Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_03-cv-05424/USCOURTS-cand-5_03-cv-05424-3/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1121 Trademark Infringement

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United States District Court

For the Northern District of California

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NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

MICROSOFT CORPORATION,

Plaintiff,

 v.

SUNCREST ENTERPRISE and YI-LING CHEN

a/k/a EILEEN CHEN,

Defendants.

/

No. C03-05424 JF (HRL)

ORDER (1) GRANTING IN PART AND

DENYING IN PART MICROSOFT’S

MOTION TO COMPEL DEPOSITION

ANSWERS; AND (2) DENYING

MICROSOFT’S REQUEST FOR

MONETARY SANCTIONS

[Re: Docket No. 58]

On January 3, 2006, this court heard the “Motion to Compel Deposition Answers from

Defendant Yi-Ling Chen a/k/a Eileen Chen” filed by plaintiff Microsoft Corporation (“Microsoft”). 

Defendants Suncrest Enterprises, Inc. (“Suncrest”) and Yi-Ling Chen (“Chen”) opposed the motion. 

Upon consideration of the papers filed by the parties, as well as the arguments of counsel, the court

grants in part and denies in part the motion to compel and denies Microsoft’s request for sanctions.

In this action, Microsoft alleges that defendants distributed counterfeit Microsoft software

products despite being on notice that such conduct infringed Microsoft’s copyrights and trademarks. 

Suncrest and Chen deny these allegations and claim that they bought software goods from vendors

they believed to be reputable.

Microsoft contends that the parties orally agreed to settle the instant lawsuit following a

*E-FILED ON 1/6/06*

Case 5:03-cv-05424-JF Document 93 Filed 01/06/06 Page 1 of 5
United States District Court

For the Northern District of California

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May 12, 2005 court-sponsored mediation before Margaret Corrigan from the Circuit Mediation

Office of the Ninth Circuit Court of Appeals. It says that while the case did not settle on May 12,

2005, the parties participated in subsequent telephone conferences with Corrigan and, after nearly two

months of discussion, the parties reached a settlement. On June 29, 2005, Microsoft’s counsel sent a

letter to defendants enclosing a settlement agreement/release, a stipulated permanent injunction and a

stipulated dismissal for Chen to sign “if acceptable.” (Dugdale Decl., Ex. A). The docket sheet

indicates that on July 6, 2005, an entry was made reflecting settlement of the case. However,

Microsoft contends that Chen did not execute the settlement documents and instead hired her third

(and current) counsel (who substituted into this action on July 14, 2005) and inexplicably reneged the

parties’ agreement.

On November 11 and 14, 2005, Microsoft deposed Chen as Suncrest’s corporate designee

pursuant to Fed.R.Civ.P. 30(b)(6), as well as in her capacity as an individual. At that deposition,

Microsoft’s counsel asked several questions pertaining to the alleged settlement, which Chen refused

to answer, asserting, among other things, the mediation privilege. Microsoft now moves to compel

Chen to answer those questions. Relying upon Folb v. Motion Picture Industry Pension & Health

Plans, 16 F. Supp.2d 1164 (C.D. Cal. 1998), Microsoft argues that the deposition questions at issue

do not call for information within the scope of the mediation privilege. Defendants assert that other

courts take a broader view, holding that all communications made in furtherance of settlement

negotiations are privileged. See Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332

F.3d 976 (6th Cir. 2003) (concluding that the parties’ communications made in furtherance of

settlement negotiations are privileged and protected from third-party discovery).

While the instant motion was pending, on December 28, 2005, the District Court denied

Microsoft’s motion to enforce the alleged oral settlement agreement. In so ruling, the court stated that:

this mediation privilege extends to the substance of the

mediator-sponsored conference call during which the mediator

allegedly obtained oral confirmation of the settlement

agreement from Microsoft’s counsel and Chen. The mediation

privilege clearly does not extend to the telephonic settlement

negotiations conducted by the parties without the aid of the

mediator or to the draft settlement agreement sent to Chen by

Microsoft’s counsel; however the parties have presented

conflicting declarations as to what was said during those

negotiations and as to the import of the draft settlement agreement.

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United States District Court

For the Northern District of California

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(Order Denying Plaintiff’s Motion to Enforce Settlement, Docket No. 89). Its ruling was made

without prejudice to Microsoft to plead a claim for breach of oral contract or a defense based upon

oral settlement. So far as this court is aware, Microsoft has not yet asserted such a claim or defense.

In any event, this court concludes that most of the deposition questions at issue seek

information pertaining to the parties’ conversations with the mediator and are, therefore, protected. 

(See Chiarelli Decl., Ex. A (Chen/Suncrest Depo. 150:8-14, 150:24-152:14)). Folb is not to the

contrary. In that case, the court concluded that “communications to the mediator and communications

between parties during the mediation” and “communications in preparation for and during the course of

a mediation with a neutral” are protected. Folb, 16 F. Supp.2d at 1180. Microsoft has not

convincingly argued that the privilege distinguishes between communications which it characterizes as

signifying an agreement and those which it says comprise ongoing negotiations over settlement terms. 

Further, there is no dispute that the mediation in the instant lawsuit was conducted pursuant to a

confidentiality agreement which provides, in relevant part:

Consistent with ADR L.R. 5-12 and 6-11 governing the

confidentiality of ENE and mediation sessions and, to the

extent applicable, California Evidence Code Sections 703.5 and

1115-1128, the participants in the ADR session agree that they shall treat as “confidential information” anything that happened

or was said in connection with the ADR session. “Confidential

information” shall not be disclosed to anyone not involved in the

litigation, shall not be disclosed to the assigned judge, and shall

not be used for any purpose, including impeachment, in any

pending or future proceedings unless all parties and the neutral

so agree.

(Gorman Decl., Ex. A). Accordingly, Microsoft’s motion to compel is DENIED as to these questions.

However, Microsoft’s motion to compel is GRANTED as to Microsoft’s questions about (1)

what Chen did when she received the June 29, 2005 letter from Microsoft’s counsel; and (2) whether

she has an understanding as to why Microsoft’s counsel notified the court that the litigation had been

settled. (Chiarelli Decl., Ex. A (Chen/Suncrest Depo., 149:24-25, 150:16-18)). On their face, these

questions do not ask Chen to reveal the substance of any communications made in preparation for and

during the mediation. As such, this court concludes that they do not impinge upon the mediation

privilege. Suncrest shall produce Chen to answer these questions (and any appropriate follow-up

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United States District Court

For the Northern District of California

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1 This court is concurrently issuing its order on Microsoft’s separately filed “Motion

to Compel Defendant Suncrest Enterprise, Inc. to Designate and Produce an Adequately Prepared

30(b)(6) Witness” in which Microsoft is being given two hours for a further deposition of Suncrest. 

The court notes that Microsoft shall have two hours total for the further depositions of Chen and

Suncrest, and not two hours for each deposition.

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questions) no later than January 31, 2006 at a mutually agreeable time and location. Further, the

deposition shall last no more than 2.0 hours (excluding breaks).1

Nevertheless, Microsoft’s request for sanctions is DENIED. Defendants correctly note that

the request did not comply with Civil Local Rule 37-3. In any event, under the circumstances

presented, this court concludes that sanctions are not warranted.

IT IS SO ORDERED.

Dated:

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

January 6, 2006

/s/ Howard R. Lloyd

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United States District Court

For the Northern District of California

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5:03-cv-5424 Notice will be electronically mailed to: 

John C. Gorman jgorman@gormanmiller.com 

Craig Alan Hansen chansen@gormanmiller.com 

Andrew K. Jacobson andy@bayoaklaw.com 

Shawn T. Leuthold leuthold@aol.com 

Counsel are responsible for distributing copies of this document to co-counsel who have not registered

for e-filing under the court’s CM/ECF program.

Case 5:03-cv-05424-JF Document 93 Filed 01/06/06 Page 5 of 5