Order Regarding Discovery Dispute Joint Report #1, VIA Tech., Inc. v. ASUS Computer Int'l et al., Case No. 14-cv-3586 (Magistrate Judge Howard Lloyd)
There is a tension in many IP cases between disclosure rules that require a plaintiff to identify its liability theories early in the case, and the understandable desire of the plaintiff to keep open its options for seeking recovery. Some plaintiffs respond to these tensions by stating their allegations in highly general terms, often leading defendants to ask for more specifics. Other plaintiffs attempt to overwhelm their opponents with detail, triggering calls by their opponents to narrow the relevant claims. Sometimes such obfuscatory tactics work, but they can backfire too. That was the recent result in VIA Tech., Inc. v. ASUS Computer Int'l et al., in which a plaintiff seeking recovery for misappropriation of trade secrets was ordered not only to trim its case, but also to disclose the alleged trade secrets to the defendant (rather than only to defense counsel).
The underlying rulings in Via Tech stemmed from a motion by which the trade secret plaintiffs, three VIA entities, sought additional discovery from the defendants. Pursuant to disclosure requirements, VIA had identified its alleged trade secrets by listing the titles of over 1,000 of its own schematics, and it wanted the defendants to produce corresponding schematics. The defendants produced schematics with matching titles, but objected to producing additional schematics with similar contents. They said performing such a comparison would be unduly burdensome given the large number of schematics in VIA's trade secret disclosure, and would be impractical since they were only allowed to see the titles of VIA's schematics (as opposed to their contents).
Magistrate Judge Howard Lloyd granted VIA's motion and ordered the defendants to produce more schematics, but subject to two important conditions that penalized VIA for serving an over-inclusive trade secret disclosure (which VIA had served pursuant to California Code of Civil Procedure § 2019.210).
First, the Court limited discovery to a handful of the 1,000+ schematics in VIA's trade secret disclosure. The Court found that VIA had adequately identified one particular combination of features as a trade secret, and ordered the defendants to produce their schematics related to those features. The Court then directed VIA to identify no more than 24 additional schematics from its list as to which the defendants would have to produce comparable schematics. As stated by Judge Lloyd, "this number of schematics creates a reasonably proportional scope of discovery."
The Court's solution brings to mind a similar decision from the patent realm: In re Katz Interactive Call Processing Patent Litigation, 639 F.3d 1303 (Fed. Cir. 2011). In that case, the plaintiff alleged infringement of 1,975 claims from 31 patents. The Federal Circuit upheld the district court's broad discretion to insist that the plaintiff substantially pare down the number of asserted claims, in part because no showing had been made that additional claims presented unique issues of infringement or invalidity. The lesson from both VIA Tech and In re Katz Interactive is that a plaintiff in an IP case who fails to limit the scope of its case risks having the court do so in unfavorable and unpredictable ways.
The Court's second directive to VIA was that it had to allow the defendants (not just their counsel) to review the schematics that were to be the subject of discovery. This would enable them to perform the comparisons needed to identify the schematics they had to produce. VIA proposed instead that an independent expert be designated to review the defendants' schematics and identify which ones should be produced, but the Court held that the defendants had a right to know the substance of the secrets they had allegedly stolen so they could prepare their defense. This ruling may incentivize future plaintiffs in the same position as VIA to more carefully and narrowly tailor their trade secret disclosures in order to limit the sensitive information they may have to disclose to their adversaries.
Plaintiffs will undoubtedly continue to devise trade secrets disclosures with a view to giving themselves flexibility and maximizing their ability to allege misappropriation. But doing so may carry unexpected consequences, and this Via Tech Order potentially gives defendants a useful precedent for stymying such efforts.
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