Leader Technologies, Inc., v. Facebook, Inc.

Filing 73

ORDER GRANTING MOTION FOR DE NOVO REVIEW AND TO EXPAND THE RECORD; SUSTAINING PLAINTIFFS OBJECTIONS TO MAGISTRATE JUDGES ORDER by Judge James Ware granting 30 Motion (jwlc3, COURT STAFF) (Filed on 5/12/2010)

1 2 3 4 5 6 7 8 9 10 Leader Technologies, Inc., v. Facebook, Inc., Defendant. / Plaintiff, IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION NO. C 10-80028 MISC JW ORDER GRANTING MOTION FOR DE NOVO REVIEW AND TO EXPAND THE RECORD; SUSTAINING PLAINTIFF'S OBJECTIONS TO MAGISTRATE JUDGE'S ORDER

United United States District Court

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For the Northern District of California

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Presently before the Court are Plaintiff's Motion for De Novo Review and to Expand the Record,1 and Plaintiff's Objections to Magistrate's Order. (hereafter, "Objections" (filed under seal).) Defendant timely filed a Response to Plaintiff's Objections.2 The Court finds it appropriate to take the matter under submission without oral argument. See Civ. L.R. 7-1(b). Based on the papers submitted to date, the Court GRANTS Plaintiff's Motion for De Novo Review and to Expand the Record and SUSTAINS Plaintiff's Objections to Magistrate Judge's Order. A. Background On November 19, 2008, Plaintiff filed a complaint against Defendant in the U.S. District Court for the District of Delaware alleging patent infringement. Leader Techs., Inc. v. Facebook, Inc., Case No. C 098-862 JJF/LPS (D. Del.). In January 2010, Plaintiff served three nonparty

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(hereafter, "Motion," Docket Item No. 36.)

(Response to Leader Technologies, Inc.'s Objection to Magistrate's Order, hereafter, "Response" (filed under seal).)

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former Defendant employees with subpoenas to testify at deposition and produce documents.3 Those nonparties were Karel Baloun, Thyagaraja S. Ramakrishnan, and Stephen D. Haggerty (collectively, the "Nonparties"). The subpoenas noticed depositions for January 27, January 26, and January 28, 2010 for each Nonparty respectively. (Id. at Ex. 1 at 1, Ex. 2 at 1, Ex. 3 at 1.) In response, each Nonparty filed an identical objection "to the time and to the location specified in the Notice of Deposition and Subpoeanas," and stated that they would "appear for a deposition, if at all, at a time and place to be agreed upon." (Id. at Ex. 4 at 2, Ex. 5 at 2, Ex. 6 at 2.) Nonparties Baloun and Ramakrishnan filed their respective objections to the subpoenas prior to the noticed deposition dates, while Nonparty Dawson-Haggerty filed his objection to the subpoena a day after his noticed deposition date. (See id., Ex. 4 at 9.) On February 4, 2010, Defendant and Nonparties filed in this Court a Motion to Quash Deposition Subpoeanas of Nonparties Karel Baloun, Stephen Dawson-Haggerty and Thyagaraja S. Ramakrishnan and for Protective Order. (See Docket Item No. 1.) On March 2, 2010, Magistrate Judge Lloyd conducted a hearing and issued an Order Granting in Part and Denying in Part Facebook's and Nonparties' Motion to Quash and for Protective Order. (hereafter, "Order," Docket Item No. 23.) In his Order, Judge Lloyd found that the burden or expense of deposing the three Nonparties outweighs its likely benefit, and that in light of discovery that Defendant has either produced or will produce in the future, the discovery sought is cumulative and duplicative. (Order at 4-5.) However, Judge Lloyd ordered the Nonparties, within ten days of the date of the Order, to serve declarations as to whether they knew about or were aware of Plaintiff, the patent-in-suit, or the patent-in-suit's inventor, and if so, when. (Id. at 5.) On March 11, 2010, all three Nonparties separately filed declarations stating that they have no knowledge of the patent-in-suit, Plaintiff, or either of the two inventors named on the patent-insuit. (See Docket Item Nos. 24-26.) (See Declaration of Sean M. Boyle in Support of Leader Technologies, Inc.'s Opposition to Motion to Quash Deposition Subpoenas of Nonparties Karel Baloun, Stephen Dawson-Haggerty and Thyagaraja S. Ramakrishnan and for Protective Order and Request for a Contempt Order, hereafter, "Boyle Decl.," Ex. 1 at 8, Ex. 2 at 8, Ex. 3 at 8, Docket Item No. 12.) 2
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United States District Court

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B.

Standards A district court may modify a magistrate judge's ruling on a non-dispositive matter, such as

an order to compel discovery, if the order is "clearly erroneous" or "contrary to law." 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); Bahn v. NME Hospitals, Inc., 929 F.2d 1404, 1414 (9th Cir. 1991). A district court must determine de novo any part of a magistrate's ruling on a dispositive matter that has been properly objected to. 28 U.S.C. § 636(b)(1)(B), (C); Fed. R. Civ. P. 72(b). A district court may "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Fed. R. Civ. P. 72(b). C. Discussion 1. Motion for De Novo Review

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Plaintiff seeks de novo review of Judge Lloyd's Order, pursuant to Civ. L.R. 72-3, on the ground that it disposes of all matters before this Court and is not reviewable on appeal from the final judgment in the principal action.4 Defendant contends that Judge Lloyd's Order is non-dispositive, and thus only reviewable under the "clearly erroneous or contrary to law" standard pursuant to Civ. L.R. 72-2. (Response at 2-4.) In support of its contention that Judge Lloyd's Order is dispositive, Plaintiff relies on In re Subpoena Served on the California Public Utilities Commission.5 In that case, the Ninth Circuit reiterated the general principle that "orders regarding discovery, including sanction orders, are normally deemed interlocutory and reviewable only on appeal from a final judgment." Id. at 1476. However, the court recognized an exception to the general rule "when a subpoena is issued by a district court in favor of a nonparty in connection with a case pending in a district court of another circuit." Id. In such circumstances, "the order is reviewable before final judgment." Id.; see also

(Leader Technologies, Inc.'s Reply in Support of its Motion for De Novo Review and to Expand the Record at 1, hereafter, "Reply," Docket Item No. 69.)
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813 F.2d 1473 (9th Cir. 1987). 3

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Premium Serv. Corp. v. Sperry & Hutchinson Co., 511 F.2d 255, 228 (9th Cir. 1975); Micro Motion, Inc. v. Kane Steel Co., 894 F.2d 1318, 1320 (Fed. Cir. 1990). The Court finds that Judge Lloyd's Order with regard to the Motion to Quash terminates the proceeding before this Court and is immediately appealable under clear Ninth Circuit precedent. The Delaware district court will have no jurisdiction over the Nonparties, so Plaintiff cannot challenge the Order if and when it appeals from the Delaware district court's final judgment. Nor will this Court conduct any further enforcement proceeding resulting in a final adjudication from which Plaintiff could appeal. Although the underlying action will continue in the District of Delaware, the lack of any opportunity for further review in that court renders Judge Lloyd's Order dispositive of the action before this Court. Thus, the Court finds that de novo review of the Order is the appropriate standard in this circumstance. In reviewing Judge Lloyd's Order de novo, the Court finds good cause to consider the additional evidence that Plaintiff presents to demonstrate that the discovery that Defendant has produced thus far has been inadequate. Civ. L.R. 72-3(b). Accordingly, the Court GRANTS Plaintiff's Motion for De Novo Review and to Expand the Record. 2. Objections to Magistrate Order

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Plaintiff objects to the Judge Lloyd's Order on the grounds that: (1) the Party witnesses that Defendant offered to produce for deposition in place of the Nonparties were not able to adequately provide the information sought,6 (2) Plaintiff has established a need to depose the Nonparties,7 (3) the testimony that the Nonparties could provide is relevant to the issue of willful infringement,8 and (4) the Motion to Quash was untimely.9

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(Objections at 5-11.) (Id. at 11-15.) (Id. at 15.) (Id. at 15-17.) 4

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Neither party disputes the underlying law applicable to the Motion to Quash. Fed. R. Civ. P. 45(c)(3) provides: On timely motion, the issuing court must quash or modify a subpoena that: (i) fails to allow a reasonable time to comply; (ii) requires a person who is neither a party nor a party's officer to travel more than 100 miles from where that person resides, is employed, or regularly transacts business in person . . . ; (iii) requires disclosure of privileged or other protected matter, if no exception or waiver applies; or (iv) subjects a person to undue burden. Here, Defendant and Nonparties do not contend that taking the Nonparties' depositions would require any of them to travel more than 100 miles from where any of them resides, is employed, or regularly transacts business in person. Nor do Defendant and Nonparties contend that taking the depositions would require any Nonparty to disclose a privileged or protected matter. Thus the only issues properly before the Court with regard to the showing necessary to grant a Motion to Quash are whether the subpoenas placed an undue burden on the Nonparties and whether Plaintiff allowed the Nonparties a reasonable time to comply with the subpoenas. Defendant and Nonparties contend that taking the depositions of the Nonparties would place an undue burden on them because their deposition testimony would be cumulative and duplicative of discovery already provided, or soon to be provided, by Defendant. (Response at 4-6.) More specifically, Defendant and Nonparties contend that the former and current Defendant employees that they have produced, along with the source code and code revision history, are adequate substitutes for the discovery Plaintiff seeks. (Id.) Fed. R. Civ. P. 26(b)(2)(C) provides: On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; and (iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. "[A] strong showing is required before a party will be denied entirely the right to take a deposition." Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975).

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Here, Plaintiff presents substantial evidence showing that the deponents Defendants produced in place of the Nonparties were unable to provide adequate information regarding the accused applications on Defendant's website.10 According to deposition testimony provided by Plaintiff, several of these replacement witnesses answered, "I don't know," to questions that appear to the Court to be central to Plaintiff's claims.11 Plaintiff further provides evidence that each of the Nonparties, as former Defendant employees, is likely to have first-hand knowledge of one or more of the accused applications.12 (See Boyle Decl., Exs. 10-11.) While it is undisputed that each Nonparty's employment with Defendant ended before the patent-in-suit issued in November 2006, Defendant acknowledged at oral argument before Judge Lloyd that knowledge of the patent-in-suit prior to its issuance can be relevant to the alleged willfulness of any infringement. (Order at 5.) While the Nonparties have all provided declarations stating that prior to the underlying action, they had never heard of Plaintiff, the patent-in-suit, or the inventors listed on the patent-in-suit, the Court finds that Plaintiff is entitled to explore the Nonparties' knowledge beyond these basic facts.

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For the Northern District of California

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Since the moving papers are all filed under seal, the Court will only refer to their contents in a broad and general fashion in this Order. In his Order, Judge Lloyd based his finding that the depositions of Nonparties would be cumulative and duplicative in part on Defendant's representation that it would produce three current Facebook engineers for deposition in addition to the two former Facebook engineers already produced. (Order at 4.) Based on the evidence Plaintiff presents in support if its Motion, it appears that Plaintiff did not conduct the depositions of these three additional witnesses until immediately before or after the hearing before Judge Lloyd. (See Boyd Decl., Ex. 1 (deposition of Joshua L. Wiseman taken February 25, 2010; Ex. 2 (deposition of Daniel Chai taken March 3, 2010); Ex.3 (deposition of James Wang taken March 5, 2010).) Thus, it appears that Judge Lloyd did not have before him evidence relating to these three depositions at the time he issued his Order. On the fuller record now before the Court, it is more apparent that the substitute deponents Defendant produced were not able to provide the information that Plaintiff seeks to glean from deposing the Nonparties. (Supplemental Declaration of Melissa H. Keyes in Support of Nonparties Karel Baloun, Stephen Dawson-Haggerty and Thyagaraja S. Ramakrishnan's Motion to Quash Deposition Subpoenas and for Protective Order, Exs. 1-2 (filed under seal).) It is undisputed that Non-party Baloun wrote a book on the subject of Facebook in which he claims to have been "one of the first ten engineers" to work for the company. (See Boyle Decl., Ex. 11 at 11.) Non-party Ramakrishnan is a former Facebook Vice President for Engineering. (Id., Ex. 10.) Plaintiff represents that Non-party Dawson-Haggerty is the software engineer who coded one of the applications on Defendant's website which Plaintiff contends infringes its Patent. (Objections at 14.) Defendant and Non-parties do not dispute Plaintiff's representation in this regard. 6
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As to Defendant and Nonparties' contention that the source code itself is the best evidence available on the issue of patent infringement, the Court finds that Plaintiff should have the opportunity to develop a narrative to explain and elaborate on the development of the accused applications. While Plaintiff may eventually decide to rely heavily on the source code at trial, Plaintiff should not be foreclosed from pursuing other means of presenting its case which may be more accessible to a jury. Thus, the Court finds that allowing Plaintiff to take the discovery it seeks would not unduly burden the Nonparties. Accordingly, the Court SUSTAINS Plaintiff's Objections to the Magistrate Judge's Order.13 D. Conclusion The Court GRANTS Plaintiff's Motion for De Novo Review and to Expand the Record and SUSTAINS Plaintiff's Objections to Magistrate Judge's Order. On de novo review, the Court DENIES Defendant and Nonparties' Motion to Quash and orders as follows: (1) Plaintiff's counsel shall meet and confer with Nonparties' counsel to determine the earliest available dates for conducting depositions of the three Nonparties. (2) On or before May 21, 2010, Plaintiff shall serve notice of the depositions of the three Nonparties. Plaintiff shall serve the deposition notice at least ten days in advance of the date of each Nonparty's deposition. (3) The Nonparties shall appear for deposition at the date and location specified in the notice.

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For the Northern District of California

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Dated: May 12, 2010

JAMES WARE United States District Judge

In light of the Court's determination that the subpoenas did not place an undue burden on Nonparties, the Court need not reach Plaintiff's other reasons for denying the Motion to Quash. The Court further finds that the Nonparties' respective objections to the subpoenas on the ground that they did not provide adequate time for compliance are made moot by this Court's present Order requiring Plaintiff to serve notice of the depositions at least ten days in advance of the deposition date. 7

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO: [e-mail] [e-mail] [e-mail] [e-mail] [e-mail] [e-mail]

Dated: May 12, 2010

Richard W. Wieking, Clerk By: /s/ JW Chambers Elizabeth Garcia Courtroom Deputy

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For the Northern District of California

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