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Tessera, Inc v. Sony Corp


October 1, 2012


The opinion of the court was delivered by: Howard R. Lloyd United States Magistrate Judge

E-filed: October 1, 2012*


United States District Court

ORDER ON DDJRs 1-4, and MOTION TO STRIKE [Dkts. 53, 55, 60, 69, 71]

In this breach of contract case Plaintiff Tessera, Inc. ("Tessera") sues Defendant Sony Corporation ("Sony") for alleged failure to pay royalties under a Master License Agreement 19

("Agreement") and for breaching the covenant of good faith and fair dealing. The dispute arose 20 when Tessera arranged for Connor Group NV ("Auditor" or "Connor") to audit records of Sony that 21 bear on Sony's royalty obligations under the Agreement. The parties dispute the audit process and 22 its results. Tessera claims that the audit reveals underpayment of royalties under the Agreement and 23 that Sony withheld information from the Auditor. Sony counterclaims that Tessera breached the 24 implied covenant of good faith and fair dealing by causing to be prepared an audit report that is not 25 independent and then using the audit report as a basis to demand payment for more than it's entitled 26 to under the Agreement. 27

The parties bring to the Court four discovery disputes and a motion to strike. The Court addresses each in turn.

would depose five Sony witnesses. The Court found that the depositions of four of the five 5 witnesses should occur in Japan. As to the fifth witness, Mr. Tadashi Saito, the Court ordered Sony 6 to submit a declaration describing in detail Saito's knowledge of the events underlying this case. 7

Having reviewed Saito's declaration, the Court finds no basis for requiring Sony to submit him for a 8 deposition. 9

The parties did not submit a joint report for resolution of their second dispute. Instead, they made separate submissions, in violation of this Court's Standing Orders. Tessera moved to strike Sony's submission (Dkt. 60). Tessera's Motion to Strike is denied, but both parties are warned that 13 further noncompliance with this Court's Standing Orders may result in sanctions, including adverse 14 rulings on any further discovery disputes. 15 focuses on the following: 17 would consider "collecting and producing a negotiated subset of documents relating to the 21

1. Discovery Dispute Joint Report #1

The first discovery dispute submitted to this Court concerned whether and where Tessera

2.Tessera's Motion to Strike and Discovery Dispute "Joint" Report #2

Although Tessera requests a range of documents in its submission to the Court, it ultimately

a.All internal Sony communications relating to Sony's determination of the royalties owed under the License Agreement*fn1

When initially asked for communications "relating to the Agreement," Sony stated that it Agreement." The request for communications relating to Sony's determination of the royalties 22 owed under the Agreement is such a reasonable subset. Further, the request for communications 23 relating to Sony's determination of the royalties owed under the Agreement bears directly on the 24 25 primary issue in this case -- whether Sony paid the royalties owed. Accordingly, Sony is directed to produce all internal Sony communications relating to Sony's determination of the royalties owed 2 under the License Agreement. produced some of these documents, and will complete the production shortly.

communication and that it has already produced all of its correspondence with the Connor Group, 10 Auditor, but not provided to the Auditor, Sony is ordered to produce that information. 16

b.All internal Sony communications relating to the audit In its separate submission, Sony states that it has agreed to produce these documents, has

c.All information requested by the Connor Group*fn2

In response to this request, Sony claims that it is in the process of producing its internal "which includes all written requests for information from the auditor and all of the material provided to the auditor by Sony." Here, the difference between Tessera's request and Sony's response seems to be that Tessera wants all of the information requested by the Auditor, and Sony is providing all of the information provided to the Auditor. To the extent that Sony has information requested by the 15 3.Discovery Dispute Joint Report #3

In the third discovery dispute submitted to the Court, Sony requests audit reports of Tessera's third party licensees, including any audits reports created by Connor for Tessera. The 19 Court has reviewed the competing contentions of the parties and finds that these documents are not 20 relevant to any party's claim or defense. 21 necessary to calculate the amount of royalties owed under the Agreement. Tessera seeks this 24 25 information through its Second Set of Requests for Production and Interrogatories. The parties disagree over the definition of a term used throughout Tessera's second set of discovery requests, as 27 Audit."

4.Discovery Dispute Joint Report #4

Finally, in the fourth discovery dispute, Tessera seeks information which it claims is well as the proper scope of the requests, which include six requests for production and eight 2 interrogatories. 3

In general, Tessera requests discovery over what it thinks it is owed under the Agreement.

Sony wants to limit discovery to what Sony believes it was required to pay under the Agreement. 5 6 Because the parties disagree over what is royalty-bearing under the Agreement, the parties disagree on what materials are necessary to calculate the amount owed under the Agreement. 8

This Court is in no position to determine the meaning of provisions in the Agreement.

The Court does find, however, that Tessera is entitled to information that would enable it to calculate 10 damages under its theory of the case. At the same time, Sony should not be required to produce discovery concerning thousands of irrelevant products. The parties should agree to a definition of "Sony Product" that, when applied to the discovery requests, enables Tessera to acquire information on a range of products broader than the definition of royalty-bearing products according to Sony's 15 theory of the case, but not so broad as to unduly burden Sony. The parties, who are presumably 16 familiar with the documents and technical definitions in the Agreement, should be in an informed 17 position to negotiate such parameters. 18 19

With these concepts in mind, the parties are directed to further meet and confer to resolve the issues raised in Discovery Dispute Joint Report #4, no later than October 4, 2012. By noon that day 21 the parties should submit a Discovery Dispute Joint Report #4 Supplement that provides a status 22 report. If, after diligent efforts, the parties are unable to agree on a discovery plan, the parties 23 should outline the narrowed issues in the Supplement and, if necessary, the Court will hold a 24 25 hearing on October 5, 2012 at 10:00 a.m. to rule on any unresolved issues.


C11-04399 EJD (HRL) Notice will be electronically mailed to: Melissa McCormick Benjamin Hattenbach 3 Brian Ledahl Morgan Chu 4 Nathan Lowenstein Richard Krebs 5 Eileen Ridley Aaron Moore 6 Matthew Lowrie Ruben Rodrigues 7 2 Counsel are responsible for distributing copies of this document to co-counsel who have not 8 registered for e-filing under the court's CM/ECF program.

United States District Court For the Northern District of California

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