SNK Corp. of America v. Atlus Dream Entertainment Co.

188 F.R.D. 566, 1999 U.S. Dist. LEXIS 13709, 1999 WL 701410
CourtDistrict Court, N.D. California
DecidedJune 4, 1999
DocketNo. C-98 21035 JF EAI
StatusPublished
Cited by5 cases

This text of 188 F.R.D. 566 (SNK Corp. of America v. Atlus Dream Entertainment Co.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SNK Corp. of America v. Atlus Dream Entertainment Co., 188 F.R.D. 566, 1999 U.S. Dist. LEXIS 13709, 1999 WL 701410 (N.D. Cal. 1999).

Opinion

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO COMPEL THIRD PARTY IRELL & MANELLA LLP TO PRODUCE DOCUMENTS PURSUANT TO SUBPOENA D UCES TECUM

INFANTE, United States Magistrate Judge.

I. INTRODUCTION

The events underlying the present action stem from an unsuccessful patent infringement suit. In November, 1997, Defendant Atlus Dream Entertainment Co., Ltd. (“Atlus Dream”) brought a patent infringement claim against plaintiffs SNK Corporation of America and SNK Corporation (collectively [567]*567“SNK”) and, less than five months later, withdrew the claim after allegedly discovering certain information from third party witnesses. Following the dismissal of the infringement claim, SNK sued defendants Atlus Dream, Atlus Co., Ltd., and Image-Ware Software, Inc. for damages incurred from having to defend the infringement claim. One of SNK’s claims is for malicious prosecution, which defendants Atlus Dream Entertainment Co., Ltd. and Atlus Co., Ltd. (collectively “Atlus”) defend by asserting that they had probable cause to file the infringement suit because they relied on advice of counsel in instituting the infringement suit. Plaintiff SNK served a subpoena duces tecum on the law firm of Irell & Manella LLP (“the Irell law firm”) to discover certain documents relating to the dismissed infringement suit.1

Presently before the Court is plaintiff SNK’s motion to compel the Irell law firm to produce all documents responsive to the subpoena. The Irell law firm has produced some responsive documents, but withholds the remaining responsive documents on grounds of attorney-client privilege and work product immunity. The Irell law firm and Atlus admit that Atlus’s reliance on advice of counsel waives the applicable privilege and immunity. They argue, however, that the scope of that waiver is narrow and is limited in time and subject matter. SNK, of course, argues that the waiver is broad and is not limited in time or subject matter.

Having considered the parties’ written submissions and the oral arguments presented at the hearing of May 17, 1999, and good cause appearing, the Court GRANTS IN PART and DENIES IN PART SNK’s motion to compel in the manner and for the reasons set forth .below.

II. BACKGROUND

A. The Photo Sticker Booth Market

Plaintiff SNK and defendant Atlus compete in the photo sticker booth market. A photo sticker booth is a coin-operated, self-service machine that digitally combines a user’s picture with a pre-stored background image, and then prints multiple copies of the combined image onto a sheet of stickers. The U.S. market for photo sticker booths apparently emerged after photo sticker booths had already enjoyed popularity in Japan. SNK’s Motion, at 4.

Even though Atlus had been one of the dominant sellers of photo sticker booths in Japan, SNK beat Atlus to the U.S. market. SNK’s Motion, at 4. SNK introduced the NeoPrint® booth in the U.S. in September, 1996. Some time in 1997, several months after SNK began selling its NeoPrint® booths, Atlus introduced the Print Club booth in the U.S. Id.

By at least July, 1997, Atlus had considered the impact of SNK’s earlier entry into the U.S. market. An Atlus executive sent an internal communication on July 9, 1997, discussing Atlus’s strategy for dealing with competition by SNK. Hersey Dec., Exh. A. In another internal communication sent on August 22, 1997, the same Atlus executive compared features of the Atlus Print Club booth with photo sticker booths of other manufacturers, including SNK’s NeoPrint® booth. Hersey Dec., Exh. C.

B. Atlus’s Unsuccessful Suit For Infringement of the ’386 Patent

U.S. Patent No. 5,343,386 discloses and claims a booth that digitally combines an image of a user with a pre-stored background image and then prints the resulting composite image. The application to which the ’386 patent claims priority was filed on August 21, 1989. Part of the application filing included an oath from the sole named inventor, Pamela L. Barber, stating that the invention had not been offered for sale more than one year before the application was filed. The ’386 patent issued on August 30, 1994, and is assigned to defendant Image-Ware Software, Inc.

The record indicates that Atlus Co. (hereinafter referred to as “Atlus Japan”) learned [568]*568about the ’386 patent some time before September, 1996. Atlus Japan retained U.S. counsel to evaluate validity and infringement of the ’386 patent, and received a first opinion letter dated September 9, 1996, concluding that the independent claims of the ’386 patent were invalid over prior art, and a second opinion letter dated October 15, 1996, concluding that the Atlus Print Club did not infringe claims of the ’386 patent. Hersey Dee., Exhs. D and E.

In 1997, Atlus Japan and ImageWare entered into a series of transactions, which included ImageWare conveying to Atlus Japan a license under the ’386 patent. Hersey Dec., Exh. F (Gindler Dec. of May 11, 1998), 113. Atlus Japan contends that it understood the license to be exclusive in nature and transferred its rights in the ’386 patent to Atlus Dream. Id.

On November 25, 1997, Atlus Dream filed a patent infringement suit against SNK and another company, American Photo Booths, Inc. In its complaint, Atlus Dream alleged, among other things, that (1) Atlus Dream was the exclusive licensee of the ’386 patent and had the exclusive right to enforce the patent; (2) the ’386 patent was legally issued; and (3) SNK’s manufacture and sale of the SNK NeoPrint in the U.S. infringes the ’386 patent. Wiles Dec., Exh. H. On February 17,1998, Atlus Dream filed an amended complaint in which it repeated these allegations.2 Wiles Dec., Exh. I. On March 6, 1998, SNK filed a counterclaim against Atlus for a declaratory judgment that the ’386 patent is invalid and not infringed. Hersey Dee., Exh. F (Gindler Dec. of May 11,1998), 116.

Informal discovery during the infringement suit provided the Irell law firm with information highly relevant to the validity of the ’386 patent. On February 5,1998, nearly two weeks before Atlus Dream filed its amended complaint, attorneys from the Irell law firm met with Ms. Barber (the sole inventor named on the ’386 patent) and learned that on-sale bar activities by ImageWare (or its predecessor company) may have occurred that would invalidate the ’386 patent. Wiles Dec., Exh. C (portion of transcript of Gindler deposition taken on April 13, 1999). Upon learning of the activities, Mr. David Gindler, one of the Irell attorneys, obtained a newspaper article mentioned by Ms. Barber substantiating the on-sale bar and contacted an attorney from the law firm responsible for prosecuting the ’386 patent (Knobbe, Martes, Olsen & Bear, LLP, hereinafter “the Knobbe law firm”) to request additional information about the on-sale activities. Id. Mr. Gindler received the requested documents on March 4, 1998. Wiles Dec., Exh. C (portion of transcript of Gindler deposition taken on April 14,1999). Attorneys from the Irell law firm also conducted an informal inspection of ImageWare’s documents. Wiles Dec., Exh. C (portion of transcript of Gindler deposition taken on April 13, 1999).

For the most part, formal discovery was delayed until the court entered a protective order governing the use and disclosure of confidential documents.

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188 F.R.D. 566, 1999 U.S. Dist. LEXIS 13709, 1999 WL 701410, Counsel Stack Legal Research, https://law.counselstack.com/opinion/snk-corp-of-america-v-atlus-dream-entertainment-co-cand-1999.