Phoenix Technologies Ltd. v. VMware, Inc.

Filing 174

ORDER by Magistrate Judge Donna M. Ryu denying 114 Plaintiff's Motion to Compel. (dmrlc1, COURT STAFF) (Filed on 9/30/2016)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7

PHOENIX TECHNOLOGIES LTD.,

Case No. 15-cv-01414-HSG (DMR)

Plaintiff,
8
ORDER DENYING PLAINTIFF’S
MOTION TO COMPEL

v.
9
10

VMWARE, INC.,

Re: Dkt. No. 114

Defendant.

United States District Court
Northern District of California

11
The parties submitted a joint discovery letter in which Plaintiff Phoenix Technologies Ltd.

12
13

moves to compel Defendant VMware, Inc. to respond to an interrogatory seeking information

14

regarding Defendant’s projected sales. [Docket No. 114 (Jt. Letter).] This matter is appropriate

15

for resolution without a hearing. Civ. L.R. 7-1(b). For the following reasons, Plaintiff’s motion is

16

denied.

17

I.

18

DISCUSSION
Plaintiff holds copyrights in its Basic Input/Output System (“BIOS”) programs. According

19

to Plaintiff, Defendant’s use of BIOS infringes Plaintiff’s copyrights and constitutes a breach of

20

the parties’ license agreement. Plaintiff propounded Interrogatory No. 2, which seeks Defendant’s

21

“projected sales, revenues, and profits on a yearly basis for 2015 and for each year (or portion

22

thereof) in the future that [Defendant] intends to continue using, selling, leasing, licensing,

23

distributing, or transferring” products “containing, incorporating, or using information from

24

Phoenix BIOS.” Plaintiff argues that information about Defendant’s projected sales is relevant to

25

its calculation of copyright damages, as well as to rebut Defendant’s argument that Plaintiff’s

26

BIOS “is an ‘outdated, obsolete product’ that has minimal value.” Jt. Letter at 1.

27
28

Defendant argues that its actual sales are relevant to the calculation of copyright damages,
but not its sales projections or forecasts. Defendant asserts that it has already produced 16 years of

1
2
3
4
5
6

actual sales data for its products containing BIOS.
Federal Rule of Civil Procedure 26 provides
Parties may obtain discovery regarding any nonprivileged matter
that is relevant to any party’s claim or defense and proportional to
the needs of the case, considering the importance of the issues at
stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties’ resources, the importance
of the discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely benefit.

7

Fed. R. Civ. P. 26(b)(1). “Information within this scope of discovery need not be admissible in

8

evidence to be discoverable.” Id. “Relevancy, for the purposes of discovery, is defined broadly,

9

although it is not without ultimate and necessary boundaries.” Gonzales v. Google, Inc., 234
F.R.D. 674, 679-80 (N.D. Cal. 2006). “[T]he party opposing discovery has the burden of showing

11
United States District Court
Northern District of California

10

that discovery should not be allowed, and also has the burden of clarifying, explaining and

12

supporting its objections with competent evidence.” La. Pac. Corp. v. Money Mkt. 1 Institutional

13

Inv. Dealer, 285 F.R.D. 481, 485 (N.D. Cal. 2012).

14

The Copyright Act provides for the recovery of “actual damages suffered by [the copyright

15

owner] as a result of the infringement, and any profits of the infringer that are attributable to the

16

infringement and are not taken into account in computing the actual damages.” 17 U.S.C. §

17

504(b). Actual damages are “the extent to which the market value of a copyrighted work has been

18

injured or destroyed by an infringement.” Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772

19

F.2d 505, 512 (9th Cir. 1985). “Actual damages are usually determined by the loss in the fair

20

market value of the copyright, measured by the profits lost due to the infringement or by the value

21

of the use of the copyrighted work to the infringer.” Polar Bear Prods., Inc. v. Timex Corp., 384

22

F.3d 700, 708 (9th Cir. 2004). To establish an infringer’s profits, “the copyright owner is required

23

to present proof only of the infringer’s gross revenue.” 17 U.S.C. § 504(b).

24

Plaintiff argues that Defendant’s sales projections for products containing BIOS are

25

relevant to determining “the value of the infringing use” of BIOS to Defendant. Jt. Letter at 1. It

26

cites one case in support of its position. See McRoberts Software, Inc. v. Media 100, Inc., 329

27

F.3d 557, 566-67, 571 (7th Cir. 2003). In McRoberts, the defendant had entered into a license

28

agreement regarding the plaintiff’s product, which was intended for use with Macintosh operating
2

1

systems. The defendant copied and translated the product source code into Windows-compatible

2

software. Id. at 561-63. The jury found infringement, and awarded copyright damages based on

3

actual damages and lost profits. The defendant challenged the damages award as speculative and

4

unsupported by the evidence. Id. at 565-67. The court noted that “[i]t is not improper for a jury to

5

consider . . . the value of the infringing use to the infringer to determine actual damages, provided

6

the amount is not based on ‘undue speculation.’” Id. at 566 (citations omitted). The court

7

described the five ways of measuring damages that the plaintiff had presented to the jury, and

8

noted that the plaintiff had provided “substantial evidence of the value of Windows-compatible

9

character generation software” to the defendant, including the defendant’s actual and projected
sales of its product line incorporating the Windows-compatible version of the plaintiff’s software.

11
United States District Court
Northern District of California

10

Id. at 566-67. It affirmed the jury award, holding that the plaintiff had provided sufficient

12

evidence of the value of the lost licensing fee “so that the jury did not have to resort to undue

13

speculation in estimating actual damages.” Id. at 566-67.

14

McRoberts is distinguishable. It did not address the discoverability of a defendant’s

15

projected sales; instead, it considered whether the jury’s damages award was supported by

16

sufficient evidence. Moreover, in McRoberts, the defendant pulled infringing products from the

17

market “[s]oon after” it began selling them. Id. at 562. Actual sales data was therefore limited.

18

Here, Defendant continues to incorporate the accused software into its products, and has produced

19

16 years of actual sales data. This constitutes ample, non-speculative evidence from which

20

Plaintiff can calculate the value of Defendant’s allegedly infringing use of BIOS. Plaintiff makes

21

no effort to explain how projected sales data would be relevant to its damages calculation,

22

especially in light of the actual sales information that has already been produced.

23

Plaintiff also argues that it needs Defendant’s sales projections to respond to the

24

anticipated argument that Plaintiff’s product has minimal value. However, Plaintiff can counter

25

this by showing that Defendant has used BIOS for many years and continues to use it in its

26

products. It does not need projected sales information to do so. In sum, the court finds that

27

Plaintiff has not established the relevance of Defendant’s projected sales for products

28

incorporating Plaintiff’s BIOS.
3

1

II.

CONCLUSION
For the foregoing reasons, Plaintiff’s motion to compel a further response to Interrogatory

2
No. 2 is denied.
3

S
Dated: September 30, 2016

NO

ER

H

9
10
11
United States District Court
Northern District of California

on

Judge D

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
4

FO

RT

8

LI

7

______________________________________
Donna M. Ryu
u
United States MagistrateyJudge
na M. R

A

6

DERED

O OR
IT IS S

R NIA

UNIT
ED

IT IS SO ORDERED.
5

RT
U
O

4

S DISTRICT
TE
C
TA

N

D IS T IC T
R

OF

C