Phoenix Technologies Ltd. v. VMware, Inc.

195 F. Supp. 3d 1096, 2016 U.S. Dist. LEXIS 86210, 2016 WL 3566942
District Court, N.D. California·Decided July 1, 2016·No. Case No. 15-cv-01414-HSG(DMR)·Published·Cited by 5 cases

Opinion

ORDER ON VMWARE’S MOTION TO COMPEL

Donna M. Ryu, United States Magistrate Judge

In this copyright infringement case, Defendant VMware, Inc. (“VMware”) moved [1098] to compel in camera review and production of documents withheld by Plaintiff Phoenix Technologies Ltd. (“Phoenix”) upon its assertion of attorney-client and work product privileges. [Docket No. 79.] On April 14, 2016, following a hearing, the court granted VMware’s motion in part, and ordered Phoenix to submit for in camera review documents withheld solely on the basis of the work product doctrine. [Docket No. 92 (Minute Order).] Having reviewed the documents in camera, the court now enters the following order on VMware’s motion to compel production.

I. FACTUAL BACKGROUND

A. Phoenix’s Allegations in This Lawsuit

Phoenix filed this copyright infringement and breach of contract case against VMware in March 2015. Phoenix alleges that it is a pioneer in the computing industry, and that its BIOS (Basic Input/Output System) programs have “played a key part in personal computers” for over 30 years. Compl. ¶ 2. VMware is a software company. It provides virtualization software that allows a user to “create one or more ‘virtual machines’ that run on a single physical computer.” Compl. ¶ 24. In 1998, the parties entered into a master license agreement (“MLA”) in which Phoenix licensed its BIOS programs to VMware subject to express limitations. The parties amended that agreement several times, most recently in 2003 and 2005. The 2003 and 2005 amendments were “Fully Paid-Up Licenses,” also known as perpetual or “all "yod can éat” licenses. Gonzalez Deck, March 10, 2016 ¶ 11. In 2005, VMware had two types of virtualization products—a desktop product and server products. Phoenix concedes that the license allows VMware to use the Phoenix BIOS in VMware’s desktop product, but claims that the license does not allow VMware to use the BIOS in VMware’s server products.

Phoenix alleges that VMware has used and continues to use the licensed programs beyond the agreed limitations. It claims that VMware’s use of the programs infringes Phoenix’s copyrights in its BIOS programs and constitutes a breach of the license agreement. Compl. ¶¶ 3, 5, 6, 8.

B, VMware’s Motion to Compel In Camera Review

Phoenix withheld over 1,700 documents from production on the grounds that they constitute attorney work product and/or attorney-client privileged communications. VMware filed a motion arguing that Phoenix improperly asserted privilege as to 203 of these documents.

On April 14, 2016, following a hearing, the court partially granted VMware’s motion for in camera review, holding that VMware had presented facts “sufficient to support a reasonable, good faith belief that in camera inspection [could] reveal evidence that information in the materials is not privileged.” In re Grand, Jury Investigation, 974 F.2d 1068, 1075 (9th Cir.1992). Accordingly, the court exercised its discretion to conduct an in camera review of documents withheld by Phoenix solely on the basis of the work product doctrine. The court ordered Phoenix to re-review documents withheld on that basis, to withdraw any assertion of work product protection that was not substantially justified, and to submit for in camera review any remaining documents for which it continued to assert work product protection. The court denied VMware’s motion with respect to documents withheld on the basis of attorney-client privilege, finding that the parties had not adequately met and conferred regarding those documents. [Docket No. 95 (Apr. 14, 2016 Hr’g Tr.) at 7.] Therefore, the only documents currently at issue are those withheld by Phoenix solely on the basis of work product protection.

[1099] Phoenix lodged the documents for which it continues to assert work product protection. In a cover letter to the court, it indicated that it has withdrawn its work product claim as to seven documents.

Phoenix asserts that the documents at issue in this motion are entitled to work product protection because they were created in anticipation of this lawsuit. VMware counters that they are business-related documents that were not prepared exclusively for litigation, i.e., that they served a “dual purpose.” VMware argues that the documents would have been prepared with or without the prospect of litigation and thus are not protected work product. See Visa U.S.A., Inc. v. First Data Corp., No. C-02-1786 JSW, 2004 WL 1878209, at *6 (N.D.Cal. Aug. 23, 2004) (describing dual purpose document analysis; citing In re Grand Jury Subpoena, Mark Torf/Torf Envt’l Mgmt., 357 F.3d 900, 906-10 (9th Cir.2004)).

C. Facts Relevant to VMware’s Motion

According to VMWare, after investment management firm Marlin Equity purchased Phoenix, it directed Phoenix’s “Collections Task Force” (“CTF”) to collect unpaid royalties from Phoenix customers. The three members of Phoenix’s CTF are Cindy Lopez, Senior Director of Contracts and Compliance; Brian Stein, CFO; and Brigitte Paje, an order operations specialist. The CTF réports to Phoenix’s CEO Rich Geruson. According to Lopez, as part of the CTF’s work, Phoenix sent out letters to hundreds of customers threatening audits if they did not verify payment of .all royalties due under their contracts. As a result of their efforts, the CTF entered into a number of new deals and collected millions of dollars from their customers. Gonzalez Decl. Ex, B (Lopez Dep.) 62,165-66, 117-20, 116, 120-21; Ex. C at 6 (May 2014 report to Marlin Equity). Stein testified that Phoenix successfully reached a business resolution through negotiations with .all of its customers except VMware. Gonzalez Decl,, March 31, 2016 (“Supp. Gonzalez Decl.”), Ex. L (Stein Dep) at 1Í0. This included a business resolution with “Customer Á”1 for several million dollars. Gonzalez Decl. Ex. C.

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Phoenix Technologies Ltd. v. VMware, Inc., 195 F. Supp. 3d 1096, 2016 U.S. Dist. LEXIS 86210, 2016 WL 3566942 (N.D. Cal. 2016).

195 F. Supp. 3d 1096 (Phoenix Technologies Ltd. v. VMware, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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