Elan Microelectronics Corporation v. Apple, Inc.

Filing 341

MOTION to Compel Discovery Related to Apple iOS Applications for the Accused Products filed by Elan Microelectronics Corporation. Motion Hearing set for 8/23/2011 10:00 AM in Courtroom 5, 4th Floor, San Jose before Magistrate Judge Paul Singh Grewal. Responses due by 7/29/2011. Replies due by 8/5/2011. (Attachments: # 1 Proposed Order)(Bu, Jane) (Filed on 7/15/2011)

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1 2 3 4 5 6 7 8 9 10 11 YITAI HU (SBN 248085) yitai.hu@alston.com SEAN P. DEBRUINE (SBN 168071) sean.debruine@alston.com ELIZABETH H. RADER (SBN 184963) elizabeth.rader@alston.com JANE HAN BU (SBN 240081) jane.bu@alston.com JENNIFER LIU (SBN 268990) celine.liu@alston.com PALANI P. RATHINASAMY (SBN 269852) palani.rathinasamy@alston.com ALSTON & BIRD LLP 275 Middlefield Road, Suite 150 Menlo Park, CA 94025-4008 Telephone: 650-838-2000 Facsimile: 650-838-2001 Attorneys for Plaintiff and Counterdefendant ELAN MICROELECTRONICS CORPORATION 12 UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA 14 SAN FRANCISCO DIVISION 15 16 17 18 ELAN MICROELECTRONICS CORPORATION, Plaintiff and Counterdefendant, 19 20 21 22 23 v. APPLE, INC., Defendant and Counterplaintiff. AND RELATED COUNTERCLAIMS 24 Case No. 5:09-cv-01531 RS (PSG) ELAN MICROELECTRONICS CORPORATION’S NOTICE OF MOTION AND MOTION TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS Date: August 23, 2011 Time: 10:00 a.m. Courtroom 5 Hon. Paul S. Grewal 25 26 27 28 ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS Case No. 5:09-cv-01531 RS (PSG) NOTICE OF MOTION AND MOTION 1 2 TO APPLE, INC. AND ITS ATTORNEYS OF RECORD: 3 PLEASE TAKE NOTICE that on August 23, 2011, at 10:00 a.m. or as soon thereafter as 4 the matter may be heard, in Courtroom 5, located at 280 South First Street, Fifth Floor, San Jose, 5 California, Plaintiff Elan Microelectronics Corporation (“Elan”) will and hereby does move this 6 Court, pursuant to L.R. 7 and Fed. R. Civ. P. 37(a)(1) and 37(a)(4) to compel Apple to produce 7 discovery related to Apple’s iOS applications for the accused products.1 As its basis for this motion, and as more fully set forth in the following Memorandum of 8 9 Points and Authorities, Elan states that this is a patent infringement action. Elan is asserting, inter 10 alia, that Apple infringes its patent claiming touch sensitive input devices capable of recognizing 11 input from multiple fingers simultaneously. The accused Apple products include tablet computers, 12 smartphones and other devices that include touchscreen input devices capable of accepting 13 multiple finger input. On April 12, 2011, Elan served Document Request Nos. 82-85 and 14 Interrogatory Nos. 20-21 requesting that Apple provide revenue, sales and certain marketing 15 information relating to Apple’s iOS applications (“iOS apps”). On June 7, 2011, Elan also served 16 a Rule 30(b)(6) deposition notice on Apple with Topic Nos. 17-21 seeking the same discovery. 17 This discovery particularly seeks comparative financial data relating to the iOS apps that rely on 18 the specific features accused of patent infringement to those iOS apps that do not rely on the 19 accused functionality. Apple refused to produce any discovery in response to these requests. This 20 discovery is highly relevant to Elan’s damages analysis, and is narrowly tailored to obtain the 21 necessary information and not unduly burdensome. Accordingly, Elan respectfully requests that 22 the Court compel Apple to provide discovery responsive to these requests. This motion is based upon this Notice of Motion, Memorandum of Points and Authorities, 23 24 and the Declaration of Jane H. Bu (“Bu Decl.”) filed herewith and on such other argument and 25 evidence as may be presented to the Court at or prior to the hearing on this motion. 26 27 28 1 Elan has filed concurrently herewith a Motion to Shorten Time asking that this motion be heard on August 2, 2011. ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 2 Case No. 5:09-cv-01531 RS (PSG) MEMORANDUM OF POINTS AND AUTHORITIES 1 2 I. 3 FACTS In this case Elan is asserting, inter alia, infringement of its U.S. Patent No. 5,875,352, 4 which covers touchpads and touchscreens capable to detecting the simultaneous presence of two 5 or more fingers, and the correlation of multi-finger contacts into user input commands. The Apple 6 products accused of infringement include the iPhone, iPod Touch and iPad products. Those 7 products run on Apple’s “iOS” mobile operating system (see http://www.apple.com/iphone/ios4). 8 Since the release of its first iPhone, Apple has touted the importance to these products of what it 9 calls its “Multi-Touch” interface technology, which allows the user to operate the products’ 10 touchscreen using multiple finger inputs. Bu Decl. Exh. G. Further, “iOS apps” are software 11 programs that work on the iOS operating system. iOS apps include games and programs that 12 allow users to perform a multitude of tasks. Apps can be purchased from Apple through its on- 13 line “App Store” where users can download commercial “apps” of their choice (see 14 http://www.apple.com/iphone/features/app-store.html).2 15 Apple’s website strongly emphasizes the importance of the connection between the Multi- 16 Touch interface and the wide variety of apps that runs on the accused iOS Products. For example, 17 Apple’s iOS 4 webpage states as follow: 18 “The first time you pick up an iPhone, you know how to use it. That’s because the revolutionary Multi-Touch interface in iOS was designed for the most natural pointing device ever: your finger. So whether you’re using one of the built-in apps or one of the over 350,000 apps and games available from the App Store, you control everything with a tap, drag, swipe, pinch, flick, or twist of your fingers…” 19 20 21 22 Bu Decl. Exh. G. Further, while all iOS apps require use of the touchscreen on Apple’s accused 23 products, some of the iOS apps are specifically designed to require the use of multiple fingers. 24 That is, certain iOS apps make use of the multi-finger input feature, while other apps do not have 25 such capabilities. 26 Elan seeks discovery into the iOS apps as evidence of the demand for, and value of, the 27 28 2 Apple retains a portion of the revenue from sale of all apps in the Apple App Store developed and sold by third parties. See e.g., Bu Decl. Exh I. ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 3 Case No. 5:09-cv-01531 RS (PSG) 1 multi-finger input features on the iOS products. The Federal Circuit has made clear in recent 2 cases that damages experts must provide “evidence tending to separate or apportion the 3 defendant’s profits and the patentee’s damages between the patented feature and the unpatented 4 features.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011). Therefore, 5 Elan requires the iOS app discovery in order to generate comparative profit information for 6 products that do not contain the accused functionality versus products that do. Elan also requested 7 the iOS app data to evaluate whether the effect of the accused patented feature has promoted the 8 sales of the iOS apps, in order to quantify and attribute the profit generated by the patented 9 features. See Georgia-Pacific Corp. v. United States Plywood Corp ., 318 F. Supp. 1116, 1120 10 11 (S.D.N.Y. 1970) (holding “convoyed sales” is relevant to the reasonable royalty analysis). Since Elan first served its iOS app discovery, Apple consistently refused to produce any of 12 the requested discovery on the basis that the iOS apps are not the accused products for the 13 underlying infringement case and thus this information is not relevant. See Bu Decl. Exhs. A, B, 14 D & E. In an attempt to resolve this issue with Apple without Court intervention, Elan met and 15 conferred with Apple several times explaining why discovery relating to Apple iOS apps is 16 relevant to the damages analysis. Bu Decl. Exh. C, D. On June 23, 2011, Apple stated that it 17 would consider Elan’s discovery requests relating to the iOS apps. Bu Decl. Ex. D at 3-4. 18 However, Apple did not substantively respond until July 13, after Elan demanded that Apple give 19 its definitive position on this discovery so it could seek the Court’s assistance if necessary. Bu 20 Decl. Exh. F. Apple’s refusal to produce any discovery related to the iOS apps, finally conveyed 21 two days ago, leaves Elan no choice but to seek Court assistance on this issue. Bu Decl. Exh. D 22 II. 23 “[P]arties may obtain discovery regarding any non-privileged matter that is relevant to any ARGUMENT 24 party’s claim or defense” or that “appears reasonably calculated to lead to the discovery of 25 admissible evidence.” Fed. R. Civ. P. 26(b)(1). Elan’s requests for financial information 26 regarding Apple iOS apps—particularly the comparison of revenue and cost data between the apps 27 that require multiple finger input and the apps that do not—is relevant to Elan’s damages case, 28 even though the iOS apps themselves are not accused products. See Beinin v. Ctr. for the Study of ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 4 Case No. 5:09-cv-01531 RS (PSG) 1 Popular Culture, 2006 U.S. Dist. LEXIS 96088, *8-9, NO. C 06-2298 JW, (N.D. Cal. Oct. 31, 2 2006) (denying defendant’s argument that revenue information from non-accused products are not 3 discoverable and ordering defendant to produce all of defendant’s indirect profits because such 4 information is reasonably calculated to lead to the discovery of admissible evidence); Uniloc USA, 5 Inc. v. Microsoft Corp., 632 F.3d at 1318. See also Biax Corp. v. NVIDIA Corp., 271 F.R.D. 200, 6 215 (D. Colo. 2010) (finding “the amount of the reasonable royalty may be affected by whether 7 and to what extent [defendant’s] use of the patent technology increased its sales of related 8 products that are not covered by the Patents-in-Suit”) (emphasis added). 9 A comparison of the financial performance of multi-finger apps to those apps that do not 10 use multi-finger input is directly relevant to Elan’s analysis and quantification of the profit 11 premium Apple has earned by offering the patented feature. Those data are also relevant to an 12 evaluation of a reasonable royalty because they may correlate to the value consumers have placed 13 on apps incorporating the accused functionality. As such, Elan’s discovery requests are precisely 14 crafted to seek such iOS app financial data, and not the technical aspects of iOS apps themselves, 15 which allows Elan to conduct the necessary damages analysis endorsed by the Federal Circuit. 16 See Lucent Techs. v. Gateway, Inc., 580 F.3d 1301, 1337 (Fed. Cir. 2009) (holding one accepted 17 method of quantifying the profit premium attributed to patented features is to compare them to the 18 features that are not patented); Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d at 1318. 19 Further, financial information for the iOS apps is relevant to certain of the Georgia-Pacific 20 factors for determining a reasonable royalty. For example, Georgia-Pacific factor six is the 21 “effect of selling the patented specialty in promoting sales of other products of the licensee; that 22 existing value of the invention to the licensor as a generator of sales of his non-patented items; and 23 the extent of such derivative or convoyed sales.” Georgia-Pacific Corp. v. United States Plywood 24 Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (emphasis added). Similarly, Georgia-Pacific 25 factor 11 relates to “[t]he extent to which the infringer has made use of the invention; and … the 26 value of such use.” Id. Apple’s advertising and marketing of the accused iOS products and the 27 apps for use with those products makes clear that there is a connection between sales and 28 promotion of the iOS apps and consumer demand for the patented technology (the multi-finger ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 5 Case No. 5:09-cv-01531 RS (PSG) 1 touchscreen capability on the iOS products), the utility and advantages of the patented technology, 2 and the commercial success of the accused products that can be attributed to the patented 3 technology. To determine the full economic value to Apple’s infringing multifinger input technology, it 4 5 is necessary to evaluate all revenues and profits Apple has earned from its incorporation of that 6 technology. While this will obviously include the sales of Apple accused devices themselves, 7 consideration must also be given to additional revenues generated as a result of or otherwise 8 dependent on the accused feature of the products. Id. at 1120. Therefore, the discovery of 9 financial data pertaining to the iOS apps is highly relevant and more than reasonably calculated to 10 lead to admissible evidence. See Sun Microsystems, Inc. v. Network Appliance, 2009 U.S. Dist. 11 LEXIS 122779 (N.D. Cal. Dec. 21, 2009) (granting deposition on financial information for 12 services not accused in the action but associated and sold in conjunction of the accused products); 13 Beinin v. Ctr. for the Study of Popular Culture, 2006 U.S. Dist. LEXIS 96088 at *8-9 (granting 14 motion to compel defendant to produce indirect profits from non-accused products because such 15 information is reasonably calculated to lead to the discovery of admissible evidence); see also, 16 Biax Corp., 271 F.R.D. at 206-207 (granting plaintiff’s motion to compel financial information 17 relating to games not accused for infringement but were developed for or capable of running on 18 any accused product)3. Elan has clearly established that it can meet the threshold for proving relevance of the 19 20 requested discovery. Accordingly Elan requests that the Court grant Elan’s motion and compel 21 Apple to immediately produce Apple iOS application financial information pursuant to the 22 disputed discovery requests. 23 Elan’s discovery is narrowly tailored to seek only the information necessary to its damages 24 analysis. Indeed, Elan is not seeking discovery on the iOS apps themselves, or their technological 25 details. Elan requests only certain financial and marketing information regarding the apps to 26 conduct its damages analysis. Apple claims that it will be unduly burdened if it is ordered to 27 28 3 The Biax court also found that revenue information from any particular licensee or subcontractor that built the games for the defendant should be readily available, as related to profits obtained by defendant through the sale of games for use by the accused products. Id. ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 6 Case No. 5:09-cv-01531 RS (PSG) 1 produce the requested information. See Bu Decl. Exhs. A and B. Apple, however, has not offered 2 any factual justification for its alleged burden, nor has Apple suggested any narrowed scope it 3 would be willing to produce. 4 Moreover, the relevance of this data to the Elan’s damages analysis outweighs any 5 purported burden on Apple. The Federal Circuit has made clear in recent damages cases such as 6 Lucent and Uniloc that damages experts must try to apportion the accused products’ profit 7 between profit attributable to the patented feature against profit attributable to unpatented features. 8 Lucent Techs., 580 F.3d at 1337; Uniloc, 632 F.3d at 1318. Comparing Apple’s financial gain 9 from iOS apps that use the multi-finger input feature versus ones without that feature is exactly the 10 type of comparison contemplated by the Federal Circuit. Therefore, the potential benefit of 11 conducting analysis on the financial data of Apple’s iOS app sales cannot be outweighed by any 12 unspecified burden Apple may claim. See, e.g., SEC v. Berry, No. C07-04431-RMW If(HRL) 13 (N.D. California April 1, 2011) (order granting motion to compel interrogatory) (rejecting 14 defendant’s “burdensome” argument in part based on the amount of time defendant was aware of 15 interrogatory request). 16 III. 17 For the foregoing reasons, Elan respectfully requests that the Court grant Elan’s motion to 18 CONCLUSION compel Apple to produce iOS app financial information, including without limitation: 19 1. The identity of the 100 top -selling iOS apps annually since 2007; 20 2. For each of those apps, by year, spreadsheet(s) in native format, detailing the title, 21 volume of sales (or numbers downloaded), unit price, Apple’s cost, Apples’ revenue or profit 22 made on these apps; 23 24 25 26 3. Underlying documentation that reflects the percentage of profit or revenue Apple is entitled to obtain for the sale of any third party iOS apps; 4. Any marketing information or ads relating to the iOS apps that highlight the use of the multi-finger input; and 27 // 28 // ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 7 Case No. 5:09-cv-01531 RS (PSG) 1 2 5. A Rule 30(6)(6) witness who can attest to the requested discovery from items 1-4. DATED: July 15, 2011 3 Respectfully submitted, ALSTON & BIRD LLP 4 5 By: 6 7 LEGAL02/32742119v2 /s/ Jane H. Bu Jane H Bu Attorneys for Plaintiff and Counterdefendant ELAN MICROELECTRONICS CORPORATION 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ELAN’S MOT. TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS 8 Case No. 5:09-cv-01531 RS (PSG)

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