Dolby Laboratories Licensing Corp. v. ArcSoft, Inc.		CASE NO. 112CV230794
DATE: 11 September 2014	TIME: 9:00	LINE NUMBER: 6

This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Wednesday 10 September 2014.  Please specify the issue to be contested when calling the Court and counsel.

On 11 September 2014, the motion of plaintiff/cross-defendant Dolby Laboratories Licensing Corporation (“Dolby”) for a protective order limiting the number of special interrogatories propounded by defendant/cross-complainant ArcSoft, Inc. (“ArcSoft”) and for monetary sanctions was argued and submitted. ArcSoft filed filed a formal opposition to the motion.

I.       Statement of Facts

Dolby is responsible for licensing audio and video technology developed by a separate but related entity, Dolby Laboratories Inc., to industry participants. ArcSoft is a software developer of multimedia imaging technologies used in devices such as smartphones, tablets, personal computers, and cameras. ArcSoft is one of Dolby’s licensees.

Beginning in 2004, ArcSoft entered into licensing agreements with Dolby for a variety of technologies used in personal computers. The license agreements require ArcSoft to report all distributions of Dolby’s intellectual property and to pay royalties thereon. According to Dolby, ArcSoft failed to report sales and pay royalties in connection with a number of its customers and has refused to allow Dolby to conduct an inspection of ArcSoft’s records as provided for under the terms of the license agreements.

On 14 February 2012, Dolby instituted this action against ArcSoft, alleging that ArcSoft breached the parties’ licensing agreements. Dolby seeks damages and specific performance of its inspection rights.

ArcSoft filed a cross-complaint against Dolby (in which ArcSoft also names SanDisk—which received products containing Dolby technology from ArcSoft—as a “Third-Party Defendant”), alleging that, subsequent to the signing of the license agreements, Dolby became a direct competitor of ArcSoft and launched an anticompetitive campaign against ArcSoft. In its cross-complaint, ArcSoft contends that Dolby is attempting to misuse the audit provisions contained in the licensing agreements in order to obtain confidential information for uses unrelated to the purpose of those agreements, i.e., to gain an unfair economic advantage over ArcSoft. In March 2013, ArcSoft filed the operative Third Amended Cross-Complaint against Dolby for breach of contract, violations of Business and Professions Code section 17200, intentional interference with contractual relations, intentional interference with prospective economic relations, negligent interference with prospective economic relations, and declaratory judgment.

II.      Discovery Dispute

On 19 April 2012, ArcSoft served its first set of special interrogatories (“SI”) on Dolby. The first set consisted of SI Nos. 1-79.

On 7 February 2014, ArcSoft served its second set of SI on Dolby. The second set consisted of SI Nos. 80-98. Dolby objected to ArcSoft’s second set of SI on the ground that it exceeded the number of SI authorized by the Civil Discovery Act. (Decl. of T. Scott in Support of Dolby’s Mot. for Protective Order (“Decl. of Scott”), ¶ 9.) Notwithstanding the objection, Dolby responded to the second set of SI.

On 3 July 2014, ArcSoft served its third set of special interrogatories (“SI”) on Dolby. This set consisted of fourteen interrogatories—SI Nos. 99-112—and was accompanied by a supporting declaration concerning the need for responses to additional interrogatories in accordance with Code of Civil Procedure (“CCP”) section 2030.040.

The third set of SI asks for answers relating to (1) Dolby’s relationship with Samsung in the mobile phone market, (2) Dolby technologies licensed to companies listed on ArcSoft’s list of customers, (3) the dates that Dolby was first aware of Dolby technology provided by ArcSoft in Samsung, LG, Nokia, and Motorola mobile devices, (4) Dolby’s efforts to collect money from ArcSoft customers relating to ArcSoft products that contained Dolby technology, (5) Dolby’s investigation or audits of ArcSoft customers, and (6) Dolby’s industry group licensing obligations.

On 28 July 2014, counsel for Dolby sent a letter to counsel for ArcSoft concerning the third set of SI. In the letter, counsel for Dolby stated:

ArcSoft has now propounded a total of 112 special interrogatories to Dolby. This number is more than three times the number of interrogatories statutorily available to ArcSoft pursuant to California Code of Civil Procedure § 2030.030. As previously stated in our responses and objections to ArcSoft’s Special Interrogatories (Set Two), Dolby objects to the number of Special Interrogatories ArcSoft has served and any additional interrogatories are simply not warranted. Although ArcSoft provided a declaration for additional discovery, this declaration is insufficient for ArcSoft to meet its burden of justifying the excessive number of interrogatories it has propounded to Dolby. Accordingly, Dolby requests that ArcSoft withdraw its Special Interrogatories to Dolby (Set Three). (Decl. of Scott, Ex. 4.)

On 1 August 2014, at 7:42 a.m., counsel for Dolby sent an email to counsel for ArcSoft, seeking a one-week extension to respond to the third set of SI. Two hours later, counsel for Dolby sent another email, stating that there was no need for an extension because Dolby intended to move for a protective order. Later that afternoon, counsel for ArcSoft sent a meet and confer letter to counsel for Dolby, responding to the letter of 28 July 2014. In the letter, counsel for ArcSoft indicated why the SI were necessary  and indicated that she wanted to work out the issues cooperatively without involvement of the court. (Decl. of A. Dao in Support of ArcSoft’s Opp. to Dolby’s Mot. for Protective Order (“Decl. of Dao”), Ex. 5.)

Also on the afternoon of 1 August 2014, counsel for ArcSoft and Dolby conducted a conference call. According to counsel for Dolby, during the call he indicated that the third set of SI were improper because they (1) exceeded the statutory limit, (2) were compound, conjunctive, and disjunctive, (3) contained prefatory instructions and definitions in violation of the Code, and (4) were not full and complete in and of themselves. (Decl. of Scott, ¶ 15.)

Counsel for ArcSoft agrees that the teleconference took place, but disputes the fact that the parties met and conferred on anything other than the number of the SI.

On 12 August 2014, without any further meet and confer, Dolby filed a motion for a protective order, seeking a declaration from the Court that Dolby need not respond to the third set of SI. On 28 August 2014, ArcSoft filed an opposition to the motion.

III.     Discussion

Dolby seeks a protective order declaring that it need not respond to ArcSoft’s third set of SI. Dolby asserts that it is entitled to this relief on two grounds. First, Dolby asserts that the third set of SI exceeds the amount of special interrogatories permitted under CCP section 2030.030 and that the declaration supporting the additional SI is not sufficient under CCP section 2030.040. Second, Dolby asserts that the SI are not code-compliant because they contain prefatory instructions and definitions, are not “full and complete” in and of themselves, and are compound, conjunctive, and disjunctive.

 

 

         A.  Legal Standard

Pursuant to CCP section 2030.030, each party has the right to propound 35 “specially prepared” interrogatories to every other party. (CCP, § 2030.030, subd. (a)(1).) The Code permits a party to exceed the “rule of 35” by attaching a declaration stating why more specially prepared interrogatories are necessary. (CCP, § 2030.040, subd. (a).)

If, despite the propounding party’s “declaration of necessity,” the responding party deems the number of interrogatories excessive, he or she may seek a protective order under CCP section 2030.090. Such order may be granted on the ground “[t]hat, contrary to the representations made (in the declaration of necessity) . . . the number of specially prepared interrogatories is unwarranted.” (CCP, § 2030.090, subd. (b)(2).)

If the responding party files a motion for a protective order challenging the number of special interrogatories as excessive, the burden is on the propounding party to justify the number of interrogatories. (CCP, § 2030.040, subd. (b) [“If the responding party seeks a protective order on the ground that the number of specially prepared interrogatories is unwarranted, the propounding party shall have the burden of justifying the number of these interrogatories.”].)

         B.  Arguments Concerning the Form of the SI

Dolby argues that each of the SI contained in the third set are defective because they (1) include prefatory instructions and definitions, and (2) contain compound, conjunctive, and disjunctive questions. Dolby also contends that four of the fourteen SI are defective because they require reference to other materials.

As to its first argument, Dolby relies upon CCP section 2030.060, subdivision (d), which provides, in pertinent part, that “[n]o preface or instruction shall be included with a set of interrogatories.” Dolby then directs the Court to ArcSoft’s SI, which contain several capitalized terms that are defined at the beginning of the requests. According to Dolby, “[b]y including so many definitions, ArcSoft has effectively turned each of its special interrogatories into a complicated category described in pages and pages of prefatory instructions.” (Mem. of Ps & As in Support of Mot. for Protective Order, at p. 7.) This argument is not well taken. First, CCP section 2030.060 expressly contemplates that terms may be defined. (CCP, § 2030.060, subd. (e) [“Any term specially defined in a set of interrogatories shall be typed with all letters capitalized wherever that term appears.”].) Second, Dolby’s assertion that the third set of SI contains “pages and pages of prefatory instructions” is not accurate. In fact, the requests contain no prefatory language and only contain three pages of definitions. For these reasons, the Court rejects Dolby’s first argument.

As to the second argument, Dolby relies upon CCP section 2030.060, subdivision (f), which provides that “[n]o specially prepared interrogatory shall contain subparts, or a compound, conjunctive, or disjunctive question.” Dolby then directs the Court to two of ArcSoft’s SI, highlighting that they use the words “and” and “or” in several places. For instance, SI No. 99 asks Dolby to respond to the following:

IDENTIFY all current and former Dolby employees or contractor(s) who conducted any investigation, review, research, trade show visit, compliance action AUDIT or inspection of ARCSOFT or any ARCSOFT PRODUCT and the dates of all such activity.

Once again, Dolby’s argument is not well taken. In Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1291, the court of appeal discussed the application of the prohibition on compound special interrogatories. Relying on Weil & Brown, the court first noted that “[a]rguably, any question containing an ‘and’ or ‘or’ is compound and conjunctive!” (Id., quoting Weil & Brown, California Practice Guide: Civil Procedure Before Trial (Rutter Group 2009) at 8F-21.) Again quoting Weil & Brown with approval, the court stated that “[t]he rule should probably apply only where more than a single subject is covered by the question [and] [q]uestions regarding the same subject should be allowed although they include an ‘and’ or ‘or.’” (Id., [emphasis in original].) Here, SI No. 99 refers to a single subject—investigations concerning ArcSoft products. The interrogatory is therefore not compound.

Furthermore, the failure to individually address each of the SI—or make it more clear to the Court which of the specific interrogatories fall into this category—makes it impossible for the Court to address Dolby’s arguments without combing through the SI to determine whether each interrogatory complies with CCP section 2030.060. This, the Court is not required to do. (See Quantum Cooking Concepts, Inc. v. LV Assocs., Inc. (2011) 197 Cal.App.4^th 927, 934 [stating that the trial court is not required to “comb the record and the law for factual and legal support that a party ahs failed to identify or provide”].) Accordingly, the Court rejects Dolby’s second argument concerning the form of the SI.

In its final argument concerning the form of the SI, Dolby once again relies upon CCP section 2030.060, subdivision (d), which requires each interrogatory to “be full and complete in and of itself.” Dolby points out that SI Nos. 101, 108, 110, and 111 all refer to outside materials. For example, SI No. 111 asks Dolby to “IDENTIFY . . . all payments made to DOLBY by any customer on the MIKE LIN EXHIBIT during the RELEVANT PERIOD.” (Decl. of Scott, Ex. 3.)

The Court agrees that the reference to the “Mike Lin Exhibit” in SI Nos. 101, 108, 110, and 111 violates CCP section 2030.060, subdivision (d). The court of appeal has made clear that “[a]n interrogatory is not ‘full and complete in and of itself’ when resort must necessarily be made to other materials in order to complete the question.” (Cantanese v. Super. Ct. (1996) 46 Cal.App.4^th 1159, 1164.) Because SI Nos. 101, 108, 110, and 111 require reference to outside materials to answer the questions posed by the interrogatories, they are not code-complaint. Accordingly, Dolby’s motion will be GRANTED at to those particular interrogatories.

         C.  Argument Concerning Excessive Number of SI

CCP section 2030.040 provides that, “[subject to the right of the responding party to seek a protective order,” any party who attaches a supporting declaration may propound a greater number of specially prepared interrogatories if this greater number is warranted because of any of the following:

(1) The complexity or the quantity of the existing and potential issues in the particular case;

(2) The financial burden on a party entailed in conducting the discovery by oral deposition; and

(3) The expedience of using this method of discovery to provide to the responding party the opportunity to conduct an inquiry, investigation, or search of files or records to supply the information sought.

ArcSoft contends that each of the above factors exist in this case warranting more than 35 specially prepared interrogatories.[1] For the reasons set forth below, the Court agrees.

As to the first factor, while ArcSoft concedes that this case has not been designated complex (which is pointed out in Dolby’s moving papers), ArcSoft points out that this case involves multiple parties and a total of 12 causes of action—three advanced by Dolby against ArcSoft in the original complaint and nine advanced by ArcSoft against Dolby and SanDisk in the cross-complaint. Based on the nature of the case, ArcSoft contends that the case should be considered complex within the meaning of CCP section 2030.040.

As to the second factor, ArcSoft asserts that, for it to obtain this information by oral deposition would result in extreme financial burden to all parties. More specifically, ArcSoft points out that obtaining this information through depositions would require at least six depositions of persons from Dolby, Samsung, LG, Hewlett-Packard, Motorola, and Nokia, which in turn could require six court reporters, six videographers, and attorneys from all parties and non-parties to appear at six depositions.

As to the final factor, ArcSoft asserts that “it is much more expedient to obtain this discovery through Special Interrogatories than to notice Dolby’s Person Most Qualified multiple times to obtain this initial information on these topics.” (Opp., at p. 12.)

The Court agrees that all three factors are satisfied.

As to the complexity of the case, while Dolby’s claims are somewhat straightforward—claiming breach of contract against ArcSoft for not paying royalties—the inclusion of ArcSoft’s cross-complaint, which asserts cases of action for among other things, violation of Business and Professions Code section 17200, adds an additional layer of complexity to this case. Moreover, the Court is persuaded that the nature of this case warrants additional SI. The case is not limited to interactions between the named parties. The claims concern identifying specific products containing specific technology that were sold to a number of industry participants, including Samsung, LG, Nokia, and Motorola. Additionally, because ArcSoft has raised claims for unfair business practices under Business and Professions Code section 17200, the controversy is not simply limited who received what and who paid for what. Instead, the controversy includes more discrete factual questions concerning how the parties interacted with one another, as well as how they interacted with several non-parties, and whether Dolby’s conduct violated industry standards.

Dolby relies upon the fact that, despite ArcSoft’s attempts, this case was not designated complex. This argument is not persuasive. There is no indication in CCP section 2030.040 that its reference to “complexity” requires a case to be deemed complex before the factor is applicable and Dolby has cited no authority for that proposition. Similarly, in support of its argument that this case is not complex, Dolby asserts that it is merely a breach of contract case. As discussed above, and as pointed out in ArcSoft’s papers, the characterization of this case as a simple breach of contract action is a gross oversimplification.

As to the second and third factors, the Court agrees with ArcSoft that having Dolby respond to fourteen additional interrogatories would be less burdensome and a more expedient method of discovery than obtaining the information through six depositions.

Based upon the above discussion, the Court finds that ArcSoft has carried its burden to justify the number of interrogatories. (See CCP, § 2030.040, subd. (b).) Accordingly, Dolby’s motion for a protective order is DENIED as to all of the SI other than SI Nos. 101, 108, 110, and 111, which are addressed in the previous section.

D.           Request for Monetary Sanctions

Dolby requests monetary sanctions against ArcSoft for having to file the motion for a protective order in the amount of $9,730. Dolby seeks this relief under CCP section 2030.090, subdivision (d), which provides that “[t]he court shall impose a monetary sanction . . . against any party, person, or attorney who unsuccessfully makes or opposes a motion for a protective order . . . unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”

Dolby only prevailed as to four of the fourteen SI at issue in its motion. The Court therefore finds that ArcSoft was substantially justified in opposing the motion. Accordingly, sanctions are not authorized under CCP section 2030.090, subdivision (d). Dolby’s request for monetary sanctions is therefore DENIED.

IV.     Conclusion and Order

Dolby’s motion for a protective order is GRANTED IN PART and DENIED IN PART. The motion is GRANTED as to SI Nos. 101, 108, 110, 111. Dolby need not respond to those particular interrogatories. The motion is otherwise DENIED.

Dolby’s request for monetary sanctions is DENIED.

 

 

 

 

________________­­­____________ DATED:

_________________________­­­________________________ HON. SOCRATES PETER MANOUKIAN Judge of the Superior Court County of Santa Clara

 

[1] In ArcSoft’s supporting declaration served with its third set of SI, counsel declared that “[t]he number of questions is warranted under Code of Civil Procedure § 2030.040(a) because this case is complex and the quantity of issues in the instant lawsuit warrants this number of special interrogatories.” (Decl. of Scott, Ex. 3.)