cal. Feb. 13, 2014) (jury could

3

reasonably find that sales were within the Unites States where sales agreements were formed and

4

executed in the United States, but the product was product was manufactured outside the United

5

States, sold to a manufacturer outside the United States, and incorporated into a product outside

6

the United States).

7

Typo is ordered to disgorge the $748,500 in proceeds it received from these sales.

8

C. Typo provided 365 warranty replacements after the injunction took effect
Typo replaced 365 keyboards under a warranty after the injunction went into effect. Ex. 11 at

9

TYP000618-625 [Dkt. No. 125-16]. In each case, Typo sent an enjoined keyboard to the customer

11
United States District Court
Northern District of California

10

after receiving a defective unit. Hallier depo. at 180:19-181:9. I previously addressed Typo’s

12

warranty replacements, stating:

13

[Typo’s] warranty program does not give it license to provide
enjoined keyboards to its customers after the preliminary injunction
took effect. Cf Aro Mfg. Co. v. Convertible Top Replacement Co.,
377 U.S. 476, 484 (1964) (“If the owner’s use infringed, so also did
his repair of the top-structure, as by replacing the worn-out fabric
component. Where use infringes, repair does also, for it perpetuates
the infringing use.”)). At oral argument, counsel for Typo stated
that Typo misapprehended the relevant law and conceded that the
warranty replacements likely violated the preliminary injunction.
Counsel argued that the violation was minimal, however, as it
involved fewer than 400 replacement keyboards.

14
15
16
17
18
19

Dkt. No. 87 at 6.
Typo is ordered to pay BlackBerry $36,500 for the 365 enjoined keyboards it improperly

20
21

distributed under its warranty program after the injunction went into effect ($100 per unit).5

22

D. Typo promoted the enjoined keyboards after the injunction took effect

23

After the injunction went into effect, Typo received numerous inquiries from customers

24

asking where the Typo device could be purchased. In at least six instances, Typo directed

25

customers to third parties to purchase the enjoined keyboard. See, e.g. Ex. 12 at TYPO00347

26
27
28

5

Typo typically sold the keyboard to consumers for approximately $100. See, e.g., Dkt. No. 12514.
6

1

(“you can try looking on eBay but please note that we do not have any association with third

2

party sellers and therefor cannot guarantee the product”). This violated the injunction’s

3

prohibition on marketing or promoting the enjoined keyboards. Typo is ordered to pay

4

BlackBerry $600 for these violations ($100 per incident).

5
6

E. Typo shipped 6,804 enjoined keyboards to Canada on the same day as the
contempt hearing
On August 20, 2014, I heard argument on BlackBerry’s motion for order to show cause

7
why Typo should not be held in contempt for violating the preliminary injunction. Dkt. No. 86.
8
That same day, Typo shipped 6,804 unsold units from its inventory in Las Vegas to Canada for
9
storage there. Hallier Depo. 207:4-18, 209:1-7. Hallier explained that this would allow Typo to
10
continue to ship keyboards to its Canadian customers from Canada in the event the Court ruled

United States District Court
Northern District of California

11
12
13
14

that “we’re not allowed to ship internationally.” Hallier Depo. 209:14-23 (“So we thought, you
know what? Let’s store them in a country where they’re selling. And if we’re not allowed to ship
internationally, if the judge rules against us that we can’t ship out of Las Vegas, then we’ll ship
them out of Canada.”).

15
Typo cannot evade the preliminary injunction by transferring enjoined products out of the
16
United States for sale. Typo is enjoined from taking steps within the United States to sell or offer
17
to sell these keyboards.
18
19

F. Typo’s reliance on advice of counsel
BlackBerry contends that “Typo should not be allowed to rely on the advice of counsel to

20
justify its willful and deliberate violations of the injunction and seek a lower sanction while
21
22
23
24

claiming privilege over the full substance of those communications.” Mot. at 22. Typo responds
that it “is not seeking to justify its actions because counsel advised that those actions were
permissible.” Opp. at 6. Rather, Typo argues that it “substantially complied with the Injunction
because Mr. Hallier’s interpretation of the Injunction was reasonable, and because Typo took ‘all

25
reasonable steps’ to comply with the Injunction which included seeking advice of counsel rather
26
27

than acting solely on its own interpretation of the terms.” Id.
Typo’s contempt of the injunction is not ameliorated by Typo’s assertion that it sought the

28
7

1

advice of counsel. There is therefore no need for an order precluding Typo from relying on advice

2

of counsel.

3

G. Attorneys’ fees

4

BlackBerry is awarded its attorneys’ fees and costs incurred in bringing both of its

5

contempt motions and in conducting special contempt discovery.6 BlackBerry shall provide the

6

Court and Typo an accounting of its fees and costs by February 24, 2015 with sufficient detail,

7

including detailed time records, to support its request. Typo may file an opposition to the amounts

8

claimed on or before March 10, 2015, and Blackberry may reply by March 17, 2015. The Court is

9

unlikely to hold a hearing, and will render its award in due course.
H. Award of Sanctions

11
United States District Court
Northern District of California

10

Typo argues that BlackBerry has not shown that it has lost any sales as a result of Typo’s

12

conduct and that an award of sanctions to BlackBerry would constitute an undeserved windfall. I

13

agree that the extent to which BlackBerry has been damaged is uncertain. But Typo’s not so

14

clever attempts to evade the Court’s preliminary injunction is quite certain, and it is my obligation

15

and intent to vindicate respect for and compliance with the Court’s orders. The amount of

16

sanctions awarded is only a third of what BlackBerry sought and is directly tied to additional

17

revenue that Typo could have expected from its illegal conduct. Under the circumstances, it is a

18

just and appropriate award.

19

II.

BLACKBERRY’S MOTION TO COMPEL
BlackBerry filed a motion to compel depositions, production of documents, production of

20
21

allegedly privileged information, and for related attorneys’ fees and expenses.7 Dkt. No. 146. I

22

heard argument regarding the motion to compel on January 21, 2014, along with the motion for

23

contempt. The parties resolved several of the disputes during the briefing on the motion, but the

24

issues addressed below remained:

25
26
27
28

6

I previously granted BlackBerry’s motion for an order to show cause why BlackBerry should
not be held in contempt and for leave to take discovery regarding Typo’s contempt. Dkt. No. 87.
7
BlackBerry filed motions to seal portions of its briefing in connection with the motion to compel.
Dkt. Nos. 146, 153. Redacted versions of the briefs have been filed on the publically-accessible
docket. Dkt. Nos. 146-4, 153-3. BlackBerry’s motions to seal are GRANTED.
8

1

A. Document production
BlackBerry seeks production of a document entitled “Blackberry-Typo-Motorola Patent

2
Review RPH.docx.” Typo is ordered to produce the document or explain why it cannot be
3

produced. BlackBerry also seeks prosecution history for Typo’s design patent application. Typo

4
states that no prosecution history exists because the application has not been examined. That may
5
be true, but Typo is ordered to produce the material it filed with the PTO.
6
7
8
9

B. Document searches
BlackBerry asserts that Typo’s searches for relevant documents are insufficient because,
for example, Goodrich did not search for emails where he was cc’d (rather than emails “to” or
“from” him) and Hyde did not search for the term Q10 (BlackBerry’s new phone) or produce

10
emails between him and iChia (manufacturer of the Typo 1 keyboard) that were exchanged just
11
United States District Court
Northern District of California

weeks after BlackBerry publically announced its Q10 production on January 30, 2013 and
12

included design drawings. I agree that Typo’s searches are insufficient. Typo is ordered to

13
conduct searches that address these deficiencies.
14
15

C. Renewed depositions
BlackBerry seeks to continue depositions of Hallier, Goodrich and Hyde after Typo

16
produced relevant documents after their depositions. Typo has agreed to make Hallier available,
17
but BlackBerry contends that Hallier does not have knowledge of the late-produced documents at
18
issue. Typo is ordered to make Hyde, Goodrich, and Hallier available for continued depositions
19
so that BlackBerry can adequately question the appropriate witnesses about relevant documents
20
produced after the depositions.
21
22

D. Privilege log
BlackBerry asserts that several documents on Typo’s privilege log are not privileged (or

23
that it waived privilege). Typo shall lodge those documents with the Court within 7 days of this
24
order so the Court can determine whether those documents are properly withheld as privileged.
25

Typo contends that BlackBerry lost documents associated with the ’964 patent, but will not

26
disclose the circumstances of the loss or specific records or categories of documents that were lost.
27
Within 7 days of this order, BlackBerry shall provide Typo a statement describing the
28
9

1

circumstances of the loss and what categories of documents were lost.

2

E. Typo’s pre-suit patent investigation

3

If Typo intends to use a pre-suit investigation by counsel as a defense in this matter, it

4

must produce the documents related to that investigation. If Typo does not intend to use the

5

material, then it can assert the attorney-client privilege if otherwise appropriate.

6

F. Attorneys’ fees

7

I decline BlackBerry’s request for attorneys’ fees and costs for the motion to compel and

8

for the renewed depositions of Hallier, Goodrich and Hyde. Recognizing the disparity in

9

resources between BlackBerry and Typo, that Typo has been responding to considerable briefing
and discovery requests since new counsel substituted in, and in light of my order granting

11
United States District Court
Northern District of California

10

BlackBerry’s motion for contempt, sanctioning Typo a considerable sum, and awarding fees on

12

that motion as well, I find that awarding additional attorneys’ fees to BlackBerry for litigating the

13

motion to compel is not warranted.
CONCLUSION

14
15

BlackBerry’s renewed motion for contempt is GRANTED. Dkt. No. 126. Within 45 days

16

of this order, Typo shall pay BlackBerry $860,600 as a sanction for violating the preliminary

17

injunction order. Typo, and its agents or anyone acting in concert with Typo, must cease and

18

desist from any further violations of the preliminary injunction. Pursuant to the schedule

19

described in Section I.G of this order, BlackBerry shall submit documentation to the Court to

20

show the costs and attorneys’ fees incurred in connection with Typo’s contempt so that the Court

21

can order costs and fees to be paid by Typo.

22
23

BlackBerry’s motion to compel is GRANTED. Dkt. No. 146. Its request for fees on the
motion to compel is DENIED.

24

BlackBerry’s motions to seal are GRANTED. Dkt. Nos. 125, 145, 146, 153.

25

IT IS SO ORDERED.

26
27
28

Dated: February 4, 2015
______________________________________
WILLIAM H. ORRICK
United States District Judge
10