Leader Technologies, Inc. v. Facebook, Inc.

Citations: 719 F. Supp. 2d 373; 2010 U.S. Dist. LEXIS 63507; 2010 WL 2545960Docket: Civil Action No. 08-862-JJF

Court: District Court, D. Delaware; June 24, 2010; Federal District Court

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In the case Leader Technologies, Inc. v. Facebook, Inc., the United States District Court for the District of Delaware addressed objections raised by both parties regarding orders issued by Magistrate Judge Stark. Leader Technologies accused Facebook of infringing U.S. Patent No. 7,139,761, which pertains to electronic information management and user relationships. The court emphasized that under 28 U.S.C. 636(b)(1)(A) and Federal Rule of Civil Procedure 72(a), non-dispositive pre-trial rulings can only be overturned if clearly erroneous or contrary to law.

Magistrate Judge Stark's March 12, 2010 order included three key findings: (1) Leader did not demonstrate a common interest privilege with litigation financing companies, necessitating the production of withheld documents; (2) Leader received limited relief regarding the production of additional technical documentation from Facebook; and (3) Facebook required access to Leader's source code, which Leader was ordered to produce.

Leader objected to the ruling on the common interest privilege, arguing that the judge's determination was erroneous since the litigation financing companies had a shared legal interest due to their involvement in financing the litigation, despite no formal deal being finalized. Leader contended that documents exchanged after establishing this common legal interest should be protected under the privilege. The court ultimately overruled both parties' objections, maintaining the findings of the magistrate judge.

Leader argues that the limited production of technical documents mandated by the Order is contrary to law and clearly erroneous. He claims the technical documents related to Facebook's website are outdated, which could allow Facebook to evade its discovery obligations, thereby prejudicing Leader. Leader further contends that without these documents, it will be challenging to explain the relevant features of Facebook's technology to the jury, asserting that Facebook's own technical documentation is essential for understanding the alleged infringement.

Facebook counters that Judge Stark's March 12, 2010 Order was appropriate and well-reasoned, particularly regarding the common interest privilege. Facebook argues that the ruling accounted for the uncertain legal landscape and related policy implications, with Leader's objections framed merely as disagreement with a nuanced decision. The Court finds that Judge Stark did not err in determining that the common interest privilege did not apply, thus requiring the production of documents Leader claimed as privileged. 

The common interest doctrine protects communications between clients and attorneys aligned in a legal cause, but to maintain this privilege, the interests must be identical and legal in nature. Judge Stark acknowledged the unsettled state of the law around common interest and reviewed relevant case law that supported Facebook's position. Leader's broad assertion that the Order was erroneous due to document exchanges post-creation of a common legal interest lacked specific legal arguments, and the Court found no misapplication of law by Judge Stark. Furthermore, Judge Stark recognized Leader's burden to prove the privilege's existence and considered various policy implications, including the role of litigation financing and the pursuit of truth in litigation. He also referenced ethical guidelines suggesting potential waiver of privilege in this context. Ultimately, the Court upheld the thorough analysis conducted by Judge Stark, determining that the Order was not clearly erroneous.

The Court upheld the March 12, 2010 Order, which denied Leader's request to compel the production of additional technical documents. Judge Stark determined that Leader had received sufficient technical information, including access to Facebook's source code, which was deemed essential for proving infringement. The Judge ruled that while technical documents enabling an expert to comprehend the source code were provided, Leader was not entitled to further documents to assist in 'translating computer language to the jury.' Leader failed to present case law supporting claims that the ruling was legally erroneous or contrary to established law, despite concerns about effectively conveying technical features to the jury. The Court noted that Facebook had fully complied with discovery obligations, having produced its complete source code, and dismissed Leader's objections to the March 12, 2010 Order.

On April 27, 2010, Magistrate Judge Stark partially granted Facebook's motion to reopen discovery related to Leader's late production of non-disclosure agreements (NDAs). The Order allowed Facebook to conduct limited discovery from six specific parties to investigate whether the Leader2Leader product was offered for sale or publicly used during the relevant period but prohibited further discovery from other third parties mentioned in the NDAs. Facebook argued that the Order restricted its ability to explore a potentially case-dispositive defense, attributing the late NDA production solely to Leader. Facebook claimed that the NDAs indicated that third parties may have received demonstrations of Leader2Leader and that Leader was pursuing commercialization. They contended that Judge Stark's decision was legally flawed and overly focused on maintaining the trial date, disregarding the potential prejudice to Facebook.

Leader asserts that the April 27, 2010 Order is lawful and not clearly erroneous, arguing that Judge Stark allowed both parties sufficient opportunity to present their views and that maintaining the trial date was just one factor considered. Leader highlights that Judge Stark indicated Facebook could seek to reopen discovery with support from six entities, which would alleviate any potential prejudice to Facebook. Moreover, Leader claims that Facebook's invalidity defenses under 35 U.S.C. 102(b) are incompatible with its false marking counterclaim and accuses Facebook of taking inconsistent positions regarding non-disclosure agreements (NDAs) in an effort to manipulate the proceedings.

The Court concludes that Judge Stark's Order is neither contrary to law nor clearly erroneous. Judge Stark determined that there is reason to believe discoverable evidence relevant to Facebook's defenses could arise from three newly identified entities. He acknowledged the possibility of relevant evidence being found and maintained that the Court has discretion to allow limited discovery before deciding on the need for additional discovery. The Court found that Facebook appears to be attempting to delay the trial set for June 28, 2010, while also suggesting that Facebook's arguments about being prevented from pursuing a dispositive defense are not compelling. The Order specifies that Facebook can still seek further relief based on discoveries made during the limited discovery phase, including the potential for bifurcating infringement and invalidity issues.

Ultimately, the Court affirms Magistrate Judge Stark's Orders from March 12, 2010, and April 27, 2010, overruling both Leader's and Facebook's objections. An appropriate order will follow.