Phoenix Technologies Ltd. v. VMware, Inc.

Northern District of California, cand-4:2015-cv-01414

ORDER by Magistrate Judge Donna M. Ryu denying {{114}} Plaintiff's Motion to Compel. (dmrlc1, COURT STAFF)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 PHOENIX TECHNOLOGIES LTD., 7 Case No. 15-cv-01414-HSG (DMR) Plaintiff, 8 v. ORDER DENYING PLAINTIFF'S 9 MOTION TO COMPEL VMWARE, INC., 10 Re: Dkt. No. 114 Defendant. 11 12 The parties submitted a joint discovery letter in which Plaintiff Phoenix Technologies Ltd. Northern District of California United States District Court 13 moves to compel Defendant VMware, Inc. to respond to an interrogatory seeking information 14 regarding Defendant's projected sales. [Docket No. 114 (Jt. Letter).] This matter is appropriate 15 for resolution without a hearing. Civ. L.R. 7-1(b). For the following reasons, Plaintiff's motion is 16 denied. 17 I. DISCUSSION 18 Plaintiff holds copyrights in its Basic Input/Output System ("BIOS") programs. According 19 to Plaintiff, Defendant's use of BIOS infringes Plaintiff's copyrights and constitutes a breach of 20 the parties' license agreement. Plaintiff propounded Interrogatory No. 2, which seeks Defendant's 21 "projected sales, revenues, and profits on a yearly basis for 2015 and for each year (or portion 22 thereof) in the future that [Defendant] intends to continue using, selling, leasing, licensing, 23 distributing, or transferring" products "containing, incorporating, or using information from 24 Phoenix BIOS." Plaintiff argues that information about Defendant's projected sales is relevant to 25 its calculation of copyright damages, as well as to rebut Defendant's argument that Plaintiff's 26 BIOS "is an 'outdated, obsolete product' that has minimal value." Jt. Letter at 1. 27 Defendant argues that its actual sales are relevant to the calculation of copyright damages, 28 but not its sales projections or forecasts. Defendant asserts that it has already produced 16 years of 1 actual sales data for its products containing BIOS. 2 Federal Rule of Civil Procedure 26 provides 3 Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to 4 the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative 5 access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or 6 expense of the proposed discovery outweighs its likely benefit. 7 Fed. R. Civ. P. 26(b)(1). "Information within this scope of discovery need not be admissible in 8 evidence to be discoverable." Id. "Relevancy, for the purposes of discovery, is defined broadly, 9 although it is not without ultimate and necessary boundaries." Gonzales v. Google, Inc., 234 10 F.R.D. 674, 679-80 (N.D. Cal. 2006). "[T]he party opposing discovery has the burden of showing 11 that discovery should not be allowed, and also has the burden of clarifying, explaining and 12 supporting its objections with competent evidence." La. Pac. Corp. v. Money Mkt. 1 Institutional Northern District of California United States District Court 13 Inv. Dealer, 285 F.R.D. 481, 485 (N.D. Cal. 2012). 14 The Copyright Act provides for the recovery of "actual damages suffered by [the copyright 15 owner] as a result of the infringement, and any profits of the infringer that are attributable to the 16 infringement and are not taken into account in computing the actual damages." 17 U.S.C. § 17 504(b). Actual damages are "the extent to which the market value of a copyrighted work has been 18 injured or destroyed by an infringement." Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 19 F.2d 505, 512 (9th Cir. 1985). "Actual damages are usually determined by the loss in the fair 20 market value of the copyright, measured by the profits lost due to the infringement or by the value 21 of the use of the copyrighted work to the infringer." Polar Bear Prods., Inc. v. Timex Corp., 384 22 F.3d 700, 708 (9th Cir. 2004). To establish an infringer's profits, "the copyright owner is required 23 to present proof only of the infringer's gross revenue." 17 U.S.C. § 504(b). 24 Plaintiff argues that Defendant's sales projections for products containing BIOS are 25 relevant to determining "the value of the infringing use" of BIOS to Defendant. Jt. Letter at 1. It 26 cites one case in support of its position. See McRoberts Software, Inc. v. Media 100, Inc., 329 27 F.3d 557, 566-67, 571 (7th Cir. 2003). In McRoberts, the defendant had entered into a license 28 agreement regarding the plaintiff's product, which was intended for use with Macintosh operating 2 1 systems. The defendant copied and translated the product source code into Windows-compatible 2 software. Id. at 561-63. The jury found infringement, and awarded copyright damages based on 3 actual damages and lost profits. The defendant challenged the damages award as speculative and 4 unsupported by the evidence. Id. at 565-67. The court noted that "[i]t is not improper for a jury to 5 consider. . . the value of the infringing use to the infringer to determine actual damages, provided 6 the amount is not based on 'undue speculation.'" Id. at 566 (citations omitted). The court 7 described the five ways of measuring damages that the plaintiff had presented to the jury, and 8 noted that the plaintiff had provided "substantial evidence of the value of Windows-compatible 9 character generation software" to the defendant, including the defendant's actual and projected 10 sales of its product line incorporating the Windows-compatible version of the plaintiff's software. 11 Id. at 566-67. It affirmed the jury award, holding that the plaintiff had provided sufficient 12 evidence of the value of the lost licensing fee "so that the jury did not have to resort to undue Northern District of California United States District Court 13 speculation in estimating actual damages." Id. at 566-67. 14 McRoberts is distinguishable. It did not address the discoverability of a defendant's 15 projected sales; instead, it considered whether the jury's damages award was supported by 16 sufficient evidence. Moreover, in McRoberts, the defendant pulled infringing products from the 17 market "[s]oon after" it began selling them. Id. at 562. Actual sales data was therefore limited. 18 Here, Defendant continues to incorporate the accused software into its products, and has produced 19 16 years of actual sales data. This constitutes ample, non-speculative evidence from which 20 Plaintiff can calculate the value of Defendant's allegedly infringing use of BIOS. Plaintiff makes 21 no effort to explain how projected sales data would be relevant to its damages calculation, 22 especially in light of the actual sales information that has already been produced. 23 Plaintiff also argues that it needs Defendant's sales projections to respond to the 24 anticipated argument that Plaintiff's product has minimal value. However, Plaintiff can counter 25 this by showing that Defendant has used BIOS for many years and continues to use it in its 26 products. It does not need projected sales information to do so. In sum, the court finds that 27 Plaintiff has not established the relevance of Defendant's projected sales for products 28 incorporating Plaintiff's BIOS. 3 II. CONCLUSION 1 For the foregoing reasons, Plaintiff's motion to compel a further response to Interrogatory 2 No. 2 is denied. ISTRIC 3 TES D TC TA O 4 S U ED IT IS SO ORDERED. RT DERED UNIT 5 O OR Dated: September 30, 2016 IT IS S 6 R NIA ______________________________________ Donna M. Ryu 7 yu na M. R Judge NO United States Magistrate on Judge D FO 8 RT LI ER H A 9 C N OF D IS T IC T 10 R 11 12 Northern District of California United States District Court 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4