Prism Technologies v. Adobe Systems Incorporated et al

Filing 615

MEMORANDUM AND ORDER - Prism's motion to preserve evidence and for sanctions (Filing No. 528 ) is granted, inasmuch as any existing handwritten notes regarding Adobe's source code will be preserved and produced, as described above. Prism's motion to preserve evidence and for sanctions (Filing No. 528 ) is denied in all other respects. Adobe's request for attorney fees contained in its brief is denied. Ordered by Senior Judge Lyle E. Strom. (TEL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
PRISM TECHNOLOGIES, LLC,

)
)
Plaintiff,
)
)
v.
)
)
ADOBE SYSTEMS, INCORPORATED; )
AUTODESK, INC.; McAFEE, INC.; )
SYMANTEC CORPORATION;
)
and TREND MICRO INCORPORATED, )
)
Defendants.
)
______________________________)

8:10CV220

MEMORANDUM AND ORDER

This matter is before the Court on the “emergency
motion” of plaintiff Prism Technologies, Inc. (“Prism”) “to
preserve evidence and for sanctions” as to defendant Adobe
Systems Incorporated (“Adobe”) (Filing No. 528, with an
accompanying brief and indices of evidence, Filing Nos. 529, 530
and 531).

In its motion, Prism seeks the following:

an order

requiring Adobe to desist from any further destruction of
evidence; an adverse inference jury instruction with regard to
evidence spoliation; and attorney fees for the preparation of the
motion.

One day after Prism filed its motion, Adobe filed an

“objection to expedited review of Prism’s ‘emergency’ motion”
(Filing No. 533, with index of evidence, Filing No. 534).

The

Court denied Prism’s request for an expedited review and set a
schedule for the parties’ responsive briefs (Filing No. 538).
Adobe then filed a brief opposing Prism’s motion, with index of
evidence (Filing Nos. 573 and 574), requesting compensation for

attorney fees.

Prism filed a reply brief, with index of evidence

(Filing Nos. 598 and 599).

After reviewing the parties’

submissions and the relevant law, the Court will grant in part
and deny in part Prism’s motion and will deny Adobe’s request for
attorney fees.
I.

Background.
On Friday, March 16, 2012, Prism deposed Adobe’s Rule

30(b)(6) corporate witness, Eric Wilde, a Senior Engineering
Manager.

During a discussion regarding source code testing, the

following dialogue transpired:
Q. How is that [feedback to
software engineers regarding
testing] done?
A. It depends on the testing
methodology used at that time.
Q. Okay.
ways?

What are the different

A. So if it was a code review, then
they provide feedback in the code
review itself, usually verbal.
Q. Okay.
taken?

Are there any notes

A. Sometimes. But that would be an
individual basis, they write on
papers, mark up papers, that
sort of thing.
Q. Do you know if any of those
notes were collected and produced
in the case?
A. I don't know.
them.

I didn’t provide

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Q. Okay.
A. They’re generally not -- They’re
just paper. Throw it in the
recycling bin.
Q. I see. And do you think those
notes are thrown in the recycling
bin even today?
A. They’re just quick notes.

Yeah.

Q. Okay. We’d probably be
interested in seeing some of those
notes.
(Ex. 2, Filing No. 530, at 8).

On Monday, March 19, 2012, Prism

wrote to Adobe to express its concern about “apparent evidence
spoliation” in reference to the “recycling” of the notes, and to
inform Adobe that Prism was “considering moving for sanctions”
(Ex. 3, Filing No. 530, at 2).

Adobe’s counsel responded that

evening, in part, “[W]e’ve [sic] very concerned with the
allegation you’ve hurled at us tonight.
you think the discrepancy is?”

Can you point out where

(Ex. 3, Filing No. 531, at 2).

The next day, March 20, the parties spoke on the
telephone.

According to Prism, “While dismissing Prism’s

concerns, Adobe’s counsel stated that she would look to see if
any notes still existed, but refused to agree to preserve,
collect and produce any remaining notes” (Filing No. 529, at 10).
Adobe describes the conversation differently, stating, “During
that call, although counsel for Adobe did not accept Prism’s
contention that documents were being destroyed, counsel

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nevertheless responded that Adobe was investigating the serious
issue raised in Prism’s letter and would respond to Prism the
next day by the close of business” (Filing No. 573, at 7).

In

addition, Adobe states, “Although Prism makes much of the fact
that counsel for Adobe supposedly did not promise to stop
destroying paper notes, in fact Adobe’s counsel made clear that
Adobe would continue to preserve all relevant evidence, but did
not believe any paper notes had been created or destroyed”
(Filing No. 573, at 7).

Prism disagrees with this

characterization of the phone conference, saying, “Mr. Banys
[Prism counsel] further recollects that, when he asked Ms.
Hunsaker [Adobe counsel] to respond by close of business
Wednesday, Ms. Hunsaker responded that Mr. Banys could not
dictate the timeline by which Adobe would complete its
‘investigation’ and Ms. Hunsaker refused to say when Adobe might
do so” (Filing No. 598, at 16).1
On March 21, 2012, before receiving the additional
response from Adobe, Prism filed the present motion.

Later that

day, Adobe responded by letter to Prism’s allegations, as Adobe
claims that it said it would do.

In that letter, Adobe stated,

1

The Court finds that the March 20 phone call satisfied the
“meet and confer” requirements of Nebraska Civil Rule 7.0.1(i).
Beyond that, the Court has no way to determine which counsel’s
memory of the phone call is the more accurate. At any rate,
regardless of the timing of the motion, the impasse continues,
and the Court will consider Prism’s motion.
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“Adobe has preserved all relevant evidence in the case and will
continue to do so” (Ex. 2, Filing No. 534, at 2).

In addition,

“We have also conducted a supplemental investigation and verified
that paper notes are, in fact, not created by the activation team
during code review or testing, but rather, documentation or notes
of that process, if any, are recorded electronically and have
been preserved and/or produced to you during this litigation”
(Id.).

Adobe wrote,
Since receiving your March 19
letter two days ago, we have
confirmed with the individuals and
engineering groups involved in
writing the activation code at
issue here that this is not their
practice in connection with testing
code, and they are aware of no such
handwritten notes having been
created or disposed of during this
case.

(Id. at 3).

“Any such notes are made electronically or

systematically in electronic form, such as in the bug database
referred to by Mr. Wilde” (Id.).
Adobe went on to describe the methods by which
information about testing is maintained at Adobe, including its
internal documentation sites, or “wikis,” meeting notes, test
plans, and email correspondence (Id. at 3-4).

Adobe stated that

this information had already been made available to Prism (Id. at
3).

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In response to Prism’s motion to the Court, Adobe
submitted a declaration under penalty of perjury by Mr. Wilde
(Ex. 12, Filing No. 574).

Mr. Wilde described his present duties

at Adobe, stating that he does not conduct or directly supervise
code review.

Mr. Wilde stated that in preparation for his

deposition, he had not spoken with “the activation engineering
team about their individual practices or note taking habits
during code review meetings or otherwise during development or
testing of the accused Adobe products” (Id. at 3).

Mr. Wilde

stated,
In fact, I am not aware of any
handwritten or paper notes being
created during the testing and
development of the accused Adobe
products at issue in this case; nor
am I aware of any handwritten notes
relating to the accused Adobe
products that have been recycled or
otherwise not preserved, either
before or during this litigation.
To the extent anything in my
testimony is being interpreted
otherwise, it is incorrect.
(Id.).

With regard to his deposition testimony, Mr. Wilde

declared,
My testimony in this regard did not
refer to the accused products in
this case or to the practice of any
individual on the activation
engineering team relevant to this
case. If I would have been asked
more specific questions about the
existence of handwritten notes
prepared by specific individuals or
related to the accused technologies
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here, I would have testified then,
as I would today, that I am not
aware of the creation or existence
of such paper notes, nor am I aware
of any instance in which such notes
have been recycled or otherwise
destroyed.
(Id.).

Instead, the notes to which Mr. Wilde referred in his

deposition “were just quick notes intended for my personal use,
not for a wider audience, whether engineers on the development
team or other individuals” (Id. at 4).

“If relevant at all to

the implementation, any such notes would necessarily be recorded
in more permanent form elsewhere, whether in technical
specification documents, bug databases, within comments in the
code itself, or in email discussions among the engineering team”
(Id.).
Adobe also submitted to the Court a declaration under
penalty of perjury by Wei Cheng, manager of the engineers who
test Adobe’s activation technology.

Mr. Cheng declared, “In my

current role, I am responsible for the overall product activation
of the accused Adobe products and directly manage the group of
individual software engineers who test and develop Adobe’s
activation technology” (Ex. 13, Filing No. 574, at 2).

“If

individual engineers on my development team were creating
handwritten notes on paper during code review meetings or
otherwise in the development and testing process, I would know
about it given my role and responsibilities” (Id. at 3).

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“The

developers on my team do not create handwritten or paper notes in
the development or testing process, nor have any such handwritten
notes been recycled or otherwise destroyed” (Id. at 3-4).

“This

is based on my experience directly leading the development team
since 2008, and personally participating in that development and
testing” (Id. at 4).
II.

Prism’s Motion for Sanctions.
“The district court retains an inherent power to impose

sanctions . . . .”

Strutton v. Meade, 668 F.3d 549, 559 (8th

Cir. 2012) (citing Stevenson v. Union Pac. R.R. Co., 354 F.3d
739, 745 (8th Cir. 2004).

“A spoliation-of-evidence sanction

requires ‘a finding of intentional destruction indicating a
desire to suppress the truth.’”

Greyhound Lines, Inc. v. Wade,

485 F.3d 1032, 1035 (8th Cir. 2007) (quoting Stevenson, 354 F.3d
at 746).

This “intentional destruction of evidence indicating a

desire to suppress the truth” is the “ultimate focus” for a Court
that is considering the imposition of sanctions for spoliation of
evidence.

Strutton, 668 F.3d at 559 (quoting Greyhound Lines,

485 F.3d at 1035).

“‘Intent is rarely proved by direct evidence,

and a district court has substantial leeway to determine intent
through consideration of circumstantial evidence, witness
credibility, motives of the witnesses in a particular case, and
other factors.’”

Greyhound Lines, 485 F.3d at 1035 (quoting

Morris v. Union Pac. R.R., 373 F.3d 896, 902 (8th Cir.2004)).
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In

addition, “[t]here must be a finding of prejudice to the opposing
party before imposing a sanction for destruction of evidence.”
Stevenson, 354 F.3d at 748 (citing Dillon v. Nissan Motor Co.,
986 F.2d 263, 267 (8th Cir. 1993)).

“Finally, whether the extent

of a sanction is appropriate is a question peculiarly committed
to the district court.”

Dillon, 986 F.2d at 268.

In its supporting brief, Prism emphasized what it sees
as the importance of the paper notes by avowing, “The only
business records that Adobe generates to memorialize these tests
[of its activation systems source code] are handwritten notes beyond these notes, Adobe has no standardized process by which it
records the results of these tests” (Filing No. 529, at 4).
Prism states, “The notes, as described by Mr. Wilde, are the only
contemporaneous record of code reviews within Adobe’s accused
systems” (Id. at 11).

Prism included a declaration by its expert

code reviewer that “[Mr. Wilde’s] notes are the type of written
documentation regarding the development, modifications, and
testing of the source code that would be helpful to me in my
analysis of Adobe’s accused software activation system” (Ex. 4,
Filing No. 530, at 4).
In response, Adobe has provided a substantial
description of its methods of internal communication during the
software testing process.

In its brief, Adobe detailed the

protocols that are followed by software development engineers

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wishing to communicate with one another, including the use of
“wikis,” “bug reports,” meeting notes, test plans, technical
specifications, and email exchanges.

According to Adobe, notes

written on pieces of paper are not typically used for
documentation at any stage of the software analysis.

Adobe

provided declarations under penalty of perjury by Mr. Wilde and
by Mr. Cheng to that effect.

In addition, as described by Adobe,

Prism’s previous deposition of another Adobe engineer, Vivek
Masra, also confirms that the “coding and testing processes were
performed electronically” (Filing No. 573, at 5).

Finally, Adobe

notes that “all of the discovery requests Prism identifies in its
motion seek only ‘documents sufficient’ to describe the operation
of the accused products, not every scrap of handwritten notes
ever created by anyone at any time” (Id. at 13).

“The source

code and 300,000 pages of documents describing the accused
systems that Adobe produced for these products is more than
‘sufficient’ to show their operation” (Id. at 13-14).

As of

March 26, 2012, counsel for Adobe wrote in a letter to Prism,
“I’ve discovered no instance so far in which anyone involved in
development of the accused Adobe systems specifically recalled
creating paper notes” (Ex. 10, Filing No. 574, at 2).
Prism identifies several discrepancies between Mr.
Wilde’s deposition testimony and his subsequent sworn
declaration, which Prism maintains must have been written by

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Adobe’s counsel and not by Mr. Wilde himself.

The Court notes

Prism’s arguments as to the many discrepancies between Mr.
Wilde’s two descriptions of the notes, first, in his deposition
testimony, and second, in his sworn declaration.

However, Prism

has provided no evidence, other than Mr. Wilde’s statements
during his deposition, that supports its conclusion that
destruction of evidence is taking place.
Here, the issue of destruction of evidence is a
question of fact that is not obvious to the Court.

In contrast,

in many of the cases cited by counsel, the question of whether or
not destruction of evidence had actually taken place was not at
issue.

See Stevenson, 354 F.3d 739, destruction of tape-recorded

voice radio communications; Dillon, 986 F.2d 263, destruction of
a vehicle; Strutton, 668 F.3d 549, destruction of agency emails;
Medcorp, Inc. v. Pinpoint Technologies, Inc., Civil Action No.
08CV00867, 2010 WL 2500301 (D. Colo. June 15, 2010), destruction
of computer hard drives; and Greyhound Lines, 485 F.3d 1032,
destruction of electronic control module data.

The Court cannot

meaningfully order a party to discontinue destroying objects that
do not exist.

Nevertheless, to the extent that any handwritten

notes are created that are responsive to Prism’s discovery
requests, the Court will order Adobe to maintain and produce such
notes along with any other responsive, relevant evidence.

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However, although required for a spoliation sanction,
Prism has shown no evidence of any intent by Adobe to destroy
evidence in an effort to hide the truth.

On the contrary, Adobe

has produced a prodigious amount of documentation that describes
its internal affairs in detail.

Thus, with regard to the

requested adverse inference jury instruction, the Court finds
that Prism has not met its burden by showing that spoliation has
occurred and that the spoliation was intentional.

Prism’s

requests for an adverse jury instruction and for attorney fees
will be denied.
III.

Adobe’s Request for Attorney Fees.
Federal Rule of Civil Procedure 37 allows for the award

of costs to a party who successfully opposes a discovery motion:
If the motion [for an order
compelling disclosure or discovery]
is denied, the court may issue any
protective order authorized under
Rule 26(c) and must, after giving
an opportunity to be heard, require
the movant, the attorney filing the
motion, or both to pay the party or
deponent who opposed the motion its
reasonable expenses incurred in
opposing the motion, including
attorney’s fees. But the court
must not order this payment if the
motion was substantially justified
or other circumstances make an
award of expenses unjust.
Fed. R. Civ. P. 37(a)(5)(B).

Upon reviewing the circumstances

underlying this motion, particularly, the contrast between the
deposition testimony and the sworn declaration of Mr. Wilde, the
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Court finds that Prism’s motion for sanctions was “substantially
justified,” in that Prism could have argued, reasonably and in
good faith, that spoliation of evidence had occurred.
Accordingly,
IT IS ORDERED:
1) Prism’s motion to preserve evidence and for
sanctions (Filing No. 528) is granted, inasmuch as any existing
handwritten notes regarding Adobe’s source code will be preserved
and produced, as described above;
2) Prism’s motion to preserve evidence and for
sanctions (Filing No. 528) is denied in all other respects; and
3) Adobe’s request for attorney fees contained in its
brief is denied.
DATED this 30th day of April, 2012.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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