Apple Inc. v. Samsung Electronics Co., Ltd. et al
Filing
737
ORDER DENYING MOTION TO COMPEL AND MOTION TO ENFORCE by Judge Paul S. Grewal denying #669 Administrative Motion to File Under Seal (psglc1, COURT STAFF) (Filed on 8/14/2013)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
United States District Court
For the Northern District of California
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APPLE INC., a California corporation
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Case No.: 12-CV-0630-LHK (PSG)
Plaintiff,
ORDER DENYING MOTION TO
COMPEL AND MOTION TO
ENFORCE
v.
SAMSUNG ELECTRONICS CO. LTD., a
Korean business entity; SAMSUNG
ELECTRONICS AMERICA, INC., a New York
corporation; SAMSUNG
TELECOMMUNICATIONS AMERICA, LLC,
a Delaware limited liability company,
(Re: Docket No. 669)
Defendants.
In this patent infringement case between Plaintiff Apple, Inc. (“Apple”) and Defendants
Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung
Telecommunications America, LLC (collectively “Samsung”), Samsung moves to compel Apple to
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produce certain financial documents and to enforce the court’s April 12, 2013 discovery order.
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Apple opposes. On August 13, 2013, the court held a hearing. By this point, the parties and the
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community at large are well-versed in the background of this case, and so the court delves directly
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into the latest disputes.
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
I.
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LEGAL STANDARDS
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Rule 26(b) provides that parties “may obtain discovery regarding any nonprivileged matter
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that is relevant to any party’s claim or defense.” The relevant information “need not be admissible
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at trial if the discovery appears reasonably calculated to lead to the discovery of admissible
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evidence.” Relevance under Rule 26(b) is broadly defined, “although it is not without ultimate and
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necessary boundaries.”1
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Fed. R. Civ. P. 26(b)(2) provides one such a limit, mandating that the court limit the
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frequency or extent of discovery if: (1) “the discovery sought is unreasonably cumulative or
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For the Northern District of California
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duplicative, or can be obtained from some other source that is more convenient, less burdensome,
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or less expensive;” (2) “the party seeking discovery has had ample opportunity to obtain the
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information by discovery in the action;” or (3) “the burden or expense of the proposed discovery
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outweighs its likely benefit.” Upon a motion to compel brought pursuant to Fed. R. Civ. P.
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37(a)(3), the moving party has the burden of demonstrating relevance.2
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II.
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A.
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DISCUSSION
Samsung’s request that Apple produce U.S. financial data according to specific
product.
Samsung asks the court to compel further responses to its Requests for Production
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(“RFPs”), which seek financial documents from Apple regarding: (1) units sold, gross and net
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revenue, gross and net margin, and gross and net profits for each Apple product (RFPs 101, 197,
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543,-546, 860-861); (2) reports and projections of U.S. sales, profitability margins, and financial
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performance for each version of the iPhone and iPad (RFPs 547-556, 863-865); and (3) all costs
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See Gonzales v. Google Inc., 234 F.R.D. 674, 680 (N.D. Cal. 2006) (internal citations and
quotations omitted).
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See Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D. Cal. 1995).
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
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comprising costs of goods sold and all costs other than standard costs for each of the accused
products (RFP 854). In its reply, Samsung further elaborates that these documents would include:
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System billings on a per-product basis;
Revenue adjustments – amortization, deferrals, commissions, and carrier subsidies – on a
per-product basis;
Standard margins for the U.S. market;
Advertising and marketing expenses for “hero products” for the U.S. market;
Gross margins on a per-product basis;
Projected iPhone revenues on a per-product basis for the U.S. market; and
Projected gross margins on a per-product basis for the U.S. market.
On April 15, 2013, Apple produced certain documents responsive to Samsung’s requests.
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Samsung objects that this production was deficient in two broad respects. First, most of the data
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For the Northern District of California
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presented was worldwide rather than U.S.-specific. Second, the data was compiled at the “product
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line level” (e.g., iPhone and iPad) rather than the “model level” (e.g., iPhone 4S, iPhone 5). Apple
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refused to present more “granular” financial data, claiming that it does not maintain reports of such
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data in its “ordinary course of business.”
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Apple does not dispute that the data is relevant under the generous Rule 26 standard.
Indeed, the U.S.-specific, model level data is highly relevant to both Samsung’s own damages
claims as well as Samsung’s defenses against Apple’s damages claim. To calculate its own
damages, Samsung must limit its damages figures to infringement that occurred in the U.S. only. 3
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Samsung also requires data specific to each accused product; generalized data spread across several
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different models will not suffice.4 Not all generations of Apple’s products are accused of
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infringing the same patents – for example, the ‘239 patent is asserted against several iPhone
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See 35 U.S.C. § 271 (“whoever without authority makes, uses, offers to sell, or sells any patented
invention, within the United States or imports into the United States any patented invention during
the term of the patent therefor, infringes the patent”).
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An expert must “carefully tie” his assessment of damages to “the claimed invention’s footprint in
the market place.” ResQNet.com, Inc. v. Microsoft Corp., 632 F.3d 1292, 1311 (Fed. Cir. 2011).
Additionally, several of the Georgia-Pacific factors used to calculate a reasonable royalty focus on
the profitability of each particular product. See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318
F. Supp. 1116, 1120 (S.D.N.Y. 1970).
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
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models, but not the iPhone 3GS.5 Different generations of iPhone products, priced anywhere from
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“free” to $199, are almost guaranteed to have different profit margins. Model-specific data is
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especially important in light of Judge Koh’s recent case management order, which requires
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Samsung to reduce its current list of 22 accused products to 10 accused products.6 Should
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Samsung decide to trim several generations of the iPhone product, the aggregated data currently
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provided would include products no longer in the case. For similar reasons, the data sought by
Samsung are also relevant to rebut Apple’s damages claim. Again, because different patents are
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asserted against different iPhone models, each likely to have different profit margins, model-
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For the Northern District of California
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specific financial data is crucial to computing lost profits accurately. Moreover, as some iPhone
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products are “free,” Samsung may argue that those models are ineligible for lost profits to the
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extent that they are not competitively priced.7 Samsung is entitled to develop these defenses.
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It is therefore uncontroversial that if Apple had reports of the data at issue, or could
generate such reports with only reasonable efforts, Apple would have to produce them. But Apple
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insists that it does not have reports of the nature Samsung would like and that only a herculean
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effort could produce even a subset of the reports demanded. Samsung presents evidence
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insinuating otherwise, submitting Apple documents showing that it does report at least some of the
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data at issue that is specific to the U.S. market and to individual product models.8 Apple also
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admits that it maintains “systems billings” and other “revenue line items” on a model-specific
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basis, but argues these are imperfect representations of revenue.9
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See Docket No. 669-2 ¶ 13.
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See Docket No. 471 at 2.
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See BIC Leisure Products, Inc. v. Windsurfing Int’l, Inc. 1 F.3d 1214, 1218-19 (Fed. Cir. 1993).
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See, e.g., Docket No. 669, Ex. 12-14 (tracking financial data, including revenue estimates and
costs, for different generations of iPhones).
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See Docket No. 711 at 6.
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
What emerges from the parties’ arguments is that Apple does have financial databases that
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it could query to generate at least some of the reports sought by Samsung.10 While this court has
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held that a party should not required to create completely new documents,11 that is not the same as
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requiring a party to query an existing dynamic database for relevant information.12 Courts
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regularly require parties to produce reports from dynamic databases, holding that “the technical
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burden… of creating a new dataset for the instant litigation does not excuse production.”13
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Compelling production here would therefore not violate any established discovery principles.
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The court may nevertheless limit production if the producing party shows that the
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For the Northern District of California
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electronically-stored information is “not reasonably accessible because of undue burden or cost.”14
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To demonstrate undue burden or cost, Apple must make a “particular and specific demonstration of
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fact, as distinguished from stereotyped and conclusory statements.”15 Apple argues broadly that it
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would be immensely burdened by an order requiring it to compile the reports required by
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Samsung’s demands because doing so would engage “multiple financial groups” in what is “likely
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Mark Buckley, Apple’s 30(b)(6) witness, provided a roadmap for querying the database to
generate the financial figures. See Docket No. 720-2 at 42:7-17, 51:19-52:1, 45:18-46:8.
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See Van v. Wal-Mart Stores, Inc., Case No. 08-5296, 2011 WL 62499, at *1 n.1 (N.D. Cal. Jan.
7, 2011) (denying motion to compel because it would require defendant to relabel existing floor
plans).
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See Gonzales, 234 F.R.D. at 683 (notwithstanding general rule that parties “are not required to
create documents that do not exist,” compelling Google to produce requested information by using
a new code to “format and extract query and URL data from many computer banks”).
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In re eBay Seller Antitrust Litigation, Case No. C 07-1882 JF(RS), 2009 WL 3613511, at *1
(N.D. Cal. Oct. 28, 2009) (requiring, under Rule 34 ESI production guidelines, that the defendant
produce records regarding certain transactional data from its dynamic database).
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Fed. R. Civ. P. 26(b)(2)(B).
Gulf Oil Co. v. Bernard, 452 U.S. 89, 102 n.16 (1981). See also Kennedy v. Jackson Nat’l Life
Ins. Co., Case No. C07-0371 CW MEJ, 2010 WL 1644944, at *1 (N.D. Cal. Apr. 22, 2010).
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
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[to be] several months of coordinated effort.”16 The court is generally dubious of such generalized
claims of burden in complying with discovery obligations.
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But there is an additional, more persuasive reason to limit Apple’s production – the court is
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required to limit discovery if “the burden or expense of the proposed discovery outweighs its likely
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benefit.”17 This is the essence of proportionality – an all-to-often ignored discovery principle.
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Because the parties have already submitted their expert damages reports, the financial documents
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would be of limited value to Samsung at this point. Although counsel was not able to shed light on
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exactly what was done, Samsung’s experts were clearly somehow able to apportion the worldwide,
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For the Northern District of California
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product line inclusive data to estimate U.S. and product-specific damages. It seems, well, senseless
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to require Apple to go to great lengths to produce data that Samsung is able to do without. This the
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court will not do.
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One other matter gives the court pause. To be sure, Samsung’s damages experts are still
open to an attack by Apple for their failure to use more granular financial data, either at pretrial
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hearings or at the trial itself. While Apple clearly could not impeach Samsung with any newly-
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compiled financial data that was not produced,18 in fairness it also is precluded more broadly from
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challenging Samsung’s damages experts for failing to allocate geographically or by product model
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in any way that could have been supported by the reports disputed here that were requested but not
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Docket No. 711 at 7 (citing Docket No. 711-5 ¶ 5-9).
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Id. section (b)(2)(C).
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See Fed. R. Civ. P. 37(c)(1) (“If a party fails to provide information or identify a witness as
required by Rule 26(a) or (e), the party is not allowed to use that information… to supply evidence
on a motion, at a hearing, or at a trial”).
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
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produced.19 This is enough to protect Samsung from any undue prejudice arising from Apple’s
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reporting limitations.
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B.
Samsung’s request to enforce the court’s April 12, 2013 order regarding pricing
documents
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In its April 12, 2013 order, the court agreed with Samsung in ruling that the following
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pricing documents were relevant and had to be produced: “(1) internal analysis by Apple of how it
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determines pricing for its products; (2) price elasticity/price sensitivity studies relating to the
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accused products; (3) documents discussing any price premiums for products that incorporate the
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patented features; and (4) discussions of pricing with wireless carriers, who heavily subsidize
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For the Northern District of California
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Apple’s products.”20 The court found such strategy documents relevant to Samsung’s reasonable
royalty and entire market value theories.21 The parties represented to the court at the hearing that
since the briefing this issue was resolved and did not require further court intervention. The court
accordingly does not address this issue further.
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IV. CONCLUSION
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Apple need not produce the financial documents sought by Samsung. But Apple is
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estopped from challenging Samsung’s experts on any ground that would be rebutted by reference
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to documents that Samsung requested but did not receive.
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IT IS SO ORDERED.
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Dated: August 14, 2013
_________________________________
PAUL S. GREWAL
United States Magistrate Judge
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Cf. Texas Instruments Inc. v. Powerchip Semiconductor Corp., Case No.
06CIV2305(SHS)(RLE), 2007 WL 1541010, at *11 (S.D.N.Y. May 24, 2007) (imposing fact
preclusion sanction based on failure to produce required database reports).
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Docket No. 404 at 11 (internal quotations omitted).
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See Docket No. 450 at 8-10.
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Case No: 12-0630 LHK (PSG)
ORDER DENYING MOTIONS TO COMPEL
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