Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_03-cv-02177/USCOURTS-cand-3_03-cv-02177-22/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

3COM CORP,

Plaintiff,

v

D-LINK SYSTEMS, INC,

Defendant,

_________________________

REALTEK SEMICONDUCTOR CORP,

Intervenor. /

No C 03-2177 VRW

ORDER

Plaintiff 3Com Corporation (3Com) brought this suit

alleging that two products of defendant D-Link Systems, Inc (DLink) infringe three of 3Com’s patents: United States patents

5,434,872, 5,732,094 and 5,307,459. Doc #1, ¶10. Realtek

Semiconductor Corporation (Realtek) later intervened. Doc #108. 

3Com also alleges that Realtek infringes seven 3Com patents

Case 3:03-cv-02177-VRW Document 391 Filed 03/27/07 Page 1 of 13
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including the patents asserted against D-Link as well as United

States patents 6,115,776, 6,327,625, 6,526,446 and 6,570,884. Docs

##108, 120. United States patent 6,115,776 was subsequently

dropped from this case. 3Com and D-Link have since settled claims

in this action, leaving Realtek as the sole defendant. Doc #108. 

D-Link remains a party to the 05-0098 case. 

Here, the court addresses four discovery disputes between

3Com and Realtek raised by 3Com in its letter brief of February 15,

2007. Doc #378.

I

Every patent in this litigation relates to network

interface technology, which facilitates the transfer of data

between a host device (such as a personal computer) and a network. 

Data transferred between the host and a network must first be

formatted into data “packets” or “frames,” which are bits of data

that have been packaged for transmission according to standardized

network protocols. Network interface devices that are the subject

of the patents contain buffer memory for temporarily storing

packets that are being received from the host and transmitted to a

network (or vice versa). Realtek designs chips which are used in

certain network interface cards. As the court writes principally

for the parties, it will not further discuss the details of the

inventions.

As a preliminary matter, Realtek’s position in a previous

motion was that only five products (the products accused in the

January 14, 2005 PICs) were properly in the case and that the court

should strike 3Com’s amended PICs, which accuse new products. Doc

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#295. The court has since denied Realtek’s motion to strike. Doc

#390. In several of the disputes below, Realtek has not produced

information related to – or its Rule 30(b)(6) witnesses were not

prepared to testify about – all the products accused in the amended

PICs. Accordingly, to the extent that Realtek has not produced the

requested information for all accused products, and instead limited

its production to the five products originally accused, the court

ORDERS Realtek to produce information for the additional products. 

II

The court visits the remaining issues in turn. First,

3Com asserts that Realtek has not produced all versions of the

relevant source code. Doc #378 at 1-3. Second, 3Com asserts that

Realtek has not produced technical information related to the

internal design of Realtek’s chips. Id at 3-4. Third, 3Com seeks

Realtek’s financial information in a more detailed form than

Realtek has thus far provided. Id at 4-8. Fourth, 3Com complains

that Realtek’s 30(b)(6) witnesses were inadequate and seeks

sanctions. Id at 8-10. Realtek opposes 3Com’s requests. Doc

#383. 

Relevancy, for the purposes of discovery, is defined

broadly, although it is not without “ultimate and necessary

boundaries.” Hickman v Taylor, 329 US 495, 507 (1947). “Once an

objection to the relevance of the information sought is raised, the

burden shifts to the party seeking the information to demonstrate

that the requests are relevant to the subject matter involved in

the pending action.” Allen v Howmedica Leibinger, Inc, 190 FRD

518, 522 (WD Tenn 1999), citing Andritz Sprout- Bauer, Inc v Beazer

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East, Inc, 174 FRD 609, 631 (MD Pa 1997). Appropriate discovery

includes, of course, inspection of “any designated documents * * *

which are in the possession, custody or control of the party upon

whom the request is served.” See FRCP 34(a)(1). With these basic

and well-known tenets in mind, the court addresses 3Com’s specific

discovery requests.

A

Source Code

On February 14, 2006, the undersigned ordered Realtek to

produce source code for the Realtek products at issue. Doc #320. 

Realtek produced several versions of source code shortly

thereafter. Docs ##378, 383. During the week of February 20,

2006, 3Com deposed Realtek’s Rule 30(b)(6) witnesses. One such

witness stated that the source code produced was current code,

which may have been modified within the preceding three weeks. Doc

#378 Ex A at 55-59. Further, the witness could not explain what

modifications were made and could not explain the differences

between the produced codes and earlier, unproduced versions. Id. 

After the Rule 30(b)(6) deposition, Realtek produced additional

code. 

Realtek maintains that it “has now produced all the

versions it maintains.” Doc #383 at 1. 3Com contends it “has good

reason to believe that at least some versions of the source code

have not yet been produced.” Doc #378 at 3. According to 3Com,

there were many versions of generation 3.xx produced, but there

were no versions (or very limited versions) of generations 4.xx,

5.xx and 6.xx. Doc #378 at 3. Realtek does not contest this;

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rather Realtek merely states “[t]here can be many explanations for

skipping a number when multiple versions of the code are created.” 

Doc #383 at 1. Realtek stops there, however, and does not offer

any “explanations.” Given the many version numbers in one

generation of code, the near absence of all other versions of code

and lack of explanation by Realtek, the court agrees that 3Com is

entitled to the code to the extent it exists or, alternatively, is

entitled to an explanation. 

Accordingly, the court ORDERS Realtek to produce all

missing versions of the source code that it maintains. If Realtek

cannot produce additional versions, the court ORDERS Realtek to

declare so by way of a statement under penalty of perjury of both a

Realtek officer, director or managing agent and its counsel at bar. 

This admission must identify the versions of the source code that

may have once existed and must explain their disappearance. 

B

Technical Information

3Com requests that Realtek produce technical information

related to the internal design and operation of the accused

products. Doc #378 at 4. 3Com seeks the technical information

because the court’s claim construction further defined physical

design elements of an infringing product. See Doc #375. Realtek

responds that the “netlist codes” already produced identify all

components in the accused products and therefore, it argues, it

should not be required to produce the additional technical

information. Doc #383 at 1-2. 

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Parties may not meet their obligations by pointing out

that the portion of materials thus far produced obviates the need

for production of the remaining items in the requested category. 

See FRCP 34(a)(1) (requiring production of “any [relevant]

documents” designated by discovering party); Buycks-Roberson v

Citibank Fed Sav Bank, 162 FRD 338, 341-42 (ND Ill 1995). Here,

Realtek does not dispute the fundamental relevance of the VHDL

code, “netlist codes” and the related technical information

detailing the internal design and operation of the accused chips. 

Accordingly, Realtek’s argument that partial production

demonstrates irrelevance of further production misses the mark. 

If Realtek sought to avoid what it considered to be an

unreasonable burden, it could have applied for leave to file a

motion for protective order under FRCP 26(c). Instead, Realtek

apparently decided it would be okay to produce just a subset of all

the relevant documents and code. 3Com should not have to rely on

Realtek’s selective representations to determine the physical

location of design elements as required by the patents-in-suit. 

Accordingly, the court ORDERS Realtek to produce VHDL

code, “netlist codes” and the related technical information

detailing the internal design and operation of the accused chips.

 

C

Financial Information

3Com seeks discovery on financial information, namely

worldwide sales and profits, for all versions of all accused

products from 1994 to present. Doc #378 at 4. Realtek contends

that 3Com is not entitled to worldwide sales and profits, that 3Com

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is not entitled to any financial information from before the

statutory period for damages and that Realtek does not maintain the

specific records that 3Com requests. Doc #383 at 2.

Without saying as much, Realtek is essentially arguing

that worldwide sales and profits are not relevant. The court

disagrees. 

First, Realtek’s worldwide sales are reasonably

calculated to lead to the discovery of admissible evidence because

the worldwide sales relate to 3Com’s claim of direct infringement. 

The court agrees with 3Com that it is entitled to information

concerning Realtek’s customers and sales to determine the extent to

which those customers sold the accused products into the United

States. 

Second, Realtek’s worldwide sales are reasonably

calculated to lead to the discovery of relevant evidence because

the worldwide sales relate to 3Com’s claim of inducing

infringement. 3Com is not required to prove its inducing

infringement theory to be entitled to discovery of such

information. See Murata Mfg Co, Ltd v Bel Fuse, Inc, 422 F Supp 2d

934, 944-46 (ND Ill 2006). 

Third, worldwide profits and sales are relevant to a

reasonable royalty calculation. See Bose Corp v JBL, Inc, 112 F

Supp 2d 138, 168 n 20 (D Mass 2000). For example, the worldwide

profit margin may be indicative of a ceiling amount for a

reasonable royalty. Worldwide sales and profits are also relevant

to Realtek’s financial condition generally. 

Fourth, worldwide sales and profits are relevant to the

affirmative defense of obviousness. That is, the greater the

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commercial success worldwide, the more likely the patent is not

obvious. Realtek argues that “[e]ven if the worldwide sales were

tangentially relevant to the issue of obviousness * * *, 3Com would

have to prove that any sales of Realtek’s products are attributable

to the inventions in the patents-in-suit.” Doc #383 at 2. Realtek

does not address the relevance of worldwide sales and profits. 

Rather, Realtek merely states 3Com would have to show a nexus

between the commercial success and the invention to rebut a prima

facie showing of obviousness by Realtek. The court finds Realtek’s

argument unpersuasive. The existence of one element (i e, the

nexus between commercial success and the invention in patent-insuit) does nothing to narrow the scope of discovery on an entirely

separate element (i e, whether the product embodying the invention

enjoyed commercial success). 

For at least these reasons, 3Com’s request for worldwide

sales and profits is within the broad scope of discovery. 

Regarding the time period of discoverable financial

information, as discussed above, worldwide sales and profits

generally may be relevant to direct infringement, inducing

infringement, determining a reasonable royalty and rebutting a

prima facie showing of obviousness. Similarly, worldwide sales and

profits before 1998 are reasonably calculated to lead to the

discovery of relevant evidence. For example here, worldwide sales

and profits before the statutory damages period may be relevant to

Realtek’s assertion that it sold accused products bound for the

United States to a single agent/distributor over a nearly ten year

period. Further, the amount of sales and profits before the

statutory damages period may be relevant to showing D-Link’s intent

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under an active inducement theory. Finally, discovery of a

defendant’s financial situation may facilitate settlement of the

action, which is one of the purposes behind the broad federal

discovery rules. Oakes v Halvorsen Marine Ltd, 179 FRD 281, 286

(CD Cal 1998). Accordingly, D-Link cannot dispose of its discovery

obligations on its own by unilaterally calculating the time period

to which it believes plaintiff is entitled to recover damages. 

3Com may discover all information regarding defendant’s worldwide

sales and profits to determine the potential scope of damages and

viable infringement theories.

Having determined that all worldwide sales and profits of

all the accused products are within the scope of discovery, the

court must examine Realtek’s present ability to produce this

information. Realtek claims that it has produced the “best

information” it has on which equipment manufacturers ultimately buy

the accused products from the agents and distributors. Doc #383 at

2. Realtek sells to agents and distributors, and it asserts that

it does not know with certainty how many chips bought by these

agents and distributors are sold or to whom it sold them. Id. 

The excerpted transcript of the Tseng depositions (Doc

#378 Exs C, F) indicates that there is a database system that

Realtek has maintained since 1999. That database contains

information such as worldwide sales by product and profits by

product. Realtek does not reconcile the Tseng deposition with its

statement “Realtek does not calculate [worldwide sales totals for

each accused product].” Doc #383 at 2. For the reasons discussed

above, worldwide sales and profits are within the scope of

discovery and 3Com is entitled to such information. 

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Additionally, while Realtek mentions in passing that

producing such financial information would be “unduly burdensome,”

it does not substantiate its claim. In light of the relevance of

the materials 3Com seeks, the court is not convinced that the

requests are unduly burdensome. The relevance of 3Com's discovery

requests outweighs the burden on the defendant. 

Accordingly, the court ORDERS Realtek to produce the

worldwide sales and profits for each accused product from 1994 to

present. For any otherwise discoverable financial information that

Realtek does not possess, Realtek is ordered to identify this

information by way of formal admission under penalty of perjury,

including an explanation why it is unable to produce such

information.

D

Additional 30(b)(6) Depositions

It is necessary to conduct additional and continued Rule

30(b)(6) depositions for at least the following reasons. First,

the court has now clarified which accused products are properly in

this suit. Realtek must produce Rule 30(b)(6) witnesses to testify

on all the accused products. Second, Realtek’s designee on

financial issues was unprepared to testify about Realtek’s

worldwide sales and profits. Because the court finds this

information discoverable, Realtek must produce a designee to

testify on these related topics as outlined above. 

Third, at the time of the Rule 30(b)(6) depositions,

Realtek had not yet produced all versions of the source code that

it maintained for the accused products. For this reason alone, the

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court finds it appropriate to order continued examination of

Realtek’s software designee. On continued deposition, while

Realtek’s software designee need not compare and contrast each and

every version of the source code, he or she must be prepared to

explain significant changes or modifications in the source code

that occurred. This will obviously require reviewing, and being

informed about, more than the most recent version of the code. 

Similarly, the hardware and design designee should be prepared to

address significant changes in the hardware and design throughout

the product development process for all accused products. 

For the reasons stated above, the court ORDERS Realtek to

produce Rule 30(b)(6) designees to be deposed on all accused

products, financial information that the court above deems

discoverable and modifications to the source code and accused

products’ design. 

3Com also seeks sanctions against Realtek in the amount

of reimbursement for the costs and expenses 3Com incurred in

sending its counsel and support personnel to Taiwan to depose

Realtek’s Rule 30(b)(6) witnesses. Doc #378 at 10. 3Com contends

that Realtek’s three Rule 30(b)(6) witnesses were “woefully

unprepared” even for the five products Realtek contended were

properly in the case. Doc #378 at 8. 3Com requests that the court

order Realtek to produce these three witnesses for continued

examination. Further, 3Com asks the court to order these

depositions take place in the United States. 

A court’s decision to impose sanctions and the choice of

an appropriate sanction are discretionary. See Nat'l Hockey League

v Metropolitan Hockey Club, 427 US 639, 642 (1976). The court

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cannot conclude that Realtek has acted willfully or in bad faith. 

Realtek may very well have erroneously believed that it had acted

properly. In addition, there is no doubt that Realtek has expended

significant effort in complying with its discovery obligation,

which perhaps explains its refusal to do more at this point. 

Accordingly, the court finds that the sanctions sought by 3Com are

unwarranted at this juncture.

The court does find, however, that it would be

inappropriate to force 3Com to incur these costs again and ORDERS

Realtek to produce its Rule 30(b)(6) witnesses for continued

deposition in the United States. Realtek presumably is now mindful

of its legal responsibilities and self-interest in discharging its

discovery obligations even at the risk of inconvenience to its

employees. 3Com’s request for sanctions is DENIED.

III

In sum, to the extent Realtek only produced the

information related to the five products originally accused and did

not produce information related to all products accused in the

amended preliminary infringement contentions, the court ORDERS

Realtek to produce such information for all products presently in

this case. The court additionally ORDERS Realtek to produce: (1)

all versions of missing source code for all accused products; (2)

VHDL, “netlist codes” and related technical information detailing

the internal design and operation of the accused chips; (3)

financial information, including worldwide sales and profits, from

the period 1994 to present; and (4) Rule 30(b)(6) witnesses to

testify on the subjects outlined above and continued examination of

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the original Rule 30(b)(6) witnesses, such depositions to occur in

the United States. Finally, the court DENIES 3Com’s request for

sanctions. 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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