Case 1:14-cv-01430-LPS Document 352 Filed 10/30/20 Page 1 of 5 PageID #: 22281
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`ELM 3DS INNOVATIONS, LLC,
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`v.
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`Plaintiff,
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`SAMSUNG ELECTRONICS CO., LTD., et al.,
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`Defendants.
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`C.A. No. 14-cv-1430-LPS
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`JURY TRIAL DEMANDED
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`FILED UNDER SEAL
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`RESPONSE LETTER TO THE HONORABLE JUDGE HALL
`OBJECTING TO DISCOVERY RELATED TO LITIGATION FUNDING
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`Dated: October 23, 2020
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`Matthew R. Ford (pro hac vice)
`BARTLIT BECK LLP
`54 W. Hubbard Street, Suite 300
`Chicago, IL 60654
`Tel: (312) 494-4400
`Fax: (312) 494-4440
`matthew.ford@bartlitbeck.com
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`Brian E. Farnan (#4089)
`Michael J. Farnan (#5165)
`FARNAN LLP
`919 North Market Street, 12th Floor
`Wilmington, DE 19801
`(302) 777-0300
`bfarnan@farnanlaw.com
`mfarnan@farnalaw.com
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`John M. Hughes (pro hac vice)
`Nosson D. Knobloch (pro hac vice)
`Katherine L.I. Hacker (pro hac vice)
`Daniel C. Taylor (pro hac vice)
`BARTLIT BECK LLP
`1801 Wewatta Street, Suite 1200
`Denver, CO 80202
`Tel: (303) 592-3100
`Fax: (303) 592-3140
`john.hughes@bartlitbeck.com
`nosson.knobloch@bartlitbeck.com
`kat.hacker@bartlitbeck.com
`dan.taylor@bartlitbeck.com
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`Attorneys for Plaintiff Elm 3DS
`Innovations, LLC
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`Case 1:14-cv-01430-LPS Document 352 Filed 10/30/20 Page 2 of 5 PageID #: 22282
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`Dear Judge Hall,
`Plaintiff Elm 3DS Innovations, LLC respectfully requests that the Court deny Samsung’s
`motion to compel litigation funding discovery. This information is not relevant to any of the claims
`or defenses in this case and is protected by the work product doctrine.
`I.
`Samsung Failed to Raise this Issue in a Timely Manner
`Samsung comes to the Court now that the parties have substantially completed document
`production to try to compel discovery it served five years ago. In August 2015, the Defendants
`served requests for litigation funding agreements, all communications with any potential or actual
`investors, and all documents relating to any litigation funding agreement. (Ex. 1 at 17, 24.) In July
`2018 (after a stay pending IPRs), Elm made clear that it “w[ould] not be producing documents
`responsive” to these requests. (Ex. 2 at 4344, 80.) Samsung did not raise any concerns.
`The next Elm heard of this issue was eight months later. At that point, Elm conferred with
`the Defendants and shared the research it found concerning the non-discoverability of litigation
`funding documents. (See Ex. 3 at 12.)
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`Ex. 4 at 3.) Again, Samsung
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`went silent, this time for sixteen months.
`For over two years, Elm has consistently stated that it was not producing this information.
`(See, e.g., Exs. 2, 3, 4, and 5.) Last week, Elm and Samsung substantially completed their document
`productions, and fact discovery will close in less than three months. (D.I. 338 at 1.) Samsung should
`not be allowed to further delay this now six-year old case by seeking to compel discovery that it
`could have sought years ago. Samsung’s delay shows how little this discovery actually affects the
`case. If it were relevant, then Samsung should (and would) have pursued it diligently.
`II.
`Litigation Funding Does Not Relate to Any Claim or Defense in this Case
`This discovery is not “relevant to any party’s claim or defense [or] proportional to the needs
`of the case.” Fed. R. Civ. P. 26(b)(1). “Discoverability of litigation funding materials under Federal
`Rule of Civil Procedure 26 is a contested issue on which there is no binding precedent in the Third
`Circuit.” United Access Techs., LLC v. AT&T Corp., No. 11-338-LPS, 2020 WL 3128269, at *1 (D.
`Del. June 12, 2020). But Samsung cites only one case from within the Third Circuit to try to claim
`this discovery is relevant. (See D.I. 344 at 12 (citing Acceleration Bay LLC v. Activision Blizzard, Inc.,
`2018 WL 798731, at *3 (D. Del. Feb. 9, 2018).) Since that case was decided, other courts within the
`Third Circuit and this very district have disagreed with its conclusion and instead joined the
`“plethora of authority that holds that discovery directed to a plaintiff’s litigation funding is
`irrelevant.” In re Valsartan NDMA Contamination Prods. Liab. Litig., 405 F. Supp. 3d 612, 615 (D.N.J.
`2019); see also, e.g., United Access, 2020 WL 3128269, at *1 (“Acceleration Bay does not hold (as no case
`could) that such materials are always relevant, without any consideration of additional factors.”); Ex.
`6, TQ Delta, LLC v. ADTRAN, Inc., D.I. 419 at 2 (D. Del. June 7, 2018) (“I have previously held in
`other cases that litigation funding agreements are in themselves irrelevant. I continue to believe that
`that is generally so . . . .”). The court should do the same here.
`Samsung has the burden of proving how its requested discovery is relevant. See Invensas Corp.
`v. Renesas Elecs. Corp., No. 11-448-GMS-CJB, 2013 WL 12146531, at *2 (D. Del. May 8, 2013). To try
`to do so, Samsung runs through a litany of arguments, none of which meet its burden.
`First, Samsung claims that this discovery is relevant to “damages, including establishing the
`value of the asserted patents.” (D.I. 344 at 1.) But a reasonable royalty in this case will be “calculated
`based upon hypothetical negotiations between a willing licensor and a willing licensee on the date
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`Case 1:14-cv-01430-LPS Document 352 Filed 10/30/20 Page 3 of 5 PageID #: 22283
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`infringement began.” LG Display Co. v. AU Optronics Corp., 722 F. Supp. 2d 466, 471 (D. Del. 2010).
`What a litigation funder would invest in exchange for a stake in a case’s outcome says nothing about
`what a willing licensee would pay to use patented technology. Judge Andrews said it best:
`These agreements are not patent licensing agreements and are not otherwise relevant
`to the hypothetical negotiation . . . . The best that can be said about litigation funding
`agreements is that they are informed gambling on the outcome of litigation. They are
`so far removed from the hypothetical negotiation that they have no relevance.
`AVM Techs., LLC v. Intel Corp., No. 15-33-RGA, 2017 WL 1787562, at *3 (D. Del. May 1, 2017).
`Second, Samsung states this discovery is relevant to “infringement, validity, and
`enforceability” because it “may . . . reveal Elm admissions and statements about the patents.” (D.I.
`344 at 1.) Samsung cannot meet its burden of proving relevance by speculating about what these
`documents “may” reveal. See Micro Motion, Inc. v. Kane Steel Co., 894 F.2d 1318, 1326 (Fed. Cir. 1990).
`This Court recently rejected similar speculation “that communications with prospective sources of
`funding, as well as subsequent litigation updates to eventual funders, are relevant to central issues
`like validity and infringement.” See United Access, 2020 WL 3128269, at *1. Samsung’s speculation
`should be rejected here too.
`Third, Samsung claims this discovery is relevant to standing. Elm has produced documents
`showing it has standing. (See Ex. 7.) Samsung claims that Elm’s “only apparent member is now
`deceased.” But Elm explained that this is untrue in response to the very interrogatory on which
`Samsung now moves to compel. (See Ex. 8 at 22 (listing entities with any interest in Elm).) In
`addition, Elm produced its “articles of incorporation, operating agreements, bylaws, and any trust
`documents necessary to show ownership and Ron Epstein’s authority on behalf of Elm.” (Ex. 9 at
`2.) Not only does Samsung not need any additional information to verify Elm’s standing, but the
`litigation funding documents it seeks would also not provide any insight on this issue.
`Fourth, Samsung claims that this discovery is relevant to refuting a potential David versus
`Goliath trial theme. (D.I. 344 at 2.)
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`Fifth, Samsung argues that this discovery is relevant to “witness credibility and bias.” (Id.)
`Samsung mentions only one witness, Ron Epstein. (Id.)
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` In Yousefi v.
`Delta Electric Motors, Inc., an employee filed a discrimination case funded by his union. Multiple union
`witnesses were going to testify, so the court allowed evidence about the union’s financing with the
`expectation of payment if the plaintiff prevailed to assess their bias. Yousefi, No. C13-1632RSL, 2015
`WL 11217257, at *2 (W.D. Wash. May 11, 2015). But without that connection to potential bias,
`“[w]hether a plaintiff is funding this litigation through savings, insurance proceeds, a kickstarter
`campaign, or contributions from [a third party] is not relevant to any claim or defense at issue.” Id.
`Finally, Samsung’s requested discovery is not proportional to the needs of the case. Even
`when plaintiffs have produced litigation funding information, courts have excluded it from trial. See,
`e.g., AVM Techs., 2017 WL 1787562, at *3 (“[If litigation funding agreements] were determined to
`have some marginal relevance, th[en] I would exclude them under Rule 403 . . . as their introduction
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`Case 1:14-cv-01430-LPS Document 352 Filed 10/30/20 Page 4 of 5 PageID #: 22284
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`would just invite a sideshow on the economics of patent litigation.”). That shows how unimportant
`this discovery is in resolving the issues in the case.
`III.
`Litigation Funding Documents Are Protected by the Work Product Doctrine
`“Ordinarily, a party may not discover documents and tangible things that are prepared in
`anticipation of litigation . . . .” Fed. R. Civ. P. 26(b)(3). “Whether a document receives work product
`protection depends upon why it was created.” Carlyle Inv. Mgmt. L.L.C. v. MoonMouth Co., No. 7841-
`VCP, 2015 WL 778846, at *8 (Del. Ch. Feb. 24, 2015). “Courts generally apply either the broader
`‘because of litigation’ test or the narrower ‘primary purpose’ test.” Id. “Delaware applies the ‘because
`of’ test. Accordingly, a document created because of litigation likely is entitled to work product
`protection.” Id. “Thus, work product protection extends relatively broadly in Delaware.” Id.
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`This Court should join the numerous other courts in Delaware and across the country that
`have concluded that litigation funding documents are created because of litigation and, therefore,
`protected as work product. See Charge Injection Techs., Inc. v. E. I. du Pont de Nemours & Co., No. 07C-
`12-134-JRJ, 2015 WL 1540520, at *5 (Del. Super. Ct. Mar. 31, 2015) (“Under Delaware law, the
`redacted payment terms in the Financing Agreement are entitled to work product protection, and
`that protection is not precluded merely because the Financing Agreement may also serve a business
`function.”); Viamedia, Inc. v. Comcast Corp., No. 16-cv-5486, 2017 WL 2834535, at *3 (N.D. Ill. June
`30, 2017) (concluding that work product protects litigation funding documents and noting “that its
`conclusion is consistent with that of other courts”). In fact, in Impact Engine, Inc. v. Google LLC, a case
`Samsung cited to try to argue that this discovery is relevant, the court concluded just this week that
`litigation funding documents “satisfy the ‘because of’ test and constitute work product.” Ex. 11, D.I.
`129 at 2 (S.D. Cal. Oct. 20, 2020). This Court should reach the same result.
`In claiming that work product does not protect this discovery, Samsung applies the wrong
`test. Two of Samsung’s cases apply the “primary purpose” test. See U.S. v. Textron Inc. & Subsidiaries,
`577 F.3d 21, 29 (1st Cir. 2009); Acceleration Bay, 2018 WL 798731, at *2. But “Delaware courts have
`expressly rejected the primary purpose test.” Carlyle, 2015 WL 778846, at *8. Another case mentions
`the “primary purpose” test when discussing the Fifth Circuit’s standard but then explains that the
`Third Circuit uses the “because of” test. See U.S. v. Rockwell Int’l, 897 F.2d 1255, 1266 (3d Cir. 1990).
`These documents would likely still be entitled to work product protection under the “primary
`purpose” test, but the fact that the broader “because of” test applies makes the decision even easier.
`It is unclear whether Samsung argues that Elm waived work product protection, but such an
`argument should fail. “Because the work product doctrine serves to protect an attorney’s work
`product from the adversary, a disclosure to a third-party does not necessarily waive the protection of
`[the] work product, as it does with attorney-client privilege.” Magnetar Techs. Corp. v. Six Flags Theme
`Park Inc., 886 F. Supp. 2d 466, 478 (D. Del. 2012). To waive work product, “the disclosure must
`enable an adversary to gain access to the information.” Id.
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`See Ex. 12, Walker Digital LLC v. Google Inc., D.I. 280 at 2 (D. Del. Feb. 12, 2013)
`(concluding plaintiff and its “patent monetization consultant” “share a common legal interest”).
`Finally, Samsung does not have a substantial need for this discovery. See Fed. R. Civ. P.
`26(b)(3)(ii). The fact that courts exclude this evidence at trial shows there is no substantial need for it.
`See AVM Techs., 2017 WL 1787562, at *3. So Elm requests that the Court deny Samsung’s motion.
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`Case 1:14-cv-01430-LPS Document 352 Filed 10/30/20 Page 5 of 5 PageID #: 22285
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`cc: Counsel of Record (Via E-Mail)
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`Respectfully submitted,
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`/s/ Brian E. Farnan
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`Brian E. Farnan
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