Finjan, LLC v. ESET, LLC

FINJAN, LLC, Plaintiff, v. ESET, LLC and ESET SPOL. S.R.O., Defendant.

Case No.: 17-cv-183-CAB-BGS

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

April 20, 2021

ORDER ON DISCOVERY DISPUTE REGARDING ACQUISITION DOCUMENTS

[ECF 849]

Defendants ESET, LLC and ESET SPOL. S.R.O ("ESET") move to compel Plaintiff Finjan, LLC ("Finjan") to produce documents in response to eleven requests for production of documents ("RFPs"). (ECF 849 at 4.¹) The parties have briefed the issues in dispute through a Joint Statement. (ECF 849.)

I. BACKGROUND

This case was stayed from May 7, 2018 until July 23, 2020 as to the '305 Patent, one of six patents Finjan asserts ESET has infringed, and is currently stayed. (ECF 215, 802.) After the stay was lifted and the parties were proceeding with discovery, the Courtordered the parties to submit proposed deadlines to complete any '305 discovery that was not completed prior to the stay. (ECF 811.) The Court then issued two orders setting deadlines to complete discovery as to the '305. (ECF 819, 832.²)

Since this briefing was filed, the district judge issued an order granting ESET's renewed motion for summary judgment of indefiniteness as to all the other patents in this case. (ECF 864.) The decision was followed by an order granting the parties' joint request to sever the '305 patent from the others and stay it pending a final determination on the decision as to the other patents. (ECF 871.)

The documents at issue in this dispute are related to Fortress Investment Group's ("Fortress") acquisition of Finjan Holdings, Inc. on July 24, 2020 for $43.9 million. (ECF 849 at 2-5, 13-17.) ESET seeks communications between and documents exchanged by Fortress and Finjan regarding: the patents asserted in this case and Finjan's patent portfolio as a whole, including valuations for any damages claims for any of the patents or any Finjan litigation (RFPs 222, 223, 226, 230 and 231); ESET (RFP 224); substitution of Finjan's counsel in any litigation (RFP 225); any allocation associated with the acquisition (RFP 227); potential invalidity, unenforceability, and prior art as to any of the patents-in-suit (RFP 232); and any communications between Finjan and its shareholders regarding the acquisition (RFP 229). (ECF 849.)

Fortress' acquisition of Finjan Holdings included Plaintiff Finjan, Inc., now Finjan, LLC.³ (Id. at 13-14.) Finjan represents that Fortress' due diligence for this acquisitionbegan in August 2018; and as part of it, Fortress and Finjan executed a non-disclosure agreement ("NDA") and common interest agreement ("CIA"), both in 2018. (Id. at 14 (citing Decl. of Regis Worley, Ex. G (Finjan's Supplemental Privilege Log) at Doc. Nos. 2322-23)⁴.)

II. DISCUSSION

There are three primary issues raised in the parties' briefing: (1) do ESET's RFPs seek discovery within the scope authorized by the Court; (2) do they seek discovery that is relevant and proportional to the needs of the case; and (3) whether the withheld documents are protected by the common legal interest doctrine. The Court first addresses whether the discovery sought is within the scope of discovery authorized and if it is relevant and proportional to the needs of the case.

A. Relevant to the '305 and Proportional to the Needs of the Case

The relevance section of ESET's briefing groups the RFPs as follows: (1) valuation documents (RFPs 222, 223, 226, 227, 230, and 231); (2) documents regarding ESET (RFPs 224); (3) Finjan's shareholder communications (RFP 229); and (4) documents regarding the validity and enforceability of the '305 Patent (RFPs 232, 233). (ECF 849 at 6-7.) In a different section of the Joint Statement, ESET identifies only RFPs 222 and 226 as patent valuation documents and separates out RFP 223 as documents referring to the asserted patents, RFP 227 as documents referring to the allocation of the acquisition, and RFPs 230 and 231 as documents referring to the valuation of infringement damages for the asserted patents. (ECF 849 at 4.) This section also includes one RFP not identified in the relevance section, RFP 225, documents referring to substitution of counsel. (Id.)

1. Discovery Limited to '305 Patent

a) Parties' Positions on Authorized Scope of Discovery

Finjan argues that the RFPs go beyond the '305 discovery authorized by the Court because they seek documents and communications between Finjan and Fortress regarding Finjan's whole patent portfolio, Finjan's former counsel, and ESET generally. (Id. at 12.)

ESET does not directly dispute that discovery at this point is limited to the '305. However, ESET argues that even if portions of responsive documents are beyond the '305, extending to patent portfolio documents, Finjan should not be allowed to withhold or redact those portions that extend beyond the '305 if they otherwise contain information relevant to the '305. (Id. at 6-7, 11 (citing Finjan, Inc. v. SonicWall, Inc., Case No. 17-cv-04467-BLF (VKD), 2020 WL 4192285, at *3 (N.D. Cal. July 21, 2020).) ESET seems to be arguing that if the documents are responsive and relevant for purposes of the '305 then they should not be withheld just because they encompass more than the '305. As to some of the RFPs, ESET also argues they are related to the '305 even though the language of the RFP does not limit its scope to the '305. Additionally, in a footnote, ESET asks that if the Court finds the valuation documents in dispute are not related to the '305 and beyond the scope of current discovery, "ESET requests that an additional discovery period be ordered that will enable ESET to take fulsome discovery of the Fortress transaction sufficiently to assess whether Finjan LLC even retained standing to sue." (Id. at 11 n.12.)

b) Analysis of Authorized Scope

The only discovery the parties were authorized to conduct when this dispute arose was '305 discovery. As noted above, discovery in this case was proceeding as to all the patents-in-suit when the case was stayed as to the '305 on May 7, 2018, however, all other discovery was completed, and the case proceeded to trial⁵ while the stay was inplace. (ECF 447 (close of expert discovery on March 19, 2019), 780-82 (trial).) In this respect, the only discovery the parties were authorized to pursue once the stay was lifted on July 23, 2020 was on the '305 because discovery was closed as to everything else. (ECF 802, 819, 832.⁶) The Court also notes that the Court's first order requiring the parties to submit proposals to complete '305 discovery ordered them to identify discovery that was not cumulative or duplicative of discovery already completed. (ECF 811.) Additionally, in ordering the parties to address all discovery deadlines (they had only addressed written discovery in their initial competing proposals) the Court reminded them that '305 discovery should only be updated as necessary because discovery as to the '305 was already in progress when it was stayed. (ECF 819.)

On their face, the RFPs are not limited to the '305. For example, RFP 222 requests "All Communications between Finjan, Inc. or Finjan Holdings, Inc. and Fortress Investment Group LLC regarding any valuation of the Patents-in-Suit or the Finjan patent portfolio as a whole." (ECF 849-6 at 12 (emphasis added).) In this respect, the language of these RFPs is overbroad in seeking discovery beyond the scope authorized by the Court. However, as to this and other similarly worded RFPs, the issue is not necessarily resolved by substituting "the '305 Patent" in place of "Patents-in-Suit or Finjan patent portfolio as a whole" or something similar to narrow every RFP to the '305. As discussed below, in the context of discovery related to a purchase of patents or an acquisition that includes patents, an RFP may arguably seek discovery relevant to the value of one patent even when it encompasses documents related to the value of other patents. (See I.A. 1.b)(1)(b).) Rather than eliminate RFPs entirely because they do notspecify they are only asking for the discovery as to the '305 or substitute in "the '305" for the broader language in a blanket fashion, the Court considers below whether the RFPs as currently stated seek any discovery that is relevant to the '305 and narrows them accordingly.

The Court briefly addresses the parties' arguments regarding obtaining discovery as to Finjan's standing below in addressing relevancy and proportionality. (See I.A.1.b)(3)) However, to the extent ESET's footnote regarding an "additional discovery period" could be considered a request to reopen discovery or open discovery more broadly than the '305, it is denied at this time for not properly raising it. "When ruling on a motion to amend a Rule 16 scheduling order to reopen discovery, [the Ninth Circuit] instructs" courts to consider:

1) whether trial is imminent, 2) whether the request is opposed, 3) whether the non-moving party would be prejudiced, 4) whether the moving party was diligent in obtaining discovery within the guidelines established by the court, 5) the foreseeability of the need for additional discovery in light of the time allowed for discovery by the district court, and 6) the likelihood that the discovery will lead to relevant evidence.

City of Pomona v. SQM N. Am. Corp., 866 F.3d 1060, 1066 (9th Cir. 2017) (quoting United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1526 (9th Cir. 1995) vacated on other grounds, 520 U.S. 939 (1997)). Not only is a footnote not a proper avenue to seek to reopen discovery, ESET has not addressed this standard or any alternative standard it might advance to justify obtaining discovery beyond the '305. Raising it in a footnote with little analysis leaves the Court to speculate as to the standard ESET might think applies and ESET's justifications under this or another standard. Additionally, by raising it in a footnote with little analysis, it also denies Finjan the opportunity squarely address the appropriate standard or ESET's arguments. The Court will not rule on an...