Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 1 of 10 PageID #: 5678
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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`R2 SOLUTIONS LLC,
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`Plaintiff,
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`DEFENDANT DATABRICKS, INC.’S MOTION TO COMPEL PLAINTIFF
`R2 SOLUTIONS, LLC TO PRODUCE FINANCIAL DOCUMENTS
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`DATABRICKS, INC.,
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`v.
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`Defendant.
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`Civil Action No. 4:23-cv-01147-ALM
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`JURY TRIAL DEMANDED
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 2 of 10 PageID #: 5679
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`Defendant Databricks, Inc. (“Databricks”) respectfully moves to compel Plaintiff R2
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`Solutions, LLC (“R2”) to produce its 2020-2024 financial statements. These financial statements
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`are highly relevant to R2’s claim for damages in the form of a reasonable royalty. Such a claim
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`requires the parties and this Court to consider the specific parties to the hypothetical negotiation,
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`including their financial conditions and relative bargaining positions—information reflected in
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`R2’s financial statements. Moreover, there is minimal burden on R2 to produce just five financial
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`statements, and R2’s unilateral belief that such financial statements are not relevant to damages—
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`based on its unproven contention regarding the appropriate hypothetical negotiation date, and R2’s
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`unfounded argument that the financial condition of a party to the hypothetical negotiation is
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`irrelevant—should be rejected. Given the inadequacy of R2’s objections, and the relevance and
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`proportionality of Databricks’ requests, Databricks respectfully asks the Court to compel R2 to
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`produce its 2020-2024 financial statements.
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`I.
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`BACKGROUND
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`In this case, R2 accuses of infringement Databricks’ products that utilize Apache Spark.1
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`(Dkt. 1 (Complaint), ¶ 7.). Apache Spark is an open-source software project, which continues to
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`be actively developed, with new features and new releases multiple times per year. (See
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`https://spark.apache.org/news/index.html.)
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` Important to this motion, R2’s infringement
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`contentions repeatedly identifies as part of the allegedly infringing functionality the source code
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`“SortMergeJoinEvaluatorFactory” (see, e.g., Kaempf Decl., Ex. A at e.g., 40, 50, 58-59, 61-64,
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`1 The parties have stipulated that “for the purposes of this litigation, the open-source Apache Spark
`source code files identified in R2’s First Supplemental Infringement Contentions is representative
`of Databricks’ corresponding internal Apache Spark source code files in the Databricks Data
`Intelligence Platform.” (Dkt. 73.)
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 3 of 10 PageID #: 5680
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`67)—which was introduced no earlier than July 2023. In other words, R2’s infringement
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`contentions indicate that the earliest possible date of alleged infringement is July 2023.
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`R2 seeks an unspecified amount of damages in the form of a reasonable royalty. (R2’s
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`Resp. to Interrog. No. 14.) While R2 acknowledges that the “reasonable royalty may be
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`determined by a variety of factors, such as those set forth in Georgia-Pacific Corp. v. U.S. Plywood
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`Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970)” (see id.), it has not provided the factual bases
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`underlying its Georgia-Pacific analysis. Instead, R2’s interrogatory responses merely indicate that
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`“Plaintiff requires discovery to determine the full extent of the Defendant’s infringements, to
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`weigh the various factors, and to compute the appropriate amount of the reasonable royalties for
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`infringement of the asserted patent,” and that “Plaintiff’s damages expert will opine on the factors
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`relating to reasonable royalties.” (Id. at 32-35 (R2’s Resp. to Interrog. Nos. 14, 15, seeking the
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`factual basis of R2’s damages claim and description of financial statements).) Relevant to this
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`motion, Databricks also specifically requested R2’s financial statements for purposes of the
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`damages analysis, which R2 has refused to provide.
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`II.
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`LEGAL STANDARD
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`A party “may obtain discovery regarding any nonprivileged matter that is relevant to any
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`party’s claim or defense and proportional to the needs of the case” including information that may
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`not ultimately be admissive as evidence. Fed. R. Civ. P. 26(b)(1). The Local Rules of the Eastern
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`District of Texas specifically provide for example, that any “information that is likely to have an
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`influence on or affect the outcome of a claim or defense” or that “deserves to be considered in the
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`preparation, evaluation, or trial of a claim or defense” is discoverable under this District’s view
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`of discovery. E.D. Tex. L. Civ. R. 26(d); see Wapp Tech Ltd. P'ship v. Wells Fargo Bank, N.A.,
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`No. 4:21-CV-00671, 2022 WL 2784468, at *1 (E.D. Tex. June 28, 2022) (J. Mazzant). If the
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 4 of 10 PageID #: 5681
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`moving party shows that requested materials are properly within this scope of discovery, then the
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`party opposing discovery bears the burden of showing “why the discovery is irrelevant, overly
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`broad, unduly burdensome or oppressive.” Id.
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`Where, as here, a patentee-plaintiff seeks damages in the form of a reasonable royalty, the
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`appropriate royalty may be determined by considering a hypothetical negotiation. Lucent Techs.,
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`Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). The hypothetical negotiation analysis
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`“must begin with the proper parties in mind.” Opticurrent, LLC v. Power Integrations, Inc., No.
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`17-CV-03597-WHO, 2018 WL 6727826, at *9 (N.D. Cal. Dec. 21, 2018) (citing Mahurkar v. C.R.
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`Bard, Inc., 79 F.3d 1572, 1579 (Fed. Cir. 1996); see also Daedalus Blue LLC v. SZ DJI Tech. Co.,
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`No. W-20-CV-00073-ADA, 2022 WL 831619, at *8 (W.D. Tex. Feb. 24, 2022) (striking damages
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`expert report that “analyzed a negotiation that involved the wrong parties entirely”).
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`Courts must consider the specific parties, including the parties’ “relative bargaining
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`strength” and “any other economic factor that normally prudent businessmen would, under similar
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`circumstances, take into consideration in negotiating the hypothetical license.” Georgia-Pac., 318
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`F. Supp. 1116, 1120 (S.D.N.Y. 1970), modified sub nom. Georgia-Pac. Corp. v. U.S. Plywood-
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`Champion Papers, Inc., 446 F.2d 295 (2d Cir. 1971), cert. dismissed, 404 U.S. 870 (1971).
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`III. ARGUMENT
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`R2’s financial statements are relevant to damages and specifically, R2’s claim for a
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`reasonable royalty, and they thus must be produced. As courts have held, the hypothetical
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`negotiation analysis must consider the specific parties in mind, including their relevant bargaining
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`strength and any other economic factors that would affect negotiating the hypothetical license. See
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`Georgia-Pac., 318 F. Supp. at 1121. R2’s financial statements will provide such information.
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`They will contain information probative of R2’s relative bargaining strength, including its financial
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 5 of 10 PageID #: 5682
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`condition, its financial obligations, and the relative benefit it would gain from different royalty
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`amounts proposed during any hypothetical negotiation. Such information bears on R2’s
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`bargaining power at the hypothetical negotiation table. Databricks is entitled to discover this basic
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`financial information, which any “normally prudent businessmen would, under similar
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`circumstances, take into consideration in negotiating the hypothetical license.” See id.
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`Moreover, Databricks’ request for financial statements is proportional to the needs of this
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`case. Indeed, Databricks has limited its request to just the five financial statements for the time
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`period during which R2 owned the patent (2020 through 2024). R2 has not, and cannot, identify
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`any legitimate burden associated with Databricks’ limited discovery request.
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`R2’s only argument for refusing to produce these financial statements is that they are
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`allegedly not relevant. Specifically, R2 claims that they are not relevant because, first, R2 is not a
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`party to the hypothetical negotiation, and second, even if it were a party to the hypothetical
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`negotiation, its statements are not relevant because it does not sell products or services. Neither
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`claim has merit.
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`First, R2’s claim that it is not a party to the hypothetical negotiation is disputed and
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`unproven, and does not excuse R2 from complying with its discovery obligations. “[T]he date of
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`the hypothetical negotiation is the date that the infringement began.” LaserDynamics, Inc. v.
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`Quanta Computer, Inc., 694 F.3d 51, 75-76 (Fed. Cir. 2012); see also Touchstream Techs., Inc. v.
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`Charter Commc'ns, Inc., No. 2:23-CV-00059-JRG-RSP, 2024 WL 5247151, at *3 (E.D. Tex. Dec.
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`30, 2024) (noting and agreeing with plaintiff’s argument that the hypothetical negotiation is
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`deemed to “occur at ‘the start of infringement, i.e., when both a patent had issued and accused
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`products were sold.’”). Here, R2 argues that the first alleged infringement occurred in 2015, at a
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`time when another entity owned the asserted patent—but such an argument belies R2’s own
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 6 of 10 PageID #: 5683
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`contentions, which fail to provide any allegation regarding the date of first infringement, let alone
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`prove infringement in 2015. For example, throughout its supplemental infringement contentions,
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`R2 cites to code called “SortMergeJoinEvaluatorFactory,” which was introduced no earlier than
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`July 2023. R2 has not explained why or how its infringement theory does not require the cited
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`“SortMergeJoinEvaluatorFactory” code. In other words, on their face, R2’s own contentions
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`indicate that the earliest date of infringement would be no earlier than July 2023. And, if R2
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`continues to fail to prove infringement at any time period before it acquired the patent (in 2020),
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`then R2 would be the party to the hypothetical negotiation.2 Accordingly, R2’s financial
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`statements for the years 2020-2024 are relevant.
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`Second, R2 argues that even if it is a party to the hypothetical negotiation, its financial
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`statements are irrelevant. This, too, should be rejected. As explained above, R2’s financial
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`statements provide basic financial information that shed light on its “relative bargaining strength”
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`and “other economic factor[s] that normally prudent businessmen would, under similar
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`circumstances, take into consideration in negotiating the hypothetical license.” Georgia-Pac., 318
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`F. Supp. at 1120. Such information regarding a party’s bargaining power affects the outcome of
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`the hypothetical negotiation. For example, a party in a weak financial condition at the time of the
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`negotiation may be motivated to accept a lower royalty amount in order to get a cash infusion
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`sooner. Or, as another example, if acquisition of the asserted patent was a significant investment
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`by the party relative to its other assets, it might be motivated to seek higher licensing values.
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`2 Moreover, even if R2 proves infringement at an earlier date (it has not), the Book of Wisdom
`doctrine allows consideration of financial information dated after the hypothetical negotiation.
`See, e.g., Advanced Tech. Incubator, Inc. v. Sharp Corp., No. 2:07-CV-468, 2009 WL 4723733,
`at *4 (E.D. Tex. Sept. 8, 2009) (“[T]he Federal Circuit does not automatically preclude the
`consideration of actual purchase prices and costs that were paid after the date of such a
`‘hypothetical’ negotiation.”).
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 7 of 10 PageID #: 5684
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`Indeed, information regarding a party’s bargaining strength is specifically contemplated in
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`multiple Georgia-Pacific factors, including the fifth factor regarding “[t]he commercial
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`relationship between the licensor and licensee,” and the twelfth factor regarding “[t]he portion of
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`the profit or of the selling price that may be customary in the particular business or in comparable
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`businesses to allow for the use of the invention or analogous inventions.” These factors allow for
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`consideration of the financial condition of a party, including the revenue, costs, and profits of its
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`business. Even if R2 is not a direct competitor to Databricks and does not sell products that
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`compete with those of Databricks, this financial information is probative of the relationship R2 (as
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`the hypothetical licensor) would have with Databricks (as the hypothetical licensee), and the
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`portion of profit it would expect from the hypothetical license. As this information is contained in
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`R2’s financial statements, Databricks should be afforded the opportunity to review it.
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`IV. CONCLUSION
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`Accordingly, Databricks respectfully requests that the Court grant this motion and compel
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`R2 to provide its 2020-2024 financial statements.3
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`3 In the alternative, Databricks requests R2’s two financial statements for years 2023-2024, which
`is the time period following the introduction of the code cited in R2’s contentions. See supra at 5.
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 8 of 10 PageID #: 5685
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`Dated: February 10, 2025
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`Respectfully submitted,
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`/s/ Jessica M. Kaempf
`Michael J. Sacksteder
`CA Bar No. 191605 (Admitted E.D. Texas)
`Email: msacksteder@fenwick.com
`Gregory Sefian
`CA Bar No. 341802 (Admitted Pro Hac Vice)
`Email: gsefian@fenwick.com
`S. Emma Lee
`CA Bar No. 344074 (Admitted Pro Hac Vice)
`Email: emma.lee@fenwick.com
`FENWICK & WEST LLP
`555 California Street, 12th Floor
`San Francisco, CA 94104
`Telephone:
`415.875.2300
`Facsimile:
`415.281.1350
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`Dargaye Churnet
`CA Bar No. 303659 (Admitted E.D. Texas)
`Email: dchurnet@fenwick.com
`FENWICK & WEST LLP
`730 Arizona Ave, 1st Floor
`Santa Monica, CA 90401
`Telephone:
`310.434.5400
`Facsimile:
`650.938.5200
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`Vigen Salmastlian
`CA Bar No. 276846 (Admitted E.D. Texas)
`Email: vsalmastlian@fenwick.com
`FENWICK & WEST LLP
`801 California Street,
`Mountain View, CA 94041
`Telephone:
`650.988.8500
`Facsimile:
`650.938.5200
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 9 of 10 PageID #: 5686
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`Jessica M. Kaempf
`WA Bar No. 51666 (Admitted E.D. Texas)
`Email: jkaempf@fenwick.com
`Jonathan G. Tamimi
`WA Bar No. 54858 (Admitted E.D. Texas)
`Email: jtamimi@fenwick.com
`FENWICK & WEST LLP
`401 Union Street, 5th Floor
`Seattle, WA 98101
`Telephone:
`206.389.4510
`Facsimile:
`206.389.4511
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`Attorneys for Defendant
`Databricks Inc.
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`Case 4:23-cv-01147-ALM Document 83 Filed 02/10/25 Page 10 of 10 PageID #:
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`CERTIFICATE OF CONFERENCE
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`The undersigned hereby certifies that counsel for Defendant has complied with the meet
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`and confer requirements in L.R. 7(h) and FRCP 37(a)(1) regarding this opposed motion. Counsel
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`for both parties met and conferred as required. Counsel for both parties participated in a telephonic
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`hearing with the Court, at which the Court authorized this filing.
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`/s/ Jessica M. Kaempf
`Jessica M. Kaempf
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`CERTIFICATE OF SERVICE
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`I hereby certify that on February 10, 2025, I electronically filed the foregoing Motion to
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`Compel with the Clerk of the Court using the CM/ECF system, which will send notification of
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`such filing to all counsel of record.
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`/s/ Jessica M. Kaempf
`Jessica M. Kaempf
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