Tessera, Inc. v. Sony Corporation
Filing
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ORDER denying 95 Motion for Relief from Non-Dispositive Pretrial Order of Magistrate Judge. The court schedules this case for a Status Conference on 12/14/2012 at 10:00 a.m. On or before 12/7/2012, the parties shall file Joint Status Conference Statement which describes the parties' agreement in connection with the discovery at issue, or if one has not been reached, describes the parties' respective positions on the issue. Signed by Judge Edward J. Davila on 11/26/2012. (ejdlc1, COURT STAFF) (Filed on 11/26/2012)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
CASE NO. 5:11-cv-04399 EJD
TESSERA, INC.,
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ORDER DENYING DEFENDANT’S
MOTION FOR RELIEF FROM NONDISPOSITIVE PRETRIAL ORDER OF
MAGISTRATE JUDGE
Plaintiff(s),
For the Northern District of California
United States District Court
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v.
SONY CORPORATION,
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[Docket Item No(s). 95]
Defendant(s).
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Presently before the court is Defendant Sony Corporation’s (“Defendant”) motion pursuant
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to Civil Local Rule 72-2 for relief from a non-dispositive discovery ruling issued by Magistrate
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Judge Howard R. Lloyd. See Docket Item No. 95. Plaintiff Tessera, Inc. (“Plaintiff”) has filed
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written opposition to the motion according to this court’s briefing order. See Docket Item No. 121.
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For the reasons explained below, Defendant’s motion will be denied.
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I.
BACKGROUND
The action underlying this dispute is one for breach of contract and breach of the covenant of
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good faith and fair dealing. The subject contract is a License Agreement between Plaintiff and
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Defendant, pursuant to which Defendant was obligated to pay certain royalties to Plaintiff in
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exchange for the use of Plaintiff’s technology. The agreement also provided Plaintiff with the right
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to examine Defendant’s records. Plaintiff conducted an audit of Defendant’s records in 2011 for the
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years 2006 through June 2010. According to Plaintiff, the audit revealed additional royalties
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CASE NO. 5:11-cv-04399 EJD
ORDER DENYING DEFENDANT’S MOTION FOR RELIEF FROM NON-DISPOSITIVE PRETRIAL ORDER OF
MAGISTRATE JUDGE
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payable by Defendant. Plaintiff also contends that Defendant did not permit the auditors to inspect
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all relevant records.
necessary to calculate damages, including information about products made by third-parties which
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carry Defendant’s brand name. Defendant objected to the requests as overbroad and burdensome
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based on its interpretation of key language in the License Agreement, which Defendant believes
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limits royalty payments to products made by Defendant or designed by Defendant but manufactured
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by others. The parties could not informally resolve their dispute and presented it to Magistrate
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Judge Lloyd. After briefing and hearing on the matter, Judge Lloyd first recommended the parties
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reach an agreement limiting the scope of production, but ultimately ordered Defendant to comply
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For the Northern District of California
In discovery, Plaintiff sought documents and information from Defendant it believed
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United States District Court
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with Plaintiff’s discovery requests no later than November 8, 2012. See Docket Item No. 83. Judge
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Lloyd thereafter denied Defendant’s motion for leave to file a motion for reconsideration of the
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discovery order. See Docket Item No. 103. Defendant now seeks relief from this court.
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II.
LEGAL STANDARD
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The district court must consider any timely objections to a magistrate’s order on a
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nondispositive motion and “modify or set aside any part of the order that is clearly erroneous or is
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contrary to law.” Fed. R. Civ. P. 72(a); see also 28 U.S.C. § 636(b)(1)(A). This is a deferential
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standard. See Grimes v. City & County of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991).
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Indeed, “[t]he reviewing court may not simply substitute its judgment for that of the deciding court”
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or subject the magistrate judge’s ruling to a de novo review. Id.
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Defendant assigns error to a decision concerning discovery and essentially seeks a protective
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order limiting production to its interpretation of the contract. Subject to the court’s inherent power
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to control the proceedings before it, “parties may obtain discovery regarding any nonprivileged
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matter that is relevant to any party’s claims or defense.” Fed. R. Civ. P. 26(b). “Relevant
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information need not be admissible at the trial if the discovery appears reasonably calculated to lead
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to the discovery of admissible evidence.” Id. However, “[t]he court may, for good cause, issue an
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order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or
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CASE NO. 5:11-cv-04399 EJD
ORDER DENYING DEFENDANT’S MOTION FOR RELIEF FROM NON-DISPOSITIVE PRETRIAL ORDER OF
MAGISTRATE JUDGE
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expense.” Fed. R. Civ. P. 26(c)(1). The requisite ‘good cause’ maybe shown “by demonstrating
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harm or prejudice that will result from the discovery.” Rivera v. NIBCO, Inc., 364 F.3d 1057, 1063
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(9th Cir. 2004). In this circuit, “[a] party asserting good cause bears the burden, for each particular
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document it seeks to protect, of showing that specific prejudice or harm will result if no protective
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order is granted.” Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1130 (9th Cir. 2003).
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Generalizations are not enough. Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 476 (9th Cir.
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1992) (“Broad allegations of harm, unsubstantiated by specific examples or articulated reasoning, do
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not satisfy the Rule 26(c) test” (citation and quotation marks omitted)).
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III.
DISCUSSION
In light of the broad standard for relevancy applied in discovery proceedings, the order
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For the Northern District of California
United States District Court
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compelling Defendant to comply with the discovery requests was neither clearly erroneous nor
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contrary to law. As Judge Lloyd appropriately recognized, Plaintiff is entitled to reasonable
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damages discovery based on its interpretation of key language in the License Agreement. Although
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Defendant disagrees with Plaintiff’s interpretation, neither Judge Lloyd nor this court can determine
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the appropriate interpretation of contract language within the context of this discovery dispute. At
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this point, that particular issue appears intertwined with the ultimate question presented by this case:
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whether Defendant breached the License Agreement by failing to pay royalties according to its
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terms. In that regard, Plaintiff has posited one interpretation of the key language; Defendant has
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posed another. One may be more extreme, but it is not so extreme so as to be inconceivable.
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Assuming the parties cannot resolve this action themselves, the court will eventually need to
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determine which party has put forth the better argument. But that decision is not one that can be
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accomplished now without the benefit of a more suitable motion addressing the merits of the
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interpretation conflict.
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The same is true of Defendant’s contention that Plaintiff’s discovery requests are overbroad
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as to time. Judge Lloyd found that Plaintiff was entitled to information dating back to when the
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License Agreement was executed in 1997 because the correct application of contract terms could not
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be decided as part of a discovery disagreement. Again, both parties have proposed distinct, yet
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CASE NO. 5:11-cv-04399 EJD
ORDER DENYING DEFENDANT’S MOTION FOR RELIEF FROM NON-DISPOSITIVE PRETRIAL ORDER OF
MAGISTRATE JUDGE
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possible, ways to apply the License Agreement. That being the case, this court agrees with Judge
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Lloyd that Plaintiff can obtain the information sought.
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Finally, Defendant argues that the order compelling production could impose an extreme
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burden, perhaps requiring Defendant to spend thousands of hours researching hundreds of thousands
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of third-party products. Judge Lloyd found this contention unconvincing because Defendant could
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not describe the process that would involved in such an undertaking, but nonetheless provided the
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parties an opportunity to ease any potential burden by reaching an agreement to limit the production
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to certain representative products.
Procedure 26(b)(2)(C) (“[T]he court must limit the frequency or extent of discovery otherwise
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For the Northern District of California
While this court is certainly mindful of the directive contained in Federal Rule of Civil
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United States District Court
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allowed by these rules or by local rule if it determines that . . . the burden or expense of the proposed
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discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy,
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the parties’ resources, the importance of the issues at stake in the action, and the importance of the
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discovery in resolving the issues.”), it is also true that “[t]he party who resists discovery has the
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burden to show that discovery should not be allowed, and has the burden of clarifying, explaining,
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and supporting its objection.” Oakes v. Halvorsen Marine Ltd., 179 F.R.D. 281, 283 (C.D. Cal.
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1998). Defendant has not met its burden here. Just as before Judge Lloyd, Defendant frames its
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claim of undue burden only with generalities based on the entire universe of third-party products
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manufactured for Defendant. But as Plaintiff points out, the discovery requests at issue pertain to
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certain products containing ball grid array and land grid array packages, and Defendant’s motion as
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well as the accompanying declaration of its general manager, Shinji Ina, are each silent as to this
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categorical limitation. Moreover, Ina himself is only able to speculate as to the extent of any burden
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(“Because Sony has so many products that contain chips, it is difficult to quantify the work that
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would be involved in exhaustively searching each product.”). That is not enough.
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In sum, Defendant’s did not establish the good cause required for the type of order it seeks,
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particularly when Judge Lloyd provided an explicit mechanism to ameliorate Defendant’s concern
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through an agreement narrowing the scope of production. In any event, the deferential standard
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CASE NO. 5:11-cv-04399 EJD
ORDER DENYING DEFENDANT’S MOTION FOR RELIEF FROM NON-DISPOSITIVE PRETRIAL ORDER OF
MAGISTRATE JUDGE
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which applies to these types of motions preclude this court from subjecting Judge Lloyd’s order to a
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de novo review based on declarations presented for the first time in this motion even if this court
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were inclined to decide the matter differently.
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IV. ORDER
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Based on the foregoing, Defendant’s motion is DENIED and all objections to Judge Lloyd’s
order are OVERRULED.
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Due to the delay caused by this proceeding, the court finds it appropriate to extend the
that the parties reach an agreement defining a fair selection of products for which information will
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be produced. Accordingly, the parties shall meet and confer on this issue forthwith, and the court
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For the Northern District of California
deadline for Defendant’s production. The court also strongly approves Judge Lloyd’s suggestion
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United States District Court
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schedules this case for a Status Conference on December 14, 2012, at 10:00 a.m. in order to
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determine the parties’ progress in that regard. On or before December 7, 2012, the parties shall file
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Joint Status Conference Statement which describes the parties’ agreement in connection with the
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discovery at issue, or if one has not been reached, describes the parties’ respective positions on the
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issue.
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Defendant shall thereafter make its production - whether for agreed-upon products or for all
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products absent an agreement - no later than December 31, 2012.
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IT IS SO ORDERED.
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Dated: November 26, 2012
EDWARD J. DAVILA
United States District Judge
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CASE NO. 5:11-cv-04399 EJD
ORDER DENYING DEFENDANT’S MOTION FOR RELIEF FROM NON-DISPOSITIVE PRETRIAL ORDER OF
MAGISTRATE JUDGE
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