Cardinal Health 414, Inc.vs Biodose LLC., et al

Filing 119

ORDER granting in part and denying in part 98 Motion to Reconsider District Judge Order/Motion for Leave to Respond to Plaintiff's Statement of Attorney's Fees and finding as moot 109 Motion for Clarification. 98 Granted as to Leave to Respond to Plaintiff's Statement of Attorney's Fees. 98 Denied as to Motion to Reconsider District Judge Order. Defendants have until 6/1/06 to Respond to Plaintiff's Request for Attorney's Fees and Costs. Signed by Judge Philip M. Pro on 5/22/06. (AAB)

Cardinal Health 414, Inc.vs Biodose LLC., et al

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 UNITED STATES DISTRICT COURT D IS T R IC T OF NEVADA *** ) C A R D IN A L HEALTH 414, INC., a ) D e la w a re Corporation, ) ) Plaintiff, ) ) v. ) ) B IO D O S E , LLC, a Nevada limited liability ) c o m p a n y; and BIOTECH PHARMACY, ) IN C ., a New Mexico corporation, ) ) Defendants. ) ) ) BIODOSE LLC, a Nevada limited liability ) c o m p a n y; and BIODOSE PHARMACY, ) IN C ., a New Mexico corporation, ) ) Counterclaimants, ) ) v. ) ) CARDINAL HEALTH 414, INC., a ) D e la w a re corporation, ) ) Counterdefendant. ) )

C V -S -0 3 -0 4 7 2 -P M P (PAL) ORDER

P r e se n tly before the Court is Defendants' Motion for Reconsideration of the C o u rt's Order on Spoilation and, in the Alternative, Leave to Respond to Plaintiff's S ta te m e n t of Attorney's Fees (Doc. #98) filed on November 23, 2005. Plaintiff filed an O p p o s itio n to Defendants' Motion for Reconsideration; Motion to Strike Declaration of D a v id Wilson; and Motion for Clarification (Doc. #109) on December 5, 2005. Defendants f ile d a Reply (Doc. #116) on December 23, 2005.

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I.

BACKGROUND T h is motion arises out of a claim for copyright infringement regarding

ra d io p h a rm a c eu tic a l isotope tracking software. (Defs.' Opp'n to Pl.'s Mot. for Spoilation a n d Default J. ("Defs.' Opp'n") at 1.) Health care providers use such software to track ra d io a c tiv e pharmaceuticals from delivery through use and disposal. Plaintiff Cardinal H e a lth 414, Inc. ("Cardinal") is engaged in the business of producing and marketing S Y N T ra c Software ("SYNTrac"), a form of radioactive isotope tracking software. (Compl. at 3.) Defendants Biodose, LLC ("Biodose") and Biotech Pharmacy, Inc. ("B iotech ") produce and market Biodose Isotope Tracking Software ("Biodose Software"), a radiopharmaceutical isotope tracking software. Biodose developed the Biodose Software over a period of two years. In affidavit, B re tt Whittacre ("Whittacre"), Biodose's owner and operator, states that the Beta testing for v e rsio n 1.0 began in early 2000, and Biodose released version 1.0 of Biodose Software in A u g u s t 2001. (Defs.' Opp'n, Ex. 1.) Whittacre further states that after the August 2001 re le a s e of version 1.0, Biodose continued to work on and improve the Biodose Software. (Id.) Whittacre states: Biodose made changes such as fixing bugs, adding features in response to customer requests, and improving the useability and operation of the s o f tw a re . Each time that Biodose made changes to the software, we g e n e ra lly would provide the revised subversion only to the affected c u s to m er. Biodose only saved new subversions of Biodose when we h a d accumulated enough changes to warrant releasing a new s u b v e rs io n to the customers. There was no general re-release or new v e rs io n of the software program until version 2.0. (Id . at 2.) Whittacre further states that "Biodose did not have the need, time or resources to d ev o te to saving thousands of subversions of its software and documenting each and every c h a n g e ." (Id. at 3.) The Biodose Software was developed almost entirely by two p rog ram m ers, Whittacre and Jared Johnson. (Id. at 3.) On October 1, 2002, Plaintiff notified Biodose that it had reason to believe the 2

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B io d o s e Software infringed Plaintiff's intellectual property rights associated with SYNTrac. (Mot. for Spoilation & Default J., Ex. 1.) In Plaintiff's First Request for Production of D o c u m e n ts , Plaintiff requested that Defendants "[p]roduce any and all versions ­ compiled a n d executable ­ of BioDose Isotope Tracking Software and database . . ." in CD-Rom f o rm a t. (Mot. for Spoilation and Default J., Ex. 11.) Plaintiff further requested Defendants " [ p ]ro d u c e each and every version of the source code employed in the development and in th e final version(s) of the BioDose Isotope Tracking Software and the conversion a p p lic a tio n found in the program." (Id.) On October 8, 2004, Defendants informed P lain tiff that they were prepared to produce the following: Source Code: Biodose 1.0 (will no longer compile due to age and components no lo n g e r being available, however we certify that all the source code has b ee n provided) Biodose 2.00.1 E x e c u tab le only- don't have the source code because all built c o n tin u o u s ly into version 2.00.1. The multiple versions may not run o n the computers at the same time (we are currently testing this), so we m a y need to provide update discs to load each version on top of the o th e r after the previous one has been reviewed. Biodose 1.11-1.17 B io d o s e 1.20-1.25 B io d o s e 1.25.1 B io d o s e 1.25.2 B io d o s e 2.0 B io d o s e 2.00.1 In addition, Biodose will provide the conversion program, which has o n ly one version. Biodose will also provide the databases for set-up a n d management of the Biodose program. The database program is ca lled the Database Administrator. (P l./C o u n te rd e f . Cardinal Health 414, Inc.'s Errata to Mot. for Spoilation & Default J., Ex. 16.) P lain tiff and Defendants offer different interpretations of what Defendants p ro d u c e d as Biodose Software version 1.0. Plaintiff argues that what Defendants have p ro d u c e d as Biodose Software version 1.0 is not actually version 1.0, but is an alternative 3

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v e rs io n of the software renamed version 1.0 for the purposes of discovery. Defendants offer D r. David Wilson's ("Wilson") affidavits rejecting Plaintiff's characterizations of D ef en d an ts' programming practice and of version 1.0. Wilson states that Plaintiff's o p inion s regarding the veracity of version 1.0 are incorrect. (Defs.' Opp'n, Ex. 2 at 2.) First, Wilson states that none of the source codes of the proposed version 1.0 contain re f ere n c e to any other version, including 1.11. (Id. at 3.) Additionally, Wilson states that th e conclusion that Biodose Software existed prior to 2001 is not contrary to Defendants' p o sition because although the software development commenced in 1999, the software e x iste d in some form prior to the actual release in 2001. (Id.) Wilson further states that, " [ i]t is [his] belief, based on . . . detailed examination of the Biodose source code and on . . . d e c a d e s of experience in software development, that the Biodose user interface, database d e sig n , and C++ source code have not been illegally altered or doctored in any way." (Id. at 6 .) On March 14, 2005, Plaintiff filed a Motion for Spoilation and Default Judgment (D o c . #38). In that motion, Plaintiff moved the Court to find Biodose spoiled evidence and to enter default judgment in Plaintiff's favor. Plaintiff argued that default judgment should b e granted for two reasons: 1) Defendants purposely destroyed the Biodose Software after b e i n g informed of Plaintiff's possible claim, and 2) Defendants purposely withheld Biodose S o f tw a re version 1.0 from Plaintiffs to thwart discovery. Plaintiff further requested the a p p o in tm e n t of a special master pursuant to Federal Rule of Civil Procedure 53(b). Defendants responded that Plaintiff's motion should be denied for two reasons. First, D e f en d a n ts argued that Plaintiff's motion was procedurally improper pursuant to Federal R u le of Civil Procedure 37. Additionally, Defendants argued that there was no evidence, or a t worst contested evidence, of willful spoilation, and therefore a finding of spoilation and th e imposition of default judgment would not be justified. On June 9, 2005, the Court denied Plaintiff's motion for spoilation and default 4

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ju d g m e n t. (Order dated June 9, 2005 (Doc. #59).) The Court held that Federal Rule of C ivil Procedure 37 was inapplicable to the situation, and therefore Rule 37's remedies were n o t available to Plaintiff. Furthermore, the Court held that a finding of spoilation and d e f au lt judgment based on the Court's inherent powers was not warranted. Specifically, the C o u rt found that there was no evidence of willfulness or bad faith on Defendants' behalf, a n d that furthermore, Plaintiff failed to demonstrate how it was materially prejudiced by the a lle g e d spoilation. Referring to Wilson's testimony confirming the veracity of version 1.0, th is Court held substantial questions of material fact existed as to version 1.0, therefore a f in d in g of spoilation was not appropriate. Finally, the Court did not appoint a special m a ste r because Plaintiff had not demonstrated why the facts of the case presented e x tra o rd in a ry circumstances warranting the appointment of a special master as required by F e d e ra l Rule of Civil Procedure 53. On May 18, 2005, Defendants disclosed to Plaintiff Wilson's rebuttal expert re p o rt.1 (Pl. Cardinal Health 414 Inc.'s Mot. for Recons. of the Order Denying Cardinal H ea lth 414, Inc.'s Mot. for Spoilation & Default J., Ex. 1.) /// /// /// /// /// /// /// /// /// A full copy of the rebuttal report has not been provided to the Court by either party. A one page supplement has been provided as Plaintiff's Exhibit 1. 5
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In the rebuttal report, Wilson states:

C. Destruction of evidence. Dr. Weiss claims that development a rtif a cts such as design documents and test plans must have existed, b u t have now been destroyed. As stated in the previous paragraph, the c la im is incorrect. The Biodose team did have design documents, and th e y were given to Cardinal Health during discovery. Dr. Weiss has apparently not seen [s D r. Weiss further claims that Cardinal Health has not been supplied w ith the original Biodose version 1.0 executable. This is not true. An e x e c u ta b le was supplied, and it runs perfectly well. Dr. Weiss also claims that Cardinal Health has not been supplied with th e original Biodose version 1.0 source code. This is true to the extent th a t the Biodose team had no reason four years ago to keep a pristine c o p y of the version 1.0 source code ­ they continually modified it to f ix bugs and add features as the program evolved. The Biodose team w a s able, however to recreate a version of the 1.0 source code, with f ile dates similar to those of the executable application. This best e f fo rt set of source files was delivered to Cardinal Health as part of the d is c o v e ry process. It bears no resemblance to the Syntrac source code. (Id.) On May 25, 2005, Plaintiff deposed Wilson. (Pl. Cardinal Health 414 Inc.'s Mot. for R e c o n s . of the Order Denying Cardinal Health 414, Inc.'s Mot. for Spoilation & Default J., E x . 2.) At his deposition, Wilson stated that he was told that the version of 1.0 provided to C a rd in a l Health was a re-creation of the version 1.0 source code. (Id.) Wilson stated that h e first was informed in October 2004 that the version 1.0 source code executable at issue w a s a re-creation, and not an original version. (Id.) Wilson further stated that he believed D e f en d a n ts made a best effort at providing Plaintiff with an executable version 1.0 source co d e. (Id.) On June 23, 2005, Plaintiff moved the Court to reconsider its June 9, 2005 Order. (Mot. for Reconsideration [Doc. #65].) Plaintiff argued that Wilson's expert rebuttal and d e p o sitio n testimony demonstrated that Biotech knew the version 1.0 source code provided to Cardinal was not original source code, but rather a re-created version of the source code. Plaintiff further argued that Biotech did not inform Plaintiff that the 1.0 version provided w a s in fact a re-creation, and not an original version. Finally, Plaintiff argued that these

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n e w facts demonstrated Biotech willfully misled Plaintiff as to the veracity of the version 1 .0 source code, and that as a result, Plaintiff had been materially prejudiced. On October 5, 2005, the Court granted in part and denied in part Plaintiff's m o tio n for reconsideration. (Order dated Oct. 5, 2005 [Doc. # 77].) Thie Court granted P la in tif f 's motion with regard to a finding of spoilation and sanctioned Defendants by re q u irin g them to pay the costs and attorneys' fees associated with Plaintiff's motion. (Id. a t 13.) Specifically, the Court held that "Defendants' failure to disclose that the version 1.0 s o u rc e code they provided to Plaintiff was a recreated version of 1.0, rather than an a rc h iv e d version of 1.0, demonstrated Defendants' willful obfuscation of an issue material to this matter." (Id. at 11.) Moreover, the Court held that "by not disclosing the actual c irc u m s ta n c es regarding the version 1.0 presented, and affirmatively representing o th e rw is e , Defendants acted in bad faith," thus a finding of spoilation was appropriate. (Id.) Therefore the Court found spoilation and granted Plaintiff's motion for attorneys' f e es . (Id.) However, this Court held that despite a finding of bad faith, default judgment w a s not warranted in this matter. (Id.) The Court found that there was no evidence that D e f en d a n ts ' actions materially prejudiced Plaintiff, and therefore default judgment was not a p p ro p ria te . (Id.) The Court held that "Defendants purposefully withheld pertinent in f o rm a tio n from both Plaintiff and the Court, wasting substantial time and resources, and th e re f o re , the Court finds that it is in its inherent power to sanction Defendants' conduct." (Id. at 12.) As a result of this ruling, Plaintiff asserts Defendants owe Plaintiff $23,650 in a tto rn e ys ' fees and costs. Defendants now move the Court to reconsider its October 5, 2005 ruling or in the a lte rn a tiv e to give Defendants leave to respond to Plaintiff's statement of attorneys' fees. Defendants argue that the Court's findings of fact are erroneous, and thus reconsideration is re q u ire d by justice. Plaintiff opposes Defendants' motion and requests the Court to clarify its October 5, 2005 Order. Specifically, Plaintiff requests that this Court draw an adverse 7

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in f e re n c e unfavorable to Defendants based on this Court's finding of spoilation. II. M O T IO N FOR RECONSIDERATION Reconsideration of a prior ruling is appropriate only in limited circumstances, su ch as the discovery of new evidence, an intervening change in controlling law, or where th e initial decision was clearly erroneous or manifestly unjust. Nunes v. Ashcroft, 375 F.3d 8 0 5 , 807-08 (9th Cir. 2004). A motion for reconsideration is not an avenue to re-litigate the sam e issues and arguments upon which the court already has ruled. Brogdon v. Nat'l H ea lth ca re Corp., 103 F. Supp. 2d 1322, 1338 (N.D. Ga. 2000). A district court has the power to sanction for the spoilation of evidence "as an e x e rc is e of the district court's inherent powers." Id. "Courts are invested with inherent p o w e rs that are `governed not by rule or statute but by the control necessarily vested in c o u rts to manage their own affairs so as to achieve the orderly and expeditious disposition o f cases." Id. (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)). "A district c o u rt is vested with broad discretion to make discovery and evidentiary rulings conducive to th e conduct of a fair and orderly trial." Campbell Indus. v. M/V Gemini, 619 F.2d 24, 27 (9 th Cir. 1980). As this Court has noted previously, "dismissal under a court's inherent powers is justified in extreme circumstances, in response to abusive litigation practices, and to insure the orderly administration of justice and the integrity of the court's orders." Halaco Eng'g C o . v. Costle, 843 F.2d 376, 380 (9th Cir. 1988) (internal citations omitted). Where a party s e e k s a default judgment, "the range of discretion for a district court is narrowed and the lo sin g party's non-compliance must be due to willfulness, fault, or bad faith." Id. "It is w e ll established in [the Ninth Circuit] that `disobedient conduct not shown to be outside the c o n tro l of the litigant' is all that is required to demonstrate willfulness, bad faith, or fault." Virtual Vision, Inc. v. Praegitzer Indus., Inc., 124 F.3d 1140, 1144 (9th Cir. 1997) (quoting H e n ry v. Gill Indus., 983 F.2d 943, 948 (9th Cir. 1993)). However, a "default judgment 8

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m a y not be entered as a sanction for a party's misconduct where the misconduct is unrelated to the merits of the suit." Estrada v. Speno & Cohen, 244 F.3d 1050, 1058 (9th Cir. 2001) (c itin g Halaco Eng'g Co., 843 F.2d at 376). Furthermore, "[d]ue process limits the im p o sitio n of the severe sanctions of dismissal or default to `extreme circumstances' in w h ic h `the deception relates to the matters in controversy' and prevents their imposition `m e re ly for punishment of an infraction that did not threaten to interfere with the rightful d e c isio n of the case.'" Fjelstad v. Am. Hondo Motor Co., Inc., 762 F.2d 1334, 1338 (9th C ir. 1985) (citing Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589 (9th Cir. 1983)). Upon review of the record and the pleadings, Defendants have not offered any n e w evidence justifying reconsideration of the Court's October 5, 2005 ruling. Nor have D ef en d an ts identified an intervening change in controlling law which renders the Court's p rio r order clearly erroneous or manifestly unjust. See Nunes, 375 F.3d at 807-08. Defendants motion for reconsideration seeks to re-litigate the same issues and arguments u p o n which the court already has ruled. Brogdon, 103 F. Supp. 2d at 1338. Thus, the Court w ill deny Defendants' motion to reconsider this Court's October 5, 2005 Order. Defendants have not presented any evidence or argument which would require re c o n sid e ra tio n . Defendants assert that this Court's statement that Biotech had "repeatedly a ss u re d this Court that the version 1.0 presented was an original version," is incorrect and u n f o u n d e d . (Order dated Oct. 5, 2005 at 11.) However, Defendants provide the Court with n o evidence or statements to the contrary. Upon review of the record the Court reconfirms its opinion that Defendants wilfully misled this Court and obfuscated the truth. In several o f Defendants' pleadings Defendants assured the Court that the version 1.0 was an original v e rs io n . (Defs.' Opp'n to Pl.'s Mot. for Spoilation and Default J. at 8 ["As such, B io te c h /B io d o s e complied with this agreement and produced version 1.0 and 2.001 at the s o u rc e code review"]; 10 ["Thus, the use of `whittrio' also shows that the source code v e rs io n was version 1.0, because Whittrio, Inc. did not work on any subsequent subversions 9

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o r version of the Biodose software]; 13-14 ["Mr. Coombs' contention that the version 1.0 s o u rc e code produced at the source code review did not compile into an executable program is not surprising and does not constitute evidence that version 1.0 was not produced"]; 17 [ " F u rth e rm o re and more importantly, Biodose produced version 1.0 of Biodose to Cardinal H e a lth at the source code review. As set forth in the Statement of Facts, Mr. Coombs' a lleg a tio n that the source code provided was not, in fact, version 1.0 is completely b a se les s" ].) Defendants' arguments are, from the opinion of the Court, unequivocal in la n g u a g e that the version 1.0 that Defendants' produced was an original version. Defendants went so far as to assert that an argument to the contrary was "completely b a se le ss ." It was not until Plaintiff's motion for reconsideration that Defendants explained th e ir interpretation of "original" and "recreated." This lack of candor is a waste of judicial re so u rc e s, and it demonstrates Defendants acted in bad faith. Furthermore, that Defendants d i d not properly archive an original file of version 1.0, the first version of BioDose s o f tw a re , the center of this matter, justifies a finding of spoilation. Defendants do not p ro v id e any evidence to the contrary, and thus this Court will deny Defendants' motion for re c o n s id e ra tio n . This Court will grant Defendants motion to respond to Plaintiff's request for a tto rn e ys ' fees and costs of $23, 650.2

It its Opposition, Plaintiff moves the Court to clarify its ruling of spoilation. Specifically, Plaintiff requests the Court rule whether the Court will draw an adverse inference against Defendants based on its finding of spoilation. As the Court has granted summary judgment, the Court will deny Plaintiff's motion as moot. However, even if there had been a finding of an adverse inference, this would not have affected the Court's decision granting Defendants' motion for summary judgment. This Court granted Defendants' motion for summary judgment on Plaintiff's claim for copyright infringement because the Court found Plaintiff failed to demonstrate substantial similarity between the two products. Central to the matter was not the source code, but the appearance of the user interface. The Court also granted Defendants' motion with regard to Plaintiff's claim for misappropriation of trade secrets, unfair competition, and violation of the Digital Millennium Copyright Act. Central to those claims was whether Defendants accessed SYNTrac software from a back-up disk left in the possession of former SYNTrac customers. BioDose Software's source code was not considered in 10

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IV .

C O N C L U S IO N IT IS THEREFORE ORDERED that Defendants' Motion For Reconsideration of

the Court's Order on Spoilation and, in the Alternative, Leave to Respond to Plaintiff's S ta te m e n t of Attorney's Fees (Doc. #98) is GRANTED in part and DENIED in part. Defendants' Motion For Reconsideration is GRANTED as to Defendants' Motion for L e a v e to Respond to Plaintiff's Request for Attorney's Fees and Costs. Defendants shall h a v e ten (10) days from the date of this Order to respond to Plaintiff's request. Defendants' m o tio n to reconsider this Court's October 5, 2005 Order is DENIED. IT IS FURTHER ORDERED that Plaintiff's Motion for Clarification (Doc. # 1 0 9 ) is DENIED as moot. DATED: May 22, 2006

_______________________________ PHILIP M. PRO Chief United States District Judge

disposing of that matter. 11