United States District Court, N.D. California, San Jose Division
July 28, 2014
IPCOM GMBH & CO. KG, Plaintiff,
APPLE INC., Defendant
For IPCom, GMBH & Co. KG, Plaintiffs: Brian C. Cannon, LEAD ATTORNEY, Cheryl Ann Galvin, Quinn Emmanuel Urquhart & Sullivan LLP, Redwood Shores, CA.
For Apple Inc., Respondent: Joseph J. Mueller, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA; Mark Daniel Selwyn, Matthew James Hawkinson, Wilmer Cutler Pickering Hale and Dorr LLP, Palo Alto, CA.
ORDER DENYING APPLE'S MOTION TO QUASH SUBPOENA IN A CIVIL CASE (Re: Docket No. 7)
PAUL S. GREWAL, United States Magistrate Judge.
Before the court is Apple Inc.'s motion to quash IPCom GMBH & Co. KG's subpoena for Apple's license agreements, which was served pursuant to 28 U.S.C. § 1782. The matter was submitted without oral argument pursuant to Civ. L.R. 7-1(b). Having reviewed the papers, the court DENIES Apple's motion to quash.
On March 2, 2012, IPCom filed an infringement action against Apple in Germany, asserting European patent EP 1 841 268. On May 7, 2013, IPCom amended its complaint to include German patent DE 199 10 239. IPCom alleges that the '268 and '239 patents are essential to the 3GPP UMTS wireless standard and sought damages in excess of € 1.5 billion. The parties agree that it is common in German patent litigation for plaintiffs to seek judgment only on infringement and to defer judgment on damages to a second proceeding. They also agree that IPCom's decision to seek judgment on both infringement and damages in the initial proceeding is not barred by German procedural rules.
The parties engaged in extensive briefing on the patent infringement and damages issues before the Mannheim Regional
Court. As part of that briefing, Apple represented that it entered into license agreements with other manufacturers covering a number of patents essential to UMTS and GSM, GRPS and EDGE wireless standards. On February 11, 2014, the court conducted an oral hearing before a three-judge panel, which is the German equivalent of a trial. The court declined to hear evidence on damages, stating that it would first adjudicate the infringement claims. On February 28, 2014, the court dismissed IPCom's infringement claims, finding no infringement of the '268 and '239 patents. Because it found no infringement, the district court did not reach the damages issue. On March 6, 2014, IPCom filed a timely appeal with the Federal Court of Justice of Germany in Karlsruhe. " The entire case including the question of the amount of damages owed is now before the Court of Appeals." 
On February 7, 2014, in preparation for the German trial, IPCom filed an ex parte application in this court pursuant to Section 1782 seeking leave to obtain copies of Apple's license agreements for use in the German proceeding. IPCom argued that " such license agreements are directly relevant to the damages calculation in that action."  On April 10, 2014, IPCom complied with this court's status request and filed a status update explaining that the suit was pending before the German appeals court. IPCom also advised that unlike American appellate courts, German appellate courts may receive facts on appeal. Finding that the discovery sought remained warranted pursuant to Section 1782, the court granted IPCom leave to obtain copies of Apple's license agreements, without prejudice to any motion to quash. On May 5, 2013, Apple so moved.
II. LEGAL STANDARDS
" Under 28 U.S.C. § 1782, a district court may order a person residing or
found within its district to produce documents or testimony for use in a foreign legal proceeding, unless the disclosure would violate a legal privilege."  A district court may issue such an order where: (1) the discovery is sought from a person residing in the district to which the application is made; (2) the discovery is for use in a proceeding before a foreign tribunal; and (3) the applicant is a foreign or international tribunal or an " interested person." 
A district court has wide discretion to grant or deny a Section 1782 application. The Supreme Court has provided a " non-exhaustive"  list of factors that a court should consider: (1) whether the " person from whom the discovery is sought is a participant in the foreign proceeding" ; (2) " the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance" ; (3) whether the discovery request is an " attempt to circumvent proof-gathering restrictions or other policies of a foreign country or the United States" ; and (4) whether the discovery requested is " unduly intrusive or burdensome." 
It is common for parties to file ex parte applications, as " parties will be given adequate notice of any discovery taken pursuant to the request and will then have the opportunity to move to quash the discovery or to participate in it."  In a motion to quash a subpoena issued in civil litigation, however, the burden of persuasion is borne by the movant.
This court previously concluded that it had the legal authority to grant IPCom's ex parte application to issue the subpoena to Apple. The court noted that (1) Apple resides in this district, (2) the discovery would be of use in German litigation and (3) the application is brought by a party to that German litigation. Apple does not contest that this court has the discretion to issue an order pursuant to Section 1782. Apple instead argues that three discretionary factors weigh in favor of granting Apple's motion to quash: (1) IPCom's
subpoena is untimely; (2) IPCom has no current need for the requested discovery; and (3) IPCom may intend to use the license agreements for improper purposes.
A. IPCom's Subpoena Is Timely
Apple first argues that IPCom's subpoena should be quashed as untimely given the procedural posture of the German litigation. It asserts that IPCom is inappropriately " seeking discovery for use after trial has concluded."  The Supreme Court has held that though the proceeding for which discovery is sought under Section 1782 must be " within reasonable contemplation," it need not be " 'pending' or 'imminent.'"  While Apple is correct that the trial before the German district court has concluded, the German proceeding remains pending before the Court of Appeals. IPCom's subpoena thus meets and exceeds the Supreme Court's standard for timeliness.
Apple's reliance on two Southern District of New York cases in which the court denied Section 1782 applications as untimely is misplaced. In Aventis Pharma v. Wyeth, the court denied Aventis' application for two reasons. First, the Aventis court noted that Aventis did not seek production in French court despite the French court's apparent jurisdictional reach over the documents. Here, although Apple does not expressly argue that IPCom could have sought production in German court, the court notes that IPCom could not have done so as " a party in a German lawsuit can only request specific documents from his adversary, not categories of documents." 
Second, the Aventis court refused to allow Aventis to " rush to a U.S. Court on the eve of an appeal in hopes of obtaining discovery it could have requested in this same Court" at the outset of the French litigation. The court stated that " the timing of Aventis' request" would create a " 'fire drill'" that would place " a burden on Wyeth so great that they can not produce the requested documents in time for the French appeal."  Here, because " the appellate briefing will continue, likely for many more months," there is no reason to believe, and Apple does not even claim,
that production for the appeal will be burdensome.
B. IPCom Has A Current Need for the Requested Discovery
As previously noted, IPCom made the unusual but permissable decision to seek judgment on both infringement and damages before the German district court. Therefore, although the district court did not reach the damages issue, " the entire case including the question of the amount of damages owed is now before the Court of Appeals."  IPCom has stated that because " the license agreements sought are directly relevant to the damages calculation" in the action, IPCom " intends to submit the requested licenses to the appellate court." 
Apple counters that the appeals court is unlikely to address the damages issue, so IPCom does not currently need the requested discovery. Apple further argues that even in the unlikely event that the appeals court reverses the finding of noninfringement, it will likely remand the case to the district court for consideration of damages. Apple therefore contends that the odds that IPCom will need the license agreements for the appellate proceeding are " vanishingly small."  Yet Apple does not argue that there is no chance that the appeals court will reverse and consider damages, only that such an outcome is highly unlikely. It cites no authority for the proposition that this court should deny IPCom access to discovery that may, even with low probability, be relevant to the appellate proceeding. Moreover, Apple's argument that " at a minimum," the court should quash IPCom's subpoena without prejudice " to allow IPCom to refile later if it prevails in its appeal of the patent merits," is without basis. Apple provides no rationale for delaying production of the license agreements nor any evidence or argument that
the burden will change at all over time.
C. IPCom Does Not Intend to Use the Requested Discovery for an Improper Purpose
Apple finally argues that IPCom's subpoena should be quashed " to the extent that IPCom seeks to use the discovery for an improper purpose."  IPCom represents that it does not intend to use the license agreements for any purpose outside the ambit of Section 1782, and Apple provides no reason to discredit IPCom's representation.
In sum, production of the license agreements is warranted pursuant to Section 1782. Apple shall produce the agreements to IPCom by August 27, 2014.
D. A Protective Order is Warranted
Apple also requests that, in the event that this motion is denied, the license agreements be subject to a protective order limiting access to IPCom's outside counsel that do not have any financial interest in IPCom and that do not represent IPCom in licensing negotiations. Apple's request is reasonable, and in any event, IPCom has agreed to such a protective order. The parties shall submit a proposed protective order by August 13, 2014.
IT IS SO ORDERED.