Power Probe Group, Inc. v. Innova Electronics Corporation

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 * * *

4 POWER PROBE GROUP INC. and Case No. 2:21-cv-00332-GMN-EJY POWER PROBE TEK, LLC, 5 Plaintiffs/Counter- ORDER 6 Defendants,

7 v.

8 INNOVA ELECTRONICS CORPORATION,

9 Defendant/Counterclaimant.

10 11 Pending before the Court is Power Probe Group, Inc.’s Motion to Compel Production of 12 Documents. ECF Nos. 126 (unsealed) and 127 (sealed). The Court has considered the Motion, the 13 Opposition (ECF No. 131), the Reply (ECF No. 134), information provided at the June 21, 2022 14 hearing (Transcript at ECF No. 159), supplemental briefing submitted by the parties (ECF Nos. 164, 15 166, 168, and 171), information provided at the September 7, 2022 hearing (Transcript at ECF No. 16 174), the Declaration of Innova C.E.O. Ieon C. Chen (ECF No. 176), and the Declaration of Samuel 17 Alexander Long, Jr. ECF No. 178. 18 I. Background 19 As the parties are aware, the June 21, 2022 hearing led the Court to order supplemental 20 briefing on issues raised in the Motion to Compel as well as during oral argument. At the September 21 7, 2022 hearing, the Court found the source code relating to the operation of the accused product— 22 the Innova Power Check 5420 (the “Accused Product” or “5420”)—was relevant and proportional 23 to the needs of the case. Id. at 33-34. However, what remained unresolved at the conclusion of that 24 hearing was whether Innova owned, possessed, had control over or a right to the source code. Id. at 25 34-35. Id. at 34. Ultimately, this prompted the Court to order Innova to do one of two things: either 26 produce the source code to Power Probe or file a declaration authored by counsel or a senior 27 executive stating facts demonstrating that Innova does not own, possess, have custody of, control of, 1 Innova could demonstrate these facts to the Court’s satisfaction, Plaintiffs’ Motion to Compel 2 Innova’s production of source code would be denied and Power Probe would have to seek production 3 of the source code through an international subpoena process such as the Hague Convention. Id. at 4 35-36. 5 On October 5, 2022, Innova filed the Declaration of its CEO, Mr. Chen. Among other 6 statements made in his Declaration, Mr. Chen states: “Innova does not now have, and it has never 7 had, possession or custody of 5420 software, such as source code or other high-level programming 8 language, and it has no legal right to obtain upon demand such documents ….” (ECF No. 176 ¶ 5); 9 “… [T]here has never been any agreement that Innova would have any ownership rights relating to 10 such software.” (id. ¶ 11); “Innova never paid Basic Aim to develop software for programming of 11 the 5420.” (id. ¶ 40); “Similarly, Innova is aware of no prohibition against Basic Aim using 5420 12 source code or selling it to anyone, it belonging to Basic Aim, after all.” (id. at 42); and, “Innova has 13 investigated and reviewed all correspondence, transactions (including purchase orders, invoices, and 14 payments), and documentation vis-a-vis Basic Aim that pertain in any way to the 5420 device, all of 15 which have been confirmed to be consistent with the fact that Innova does not have possession, 16 custody or control, i.e., any legal right to demand, source code for the 5420 device.” Id. ¶ 44. 17 On October 6, 2022, counsel for Power Probe filed a Declaration in response to Mr. Chen’s 18 Declaration. Power Probe takes issue with Mr. Chen’s failure to address numerous Innova Purchase 19 Orders directed to the Accused Product itself. Those Purchase Orders include the following 20 language: “All inventions or ideas, whether patenable or not, made, conceived, developed, or 21 acquired by Seller incident to the filling of this order shall vest in and inure to Buyer’s sole benefit.” 22 It is undisputed that the Seller is Basic Aim and the Buyer is Innova. Power Probe argues that Mr. 23 Chen does not explain how circuity and any related software for the Accused Product did not vest 24 with Innova by virtue of the Purchase Order language. ECF No. 178 ¶¶ 11-13. 25 Power Probe also argues that Mr. Chen does not describe steps taken by Innova to obtain the 26 source code from Basic Aim; although, Mr. Chen does state that Innova made no request for such 27 code. Id. ¶ 14; ECF No. 176 ¶ 47. Finally, Power Probe claims Mr. Chen’s statements that the 1 designed” at company headquarters in California relates only to “onboard diagnostic product” is 2 inconsistent with Innova’s Answers to Power Probes Complaints in which Innova admits the 3 Accused Product was “researched, developed and designed” in California. Id. ¶ 15 citing ECF Nos. 4 22 ¶ 42; 34 ¶ 42. 5 II. Discussion 6 A party must produce relevant and proportional documents in response to a discovery request 7 that are in the party’s possession, custody or control (e.g. documents the party has a legal right to 8 obtain). Chamber of Commerce of United States of America v. City of Seattle, 334 F.R.D. 440, 441 9 (W.D. Wash. 2020). The corollary to this basic rule is that the Court cannot order a party to produce 10 that which the party does not have or have a right to. See Acosta v. JV Harvesting, Case No. 17-cv- 11 1225-CAB-WVG, 2017 WL 3437654, at * 3 (S. D. Ca. Aug. 10, 2017) citing 8A Charles A. Wright, 12 Arthur R. Miller, & Richard L. Marcus, Federal Practice and Procedure § 2219 (2d ed. 1994) (“[A] 13 party cannot be required to permit inspection of documents or things that it does not have and does 14 not control.”). 15 In this case, as the moving party, Power Probe has the burden of proving Innova has 16 possession, custody or control of the source code Power Probe seeks. United States v. Int’l Union 17 of Petroleum & Indus. Workers, AFL-CIO, 870 F.2d 1450, 1452 (9th Cir. 1989). The Court provided 18 Power Probe ample opportunity to meet its burden. In addition to the initial briefing on the Motion 19 to Compel, the Court held a hearing in June 2022, ordered supplemental briefing, and then held a 20 second hearing in September 2022. The Court required Innova, the manufacturer of the Accused 21 Product, to either produce the source code or file a detailed and thorough declaration demonstrating 22 it does not own, possess, control, or have a right to the source code for the Accused Product. ECF 23 No. 174 at 35-36. Innova filed the Declaration of Mr. Chen, its C.E.O. ECF No. 176. The 24 Declaration is unequivocal regarding Innova’s lack of ownership, possession, and right to the source 25 code. Id. 26 Nonetheless, Power Probe is correct that Mr. Chen does not address any Purchase Order 27 other than one not pertaining directly to the Accused Product itself. With respect to Power Probe’s 1 argument that Innova fails to explain any attempts to obtain the source code, Mr. Chen is clear that 2 Innova made no such attempt because Innova has no right to the code. 3 Relying on M Seven Systems Limited v. Leap Wireless International, Inc., Case No. 12-cv- 4 1424-CAB (BLM), 2014 WL 12026064 (S.D. Cal. Mar. 17, 2014), Power Probe takes issue with 5 Innova’s lack of effort to obtain the source code. M Seven developed source code for a mobile 6 phone launched in 2008 that contained Advanced Wireless Services (“AWS”). Id. at * 1. M Seven 7 owned the copyright to the M7 source code. Id. Defendant Chris Choi was M Seven’s general 8 manager with access to the trade secrets concerning the launched phone. Id. Choi left M Seven and 9 took a position with Cricket—a mobile phone service provider. Id. In March 2008, Choi offered to 10 purchase the source code from M Seven, which M Seven declined. Id. In September 2008, Stanley 11 Park, also an employee of M Seven, left to become Chief of Software Engineering, Project 12 Management, Produce Management and Marketing for ACTScom Korea. Id. One month later, in 13 October 2008, Cricket and ACTScom entered into a contract for AWS mobile phones. Id. 14 ACTScom USA was incorporated in San Diego in January 2009 with Choi and Park as investor and 15 CFO respectively. Id. In February 2009, Cricket launched a phone the plaintiff contended contained 16 stolen M Seven source code and hardware design. Id. 17 Litigation followed and the plaintiff filed a motion to compel. Id. After reviewing the 18 discovery standards, the court considered the plaintiff’s request for the alleged infringing phone’s 19 source code. Id. at 3. Considering this issue, the court noted that the defendants produced source 20 code for one phone they marketed, but alleged not to possess copies of the source code for any other 21 phone at issue in the litigation. Id. The plaintiff submitted emails from 2009 with source code 22 attached on which defendant Park was copied, but the Court found these emails did not establish the 23 defendants were in current possession of such code, “especially in light of the declarations from 24 Defendants Choi and Park.” Id. 25 In contrast, the court also noted that the defendants did not address “custody or control” of 26 the source code. Id. Instead, the defendants argued they could not “easily obtain” the code because 27 they had no contract with the entity allegedly in possession, which entity was “embroiled in litigation 1 they have made any actual effort or attempts to obtain the source code …; rather, they merely 2 speculate that any efforts would be unsuccessful.” Id. Further, Defendants did not state whether 3 they ever had possession, custody or control over source code for phones that was not produced or, 4 if they ever did have such possession, custody or control, what happened to that source code. Id. 5 The court noted the defendants acknowledged that ACTScom Korea might have source code on their 6 computers in Korea, but “adamantly” denied they knew where the source code was or may be located 7 on such computers. Id. at 4. Defendant Choi admitted that ACTScom Korea was either owned by 8 him or companies owned by him, as was ACTScom USA, thereby demonstrating Choi had custody 9 or control over all documents, ESI, and other assets owned by ACTScom Korea. Id. (internal 10 citations omitted). The court found that Choi’s “speculations and bald assertions” were insufficient 11 to demonstrate Defendant met his discovery obligations. Id. 12 The facts of the case at bar are nothing like the facts in M Seven. There is no current or 13 former employee of Innova who is alleged to be a current or former employee of Basic Aim; nor is 14 there a current or former employee of Basic Aim who is alleged to be a current or former employee 15 of Innova. There are no facts showing common ownership or control of these companies. There are 16 no facts suggesting Basic Aim, on behalf of Innova, misappropriate patented technology belonging 17 to Power Probe. Innova unequivocally states it never had possession, custody or control of the source 18 code. Innova does not profess to have any knowledge of where the source code Power Probe seeks 19 might be found. 20 In sum, the Court finds nothing to support the conclusion that Innova ever had control, 21 custody or possession of the Accused Product’s source code. There is no evidence to support Innova 22 has any right to the source code other than boilerplate language in the Purchase Orders. Considering 23 all the evidence before the Court, and Power Probe’s obligation to prove Innova is in possession, 24 custody or control of the source code, the Court finds Power Probe had not met its burden. To find 25 to the contrary would require the Court to conclude Mr. Chen, together with Innova’s counsel, filed 26 a declaration knowing it contained material misrepresentations on which the Court was intended to 27 rely. This is a grave consideration and one the Court must reject. It is true that Mr. Chen is not a 1 || established by Fed. R. Civ. P. 11 and the rules of professional conduct. Unlike the facts in M Seve 2 || there is simply nothing that would lead the Court to reasonably conclude the representations | 3 || Innova are misrepresentations. The Court’s finding does not preclude Power Probe from testing tl 4 || information in Mr. Chen’s Declaration through other discovery means such as a deposition or writt 5 || requests. 6 || I. Order 7 Accordingly, IT IS HEREBY ORDERED that Power Probe Group, Inc.’s Motion to Comp 8 || Production of Documents (ECF Nos. 126 (unsealed) and 127 (sealed)), to the extent the □□□□□□□□ 9 || of the source code remained unresolved following the September 7, 2022 hearing (see ECF No. 174 10 |} are DENIED without prejudice. If additional information comes to light to call into questi 11 |} Innova’s possession, custody or control of source code, Power Probe may bring the issue again 12 || the Court. 13 Dated this 12th day of October, 2022. 14

16 : ELAYNAY. YOU: 17 UNITED. STATES MAG TE JUDGE 18 19 20 21 22 23 24 25 26 27 28