Function Media, L.L.C. v. Google, Inc. et al

Filing 153

Second MOTION to Expedite Motion to Compel by Function Media, L.L.C.. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Text of Proposed Order)(Nelson, Justin)

Function Media, L.L.C. v. Google, Inc. et al

Doc. 153

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION
FUNCTION MEDIA. L.L.C. Plaintiffs.
vs.

Civil Action No. 2007-CV-279

GOOGLE, INC. AND YAHOO, INC.
Defendants.

JURY TRIAL DEMANDED

SECOND EXPEDITED MOTION TO COMPEL This Motion concerns a discrete issue

-

whether Google should produce the valuation

reports and pricing information for its acquisitions. As described in the corresponding Motion to

Expedite, Google and Function Media have agreed on an expedited briefing procedure with a 5page limit so that this Court can hear the issue the same day as the Marhnan heanng. This

Motion

-

and the corresponding expedited briefing schedule

- is necessary because Google has

reneged on its promise to produce this information.

I.

Facts and History Starting in April, Function Media began asked Google for its acquisition and purchase

price information.

A review of the evidence

produced revealed that Google often acquires a

company in lieu of taking a license to the technology. See, e.g., Exh. 1, Declaration of 'Walter

Bratic

fl 3 (hereinafter

"Bratic Dec."). Function Media sought from Google basic

and

confirmatory details such as pricing information and the final valuation report

for

all

transactions, along with more detailed related to a subset of those acquisitions concerning ads-

related technology. This Motion does not concern the so-called "ads-related" acquisitions,

as

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Dockets.Justia.com

Google recently has agreed to search for and produce relevant documents such as presentations,
emails, and correspondence related to these transactions. On June I0,2009, Function Media specifically underscored what it was looking for with

respect

to Google's acquisitions:

'oAs we discussed, we would

like to obtain basic and

confirmatory details regarding all the acquisitions Google has entered into. For some of these, a

confirmation of price, amount, technology, and whether any patents were purchased should be
sufficient in chart form.
'We'd

also like, however, any FASB-141 report or document that similar

document that discusses any valuation of the IP or patents at the deal's conclusion." Exh. 2 (email from Justin Nelson, June 10, 2009).

After numerous meets and confers and literally months of negotiations, on August

5,

2009, the parties agreed that Google would produce a list of the price information about all its
transactions (including the form of paˇrment for the transactions). See Exh. 3 (letter from Amy

Candido, counsel for Google,

at2).

Function Media agreed not to seek the valuation reports

because Google claimed that such a search would be overly burdensome. Google promised to produce that information by "the end of this week fAugust 7] or early next week [August 10 or

Ilf." Id.

That next week, however, Google informed Function Media that it in fact tikely would

not be producing these documents, and that even creating a list of transactions would be too

much. Function Media responded that it only gave up its request for the valuation reports
because of Google's claim of burden, and that

it was now seemed easier simply to produce what

Function Media had originally requested

-

valuation reports and basic price information. See

Exh. 4 (email from Justin Nelson, 8-18-09). On August 18,2009, Google informed Function
Media of its final position that it would not produce any information about any non-"ads-related"

acquisitions. See Exh.5 (email from Amy Candido). Function Media filed this Motion on an
agreed expedited schedule the next day.

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il.

The Information Ís Relevant and the Request Is Narrow

As this Court is well aware, the "Georgia-Pacific" factors are an accepted methodology for
determining the amount of damages in a patent case. See Georgia-Pacific Corp. v. United States Plywood Corp.,3l8 F. Supp. 116 (S.D.N.Y. 1970). These factors include the relevant guidelines
and policies of both the patentee and the infringer and a "h1'pothetical negotiation" between the

patentee and the infringer at the time of first infringement. As Function Media's damages expert

'Walter

Bratic has pointed out in an accompanying declaration,

it appears that in many

cases,

Google has acquired a company rather than take a traditional license. See Bratic Dec. fl

3. For

this reason, according to Mr. Bratic, Google's purchase price and valuation analysis are relevant to the Georgia-Pacific analysis. Id.

It also is insufficient to limit this information solely to a subset of acquisitions related only to
"ads-related" acquisitions. As Mr. Bratic explains, "ads-related revenue comprises the vast proportion of Google's revenue"

-

up to 99%o according to its SEC

filings. SeeBratic Dec. fl 5.

Mr. Bratic also states that "what Google pays for non-ads related technology
a small subset of its current revenue base

-

which comprises

-

is an important measure for determining what Google

would pay for ads-related technology such as that related to the patents-in-suit."
because of the vital role played by advertising in generating revenue for Google,

Id. Indeed,

it is impossible

to separate completely "ads-related" from non-"ads-related" transactions. Mr. Bratic concludes:
"As part of my analysis of reasonable royalty damages in this matter, it is relevant to consider the
value Google placed on various technologies it obtained through acquisitions. A complete set of

the purchase price and valuation information from Google's acquisitions is therefore of great
relevance Dec. flfl

in attempting to ascertain the value Google

ascribes to various transactions" Bratic

3-4.

See also id. n 6 ([T]he information requested

will help me formulate my expert

opinion.").
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Mr. Bratic's expert opinion that this information is relevant is confirmed by the case law.
'oThe amount paid to acquire a company with desired patents, and the amount of the acquisition

amount allotted to a particular patent is relevant to the establishment of a reasonable royalty."
Fresenius Medical Care Holding, Inc v. Baxter Int'L, Inc. , 224
F

.R.D. 644, 653 (N.D. Cal. 2004)

(citing Integra Lifesciences

I, Ltd. v. Merck,

331 F.3d 860, 871 (Fed.Cir.2003)). As the

Fresenius court concluded, "Thus, the evaluation and acquisition
evaluation of its various assets is discoverable." 224F.R.D. at653.

of Althin as well as the

Google is likely to argue that the transactions at issue here are not strictly confined to ads and

therefore have no relevance. The problem with this argument is Google's own business model. Because advertising revenue comprises such

a significant share of Google's revenue, it

is

impossible

to separate completely advertising from the rest of Google's portfolio.

lndeed,

Google itself recognizes the virtuous cycle of attracting users in order to attract advertising
revenues. See, e.g.,2008 Google Annual Report, page 8, Founders' Letter (attached as Exh. 6)

("We always that we could have an advertising system that would add value not only to our
bottom line but also to the quality of our search result pages."); id. at

l7

(Page 1 of Google 10-K

entitled "Item

l:

Business

- Overview") ("Google is a global

technology leader focused on

improving the ways people connect with information . . .

.

We generate revenue primarily by

delivering relevant, cost-effective online advertising."). Moreover, as Mr. Bratic has explained,

what Google has paid for emerging technologies that comprise literally a sliver of Google's
revenue are important in assessing what Google would pay in a hypothetical negotiation at the

time of first infüngement for this technology. See Bratic Dec. !f 5. This information also would
rebut any Google argument that it would not have paid a particular amount of money to a small
company.

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Finally, Function Media has attempted to recogníze some difference between the strictly
"ads-related" acquisitions and the rest

of Google's acquisitions. It has not

sought internal

communications, emails, presentations, and the like for this broader set of acquisitions. Rather,

it

seeks to obtain basic details about the acquisition

- the price, how it was structured,

and any

valuation reports to determine the intellectual property component of the transaction.

ilI.

Alternative Relief - This Court Should Refuse to Arguments That Depend on This Withheld Material

Allow Google to Make

In the alternative, should this Court deny this Motion
seeks an order barring Google from (1) arguing that

-

which it should not

-

Function Media

it would not have acquired the patents
a

through an acquisition of the companyl and (2) arguing that Google would not have paid

particular sum of money to a small company. Function Media has no way to assess the veracity

of such arguments except by the information that Google has but will not produce. See, e.g.,
Paltalk v. Microsoft, Docket No. 2:06-cv-367, Docket No. 203, at I-2 (attached as Exhibit 7)
(decision from this Court refusing to allow Microsoft to introduce evidence of licenses that it
claimed were irrelevant and did not produce).

IV.

Conclusion
For all the foregoing reasons, this Court should grant the motion.

Respectfu

lly submitted,

/s/ Justin A. Nelson Max L. Tribble, Jr. State Bar No. 20213950 Email : [e-mail] SUSMAN GODFREY LLP 1000 Louisiana, Suite 5100 Houston, Texas, 77002 Telephone : [phone] Facsimile: (7 13) 654-6666 Lead Attorney for Plaintifß

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OF COUNSEL: Justin A. Nelson, State Bar No.24034766

Susuˇ,x GoornnvL.L.P. 1201Third Avenue, Suite 3800
Seattle, \ü/ashington 98 1 01 -3000 Telephone : [phone] Facsimile: (206) 5 16-3883 inselson@susman godfre)ˇ. corn Joseph S. Grinstein, State Bar No. 24002188 Aimée Robert, State Bar No.24046729

SUSMAN GODFREY L.L.P. 1000 Louisiana Street, Suite 5100
Houston, Texas 77 002-5096 Telephone: [phone] Fax: [phone] Email: j erinsteín@susrnangodfrey. com Email: [e-mail] Jeremy Brandon, State Bar No. 24040563 SUSMAN GODFREY L.L.P. Suite 5100 901 Main Street Dallas, Texas 7 5202-377 5 Telephone: [phone] Fax: [phone] Email jbrandon@susmangodfrey. com

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CERTIFICATE OF CONFERENCE
Counsel for plaintiffs have conferred with counsel for defendants as described in the

Motion. Defendants agree fhat a Motion is proper, and are opposed as to the disposition of the
matters raised in this motion. /s/ Justin A. Nelson Justin A. Nelson

CERTIFICATE OF SERVICE

I hereby certify that the foregoing documents have been served on all counsel of record
via ECFIPACER this 19th day of August, 2009.

isl Justin A. Nelson Justin A. Nelson

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