MPH Techs. OY v. Apple, Inc.

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MPH TECHNOLOGIES OY, Plaintiff, v. APPLE INC., Defendant.

No. 3:24-CV-00271-ART-CLB

United States District Court, D. Nevada

August 13, 2024

ORDER GRANTING PLAINTIFF'S MOTION TO COMPEL

[ECF No. 1]

Before the Court is Plaintiff MPH Technologies Oy's (“MPH”) motion to compel third party VirnetX Inc. (“VirnetX”) to produce documents responsive to MPH's subpoena. (ECF Nos. 1, 9^[1].) VirnetX responded, (ECF No. 4), and MPH replied. (ECF No. 10.) For the reasons stated below, the Court grants MPH's motion to compel.

I. BACKGROUND

In 2018, MPH filed a lawsuit against Defendant Apple, Inc. (“Apple”) for patent infringement in the Northern District of California (“California Lawsuit”). MPH Technologies Oy v. Apple, Inc., Case No. 3:18-cv-05935-TLT (N. D. Cal. filed Sept. 27, 2018). The suit alleges Apple infringed on MPH's patents which relate and pertain to sending messages through secure connections, specifically through those devices, servers, and associated software that support, are used and practice Apple's iMessage, FaceTime, and other services utilizing the Apple Push Notification service. (ECF No. 1 at 3.) MPH also alleges Apple infringed on MPH's patent through Apple's Always On VPN feature. (Id.)

MPH is now seeking documents from VirnetX relating to two patent infringement lawsuits that VirnetX filed against Apple in the Eastern District of Texas (“VirnetX Lawsuits”). (ECF No. 1.) MPH argues the VirnetX Lawsuits share similarities with the California Lawsuit because “VirnetX's suits involved similar patented technology and some of the very same accused Apple products and features.” (Id. at 2.) MPH argues the licenses and damages expert reports from the VirnetX Lawsuits are “highly relevant” to MPH's litigation for the determination of any damages, including reasonable royalty damages. (Id.) VirnetX objected to producing the documents, (ECF No. 9-3), and MPH moved to enforce the subpoena in the District of Nevada.^[2] (ECF No. 1 at 5-6.)

A. VirnetX Lawsuits

In 2010, VirnetX sued various entities, including Apple, in the Eastern District of Texas for patent infringement for “technology for providing security over networks such as the Internet” based on Apple's FaceTime and “VPN on Demand” features. Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014). The case proceeded to trial, where the jury awarded VirnetX $362.2 million in damages. Id. at 1313. On appeal, the award of damages was vacated, and the issue remanded for further proceedings. Id. at 1314. Upon remand, the jury found that Apple's FaceTime feature infringed on two of VirnetX's patents and awarded $302.4 million in damages for the collective infringement by the VPN on Demand and FaceTime features in the accused Apple products. VirnetX Inc. v. Apple Inc., 324 F.Supp.3d 836, 844 (E.D. Tex. 2017). The district court found the record contained sufficient evidence to support the jury's damages award because it was based on VirnetX's expert's opinion, id. at 856-58, and the Federal Circuit affirmed. VirnetX Inc. v. Cisco Sys., Inc., 748 Fed.Appx. 332 (Fed. Cir. 2019).

Two years later, VirnetX filed another lawsuit against Apple in the Eastern District of Texas based on a redesigned VPN on Demand and redesigned FaceTime service. VirnetX Inc. v. Apple Inc., No. 6:12-cv-00855-RWS, 2018 WL 10048706 (E.D. Tex, Aug. 30, 2018). At trial, the jury returned a verdict finding both VPN on Demand and FaceTime to infringe on each asserted patent and awarding $502.5 million in damages. Id. at *2. The district court upheld the jury's verdict and award of damages, including the jury's reliance on the royalty calculation by VirnetX's expert. Id. at *15.

On appeal, the Federal Circuit affirmed infringement on patents by the redesigned VPN on Demand but reversed infringement of the patents based on the redesigned FaceTime service. VirnetX Inc. v. Apple Inc., 792 Fed.Appx. 796, 813 (Fed. Cir. 2019). As the award of damages did not indicate which portions were allocated to which patents, the Federal Circuit vacated the damage award and remanded the case for proceedings on damages. Id. at 812-13. On remand, the jury again awarded damages to VirnetX. VirnetX Inc. v. Apple Inc., No. 2021-1672, 2023 WL 2770074, at *1 (Fed. Cir. Mar. 31, 2023), cert. denied sub nom. VirnetX Inc. v. Mangrove Partners Master Fund, Ltd., 144 S.Ct. 1001 (2024). However, “[i]in the meantime, the Patent Trial and Appeal Board found both patents unpatentable” and the Federal Circuit affirmed the Board's decision. Id. (citing VirnetX Inc. v. Mangrove Partners Master Fund, Nos. 20-2271,20-2272 (Fed. Cir. Mar. 30, 2023).) Critically, both parties had agreed that if the decision of the Patent Trial and Appeal Board was upheld, VirnetX would no longer have a legally cognizable cause of action against Apple because the Patent and Trademark Office would be obligated to cancel the claims of both patents. Id. (citations omitted). Thus, the Federal Circuit vacated the district court's judgment and remanded the case to be dismissed as moot. Id.

B. MPH's Subpoena

During discovery in the California Lawsuit, MPH served a subpoena on VirnetX for documents from the VirnetX Lawsuits. Specifically, MPH seeks: (1) patent licensing agreements entered into by or for VirnetX relating to virtual private networking, secure messaging, or videoconferencing; (2) patent license agreements produced or identified as relevant during the VirnetX Lawsuits; patent license agreements entered into by or for VirnetX relating to infringement of claims asserted by or for VirnetX against Apple; and (4) damages expert reports from the VirnetX Lawsuits. (ECF No. 1 at 5; ECF No. 9-2 at 1-7.)

On March 22, 2024, VirnetX served its objections and responses to the subpoena. (ECF No. 9-3.) Generally, VirnetX objected to the subpoena on the basis that MPH's requests for productions (“RFP”) are not relevant to any claim or defense, not proportional to the needs of the case, and unduly burdensome. (Id.) VirnetX did not provide any documents pursuant to MPH's subpoena. (Id.) The parties subsequently had two meet and confers regarding the discovery dispute, but ultimately VirnetX “confirmed that it remains unwilling to produce the requested documents.” (ECF No. 1 at 5.)

II. LEGAL STANDARD

“[B]road discretion is vested in the trial court to permit or deny discovery.” Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002); see also Crawford-El v. Britton, 523 U.S. 574, 598 (1998). Parties are entitled to discover non-privileged information that is relevant to a party's claim or defense and is proportional to the needs of the case, including consideration of the importance of the issues at stake in the action, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Fed.R.Civ.P. 26(b)(1); see also ATS Prods., Inc. v. Champion Fiberglass, Inc., 309 F.R.D. 527, 530 (N.D. Cal. 2015) (the scope of third-party discovery is subject to the same limitations). The discovery process should be cooperative and largely unsupervised by the court. Sali v. Corona Reg. Med. Ctr., 884 F.3d 1218, 1219 (9th Cir. 2018).

Rule 45 governs the issuance of subpoenas requiring non-parties to produce designated documents. See Fed.R.Civ.P. 45(a)(1)(A)(iii). When a nonparty is served with a subpoena, it has three options: it may (1) comply with the subpoena, (2) serve an objection on the requesting party in accordance with Rule 45(d)(2)(B), or (3) move to quash or modify the subpoena in accordance with Rule 45(d)(3). See Genx Processors Mauritius Ltd. v. Jackson, No. 2:14-cv-019830-APG-PAL, 2018 WL 5777485, at *9 (D. Nev., Nov. 2, 2018) (citing In re Plise, 506 B.R. 870, 878 (B.A.P. 9th Cir. 2014). Timely written objections to a subpoena in accordance with Rule 45(d) qualify as an “adequate excuse” for noncompliance. Id. (citing DeGeer v. Gillis, 755 F.Supp.2d 909, 930 (N.D. Ill. 2010); In re Exxon Valdez, 142 F.R.D. at 385). When a nonparty raises timely objections to the subpoenas, the nonparty is not required to produce documents, or even search for them, until the propounding party obtains an order directing compliance. Genx Processors, 2018 WL 5777485, at *9 (citing Pennwalt Corp. v. Durand-Wayland, Inc., 708 F.2d 492, 494 & n.5 (9th Cir. 1983); In re Plise, 506 B.R. at 878; DeGeer, 755 F.Supp.2d at 930.)

The scope of discovery under a subpoena issued pursuant to Rule 45 is the same as the scope of discovery allowed under Rule 26(b)(1) - material that is relevant to a claim or defense of any party. Paws Up Ranch, LLC v. Green, No. 2:12-cv-01547-GMN-NJK, 2013 WL 6184940, at *3-4 (D. Nev. Nov. 22, 2013) (internal citation omitted). The court must quash or modify a subpoena that “subjects a person to undue burden.” Fed.R.Civ.P. 45(d)(3)(A)(iv). “[T]he order must protect a person who is neither a party nor a party's officer from significant expense resulting from compliance.” Fed.R.Civ.P. 45(d)(2)(ii). What constitutes an “undue burden” is the same when a nonparty is subpoenaed under Rule 45 as when a party receives a RFP under Rule 34. Mount Hope Church v. Bash Back!, 705 F.3d 418, 429 (9th Cir. 2012) (“[W]e will not read ‘undue burden' differently just because a non-party was subpoenaed.”). As the “rule of proportionality” concerns the scope of discovery generally, see Rule 26(b)(2)(C)(iii), it applies both to Rule 34 requests to parties and to Rule 45 subpoenas to non-parties. St. Jude Medical S.C., Inc. v. Janssen-Counotte, 305 F.R.D. 630, 637 (D. Or. 2015).

III. DISCUSSION

A. Relevance

First the Court will evaluate whether VirnetX has met its burden of showing the requested documents...