Ceats, Inc. vs. Mcdermott, Will & Emery, Llp

Opposition

Cal. Super. - 4th Dist.May 30, 2014

© 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O AFFELD GRIVAKES ZUCKER LLP David W. Affeld, SBN 123922 Peter Shimamoto, SBN 123422 2049 Century Park East, Suite 2460 Los Angeles, CA 90067 Telephone: (310) 979-8700 Fax: (310) 979-8701 Attorneys for Plaintiff CEATS, Inc. SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE - COMPLEX CIVIL DIVISION CEATS, INC, a Nevada corporation, Plaintiff, VS. McDERMOTT WILL & EMERY LLP, an Illinois limited liability partnership, Defendant. CASE NO. 30-2014-00725880-CU-PN-CJC Assigned to the Hon. Kim G. Dunning, Dept. CX-104, for all purposes OPPOSITION/RESPONSE BY PLAINTIFF CEATS, INC. TO MOTION TO COMPEL THIRD PARTY KNOBBE MARTENS OLSON & BEAR LLP TO PRODUCE DOCUMENTS IN RESPONSE TO SUBPOENA Date: October 31, 2016 Time: 11:00 a.m. Dept. CX-104 Plaintiff CEATS, Inc. (“CEATS”), hereby opposes and responds to the motion by defendant McDermott Will & Emery LLP to compel third party Knobbe Martens Olson & Bear LLP to produce documents in response to subpoena as follows: -1- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O I. INTRODUCTION The motion by defendant McDermott Will & Emery LLP (“MWE”) to compel production of documents by third party Knobbe Martens Olson & Bear, LLP (“Knobbe”), should be granted in part and denied in part. CEATS responds to this motion instead of Knobbe because, as MWE correctly notes, Knobbe has asserted privilege and objections at the direction of CEATS, and that CEATS is the real party in interest on this motion. Motion at 1:7-9. The Court should rule as follows: I. CEATS has not waived the attorney-client privilege as between it and Knobbe. However, it agrees to allow a limited production of certain Knobbe documents relating to the underlying Texas patent infringement action. 2. CEATS opposes in part and in part does not oppose production of documents relating to the patents it held at the time the complaint in the Texas litigation was filed. Four claims, one each from each of four patents, were asserted at the trial of the Texas litigation. In this malpractice case, CEATS contends that claims from two other patents should also have been asserted. No other patents are relevant to this dispute. CEATS agrees that non-privileged documents relating to the six patents that are relevant to this case should be produced. However, documents relating to any other patents would involve collateral issues. Production should not be ordered as to them. Moreover, privileged communications between CEATS and its patent counsel, Knobbe, regarding the prosecution of the six patents that are relevant remain privileged. No waiver occurred; no exception to the privilege applies. Thus, non-privileged documents pertaining to the six relevant patents should be ordered produced, but no other documents should be ordered produced. 3. No royalty documents should be ordered produced. Documents relating to CEATS’s licensing of its patents and royalties received after the conclusion of the Texas litigation are not relevant to this case. CEATS does not seek damages for lost future royalties. It only seeks damages for lost past infringement damages that should have been awarded at the conclusion of the Texas action. The historical damages that were lost when MWE lost the Texas action are based on proof MWE offered at trial, under the standard of Rule 11 of the Federal Rules of Civil -1- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O Procedure. MWE is estopped from denying the historical damages it sought to prove at trial. CEATS does not claim any other lost royalties. No other royalty evidence that was generated after the conclusion of the Texas action is relevant. Accordingly, MWE’s motion should be granted in part and denied in part. CEATS agrees with MWE that MWE’s motion to file certain documents related to this motion under seal should be granted. II. ARGUMENT A. CEATS Did Not Waive Privilege as to Knobbe, but Will Allow Production of Documents Relating to the Texas Action CEATS did not “waive” privilege between it and Knobbe by suing MWE for MWE’s professional negligence. Evidence Code section 958 exists to permit a lawyer (or law firm) in a dispute with the lawyer’s client to respond to the client’s allegations. Otherwise, the client could adduce evidence in support of the client’s side of the dispute, but muzzle the lawyer. To remedy this unfairness, Section 958 provides an exception to the attorney-client privilege" to allow the lawyer to protect the lawyer’s own rights. Solin v. O'Melveny & Myers, 89 Cal. App. 4th 451, 463-464 (2001) (the rationale for the exception is that “[i]t would be unjust to permit a client . . . to accuse his attorney of a breach of duty and to invoke the privilege to prevent the attorney from bringing forth evidence in defense of the charge”) (internal quotations and citations omitted). However, the exception of Section 958 applies only to the lawyer in the dispute with the client. It does not apply to other lawyers involved in the dispute in some other way. As the court held in Anten v. Superior Court, 233 Cal. App. 4™ 1254, 1259 (2015): The wording of section 958 is broad, but case law has clarified that the exception is limited to communications between the lawyer charging or charged with a breach of "Technically, Section 958 provides an exception to the attorney-client privilege, not a y p p y p g waiver of it. People v. Ledesma, 39 Cal. 4th 641, 691 (2006) (“[s]trictly speaking, however, Evidence Code section 958 establishes an exception to the privilege, not a waiver”). 9. Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O duty, on the one hand, and the client charging or charged with a breach of duty, on the other. Thus, for example, in Schlumberger Ltd. v. Superior Court, 115 Cal. App. 3d 386 (1981), the court held that Section 958 provided for a waiver of privilege between the client and the former law firm sued for malpractice, but not for a waiver between the client and its current counsel representing it in the malpractice case against the former lawyer. MWE’s reliance on Rutgard v. Haynes, 185 F.R.D. 596 (S.D. Cal. 1999), is puzzling. The decision by a federal district court purportedly invoking California law contradicts the holding in Schlumberger. As the Connecticut Supreme Court held in Woodbury Knoll, LLC v. Shipman and Goodwin, LLP, 305 Conn. 750, 48 A. 3d 16 (2012), Rutgard “appears to be an outlier, as the vast majority of jurisdictions that have addressed the issue [in Rutgard] have concluded that the privilege is not waived” (emphasis added). 305 Conn. at 782-784, 48 A. 3d at 36-37. Further, Rutgard relied primarily on an Illinois lower state court decision that was reversed by the Illinois Supreme Court. Id. MWE’s reliance on three other out-of-state decisions is similarly misplaced. The law in California is as stated above, reflected in the Anten decision. Here, Section 958 is available to MWE regarding otherwise privileged communications between MWE and CEATS, but not as to communications between Knobbe and CEATS. Incidentally, in saying that Knobbe was “involved” in the underlying Texas litigation, MWE incorrectly implies that Knobbe was tantamount to co-counsel with MWE. The implication is untrue. Knobbe’s primary role in the case was that one of its lawyers was a percipient witness. Bill Bunker of Knobbe handled patent prosecution for CEATS. One of the defenses asserted by the underlying defendants in the Texas case was that CEATS’s patents should allegedly be found invalid because of alleged inequitable conduct on the part of CEATS before the United States Patent and Trademark Office. Mr. Bunker was scheduled to be a percipient witness to refute that defense. See, for example, Exhibits 11 and 18 cited by MWE in support of this motion. Shortly before trial, the defendants abandoned the defense. -3- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O Mr. Bunker and Knobbe also occasionally communicated with MWE regarding additional patent prosecution work Knobbe did for CEATS on additional patents. Knobbe and CEATS had an obligation to disclose to the Patent Office any additional “prior art” they became aware of through the Texas litigation. This activity had nothing to do with providing litigation support for MWE in the Texas litigation. Out of tens of thousands of email produced by MWE in this case, only a smattering involve Knobbe. Of that smattering, most concern Mr. Bunker's role as a percipient witness or on- going patent prosecution. A fraction of the Knobbe email involve minor comments on the complaint MWE prepared at the outset of the Texas litigation, and comments on a motion in limine to exclude Expedia 2.0 evidence at trial. Knobbe was otherwise not involved in the Texas litigation. CEATS’s disclosure to MWE of a handful of emails from Knobbe did not constitute subject matter waiver as to all aspects of Knobbe’s representation of CEATS. At most, it reflected narrow subject matter waiver as to the particular subjects to which the email pertained. In Transamerica Title Insurance Co. v. Superior Court, 188 Cal. App. 3d 1047, 1052 (1987), the court observed: “[t]he scope of either a statutory or implied waiver is narrowly defined and the information required to be disclosed must fit strictly within the confines of the waiver.” The court in Transamerica refused to find a waiver of privilege when Transamerica voluntarily produced one memo in support of an advice of counsel defense, but withheld other privileged communications. Here, CEATS will agree to allow production of privileged documents relating to the narrow subjects MWE identified, namely, comments on the drafting of the complaint at the outset of the Texas litigation (e.g., Exhibits 14 and 15); advice regarding how to counter the defendants’ invalidity arguments (e.g., Exhibits 16 19, 20); Bill Bunker's role as a percipient witness as the patent prosecutor for CEATS (e.g., Exhibits 11, 18); the appeal (e.g., Exhibit 22); and settlement strategy (e.g., Ex. 23). The communications would be deemed part of joint representation communications for purposes of this case. By permitting MWE to have access to these communications for purposes of this litigation, CEATS does not intend any waiver as to any other party for any other purpose, within this lawsuit or outside of it. 4- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O Production as to Category Nos. 1-5, 13-16, and 21-22 should be required only as set forth above. B. CEATS’s Understanding of Its Patents Category Nos. 7, 12, and 20 seek information regarding “CEATS’s understanding of the patents that it owned at the time the complaint was filed in the Texas litigation.” Motion at 6:7-8. These categories are significantly overbroad. Moreover, to the extent they intrude on privilege, they should be denied as set forth in Section A above. Only four claims, one each from each of four patents, were asserted at the trial of the Texas action: Claim 1 of U.S. Patent No. 7,454,361; Claim 8 of U.S. Patent No. 7,548,866; Claim 8 of U.S. Patent No. 7,660,728; and Claim 5 of U.S. Patent No. 7,548,869. CEATS also contends that MWE was also negligent in not asserting claims from U.S. Patent Nos. 7,548,867 and 7,548,868. Only these six patents are relevant in this case. CEATS does not allege negligence with respect to any other claim or patent. Accordingly, no documents pertaining to any other patent or claim should be ordered produced. As to the six patents in issue, CEATS agrees that to the extent it has not already produced all non-privileged documents pertaining to these patents (most, if not all, already have been produced), it will produce the remainder. CG CEATS’s Attempts to License Its Patents Category nos. 17 and 18 seek documents related to CEATS’s attempts to license its patents. Documents relating to CEATS’s licensing of its patents and royalties received after the conclusion of the Texas litigation are not relevant to this case. CEATS does not seek damages for lost future royalties. It only seeks damages for lost past infringement damages that should have been awarded at the conclusion of the Texas action. The historical damages that were lost when MWE lost the Texas action are based on proof MWE offered at trial, under the standard of Rule 11 of the Federal Rules of Civil Procedure. MWE is estopped from denying the historical damages it sought to prove at trial. CEATS does not claim any other lost royalties. No other royalty evidence that was generated after the conclusion of the Texas action is relevant. -5- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. Any Documents Ordered Produced Should Be Limited to July 1, 2009 to June 3,2013 As stated in MWE’s motion, the time frame for any production should be limited to July 1, 2009 to June 3, 2013. Motion at 6:18-20. DATED: October 27, 2016 AFFELD GRIVAKES ZUCKER LLP By: Isl David W. Affeld David W. Affeld Attorneys for Plaintiff CEATS, Inc. -6- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena © 00 NN Oo U 1 ~~ W N B= N N N N NN N NN N N RB 2 RB 2 [9 2 [2 12 pm pm 0 NN oO UU BA W N BP O VOW 0 N N OO U 1 W N RL O PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action; my business address is: 2049 Century Park East, Suite 2460, Los Angeles, CA 90067. On October 27, 2016, I served the foregoing document(s) described as: OPPOSITION/RESPONSE BY PLAINTIFF CEATS, INC. TO MOTION TO COMPEL THIRD PARTY KNOBBE MARTENS OLSON & BEAR LLP TO PRODUCE DOCUMENTS IN RESPONSE TO SUBPOENA on interested parties in this action as stated below: Bradley S. Phillips Stuart N. Senator Heather Takahashi Nicholas Sidney MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue Los Angeles, California 90071-1560 brad. phillips @mto.com stuart.senator @mto.com (BY ELECTRONIC SERVICE VIA ONELEGAL EFILING SERVICE) - I caused the above-entitled document(s) to be served through the OneLegal E-Filing Service at www.onelegal.com addressed to all parties appearing on the electronic service list for the above-entitled case. A copy of the One Legal Service Receipt Page/Confirmation will be maintained with the original document(s) in this office. I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on October 27, 2016, at Los Angeles, California. Catherine Lenke /s/ Catherine Lenke [Print Name of Person Executing Proof] [Signature] 7- Opposition/Response by Plaintiff CEATS to Motion to Compel re: Knobbe Martens Subpoena