Case Name: Palmchip Corp. v. Ralink Technology Corp., et al.
Case No.: 112CV234653
Plaintiff Palmchip Corp. moves for an Order designating the present action as a complex case pursuant to California Rule of Court 3.400. Plaintiff argues that this case is likely to involve (1) numerous pretrial motions raising difficult or novel legal issues that will be time-consuming to resolve; (2) management of a large number of witnesses or a substantial amount of documentary evidence; (3) coordination with related actions pending in one or more courts in other counties, states, or countries, or in a federal court; and (4) substantial post judgment judicial supervision. Defendants MediaTek, Inc., a Taiwan Corporation, and MediaTek USA, Inc., a Delaware Corporation, oppose the motion. Defendants argue that this is a case about a breach of contract for the payment of royalties and the crux of this case has not changed since Plaintiff filed its complaint nearly two years ago.
Plaintiff filed this lawsuit in October 2012 for breach of licensing agreements in regards to three of Defendants’ computer chips; Plaintiff did not designate the case as complex. (Liang Decl. Ex. D.) In December 2012, the parties stipulated to a stay of this action to engage in settlement discussions. (Liang Decl. ¶ 2.) As part of these discussions, Plaintiff reviewed the source code on Defendants’ chips, subject to a protective order. (Ibid.) After that review, Plaintiff claims that Defendant incorporated Plaintiff’s technology into dozens of chip designs instead of three, and that Defendants sold over one-hundred million units. Settlement efforts failed and the parties began discovery in the fall of 2013. (Liang Decl. ¶ 3.) The parties have a dispute about the source code protective order for the production of source code in regular discovery. (Liang Decl. ¶ 4.) All discovery disputes have been presented to the Honorable Judge Manokian, with the majority having been briefed, argued, and adjudicated.
With or without a hearing, the court may decide on its motion, or on a noticed motion, that a civil action is complex. (California Rules of Court 3.403(b).) A complex case is “an action that requires exceptional judicial management to avoid placing unnecessary burdens on the court or the litigants and to expedite the case, keep costs reasonable, and promote effective decision making by the court, the parties, and counsel.” (Ibid. 3.400(a).) In deciding whether a case is complex, courts consider if the case is likely to involve “(1) Numerous pretrial motions raising difficult or novel legal issues that will be time-consuming to resolve; (2) Management of a large number of witnesses or a substantial amount of documentary evidence; (3) Management of a large number of separately represented parties; (4) Coordination with related actions pending in one or more courts in other counties, states, or countries, or in a federal court; and (5) Substantial postjudgment judicial supervision.” (Ibid. 3.400(b).)
Arguments
Defendants argue that Plaintiff failed to make this case complex when it first filed the lawsuit, and that just because there are more chips at issue this case does not warrant the designation of complex. In addition, Defendant argues that Plaintiff delayed filing this motion.
Plaintiff responds that delay is not a factor in determining whether a case should be designated complex, and that the Rules of Court allow a complex designation either at the outset or the case or at a later time. In addition, Plaintiff argues that there would be no prejudice if this case were designated as complex.
- Difficult and Novel Issues
Plaintiff argues that discovery has barely begun and yet the range and breadth of discovery motions has already exceeded the typical case and have placed a significant burden on this Court. Plaintiff also argues that this action will eventually involve substantial motion practice raising highly technical issues related to computer chip design, which will be costly and time consuming to resolve. Plaintiff also envisions that it will file other discovery motions in the near future and expects the same from Defendants, including a motion for a protective order.
Defendant argues that this is a standard breach of contract case with a few core, but straightforward, issues that need to adjudicated: which of the Defendants’ chips contain Plaintiff’s source code, was the source code licensed under the agreements between the two parties, and what are the damages resulting from that. Defendants also contend that Plaintiff fails to demonstrate how these discovery motions present any difficult or novel legal issues that cannot be managed without a case re-assignment. Defendants claim that the current discovery motions are routine and should be handled in a dedicated discovery department. Defendants argue that this motion is tantamount to belated judge-shopping.
- Management of Substantial Documentary Evidence
Plaintiff asserts that its current claims relate to over one hundred million units of dozens of chip designs integrated into close to 80 different products sold by Defendants, and Plaintiff anticipates that further designs and products will be identified when discovery advances. Plaintiff argues that to describe the documentary evidence at issue as voluminous is an understatement. Plaintiff also contends that in a recent discovery motion, a Declaration filed by Defendants stated that the documents were made available for review by Plaintiff’s experts and those documents amounted to over 9,800 folders containing over 110,000 documents (Brosas Decl. Ex. C.) Those 110,000 documents related to just six chips under dispute at the time of the early settlement stay. (Ibid.) Plaintiffs additionally argue that because Defendants’ business is largely based in Taiwan, there will be translation issues as well as the management of foreign depositions of numerous witnesses.
Defendant argues that Plaintiff grossly overstates the magnitude of documentary evidence that will need to be managed in this case because the documentary evidence depends in part on discovery motions pending before Judge Manoukian. Defendants also argue that the 110,000 documents cited by Plaintiff are part of an electronic source code, and that under Plaintiff’s perspective, virtually any case involving electronically stored information would automatically qualify for complex designation. Defendants also argue that the Defendant has been based in Taiwan since the beginning of this case, and Plaintiff did not designate the case as complex.
Plaintiff responds that while the legal issues technically remain the same, the increase in scope of the accused infringement has qualitatively changed the case. Plaintiff argues that because unlicensed use of its code may need to be established independently for each of the accused products, this case now involves dozens of mini-cases, and the scope of documents, testimony, and nearly every aspect of the case has multiplied substantially. Plaintiffs also claim that Judge Manoukian has already heard twenty motions since December 6, 2013.
- Requires Coordination with a Parallel Federal Proceeding
Plaintiff has filed a federal action for patent infringement against the four Defendants in this case with respect to nine chips then understood to be at issue. With the exception of a co-plaintiff not present in this case—NetVinci, Inc.—Plaintiff argues that the federal action involves the same parties and the same technology and the same acts as at issue in this action. Plaintiff claims that Judge Pfaelzer in the federal case has expressly tied discovery in that action to discovery in this action, and argues that the two cases are inextricably linked.
Defendant argues that when Plaintiff filed the federal lawsuit, Plaintiff did not attempt to designate this case as complex. Defendant also argues that Plaintiff’s position about coordinating discovery is ironic because much of the discovery log jam is the result of Plaintiff’s refusal to accept the ND Cal. model protective order for source code review. Defendant also argues that Plaintiff’s claim that Judge Pfaelzer stayed discovery in the patent case is misleading because the Judge stayed discovery until after the claim construction hearing.
Plaintiff responds that Defendants’ cite to the federal court transcript are inapposite to this motion and do not in anyway contradict the citations Plaintiff made in its moving papers. Plaintiff claims that while the two claims are based on different legal theories and the outcomes are not inexorably tied together, they overlap in some areas and it will be necessary to coordinate to avoid incompatible outcomes.
- Post Judgment Judicial Supervision
Plaintiff argues that if Plaintiff wins, then Plaintiff will likely receive injunctive relief. Plaintiff contends that under such circumstances, judicial supervision will be necessary to ensure compliance with the injunction.
Defendants argue that Plaintiff’s assertion is highly speculative and there is no guarantee that Plaintiff is entitled to equitable relief.
Plaintiff responds that Defendants’ argument would apply to all complex designated cases because it is speculation to know whether there will or will not be an injunction issued before judgment is entered. Plaintiff contends that if the speculative nature of post-judgment supervision made it inappropriate for consideration as a factor, then the legislature would not have specifically included it as a factor of consideration.
Discussion
The Court finds that the factors in this case weigh in favor of re-designating the case as complex. Even though the Court does not find that this case will raise difficult or novel issues, the Court finds that this case will likely require the management of a substantial number of documents, require coordination with a parallel federal proceeding, and require post judicial supervision.
This case requires the determination of which of the Defendants’ chips contain Plaintiff’s source code. 110,000 documents, even though they are on an electronic source file, is still a substantial amount of documents for the parties to go through. In addition, that number related only to six chips, where now the number of chips at issue is at least eighty. Such a case will likely require management of all of those documents.
This case also requires coordination with the Federal Court because Judge Pfaelzer has instructed that discovery in the federal case follow the discovery allowed in the state court case. The Court does not want to waste resources deciding issues that the Federal Court has already decided, and the Court does not want the parties to confront conflicting rulings on issues. These considerations weigh in favor of granting the complex designation.
This case may also require post judgment judicial supervision because Plaintiff may be entitled to an injunction to protect its interests. Even though Defendant argues that it is speculative that an injunction may be required, the Rule of Court requires “whether the action is likely to involve […] substantial postjudgment judicial supervision.” (Cal. Rule of Court 3.400(b)(5).) The Court finds that this action is likely to involve substantial post judgment judicial supervision because of the number of chips that are alleged to have infringed material on them.
Therefore, the motion to designate the case as complex is GRANTED.
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