JK SOFT, INC. v. INNOAS, INC. et al
Filing
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LETTER OPINION AND ORDER granting in part and denying in part without prejudice 26 Defendants/Third-Party Plaintiffs' Motion for Protective Order, etc. Signed by Chief Mag. Judge Mark Falk on 4/23/20. (jc, )
Case 2:18-cv-00199-WJM-MF Document 30 Filed 04/23/20 Page 1 of 6 PageID: 367
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
CHAMBERS OF
MARK FALK
UNITED STATES MAGISTRATE JUDGE
USPO & COURTHOUSE
1 FEDERAL SQ., ROOM 457
NEWARK, NJ 07101
(973) 645-3110
LETTER OPINION AND ORDER
April 23, 2020
TO ALL COUNSEL OF RECORD
Re:
JKSoft, Inc. Innoas, Inc. et al.,
Civil Action No. 18-199 (WJM)
Dear Counsel:
Before the Court is Defendants/Third-party Plaintiffs’ motion for a protective order. 1
(CM/ECF No. 26.) The motion is opposed. The motion is decided on the papers.
Fed.R.Civ.P. 78(b). For the reasons set forth below, the motion is granted in part, and
denied in part without prejudice.
Background
This is a trademark and copyright infringement case. Plaintiff JKSoft, Inc. (“JK”)
claims it is the owner of Point of Sale software 2 (“POS software”) and product
licensing/activation keys (“Keys”) for the software. (Comp. ¶¶ 2, 11.) According to JK,
the POS software and Keys were created and developed by Jae H. Kang (“Kang”), JK’s
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2
Defendants move pursuant to Fed. R. Civ. P. 26(c) and Local Civ. R. 5.3.
The names of the POS software include JKRestaurant, JKRetail and JKSalon. (Compl. ¶ 2.)
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owner and principal. (Comp. ¶ 2.) The Keys, which consist of a unique series of numbers
and letters, must be entered into an end-user’s computer in order to run the POS software. 3
JK alleges that Defendant Innoas, Inc. (Innoas”) and its principal, Defendant Noah Lee
(“Lee”) 4, unlawfully sold and distributed JK’s POS software and Keys. (Comp. ¶¶ 2, 11.)
Specifically, JK alleges that Lee stole a pre-2012 version of the source code to the Keys,
and that Defendants have been unlawfully selling the POS software together with the
counterfeit and pirated Keys, allowing purchasers of the pirated material illegal access to
the full version of JK’s software. (Comp. ¶ 3.)
Plaintiff filed a 15-count Complaint against Innoas and Lee asserting, inter alia,
claims for copyright infringement 5, common law trademark infringement, violations of the
Computer Fraud and Abuse Act 6 and Digital Millennium Copyright Act 7, as well as other
federal statutory and state law claims. Defendants filed an Answer and a 21-count
Counterclaim/Third-party complaint against JK and Kang asserting claims for, among other
things, breach of contract, tortious interference with business relationships, negligent
misrepresentation, and a single count for copyright infringement. 8 Defendants’ claims
primarily sound in breaches of duty and misrepresentation/fraud arising largely out of an
alleged business partnership with JK.
Current Dispute
The parties agree that a Discovery Confidentiality Order (“DCO”) should be entered
to protect confidential information at issue in this case. The crux of the parties’ dispute
relates to the scope and manner of the confidential information to be produced by Plaintiff
in this litigation. 9 In particular, the parties are unable to agree on which source codes are to
3
A Key is akin to a serial number and is typically used by software developers to protect their intellectual property.
from piracy. (Comp. ¶ 4.)
4
Defendant is Seung Jai Yi a/k/a Noah Lee.
5
17 U.S.C. ¶¶ 101, 105.
6
18 U.S.C. ¶ 1030.
7
17 U.S.C. ¶ 1201.
8
Defendants also assert a claim for vicarious and contributory copyright infringement.
9
JK objects to: (1) the version of the source code to be produced; (2) the method/manner of production, and (3) the
language of the confidentiality order.
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be produced, even if they are subject to a DCO, and how such production should be made.
Therefore, although styled as a motion for a protective order, Defendants’ application is
more akin to a motion to compel.
By way of this motion, Defendants seek access to all of JK’s POS software source
codes. JK refuses to produce all of the codes and seeks to limit production to a source code
developed before 2013. JK claims that Lee stole a pre-2012 version of the source code and
has been selling the older version of the POS software. Plaintiff is concerned that if Lee is
permitted to gain access to JK’s newer source codes 10, Lee would be able to upgrade the
older, allegedly pirated-version of the software and unlawfully sell it too, causing JK
further economic damage. Since JK believes that Lee already possesses the older source
code (having obtained it allegedly by theft), JK is amenable to permitting Defendants’
experts to visually inspect the earlier version of the source code—just prior to 2012—but
not the latter. JK is not agreeable to allowing expert access to the updated, current
versions. (PL.’s Br. 5.) Defendants argue that they have asserted a claim for copyright
infringement and therefore are entitled to access to all of the source codes.
Legal Standard
The Court has broad discretion in deciding discovery issues. See Gerald Chamles
Corp. v. Oki Data Americas, Inc., No. 07-1947, 2007 WL 4789040, at *1 (D.N.J. Dec. 11,
2007). The appropriate scope of discovery and the management of discovery requests are
left to the sound discretion of the Court. See In re Fine Paper Antitrust Litig., 685 F.2d
810, 817 (3d Cir. 1982) (finding that conduct of discovery is committed to sound discretion
of Court).
A party seeking to compel the production of a source code must demonstrate that it
is relevant and necessary to the action. See Congoo, LLC v. Revcontent LLC, 16-401,
2017 WL 3584205 (D.N.J. Aug. 10, 2017) (citing In re Apple & AT&TM Antitrust Litig.,
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According to JK, Kang has updated the source code through the years. (Pl.’s Br. at 4.) Kang claims that the version
allegedly stolen by Lee was last updated sometime in or prior to 2012. (Id.)
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2010 WL 1240295 (N.D.Cal. March 26, 2010); Synopsys, Inc. v. Nassda Corp., 2002 WL
32749138 (N.D. Cal. Sept. 16, 2002)). The relevancy and necessity requirements must be
met, regardless of whether a discovery confidentiality order is in place. See Congoo, LLC,
2017 WL 3584205 at *3. A court will not be justified in ordering disclosure of a source
code when alternatives are available. See Congoo, LLC, 2017 WL 3584205 at *3-4 (citing
Telspace, LLC v. Coast to Coast Cellular, Inc., 2014 WL 4364851, *4 (W.D. Wash. Sept.
3, 2014); Hartley Pen. Co. v. United States Dist. Ct. for S.D. Cal., 287 F.2d 324, 330-31
(9th Cir. 1961)).
Decision
Because JK is willing to produce, subject to the entry of a DCO, source code or
source code related materials for the period ending 2013, the real question before this Court
is whether to compel, at this point in the litigation, Plaintiff to produce post-2013 source
codes. Defendants, the parties seeking the information, make the bald claim that because
they have asserted a claim for copyright infringement and must defend against one, they are
entitled to the source codes at issue. At least at this juncture of the litigation, the Court
disagrees.
Based on the limited record before it, the Court cannot make a final determination as
to whether the post-2013 source codes at issue are relevant and necessary to the
adjudication of the claims and defenses in this case. Defendants’ affirmative claims arise
out of an alleged existence of a business partnership between Kang and Lee. Defendants’
causes of action against JK and Kang sound primarily in breach of duty, tort, and
defamation. The source codes Defendants seek appear to have little, if any, relevance to
the merits of these claims—or at least Defendants have not demonstrated that they do. Of
the 21 counts in Defendants’ third-party pleading, only one is an infringement claim. This
sole infringement claim is based upon Defendants’ allegation that Lee designed the “look
and “feel” of the POS software which was used by JK. (Counter-claim ¶¶ 368-371.) That
appears to be the extent of the infringement claim as it relates to the development and
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authorship of the POS software at issue. Defendants do not contend that they created the
source code. Given these allegations, and based on the record before it, the Court is not
persuaded that the post-2013 source codes are relevant and necessary for the prosecution of
the claims and defenses, at least at this stage of the litigation.
The Court may limit or deny otherwise appropriate discovery when the
information sought is not proportional to the needs of the case. Fed. R. Civ. P. 26(b)(1).
Given the highly proprietary nature of the latter created source codes, and the concerns
expressed by Plaintiff regarding their disclosure, the Court, in an abundance of caution,
finds that their confidentiality outweighs the need for their production at this point in the
case. Given the proprietary nature of JK’s source codes, which is not in dispute, and the
irreparable harm that could occur if it is produced, the Court finds that production of the
code is not warranted now, even with the entry of a DCO. See Viacom Int’l Inc. v.
YouTube Inc., 253 F.R.D. 256, 260 (S.D.N.Y. July 1, 2008) (“the protections set forth in
the stipulated confidentiality order are careful and extensive, but nevertheless not as safe
as non-disclosure. There is no occasion to rely on them, without a preliminary proper
showing justifying production of the search code”) This is particularly the case as
Defendants have not demonstrated that production of the source code is relevant or
necessary to prove their claims or defend against Plaintiff’s. It is conceivable, however,
that after JK’s production of the pre-2013 source code and review of it by Defendants’
expert(s), it may be determined that the post-2013 source codes are relevant and
necessarily discoverable in this litigation. Until then, the Court will proceed with
caution in fashioning a remedy here.
So, as a first step, the parties are directed to submit to the Court a proposed DCO
which provides for the disclosure of the source codes Plaintiff is willing to produce as
described by Plaintiff in its opposition to this motion. To the extent the parties disagree on
the manner or form as to how the source code is to be produced, the parties should confer
further on this issue. After the source code is produced, and the parties’ respective experts
have had an opportunity to review the material, either party may submit a brief letter to the
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Undersigned advising of the need for the Court’s assistance relating to the discoverability
of additional source codes.
SO ORDERED.
s/Mark Falk
MARK FALK
United States Magistrate Judge
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