Scramoge Tech. Ltd. v. Apple, Inc.

669 F.Supp.3d 826

SCRAMOGE TECHNOLOGY LIMITED, Plaintiff, v. APPLE, INC., Defendant.

Case No. 22-cv-03041-JSC

United States District Court, N.D. California

Signed April 17, 2023

Drew B. Hollander, Pro Hac Vice, Brett E. Cooper, Pro Hac Vice, Jonathan Randy Yim, Pro Hac Vice, BC Law Group, P.C., New York, NY, Seth Raymond Hasenour, Pro Hac Vice, BC Law Group, P.C. a Professional Corporation, Austin, TX, Brian D. Ledahl, Christian W. Conkle, James Milkey, Jonathan, Ma, Marc A. Fenster, Reza Mirzaie, Russ August & Kabat, Los Angeles, CA, John Francis Petrsoric, Pro Hac Vice, BC Law Group, P.C., Westport, CT, for Plaintiff.

Alton Luther Absher, III, Pro Hac Vice, Andrew W. Rinehart, Pro Hac Vice, Kilpatrick Townsend & Stockton LLP, Winston-Salem, NC, Amanda N. Brouillette, Pro Hac Vice, Kilpatrick Townsend and Stockton LLP, Atlanta, GA, J. Stephen Ravel, Kelly Ransom, Kelly Hat Hallman LLP, Austin, TX, Kasey Koballa, Pro Hac Vice, Kilpatrick Townsend and Stockton LLP, Raleigh, NC, Mansi Hasendra Shah, Kilpatrick Townsend & Stockton LLP, Menlo Park, CA, Rishi Gupta, Steven David Moore, Sarah F. Glendon, Kilpatrick Townsend & Stockton LLP, San Francisco, CA, Christopher P. Schaffer, Kilpatrick Townsend & Stockton, San Diego, CA, for Defendant.

ORDER RE: CROSS-MOTIONS FOR SUMMARY JUDGMENT

[Redacted]

Re: Dkt. Nos. 126, 157

JACQUELINE SCOTT CORLEY, United States District Judge

Scramoge Technology Ltd. sues Apple, Inc. for infringing its patents. (Dkt. No. 12.)¹ Before the Court are the parties' cross-motions for summary judgment on the issue whether Apple has a license to the five patents-in-suit,² (Dkt. Nos. 126, 157, 159, 162), and related motions to file under seal, (Dkt. Nos. 125, 137, 148, 156, 158, 161). After carefully considering the briefing, and with the benefit of oral argument on April 13, 2023, the Court DENIES Apple's motion, GRANTS Scramoge's cross-motion, and GRANTS in part the sealing motions as set forth below. The summary judgment record is insufficient to support a finding that Apple has a license to the patents-in-suit.

BACKGROUND

This motion is about the relationship between two non-parties to this case, LG Electronics Inc. and LG Innotek, Ltd. Each of those non-parties dealt separately with the two parties here.

In [Redacted] Apple and LG Electronics entered into a patent [Redacted] license agreement for [Redacted]. The Agreement "refer[s] to [LG Electronics] along with its Affiliates as 'LGE.' " (Dkt. No. 125-5 at 3.) In part, the 2017 Agreement granted Apple a license to certain patents owned or controlled by "LGE . . . and its Affiliates." (Id. at 6.)

[Redacted]

(Id. at 3.)

[Redacted]

(Id. at 5.) In addition to granting Apple a license to LG Electronics and its Affiliates' patents, the Agreement granted what is known as a springing license to patents transferred in the future:

[Redacted] (Id. at 7.) When the [Redacted], Apple and LG Electronics entered into another agreement [Redacted]. (Dkt. No. 125-7.) The [Redacted] (Id. at 10.)

In 2021, LG Innotek transferred certain patents to Scramoge. (Dkt. No. 125-8.) Now, Scramoge contends Apple is infringing Scramoge's patents, while Apple asserts its Agreements with LG Electronics give Apple a license to the patents.

DISCUSSION

I. LICENSE

A license is an affirmative defense to patent infringement. Carborundum Co. v. Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 878 (Fed. Cir. 1995). It is the alleged infringer's burden to establish a license exists. Id. Thus, to prevail on summary judgment, Apple must establish that undisputed evidence compels the conclusion there was a license. See Evanston Ins. Co. v. Atain Specialty Ins. Co., 254 F. Supp. 3d 1150, 1155 (N.D. Cal. 2017) ("Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party." (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986))). Scramoge, to prevail on its own motion, must establish there is insufficient evidence to conclude there was a license. See Celotex, 477 U.S. at 325, 106 S.Ct. 2548; Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) ("[W]hen parties submit cross-motions for summary judgment, each motion must be considered on its own merits.").

Delaware law governs interpretation of the Agreements. (See Dkt. No. 125-5 at 16; Dkt. No. 125-7 at 20.) The law "places great weight on the plain terms of a disputed contractual provision." Cox Commc'ns, Inc. v. T-Mobile US, Inc., 273 A.3d 752, 760 (Del. 2022).

[W]e interpret clear and unambiguous terms according to their ordinary meaning. We do not consider extrinsic evidence unless we find that the text is ambiguous. Ambiguity is present only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.

Id. (cleaned up). This rule refers to evidence about what the contract terms mean. As a matter of contract interpretation, courts look to extrinsic evidence of meaning only if the terms are ambiguous. But the rule does not refer to sufficiency of the evidence or a moving party's summary judgment burden: as a matter of civil procedure, courts must determine whether the evidence shows the contract terms have been met. See, e.g., eCommerce Indus., Inc. v. MWA Intel., Inc., No. CV 7471-VCP, 2013 WL 5621678, at *25 (Del. Ch. Sept. 30, 2013) (concluding "MWA has not shown by a preponderance of the evidence that either ECI or DGI exercised control over Tech AnyWare [as an Affiliate] within the meaning of the Agreement," because "[t]he record shows [the sole member of Tech AnyWare's LLC] alone directs the management and policies of Tech Any Ware").

A. Apple's Motion

Apple contends the undisputed evidence shows LG Innotek is an "Affiliate" of LG Electronics such that the Agreements' springing license provision gives Apple a license to patents that LG Innotek transferred. [Redacted] (Dkt. No. 125-5 at 3.) [Redacted]

[Redacted]

(Id.) Apple contends it has established as a matter of law that LG Electronics meets the Agreements' [Redacted]. Thus, it does not rely on LG Electronics' ownership of voting securities in LG Innotek, which the parties seem to agree is 40.8%, to establish control under the Agreements' first definition. (See Dkt. No. 125-6 at 12.)

On the summary judgment record, Apple's only evidence as to [Redacted] is a set of consolidated financial statements on LG Electronics' website. The statements represent they were prepared by an auditor on behalf of LG Electronics "in accordance with International Financial Reporting Standards [IFRS] as adopted by the Republic of Korea." (Id. at 4.) The statements list LG Innotek as a "Subsidiary" of LG Electronics and list the "Basis of control" as "De-facto control." (Id. at 12.) The statements note:

Although [LG Electronics] owns less than half of the voting rights of LG Innotek Co., Ltd. which is an intermediate parent company of its subsidiaries, [LG Electronics] is deemed to have control over LG Innotek Co., Ltd. due to the size and dispersion of holdings of the other shareholders and their voting patterns at previous shareholders' meetings . . . . [LG Electronics] has the substantial power to direct the relevant activities and is exposed to variable returns.

(Id. at 20 nn. 1, 3.) Scramoge objects to the statements on several grounds.

1. Admissibility

The statements' contents are hearsay because they are offered for the truth that LG Electronics has control over LG Innotek due to the dispersion and voting patterns of LG Innotek's shareholders and has power to direct its relevant activities. See Fed. R. Evid. 801(c), 802. The contents may be hearsay within hearsay to the extent they are the auditor's report of LG Electronics' own assertion that it has control over LG Innotek. At the summary judgment stage, although Apple may rely on evidence in inadmissible form, it must establish the contents are admissible. See Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003). For example, in Fraser, the defendant bank made a hearsay objection to the plaintiff's diary, attached to her deposition.

The contents of the diary are mere recitations of events within Fraser's personal knowledge and, depending on the circumstances, could be admitted into evidence at trial in a variety of ways. Fraser could testify to all the relevant portions of the diary from her personal knowledge. Fed. R. Evid. 602. If she forgets the exact dates or the details of the event, she may be able to use the diary to refresh her recollection. Fed. R. Evid. 612 . . . . If the diary fails to refresh her recollection, she might still be able to read the diary into evidence as a recorded recollection under Fed. R. Evid. 803(5).

Because the diary's contents could be presented in an admissible form at trial, we may consider the diary's contents in the Bank's summary judgment motion.

Id. at 1037.

Apple has not established the statements' contents could be presented in an admissible form at trial. It invokes the business records exception, Fed. R. Evid. 803(6), but has not satisfied that hearsay exception. That exception requires, among other things, that "(A) the record was made at or near the time by—or from information transmitted by—someone with knowledge," and (D) that the knowledge and the other requirements are shown "by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11)." Fed. R. Evid. 803(6)(A), (D). Other than the name of the auditing entity, which appears on the statements themselves, Apple offers no evidence about which LG Electronics and auditor personnel were involved in recording the statements, or which documents and data they reviewed about the relationship between LG Electronics and LG Innotek. See Paddack v. Dave Christensen, Inc., 745 F.2d 1254, 1258-59 & n.7 (9th Cir. 1984) (noting...