Finjan, Inc. v. ESET, LLC et al

Filing 433

ORDER On Finjan's Motion for Review of Magistrate Judge's Order on Discovery Dispute as to ESET's Interrogatory No. 23 [Doc. No. 408 ]. Signed by Judge Cathy Ann Bencivengo on 1/24/2019. (anh)

1
2
3
4
5
6
7

UNITED STATES DISTRICT COURT

8

SOUTHERN DISTRICT OF CALIFORNIA

9
10

FINJAN, INC.,

Case No.: 3: 17-cv-00183-CAB-BGS
Plaintiff,

11
12

v.

13

ORDER ON FINJAN’s MOTION
FOR REVIEW OF MAGISTRATE
JUDGE’S ORDER ON DISCOVERY
DISPUTE AS TO ESET’S
INTERROGATORY NO. 23
[Doc. No. 408]

ESET, LLC, et al.,

14

Defendants.

15
16

AND RELATED COUNTERCLAIMS.

17
18
19

Plaintiff Finjan objects to the Magistrate Judge’s ruling that it provide Defendants

20

ESET LLC and ESET SPOL. S.R.O. (collectively “ESET”) with information regarding

21
22
23
24
25

legal fees paid in connection with the settlement of previous litigation. [Doc. No. 408-1.]
Plaintiff filed its motion on the grounds that the ruling regarding Interrogatory No. 23 is
clearly erroneous and contrary law and as a result, it seeks the return and destruction of the
supplemental discovery provided in response to the Magistrate Judge Skomal’s order. [Id.]
As the Court has explained previously, its review of magistrate judge orders on non-

26

dispositive motions is limited. A district court judge may reconsider a magistrate judge’s

27

ruling on a non-dispositive motion only “where it has been shown that the magistrate’s

28
1
3: 17-cv-00183-CAB-BGS

1

order is clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(1); see also Fed. R.

2

Civ. P. 72(a). “A magistrate judge’s legal conclusions are reviewable de novo to determine

3

whether they are “contrary to law” and findings of fact are subject to the “clearly

4

erroneous” standard.” Meeks v. Nunez, Case No. 13cv973-GPC(BGS), 2016 WL 2586681,

5

*2 (S.D. Cal. May 4, 2016) (citing Perry v. Schwarzenegger, 268 F.R.D. 344, 348 (N.D.

6

Cal. Mar. 22, 2010)).

7

“The ‘clearly erroneous’ standard applies to the magistrate judge’s factual

8

determinations and discretionary decisions . . . .” Computer Econ., Inc. v. Gartner Grp.,

9

Inc., 50 F. Supp. 2d 980, 983 (S.D. Cal. May 25, 1999) (citations omitted). “Under this

10

standard, ‘the district court can overturn the magistrate judge’s ruling only if the district

11

court is left with the definite and firm conviction that a mistake has been made.’” Id.

12

(quoting Weeks v. Samsung Heavy Indus. Co., Ltd., 126 F.3d 926, 943 (7th Cir. 1997)); see

13

also Green v. Baca, 219 F.R.D. 485, 489 (C.D. Cal. Dec. 16, 2003) (citations omitted).

14

The “contrary to law” standard “allows independent, plenary review of purely legal

15

determinations by the Magistrate Judge.” Jadwin v. Cnty. of Kern, 767 F. Supp. 2d 1069,

16

1110 (E.D. Cal. Jan. 24, 2011) (citing FDIC v. Fidelity & Deposit Co. of Md, 196 F.R.D.

17

375, 378 (S.D. Cal. May 1, 2000); see also Computer Econ., 50 F. Supp. 2d at 983 n. 4;

18

see also Green, 219 F.R.D., at 489. A magistrate judge’s order “is contrary to law when it

19

fails to apply or misapplies relevant statutes, case law, or rules of procedure.” Jadwin, 767

20

F. Supp. 2d at 1110-11 (quoting DeFazio v. Wallis, 459 F. Supp. 2d 159, 163 (E.D.N.Y

21

Oct. 17, 2006)) (internal quotation marks omitted).

22

On October 30, 2018, Magistrate Judge Skomal held a telephonic discovery

23

conference which including a discussion regarding ESET’s Interrogatory No. 23, with the

24

parties being ordered to submit a joint statement on the issue. [Doc. No. 377.] On

25

November 7, 2018, the parties submitted the requested joint statement [Doc. No. 381] and

26

on November 20, 2018, Magistrate Judge Skomal issued on order that addressed the dispute

27

surrounding Interrogatory No. 23 [Doc. No. 392].

28
2
3: 17-cv-00183-CAB-BGS

1

ESET’s Interrogatory No. 23 asks Finjan to:

2

identify all dollar amount and date of each contingency payment made by
Finjan for legal services in connection with settlement of each litigation
initiated by Finjan from January 2005 to August 2018.

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

[Doc. No. 381 at 2.]
Magistrate Judge Skomal accurately summarized the parties’ positions as set forth
in the joint statement. [Doc. Nos. 381, 392.] Finjan argued that the discovery sought was
irrelevant and unnecessary, especially since the information regarding settlement
agreements would ultimately be inadmissible. [Doc. No. 392 at 1.] Further, Finjan asserted
that it had already provided information that it claimed adequately explained what Finjan
does consider in licensing negotiations, that “this is what ESET’s experts should be
considering in determining how settlement amounts are calculated, not how or if legal fees
are factored into the settlement agreements.” [Id. at 2.] ESET, in turn, argued that its
expert may need to take the contingency fee payments into consideration in determining
the value of Finjan’s settlement agreements, and, ultimately, the value of the asserted
patents. [Id.] Further, ESET argued that its and Finjan’s experts should be given the
information regarding any settlements and the contingency fee payments stemming from
them in order to provide an actual value of the settlement, that the experts could then choose
to accept or reject. [Id.] ESET disputed Finjan’s assertion that Finjan does not take
contingency payments into consideration when determining the value of its settlement
agreements, characterizing it as a “self-serving statement.” [Id.] Judge Skomal concluded
that Finjan could not deny ESET information that could potentially be relevant to its
expert’s determination of a reasonable royalty based solely on the fact that Finjan does not
factor contingency fees into its settlement agreements.

[Id.]

Finjan was therefore

compelled to provide a response to Interrogatory No. 23. [Id. at 3.]
Plaintiff is objecting on the grounds that payments by Finjan to its outside counsel
for legal services have no relevance to damages in this action as a matter of law. Plaintiff
argues that the purpose of a hypothetical negotiation, as explained in Carnegie Mellon
3
3: 17-cv-00183-CAB-BGS

1

University v. Marvell Technology Group, Ltd, 807 F.3d 1283, 1303-04 (Fed. Cir. 2015), is

2

“to ascertain the royalty upon which the parties would have agreed had they successfully

3

negotiated an agreement just before the infringement began.” [Doc. No. 408 at 9.] While

4

Finjan concedes that settlement agreements may be considered as one of the 15 factors that

5

may affect the outcome of hypothetical negotiations, it posits that such information may

6

not always be informative because the circumstances under which they were entered can

7

vary considerably, citing for the first time LaserDynamics, Inc v. Quanta Computer, Inc.

8

694 F.3d 51, 77 (Fed. Cir. 2012). [Id. at 9.] Plaintiff contends, therefore, that the court

9

failed to properly consider its explanation of damages law, informing that if the court had,

10

it would have become evident that payments to attorneys should not be deducted from the

11

value of settlement agreements, thereby making ESET’s proposed calculation incorrect.

12

[Id. at 9-11.] Further, Plaintiff asserts that the order is clearly erroneous because there is

13

no factual basis for claiming Finjan’s payments to its attorneys are relevant. [Id. at 11-13.]

14

Finally, Plaintiff argues that the information is not discoverable under Rule 26. [Id. at 13-

15

15.]
But, after consideration of both parties’ positions, Magistrate Judge Skomal found

16
17
18
19
20
21
22
23
24
25
26

that:
Finjan cannot deny ESET information that may be relevant to ESET’s expert’s
determination of a reasonable royalty based solely on Finjan’s assert that it
does not factor contingency fees into its settlement agreements. Similarly, in
terms of the relevancy of the discovery, ESET is not limited to considering
only the things Finjan’s witnesses generally and somewhat vaguely identify
as factors it considers in calculating its settlement agreements. ESET is not
required to take them at their word as to how they calculate it to the exclusion
of any other possible factors that might have mattered. ESET’s proposed
calculation, deducting the contingency fees from the settlement amount to
arrive at the true value of the agreement, may not ultimately hold up or be
admissible, but that does not mean it is outside the scope of discovery.
[Doc. No. at 392 at 3.]

27

In so finding, Magistrate Judge Skomal distinguished the request from the singular

28

case Finjan relied on in the joint statement, applied the standard set forth in Federal Rule
4
3: 17-cv-00183-CAB-BGS

1

of Civil Procedure 26(b)(1), concluded the information was relevant and the burden of

2

responding was minimal.

3

A review of the order demonstrates that Magistrate Judge Skomal had a thorough

4

understanding of the parties’ positions and discovery history, referenced specific

5

arguments made by the parties, and was familiar with, and in fact discusses, the relevant

6

case law. See generally, Doc. No. 392. Given the broad discretion of the court in

7

conducting discovery, the ruling of Magistrate Judge Skomal was not an abuse of

8

discretion. Plaintiff has failed to show that the discovery order was “clearly erroneous or

9

contrary to law.” Plaintiff’s request that this Court order ESET to return and destroy the

10

supplemental discovery provided in response to Interrogatory No. 23 is therefore

11

DENIED.

12
13

It is SO ORDERED.
Dated: January 24, 2019

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5
3: 17-cv-00183-CAB-BGS