Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-03114/USCOURTS-cand-5_04-cv-03114-7/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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1

 At the hearing, the parties also presented further argument regarding motions that were

originally heard on March 29, 2006 and as to which the parties had been directed to engage in

further meet and confer discussions. The Court’s ruling on those motions is being issued

simultaneously herewith, in a separate order.

*E-FILED 4/24/06*

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ISMART INTERNATIONAL LIMITED, 

Plaintiff,

 v.

I-DOCSECURE, LLC, et al.,

Defendants. /

NO. C 04-03114 RMW (RS)

ORDER GRANTING IN PART

AND DENYING IN PART

PLAINTIFF’S MOTION FOR A

PROTECTIVE ORDER

I. INTRODUCTION

Plaintiff iSmart International Limited moves for an order relieving it from the obligation to

produce certain materials that it contends contain trade secrets or other confidential information. The

motion was fully briefed and heard by the Court on April 12, 2005.1 Based on all papers filed to

date, as well as on the argument of counsel, the Court grants in part and denies in part iSmart’s

motion for protective order. 

II. BACKGROUND

This action arises from the failure of a joint enterprise formed by iSmart and defendants on

February 11, 2005. The parties generally agreed to contribute assets, including software, to a

separate, jointly-owned entity that would promote, sell, and support existing products and develop

new ones. The parties’ relationship crumbled shortly after they entered into the joint agreement.

Case 5:04-cv-03114-RMW Document 187 Filed 04/24/06 Page 1 of 6
United States District Court

For the Northern District of California

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iSmart alleges that the defendants falsely represented the assets that they agreed to contribute

to the joint entity. Defendants contend that funding from iSmart came late and in insufficient

amounts to cover the joint entity’s operational expenses. Additionally, defendants allege that iSmart

never shared its Smart Card technology, related assets, and customer information with the joint

entity as the agreement bound it to do.

On July 30, 2004, iSmart filed this action for rescission of the joint agreement. Defendants

responded with counterclaims for specific performance as well as various fraud and contract claims

against iSmart, counterdefendant Raj Dhesikan, and two other unserved counterdefendants.

On January 12, 2006, defendants propounded its first request for production of documents to

iSmart. By this motion, iSmart seeks to be relieved from having to produce software, source code,

object code, and related technical specifications relating to its Smart Card technology, on the

grounds that disclosure could jeopardize the cards’ security and the value to card users. Although

iSmart contends that none of the responsive materials should be produced, it places the greatest

emphasis on certain software referred to as the “Visa codelet,” which it contends was never intended

to be part of the joint venture. The parties have recently entered into an amended stipulated

protective order to which, they agree, any documents required to be produced will be subject.

III. DISCUSSION

 Under the Federal Rules of Civil Procedure, Rule 26(b)(1), [p]arties may obtain discovery

regarding any matter, not privileged, that is relevant to the claim or defense of any party . . .

Relevant information need not be admissible at the trial if the discovery appears reasonably

calculated to lead to the discovery of admissible evidence.” (emphasis added). The Federal Rules

of Evidence further provide that evidence is relevant if it has “any tendency to make the existence of

any fact that is of consequence to the determination of the action more probable or less probable

than it would be without the evidence.” Fed. R Evid., Rule 401. There is no absolute privilege for

trade secrets or similar confidential information. Federal Open Market Committee v. Merrill, 443

U.S. 340, 362 (1979). However, discovery may be limited by the court for good cause shown “to

protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”

Fed. R. Civ. P. 26 (c)).

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United States District Court

For the Northern District of California

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Here, there is no dispute that software code and other material relating to the Smart Card

technology include proprietary confidential information. While iSmart has shown that unfettered

disclosure of the information could cause harm to iSmart or to third parties, it has not shown that

disclosure under the parties’ stipulated protective order would create undue risks.

Defendants’ counterclaims include allegations of fraud in the inducement, negligent

misrepresentation, and deceit by false promise, all of which relate to representations purportedly

made by iSmart regarding its ISM technology in connection with the formation of the joint venture. 

Defendants contend that documents responsive to requests nos. 1-3 will be relevant to determine

whether iSmart’s representations about the ISM technology had a sufficient basis in fact, and

whether iSmart could have performed its contractual promise to contribute that technology to the

joint entity. iSmart counters that the requests seeking the ISM technology software source code and

object code are too attenuated because defendants are not contending the encryption/decryption

algorithms are deficient or that they ever had knowledge of the algorithms. Even if the claims do

not directly implicate the functionality of the software, however, that does not mean that it is

irrelevant. The mere existence of the code may be probative as to whether or not iSmart’s

representations about the technology were true. 

iSmart also contends that defendants cannot claim they were relying on representations

regarding specific technology at the time they entered the joint venture agreement because “Exhibit

B,” which identified the subject “ISM technology” had not been finalized by that time. The fact

that Exhibit B may not have then been final, however, is not dispositive, particularly at the discovery

stage. There is no real dispute that the ISM technology was at the center of what the joint venture

was formed to exploit and there is no basis to preclude production in light of the entry of the

protective order.

The primary issue is whether iSmart should be required to produce a particular piece of

intellectual property: its so-called “Visa codelet” and related materials. iSmart contends that this

particular technology was never intended to be part of the joint venture and that production of the

software code pertaining to it could seriously jeopardize the security and integrity of credit card

transactions for consumers across the globe.

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United States District Court

For the Northern District of California

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2

 Requests 1 - 3 are specific to technology identified in the agreement. However, as iSmart

suggests, requests 43 and 44 appear potentially broad enough to implicate the Visa codelet, and

defendants have not disclaimed any intent to seek it.

The record is not entirely clear as to the relationship between the Visa codelet and the

technology that was to be part of the joint venture, nor is it entirely clear that production of the Visa

codelet and related documents would necessarily even be responsive to the existing document

requests.2

 If, and to the extent that, the Visa codelet was part of or closely interrelated to technology

that was to be part of the joint venture, there would appear to be no sufficient reason to preclude its

production under the protective order. However, since the Visa codelet is not specifically identified

in the joint venture documents, production of the highly sensitive source code and similar technical

information is not warranted at the present time. At the hearing, defendants suggested that, at least

for now, they would be satisfied with production of non-technical materials relating to the Visa

codelet, and that appears to be a reasonable solution. Accordingly, a protective order will issue

relieving iSmart from any obligation to produce Visa codelet source code, object code, or technical

documentation absent further court order, but this protective order does not preclude production of

any other documents that may relate to the Visa codelet to the extent that any such documents may

exist and may be responsive to any requests.

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United States District Court

For the Northern District of California

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IV. CONCLUSION

For the above stated reasons, iSmart’s motion for protective order is GRANTED to the

limited extent that iSmart is hereby relieved from any obligation to produce Visa codelet source

code, object code, or technical documentation absent further court order. To the extent the motion

sought entry of a protective order, that aspect of the motion has been resolved by entry of such an

order, pursuant the parties’ stipulation, on April 6, 2006. The motion is in all other respects

DENIED.

IT IS SO ORDERED.

Dated: April 24, 2006 

RICHARD SEEBORG

United States Magistrate Judge

Case 5:04-cv-03114-RMW Document 187 Filed 04/24/06 Page 5 of 6
United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT NOTICE OF THIS ORDER HAS BEEN DELIVERED TO:

Michael Chaplin mchaplin@whitecase.com, drose@whitecase.com

James Arthur Hughes jah@greenstamps.com, jkjompedahl@greenstamps.com

Marc A. Koonin marc.koonin@sdma.com

Joseph Kouri joseph.kouri@sdma.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. 

Dated: April 24, 2006 Chambers of Judge Richard Seeborg

By: /s/ BAK 

Case 5:04-cv-03114-RMW Document 187 Filed 04/24/06 Page 6 of 6