Elan Microelectronics Corporation v. Apple, Inc.

Filing 369

RESPONSE (re 341 MOTION to Compel Discovery Related to Apple iOS Applications for the Accused Products ) filed byApple, Inc.. (Walter, Derek) (Filed on 8/2/2011)

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1 2 3 4 5 6 7 8 9 10 11 MATTHEW D. POWERS (Bar No. 104795) matthew.powers@tensegritylawgroup.com TENSEGRITY LAW GROUP LLP 201 Redwood Shores Parkway, Suite 401 Redwood Shores, CA 94065 Telephone: (650) 802-6000 Facsimile: (650) 802-6001 JARED BOBROW (Bar No. 133712) jared.bobrow@weil.com SONAL N. MEHTA (Bar No. 222086) sonal.mehta@weil.com DEREK C. WALTER (Bar. No. 246322) derek.walter@weil.com NATHAN GREENBLATT (Bar No. 262279) nathan.greenblatt@weil.com WEIL, GOTSHAL & MANGES LLP Silicon Valley Office 201 Redwood Shores Parkway Redwood Shores, CA 94065 Telephone: (650) 802-3000 Facsimile: (650) 802-3100 12 13 Attorneys for Defendant and Counterclaim Plaintiff Apple Inc. 14 UNITED STATES DISTRICT COURT 15 NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION 16 17 ELAN MICROELECTRONICS CORPORATION, 18 Plaintiff and Counterclaim Defendant, 19 20 21 22 v. Case No. C-09-01531 RS (PSG) APPLE’S OPPOSITION TO ELAN MICROELECTRONICS CORPORATION’S MOTION TO COMPEL DISCOVERY RELATED TO APPLE iOS APPLICATIONS FOR THE ACCUSED PRODUCTS APPLE INC., Defendant and Counterclaim Plaintiff. 23 24 DATE: TIME: JUDGE: CTRM: August 23, 2011 10:00 a.m. Hon. Paul S. Grewal 5 25 26 27 28 APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS Case No. C-09-01531 RS (PSG) 1 I. 2 INTRODUCTION 3 By its motion, Elan asks the Court to compel Apple to provide extensive discovery related 4 to Apple’s iOS apps,1 including inter alia detailed financial information for hundreds of apps, 5 marketing information for those apps, and even a 30(b)(6) witness. Yet, iOS apps are not even 6 accused of infringement in this case, and they undisputedly do not carry out the accused 7 functionality. Elan has even confirmed in meet and confer that it has no intention of accusing 8 iOS apps of infringement or adding them to the case as accused products. See Declaration of 9 Derek C. Walter In Support of Apple’s Opposition to Motion to Compel Discovery Related to 10 Apple iOS Applications (“Walter Decl.”) ¶ 1. 11 Why then, at this very late stage in the discovery process is Elan suddenly seeking 12 extensive discovery on iOS apps? Allegedly, Elan seeks discovery related to hundreds of iOS 13 apps—each of which include scores of features—so that it can, first, somehow determine the 14 economic value of one feature (i.e., multiple-finger input) that some apps allegedly utilize. Then, 15 based on the results with iOS apps, Elan will supposedly extrapolate to determine the contribution 16 of multiple-finger input to the overall economic value of the accused products themselves. Elan 17 reveals little about what its attenuated analysis will entail, except to say that it will involve some 18 sort of comparison of the “financial gain” from apps that include multiple-finger input to the 19 “financial gain” from apps that do not include multiple-finger input. However, as set forth herein, 20 the requested discovery is irrelevant, as there is no way for Elan to use such information to 21 disentangle the economic value of multiple-finger input from the hundreds of other features 22 present in both the iOS apps and the accused products. At best, Elan’s discovery request reflects 23 a frivolous and speculative fishing expedition. At worst, it reflects an attempt to put before the 24 jury prejudicially large sales figures for hundreds of non-accused iOS apps, which Elan will 25 contend are representative of the value of a single allegedly infringing feature. Moreover, such 26 1 27 28 The term “iOS apps” refers to applications or programs that run on Apple handheld products, including the accused iPhone and iPad products. There are hundreds of thousands of available iOS apps, including, for instance, games, multimedia, informational, and shopping apps, to name just a few. APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 1 Case No. C-09-01531 RS (PSG) 1 discovery is entirely unnecessary because Elan is already in possession of detailed financial 2 information for not just the accused products themselves, but also the specific components they 3 contain that are responsible for multiple-finger input. In particular, Elan is already in possession 4 of detailed financial information regarding the volume and costs of the specific computer chips 5 Apple purchases that carry out multiple-finger input in the accused products. Such discovery will 6 allow Elan to prepare a properly apportioned damages theory focused on the accused feature, as 7 the law requires. Where, as here, the requested discovery is extensive and burdensome, incapable 8 of shedding any light on an issue in the case, potentially highly prejudicial, and unnecessary in 9 light of other available discovery, the Court should exercise its discretion pursuant to Rule 26 to 10 limit further discovery. Elan’s motion should be denied. 11 II. 12 THE DISCOVERY ELAN SEEKS WILL YIELD NO RELEVANT INFORMATION REGARDING THE VALUE OF MULTITOUCH OR ANY OTHER DAMAGES ISSUE 13 14 Elan presents two reasons for why financial data related to iOS apps is supposedly 15 relevant to its damages case. First, Elan claims that apps financial data will provide it with 16 “evidence tending to separate or apportion the defendant’s profits and the patentee’s damages 17 between the patented features and the unpatented features.” Mot. at 4 (citing Uniloc USA, Inc. v. 18 Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011)). Second, Elan argues that apps financial 19 data will provide evidence of “convoyed sales,” which will supposedly be relevant to a reasonable 20 royalty analysis under Georgia-Pacific. Mot. at 5. Neither of these two closely-related theories 21 is laid out with any precision in Elan’s brief. This is not surprising. Indeed, as set forth below, 22 when Elan’s theories are examined, it becomes clear that they have no merit and that the 23 discovery Elan seeks will ultimately be irrelevant. 24 As to Elan’s first theory, Elan has indicated in meet and confer that it intends to make 25 some sort of comparison between a subset of the 100 top-selling apps that use multi-finger 26 gestures to a corresponding subset of those apps that do not use multi-finger gestures. Mot. at 4- 27 5. Ostensibly, Elan contends that any difference in revenue, number of sales, etc. between such 28 sets of the best-selling iOS apps may be attributed to multiple-finger input, which will then APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 2 Case No. C-09-01531 RS (PSG) 1 supposedly allow Elan to “evaluate whether the effect of the accused patented feature has 2 promoted the sales of the iOS apps[.]” Mot. at 4. This makes no sense. There are over 350,000 3 apps available for iOS devices. Each of these apps contains a wide range of features, including, 4 but not limited to, the content of the app itself, plus program or gameplay options, advanced 5 graphics, sound effects, music, design, updates, camera integration, voice or data network 6 connectivity, GPS integration, and user interface controls (including single-finger gestures, 7 multiple-finger gestures, accelerometer-based control, etc.), to name just a few. See generally 8 Walter Decl., Exh. A [iOS Developer Library] (homepage for iOS App development software, 9 listing instructional material for a range of iOS features, including graphics, animation, 10 networking, mathematical computation, etc.).2 In other words, multi-finger touch is, at best, a 11 small part of a large package of features that contribute to the functionality and user experience 12 provided by apps. 13 Given the extensive feature set available to app developers, even if Elan’s conjecture that 14 apps with multiple-finger input have higher revenues than those without multiple-finger input 15 were correct, it simply does not follow that those revenue differences can be attributed or even 16 correlated to multiple-finger input. 17 disentangling economic information related to multiple-finger input from the bulk economic 18 information related to the multiplicity of features in iOS apps that Elan now seeks. Likewise, 19 Elan has also failed to provide anything to suggest that an attempt to do so would pass muster as 20 sound economic analysis. Cf. Cable Electric Products, Inc. v. Genmark, Inc., 770 F.2d 1015, 21 1027 (Fed. Cir. 1985) (evidence of commercial success must be shown “to have in some way 22 been due to the nature of the claimed invention, as opposed to other economic and commercial 23 factors unrelated to the technical quality of the patented subject matter.”). Indeed, Elan has never suggested any manner of 24 To illustrate the issues more concretely, consider the “Angry Birds” app, which is 25 currently the top paid iPhone App in many countries, including the United States. See Exh. B 26 27 28 2 Unless otherwise stated, all exhibit cites are to exhibits attached to the Declaration of Derek C. Walter In Support of Apple’s Opposition to Motion to Compel Discovery Related to Apple iOS Applications. APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 3 Case No. C-09-01531 RS (PSG) 1 [iTunes Store Top 10 Apps – Paid]. “Angry Birds” is a game in which the player uses a single 2 finger to launch a bird-like projectile from a slingshot to try and topple a series of structures, in 3 the process smashing green pigs within the structure. While the game includes multiple-finger 4 input, it is used mainly, if not exclusively, to zoom-in and out. Of course, the game includes an 5 enormous array of additional features, all of which simply cannot be enumerated here. The game 6 includes over 270 levels, each of which requires a different strategy to pass, and which provide 7 hours of gameplay. See generally Exh. C [Angry Birds Wikipedia]; Exh. D [Angry Birds by 8 Clickgamer.com]. From the main menu screen, the user can keep track of all the levels that have 9 been passed, and replay those levels at will. The game includes different types of birds, each of 10 which have different projectile behavior, and which make noises and facial expressions when shot 11 at a target. The target structures themselves are made of a range of different materials, and 12 include pigs of various sizes, which again are characterized by sounds and facial expressions as 13 well as varying target behaviors. The game has its own soundtrack and artwork, and further 14 includes content that can be downloaded from within the game itself (e.g., tools to help a player 15 pass a level he or she is stuck on). When the player achieves certain milestones, the player may 16 synchronize those game achievements with an external server. Likewise, the game has options 17 for interactivity with the social networking sites Facebook and Twitter. Through the range of 18 included features, the game embodies its own unique personality, and the user establishes an 19 emotional connection with the game and its characters. Indeed, the game has spawned specific 20 promotional and holiday versions, such as a Halloween edition and an edition to go with a 21 recently released animated movie from 20th Century Fox. See generally Exh. C [Angry Birds 22 Wikipedia]. In fact, a stand-alone movie based on the game Angry Birds is even being planned. 23 See Exh. E [July 8, 2011 article entitled “Weekly Ketchup: Angry Birds Movie In The Works”]. 24 Of course, this range of attributes taken collectively creates the overall value of the 25 “Angry Birds” App, and there is no reasonable way for Elan to extract the specific contribution of 26 multiple-finger input, if any. Nor is there any reasonable way for Elan to compare “Angry 27 Birds”—with its unique combination of features and attributes—to any other app or collection of 28 apps. Of course, “Angry Birds” is just one of hundreds of apps that Elan seeks discovery on, each APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 4 Case No. C-09-01531 RS (PSG) 1 of which has its own unique combination of features and attributes and cannot be reasonably 2 compared to any other app or collection of apps. Simply put, it does not take a damages expert to 3 see that the vague apples-to-oranges comparisons Elan is proposing reflect not sound economic 4 analysis, but conjecture. 5 Yet, with just a few weeks left in discovery, Elan asserts that we should trust it that there 6 is a reasonable basis for the burdensome discovery related to iOS apps that it now requests. 7 Notably, Elan does not even purport to seek information that would allow it to make a controlled 8 comparison of pairs of apps that differ only by their use of multiple-finger input, but that are 9 otherwise identical (i.e., a comparison of a multiple-finger input version of “Angry Birds” to a 10 single finger input version of “Angry Birds”), a fact that provides further confirmation of the 11 purely speculative nature of the requested discovery. Regardless, Apple is unaware of any such 12 app where a developer has actually considered multiple-finger input unique and important enough 13 to prepare distinct and separate app versions that differ in just this one feature, and Elan has never 14 identified any such apps. 15 Elan’s second relevance theory appears to pertain to the concept of “convoyed sales” or 16 the sales of non-patented items. Although unclear, it appears that Elan is suggesting that Apple’s 17 ability to sell iOS apps that use multiple-finger input should influence the royalty rate for the 18 accused products themselves. Compared to Elan’s first relevance theory, there is even less 19 explanation in Elan’s brief as to how discovery related to iOS apps will help it propose an 20 apportioned royalty rate directed to multiple-finger input. This is again unsurprising because this 21 relevance theory is even more attenuated and flawed than Elan’s first theory. At the outset, this 22 theory suffers from the same problems as Elan’s first theory. Indeed, as noted above, iOS apps 23 themselves include hundreds of features and can further take advantage of hundreds of features in 24 iOS. Elan presents no suggestion as to how it can disentangle the economic value of multiple- 25 finger input from this extensive range of features. To the contrary, Elan’s attempt to inject into 26 the case hundreds of stand alone products made by hundreds of third parties that include hundreds 27 of features completely distinct from multiple-finger input takes the focus away from the single 28 feature in Apple products that is actually accused of infringing. APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 5 Case No. C-09-01531 RS (PSG) 1 Likewise, Elan never explains how sales data for apps—most of which were created long 2 after the accused products were introduced—is relevant to the hypothetical negotiation that would 3 have taken place when the accused products were released. Rite-Hite Corp. v. Kelley Co., Inc., 56 4 F.3d 1538, 1554 (Fed. Cir. 1995) (hypothetical negotiation takes place “at the time infringement 5 began”). Finally, there is no dispute that the iOS apps do not carry out the accused functionality. 6 At most, some iOS apps use multiple touch input features present in iOS. Even if one assumes 7 that the Apple products infringe Elan’s ’352 patent, there has been no showing whatsoever from 8 Elan that iOS apps require the particular method of detecting multiple fingers set forth in the ’352 9 patent. Indeed, it cannot be disputed that there are other methods for detecting multiple fingers 10 other than the method set forth in the ’352 patent. 11 Given the foregoing, it is unsurprising that Elan fails to cite a single case that is truly 12 applicable to the case at bar and that would support its position. For example, Elan relies upon 13 the Beinin case for the proposition that “revenue information from non-accused products” is 14 discoverable. Mot. at 5. However, Beinin has nothing to do with (1) comparing non-patented 15 products to patented products to estimate the value of an accused feature, or (2) the convoyed 16 sales doctrine of patent law and whether such sales are relevant to the determination of a royalty 17 rate. Beinin did not even have anything to do with patents—it was a copyright case involving 18 unauthorized use of a photograph. Beinen v. Ctr. for the Study of Popular Culture, 2006 U.S. 19 Dist. LEXIS 96088, *1-2, No. C06-2298 JW (N.D. Cal. Oct. 31, 2006) (Exh. F). In Beinin, the 20 plaintiff sought damages not just for sales of a pamphlet containing the copyrighted material, but 21 also for publication of the pamphlet with the copyrighted photograph on a website. Beinin is 22 irrelevant to the instant case. Similarly, in the Biax case relied upon by Elan, the Court expressly 23 limited any discovery of convoyed sales “to the time frame applicable to a reasonable royalty 24 analysis under Georgia-Pacific, that is, as stated by BIAX, ‘the beginning of the infringement 25 period.’” Biax Corp. v. Nvidia Corp., 271 F.R.D. 200, 216 (D. Colo. 2010). In this regard, Biax 26 confirms that Elan’s motion should be denied, as the overwhelming bulk of the sales information 27 Elan seeks took place long after the beginning of the alleged infringement period in 2006. 28 Indeed, the app store where users purchase most apps did not even open until summer of 2008. APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 6 Case No. C-09-01531 RS (PSG) 1 See Exh. G [Apple Introduces the New iPhone 3G] (June 2008 article explaining “iPhone 3G 2 includes the new App Store, providing iPhone users with native applications in a variety of 3 categories including games, business, news, sports, health, reference and travel.”). Finally, in the 4 Sun Microsystems case, the issue before the court was whether a deposition topic on financial 5 information for support services for the accused products was duplicative of prior discovery; the 6 Court did not discuss the relevance of the disputed discovery, as it was not even in dispute. See 7 Sun Microsystems, Inc. v. Network Appliance, 2009 U.S. Dist. LEXIS 122779, *10-12 (N.D. Cal. 8 Dec. 21, 2009) (Exh. H). Sun Microsystems, Inc. sheds no light whatsoever on the issues now 9 presented. Thus, the cases that Elan relies upon either provide no support for Elan’s position or 10 affirmatively support a denial of Elan’s motion. 11 “While the standard of relevancy is a liberal one, it is not so liberal as to allow a party to 12 roam in shadow zones of relevancy and to explore matter which does not presently appear 13 germane on the theory that it might conceivably become so.” In re Fontaine, 402 F. Supp. 1219, 14 1221 (E.D.N.Y. 1975). As such, absent a more concrete justification from Elan as to why 15 discovery related to iOS apps is relevant, the Court should not even open the door to such 16 discovery. 17 III. 18 THE BURDEN OF COLLECTING THE REQUESTED INFORMATION OUTWEIGHS ANY MINIMAL RELEVANCE ELAN ALLEGES 19 As set forth above, the discovery Elan seeks does not pass even a threshold relevancy test. 20 However, even if one assumes that the discovery Elan seeks offers a sliver of insight into an issue 21 in this case, Elan’s motion should still be denied. Indeed, the Federal Rules of Civil Procedure 22 embody a rule of proportionality, providing that even if requested discovery is relevant, it should 23 nonetheless be denied if the Court determines that “the burden or expense of the proposed 24 discovery outweighs its likely benefit, considering the needs of the case, the amount in 25 controversy, the parties’ resources, the importance of the issues at stake in the action, and the 26 importance of the discovery in resolving the issues.” Fed. R. Civ. P. 26(b)(2)(c)(iii). 27 The totality of these factors weighs against additional discovery. First, for the range of 28 APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 7 Case No. C-09-01531 RS (PSG) 1 reasons noted above, the requested discovery will shed no light on Elan’s case. See supra Part II. 2 In fact, to the extent Elan uses this discovery to make a speculative determination as to the value 3 of multiple-finger input, it will likely do so in a fashion that will have the jury confronted with 4 massive figures that in no way reflect the value of multiple-finger input. Indeed, in its motion, 5 Elan demands the “identity of the 100 top-selling iOS apps annually since 2007.” Mot. at 7. 6 Thus, Elan does not merely seek generic information on any group of iOS apps for the purposes 7 of assessing the value of multiple-finger input, but information on the iOS apps that make the 8 most money. This will undoubtedly reflect an enormous dollar figure. For instance, with respect 9 to the “Angry Birds” app discussed above, which is currently the top paid iPhone app in many 10 countries, including the United States, publicly available articles indicate that it has been 11 downloaded roughly 250 million times across all platforms. See Exh. I [‘Angry Birds’ Reaches 12 250 Million Downloads]. This figure, if true, would reflect millions of dollars of worth of sales. 13 See id.; Exh. B [iTunes Store Top 10 Apps – Paid]. Sales figures for the aggregate of the 100 14 top-selling iOS apps since 2007 could thus reflect a colossal dollar figure. Of course, such 15 figures have no place before the jury where, as here, they relate to products that are not accused. 16 That Elan is seeking this discovery when it has no legitimate damages theory to which it is 17 relevant raises significant concerns that Elan will attempt to place such figures before the jury 18 under the guise of its comparative analysis to determine the value of two finger input or as 19 support for the notion that Apple should pay an inordinately high royalty rate. Thus, in addition 20 to being irrelevant, Elan’s alleged iOS apps discovery theory has the potential to be highly 21 prejudicial. 22 As to the benefit of the requested discovery given the needs of the case, Apple has already 23 expended significant resources to provide Elan with extensive damages-related discovery, 24 including detailed financial information for the accused products and their components that 25 actually embody the accused functionality, in addition to extensive licensing, marketing, and 26 technical information that sheds light on the Georgia-Pacific factors. Most notably, the accused 27 Apple products include specific chips—apart from their main microprocessor—associated with 28 their respective touch input devices that have built-in programming for carrying out the accused APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 8 Case No. C-09-01531 RS (PSG) 1 two finger input functionality. 2 spreadsheets containing information regarding (1) the identities and suppliers of the chipsets 3 Apple purchases, (2) the volume of chipsets Apple purchases, and (3) the costs of those chipsets. 4 Apple has provided this information for the chipsets used in nearly all of the accused products, 5 and continues to collect and produce any such additional information. Beyond this, Apple has 6 endeavored to provide Elan with any financial information regarding the components that make 7 up the rest of the touchpad or touchscreen assembly beyond the individual microchip. In light of 8 this discovery that Elan already has at its disposal, any additional discovery regarding iOS apps, 9 would not only be irrelevant and prejudicial, but also unnecessary. Apple has already provided Elan with detailed financial 10 Finally, as to the burdens involved, Elan’s motion seeks five different items related to iOS 11 apps, including native format spreadsheets detailing costs, profits, and revenues for the 100 top- 12 selling apps over the last five years. Likewise, Elan asks that Apple review all marketing 13 information related to iOS apps so that it can collect material that “highlights” multi-finger input. 14 Elan then asks that Apple identify, prepare, and present a 30(b)(6) witness on this information. 15 Putting aside the irrelevance of the requested discovery, the burden associated with the requested 16 discovery is undue. This burden is exacerbated by the tardiness with which Elan has sought 17 discovery related to iOS apps. Indeed, this action has been pending since April 2009, yet Elan 18 waited until April 12, 2011 to propound any discovery requests whatsoever related to iOS apps. 19 After Apple first objected and declined to provide discovery into this topic based on its objections 20 on May 12, 2011, Elan then waited until June 10, 2011—roughly one month later—to make even 21 an initial follow up. Now, with only a few weeks in the discovery period, and with the parties 22 extremely busy trying to complete discovery efforts, Elan demands that Apple provide extensive 23 unnecessary discovery on a topic that will yield no meaningful information. 24 25 Plainly, any reasonable balancing of the burdens and benefits of the requested discovery weighs in favor of precluding any discovery into iOS apps. 26 27 28 APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 9 Case No. C-09-01531 RS (PSG) 1 IV. 2 CONCLUSION For the foregoing reasons, Apple respectfully requests that Elan’s motion to compel be 3 4 denied. 5 6 Dated: August 2, 2011 WEIL, GOTSHAL & MANGES LLP 7 8 By: 9 10 /s/ Sonal N. Mehta Sonal N. Mehta Attorneys for Defendant and Counterclaim Plaintiff Apple Inc. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPLE’S OPPOSITION TO ELAN’S MOTION TO COMPEL RE: iOS APPS 10 Case No. C-09-01531 RS (PSG)

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