Kelora Systems, LLC v. Target Corporation et al

Filing 416

ORDER RE 11/4/2011 DISCOVERY LETTER 411 . Signed by Judge Beeler on 11/9/2011. (lblc1, COURT STAFF) (Filed on 11/9/2011)

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UNITED STATES DISTRICT COURT

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Northern District of California

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Oakland Division
KELORA SYSTEMS, LLC,

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For the Northern District of California

UNITED STATES DISTRICT COURT

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No. C 11-01548 CW (LB)

Plaintiff,
v.

ORDER RE 11/4/2011 DISCOVERY
LETTER

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TARGET CORPORATION, et al.,
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[ECF No. 411]
Defendants.
_____________________________________/

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I. INTRODUCTION

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The district court has referred all discovery matters in the above-captioned patent case and the

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related cases to the undersigned. Referral Order, ECF No. 333 at 2.1 On November 4, 2011, Kelora

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Systems, LLC and Defendants2 submitted a joint discovery letter in which Kelora seeks to compel

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Defendants’ production of certain financial-related documents (costs and sales revenue information

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from 1999 to the present) regarding Defendants’ e-commerce websites that are accused of infringing

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Kelora’s patent in suit for the period prior to November 2, 2010. ECF No. 411 at 1. After

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conducting a telephonic hearing, the court denies Kelora’s motion to compel to the extent that it

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seeks documents for the 12-month period before and the 12-month period after each of the

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Defendants’ websites first began to implement parametric search and anytime prior to November 2,

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Citations are to the clerk’s electronic case file (ECF) with pin cites to the electronic page
numbers at the top (as opposed to the bottom) of the page.
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Defendants are Amazon.com, Inc., Costco Wholesale Corp., Hewlet-Packard Co., Office
Depot, Inc., and Target Corp.
ORDER RE 11/4/2011 DISCOVERY LETTER
C 11-01548 CW (LB)

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2008.

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II. FACTUAL BACKGROUND

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Kelora is the owner by assignment of all right, title and interest in U.S. Patent No. 6,275,821

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(“‘821 patent”), which is entitled “Method and system for executing a guided parametric search” and

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was issued by the U.S. Patent & Trademark Office (“PTO”) on August 14, 2001. Second Amended

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Complaint, ECF No. 334 at 3. The PTO issued a reexamination certificate for the ‘821 patent on

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November 2, 2010. Id. The patent claims a “process for identifying a single item from a family of

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items” that is run on a single, local computer or over the internet. ECF No. 330-4 at 2-3.

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On November 8, 2010, Kelora filed suit against 20 defendants in the Western District of
Wisconsin. This action was subsequently transferred to the Northern District of California (Kelora

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Systems, LLC v. Target Corp., et al., CV 11-1548 CW).

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For the Northern District of California

UNITED STATES DISTRICT COURT

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On November 4, 2011, Kelora and Defendants submitted a joint discovery letter in which

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Kelora seeks to compel Defendants’ production of certain financial-related documents (costs and

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sales revenue information from 1999 to the present) regarding Defendants’ e-commerce websites

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that are accused of infringing Kelora’s patent in suit for the period prior to November 2, 2010. ECF

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No. 411 at 1.

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III. DISCUSSION
During a meet-and-confer session, Kelora offered to limit the scope of its requests to two

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periods: (1) from November 2, 2008, to the present; and (2) for the 12-month period before and the

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12-month period after each of the Defendants’ websites first began to implement parametric search.

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Id. Kelora argues that the financial information for the two-year period prior to the issuance of the

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‘821 Patent on November 2, 2010, would be relevant to a hypothetical licensor and licensee about to

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commence negotiations because parametric search helps drive Defendants’ ecommerce sales. Id. at

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2, 6. Kelora further contends that the “before” and “after” financial information is probative of the

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potential value that the Defendants enjoyed from the use of parametric search in their websites, even

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if that use occurred prior to the issuance of the ‘821 Patent.. Id. at 2 (citing Georgia–Pacific Corp.

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v. U.S. Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y.1970)). Kelora also claims that

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Defendants concede the relevance of this information by having agreed to produce such financial
documents for the post-November 2010 period. Id. at 5. Finally, Kelora argues that Defendants have
ORDER RE 11/4/2011 DISCOVERY LETTER
C 11-01548 CW (LB)

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not demonstrated any undue burden with producing financial information for the 12-month “before

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and after” period. Id.

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Defendants note that Judge Wilken already has ruled that Kelora may not seek damages for any

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infringement prior to November 2, 2010, and that Kelora will “have to be able to explain why it is

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that a document before November 2nd was relevant to damages that happened in the future,” and

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that such discovery must not be “burdensome and done for purposes of harassment or delay.” ECF

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No. 411 at 3. Defendants claim that their objection to Kelora’s blanket request for financial

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information “for the 12- month period before and the 12-month period after [the accused] websites

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first began to implement parametric search” should be sustained because the request is not

Defendants dispute that revenue for sales made via websites is relevant to a reasonable royalty in

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For the Northern District of California

reasonably tailored to identify probative evidence and minimize the burden on Defendants. Id. at 5.

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UNITED STATES DISTRICT COURT

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this case, because the revenue is for sales of products (e.g., books) that are not accused of

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infringement. Id. at 3. Defendants further contend that Kelora fails to point to any evidence that

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such revenues can be tied to the importance of the accused functionality, noting that there are many

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other variables that can affect website sales revenue in a given time period, including the state of the

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economy, promotions run on the website, changes to other features on the website, etc. Id. at 3-4.

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Defendants also claim that the before and after data can span back as much as nine years, which is

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not reasonably related to the infringement in question. Id. at 4. Additionally, Defendants contend

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that they should not have to produce information based on when websites first began to use

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parametric searching because this is vague and open to interpretation and the first use might infringe

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on the patent. Id. Defendants state that their offer to compromise by producing financial data for

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post-November 2, 2010 sales made via the websites specifically identified in Kelora’s preliminary

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infringement contentions and for sales made after November 2, 2008, if the accused functionality

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had been implemented on the accused websites by then, was not a concession as to the relevance of

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the information. Id.

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The Defendants’ compromise position is reasonable. The financial information provides a basis

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for determining the value of the method but (1) there are many other potentially confounding factors

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that limit the probative value of comparing the “before” and “after” data; (2) information from years
before the reexamination would not likely play a meaningful role in the hypothetical negotiation;
ORDER RE 11/4/2011 DISCOVERY LETTER
C 11-01548 CW (LB)

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and (3) Judge Wilken clearly indicated that discovery regarding damages for the time period before

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November 2, 2010 should be limited.

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IV. CONCLUSION
For the foregoing reasons, the court denies Kelora’s motion to compel to the extent that it seeks

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documents for the 12-month period before and the 12-month period after each of the Defendants’

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websites first began to implement parametric search and anytime prior to November 2, 2008. The

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court specifically orders discovery of financial data for post-November 2, 2010 sales made via the

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websites specifically identified in Kelora’s preliminary infringement contentions and financial

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information for sales made after November 2, 2008 (i.e., two years prior to the reexamination

court specifically finds that Defendants’ compromise offer was not a concession as to the relevance

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For the Northern District of California

certificate), if the accused functionality had been implemented on the accused websites by then. The

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UNITED STATES DISTRICT COURT

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of the information.

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This disposes of ECF No. 411.

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IT IS SO ORDERED.

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Dated: November 9, 2011

_______________________________
LAUREL BEELER
United States Magistrate Judge

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ORDER RE 11/4/2011 DISCOVERY LETTER
C 11-01548 CW (LB)

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