Case 5:19-cv-00036-RWS Document 160 Filed 12/06/19 Page 1 of 11 PageID #: 6228
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TEXARKANA DIVISION
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`MAXELL, LTD.,
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`Plaintiff
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`Civil Action NO. 5:19-cv-00036-RWS
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`v.
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`APPLE INC.,
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`Defendant.
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`JURY TRIAL DEMANDED
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`APPLE INC.’S MOTION TO COMPEL
`LICENSING AND NEGOTIATION DOCUMENTS
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`Case 5:19-cv-00036-RWS Document 160 Filed 12/06/19 Page 2 of 11 PageID #: 6229
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`TABLE OF AUTHORITIES
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`Page
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`I.
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`II.
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`INTRODUCTION ............................................................................................................. 1
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`MATERIAL FACTS ......................................................................................................... 1
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`III.
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`LEGAL STANDARD ........................................................................................................ 4
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`IV. ARGUMENT ..................................................................................................................... 5
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`V.
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`CONCLUSION .................................................................................................................. 7
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`Case 5:19-cv-00036-RWS Document 160 Filed 12/06/19 Page 3 of 11 PageID #: 6230
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`I.
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`INTRODUCTION
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`Plaintiff Maxell, Ltd. (“Maxell”) is trying to monetize patents in the United States
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`without providing full discovery on their encumbrances, claiming that highly relevant licenses
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`and communications are locked away in Japan with the asserted patents’ previous owner.
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`Maxell offers specious explanations in claiming that it has no practical ability to get such
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`documents, even though the entity that possesses them—Hitachi Ltd.—completely owned
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`Maxell until very recently, still partially owns, and recently loaned a key employee to work for
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`Maxell “on assignment.” Maxell claims that it was given only certain files along with the
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`patents assigned to it by Hitachi and that, as a passive recipient of such files, it has no authority
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`to demand anything else—no matter how utterly deficient the transfer was. The result is that
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`Maxell gets the best of both worlds: it can both accuse Apple of infringement and then claim
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`ignorance when it is revealed that many of the very accused components are actually licensed.
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`The prejudice to Apple is manifest. Apple should not be forced to engage in international
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`and third-party discovery to determine the full extent to which the patents asserted by Maxell
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`have already been licensed to Apple’s suppliers by Hitachi. Maxell should be compelled to fully
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`utilize its obvious practical ability to engage with Hitachi—with which it has a significant and
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`continuing relationship—and provide full discovery.
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`II. MATERIAL FACTS
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`Patent and Entity Ownership History: The Plaintiff—Maxell—is the latest assignee of
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`the asserted patents themselves and/or the parent applications from which they stem (the
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`“asserted patents”). All ten asserted patents originated with Hitachi, Ltd. (“Hitachi”). See D.I.
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`111 (Am. Compl.) at ¶ 4. In 2009, Hitachi assigned the asserted patents to its wholly owned
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`1
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`subsidiary, Hitachi Consumer Electronics Co., Ltd. (“HCE”).1 Am. Compl. at 1[ 4. In 2013,
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`HCE assigned them to Hitachi Maxell, Ltd. (“Hitachi Maxell”). Id. Hitachi wholly owned
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`Hitachi Maxell until 2017, when Hitachi sold most of its shares but retained a 15% stake.2 Later
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`in 2017, Hitachi Maxell assigned the asserted patents to Maxell due to a reorganization/name
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`change. Am. Compl. at 1[ 4. Around the same time, Hitachi reduced its stake in Hitachi Maxell
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`(later renamed Maxell Holdings, Ltd.), to about 3%, where it currently stands.3
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`Licensing and Potential Sale of Asserted Patents: While Hitachi owned the asserted
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`patents, it actively licensed them—
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`—
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`——
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`— Maxell lists Mr. Matsuo as a witness with knowledge about “licensing
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`1 See “Hitachi Announces Corporate Split and New Company Establishment Plan for Consumer
`Business Group,” (https://www.hitachi.com/New/cnews/f 090526a.pdfl (last visited on
`December 3, 2019).
`2 See “Notification of Change in Capital Relationship between Hitachi and Hitachi Maxell,”
`thttp://www.hitachi.com/New/cnews/month/ZO17/03/f 170321a.pdfl (last visited on December
`3, 2019) (noting an intention to “keep [a] collaborative relationship”).
`3 See “Hitachi drawing down Maxell stake,”
`htt s://asia.nikkei.conl/Business/Markets/Stocks/Hitachi-drawin -down-Maxell-stake (last
`visited on December 3, 2019); Maxell Holdings, Ltd. Integrated Report 2019,
`htt s://www2.maxell.co.'
`/ir/ df/MHD IRl9 E interactive. d at 66 (last visited on
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`December 3, 2019).
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`of Maxell patents” and should be contacted through Maxell’s lawyers. Ex. 2.
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`Discovery Regarding Pre—Suit Communications and Mr. Matsuo’s Employment
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`“Assignment” to Maxell: Maxell filed this lawsuit in March 2019 and produced some pre-suit
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`commmaicaaons and some licenses-—
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`— Maxell also claimed that Mr-
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`Matsuo is no longer an employee of Maxell. Maxell’s counsel offered to contact Hitachi and ask
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`for the documents that Apple had been demanding. Maxell later sent a letter to Satoshi Matsuo
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`on September 11, 2019, which it claims has been ignored.4 Apple then requested documents to
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`support Maxell’s explanation regarding the nature of Mr. Matsuo’s “assignment” to Maxell, and
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`Maxell confirmed that it had no such doclunents.
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`Discovery Regarding Licenses:—
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`—
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`4 Apple has also filed a Motion for Issuance of Letters of Request for International Judicial
`Assistance (1)1. 146) to try to obtain doclunents directly from Hitachi, Ltd., notwithstanding the
`low likelihood that responsive documents will be produced in timely manner. This motion does
`not, however, absolve Maxell of its duty to produce the docmnents itself.
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`— Maxell represented during a meet and confer that it had
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`produced all licenses in its possession that concerned the “smartphone portfolio,” i.e., the set of
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`patents that includes the asserted patents.—
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`— This is troubling given that Maxell has alleged infringement
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`through Apple’s use of components it purchased from these and other suppliers.5
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`IH.
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`LEGAL STANDARD
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`Subject to the limitation of Rule 26 of the Federal Rules of Civil Procedure, Rule 34(a)(1)
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`of the Federal Rules of Civil Procedure provides that a party may obtain discovery that is “in the
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`responding party’s possession, custody, or control.” This C01111 has held that “‘control’ does not
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`require that a party have legal ownership or actual physical possession of the documents at issue;
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`rather, documents are considered to be under a party’s control for discovery purposes when that
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`party has the right, authority, or practical ability to obtain the documents from a nonparty to the
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`suit.” Kamatani v. BenQ Corp, 2005 US. Dist. LEXIS 42762, *17 (ED. Tex. Oct. 6, 2005)
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`(citing Bank ofNew York v. Meridien Biao Bank Tan; , 171 F.R.D. 135 (S.D.N.Y. 1997)).
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`Whether a party has the “right, authority or practical ability” to obtain information from a
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`non-party is determined by examining the nature of the relationship between the entities at issue
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`through the following five factors: (1) commonality of ownership; (2) exchange or inteimingling
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`of directors, officers or employees of the two corporations; (3) exchange of documents between
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`IU‘
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`the corporations in the ordinary course of business; (4) any benefit or involvement of the non-
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`party corporation in the transaction; and (5) involvement of the non-party corporation in the
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`litigation. Diamond Consortium, Inc. v. Manookian, No. 4:16CV94-ALM, 2017 U.S. Dist.
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`LEXIS 122625, at *23-24 (E.D. Tex. Aug. 3, 2017) (citing Shell Global Solutions (US) Inc. v.
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`RMS Eng’g, Inc., 2011 U.S. Dist. LEXIS 85120, *6 (S.D. Tex. Aug. 3, 2011).
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`IV. ARGUMENT
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`Maxell does not dispute that the discovery Apple seeks in this motion—(1)
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`communications related to Apple’s potential purchase of the ’794 patent; and (2) licenses that
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`grant rights to the asserted patents to Apple’s suppliers—is relevant.6 Maxell disputes instead
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`that it has a duty to gather and produce these documents even though they are not in its physical
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`possession and instead reside with the patent assignor, i.e., Hitachi. As a general matter, it would
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`be “logically inconsistent and unfair to allow the right to sue to be transferred” without “the
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`obligations that go with litigating a claim.” Royal Park Invs. SA/NV v. Deutsche Bank Nat’l
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`Trust Co., No. 14-CV-04394 (AJN)) (BCM), 2018 U.S. Dist. Lexis 128189, at *12 (S.D.N.Y.
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`May 15, 2018) (quoting JPMorgan Chase Bank v. Winnick, 228 F.R.D. 505, 506 (S.D.N.Y.
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`2005)). Hitachi/HCE would unquestionably have the duty to produce these documents, and
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`permitting Maxell to escape this obligation by virtue of Hitachi being a third party would be
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`tantamount to allowing them to “assign a claim more valuable than [they] could ever have,”
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`because it “would entail certain [discovery] obligations that, when assigned, would magically
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`disappear.” Winnick, 228 F.R.D. at 506. Further, in any event, stepping through each of the
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`Shell factors shows that Maxell and Hitachi are closely intermingled corporate entities, and that
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`6 To the extent for the first time in opposition to this Motion Maxell tries to dispute the relevancy
`of category (1), it would be incorrect. Documents showing negotiations over the sale of an
`asserted patent in this case by the very party accused of infringing that patent are highly relevant
`to at least damages and to show at least the course of the parties’ dealings.
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`5
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`Maxell should have several avenues available to it for obtaining these highly relevant documents.
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`(1) Commonality of ownership: Maxell was wholly owned by Hitachi through much of
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`its pre-suit interactions with Apple, until 2017, and Hitachi still retains a 3% stake.
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`(2) Exchange or intermingling of directors, officers or employees of the two
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`dispute that Mr. Matsuo is both (1) a current employee of Hitachi and (2) was “assigned” to
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`Maxell as recently as December 2017 (which, notably, was after Hitachi reduced its stake in
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`Maxell to 3%). Maxell claims that Mr. Matsuo’s engagement has ended. Ex. 4. Maxell also
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`claims that there are no documents embodying or otherwise describing the scope and nature of
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`Mr. Matsuo’s “assigmnent” to Maxell.
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`(3) Exchange of documents in the ordinary course of business: A cursory review of
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`the public record shows that Maxell and Hitachi closely coordinate on business ventures and
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`surely exchange documents 111 the ordina1y course of business. For example, Maxell develops
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`light source projectors that it sells under the Hitachi brand name and distlibutes through Hitachi.7
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`7 See Maxell Appoints Hitachi to Launch its new Projectors111 Spring 2019
`a11.com/a1ticle/ 1ess-1eleases/maxell—-a
`oints-hitachi-to—lalmch—its—new—
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`project01s-ill-spling-ZO 1 91 (last visited December 3 2019).
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`(4) Benefit or involvement of the non-party corporation in the transaction: For
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`purposes of a patent infiingement suit, the “transaction” has been construed to relate to
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`obtaimnent of the IP rights at issue. See Shell, 2011 US. Dist. LEXIS 85120 at *8-9. Here,
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`Hitachi assigned the asserted patents to HCE, and then HCE to Hitachi Maxell, and then Hitachi
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`Maxell to Maxell. The Hitachi predecessor entities were also involved in monetizing the
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`asserted patents, including attempting to sell at least of them (the ’794 patent) to Apple.
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`(5) Involvement of the non-party corporation in the litigation: Apple expects Hitachi
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`to be involved in this litigation through at least making inventors of the asserted patents available
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`for deposition. Maxell was able to offer Hitachi inventors to appear for deposition in its
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`litigations against Huawei and ZTE (at least nine that Apple is aware of). Maxell’s initial
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`disclosures also specify that inventors should be contacted through Maxell’s counsel. Ex. 2. The
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`same is true of Satoshi Matsuo, who is listed as a witness with knowledge about “licensing of
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`Maxell patents” and should be contacted through Maxell. Id. In total, the circmnstances show
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`that Hitachi and Maxell have a sufficiently intimate relationship, including through their recent
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`sharing of Satoshi Matsuo as an employee and their ability to request assistance at any time.
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`V.
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`CONCLUSION
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`Apple’s motion should be granted, and Maxell should produce all communications
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`related to potential sale of asserted patents to Apple, and all licenses that its predecessor entities
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`entered into that include rights to any asserted patent. Apple does not seek discovery sanctions
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`through this motion under, e.g., FED. R. CIV. P. 37, but reserves the right to do so.
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`Case 5:19-cv-00036-RWS Document 160 Filed 12/06/19 Page 10 of 11 PageID #: 6237
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`December 4, 2019
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`/s/ Luann L. Simmons
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`Luann L. Simmons (Pro Hac Vice)
`lsimmons@omm.com
`O’MELVENY & MYERS LLP
`Two Embarcadero Center
`28th Floor
`San Francisco, CA 94111
`Telephone: 415-984-8700
`Facsimile: 415-984-8701
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`Xin-Yi Zhou (Pro Hac Vice)
`vzhou@omm.com
`Anthony G. Beasley (TX #24093882)
`tbeasley@omm.com
`O’MELVENY & MYERS LLP
`400 S. Hope Street
`Los Angeles, CA 90071
`Telephone: 213-430-6000
`Facsimile: 213-430-6407
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`Laura Bayne Gore (Pro Hac Vice)
`lbayne@omm.com
`O’MELVENY & MYERS LLP
`Times Square Tower, 7 Times Square
`New York, NY 10036
`Telephone: 212-326-2000
`Facsimile: 212-326-2061
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`Melissa R. Smith (TX #24001351)
`melissa@gilliamsmithlaw.com
`GILLIAM & SMITH, LLP
`303 South Washington Avenue
`Marshall, Texas 75670
`Telephone: (903) 934-8450
`Facsimile: (903) 934-9257
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`Attorneys for Defendant Apple Inc.
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`Case 5:19-cv-00036-RWS Document 160 Filed 12/06/19 Page 11 of 11 PageID #: 6238
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`CERTIFICATE OF SERVICE
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`The undersigned hereby certifies that all counsel of record who are deemed to have
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`consented to electronic service are being served with a copy of this document via the Court's
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`CM/ECF system per Local Rule CV-5(a)(3) on December 4, 2019.
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`/s/ Melissa R. Smith
`Melissa R. Smith
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`CERTIFICATE OF CONFERENCE
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`Counsel have complied with the meet and confer requirement in Local Rule CV-7(h) and
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`the instant motion is opposed. Counsel met and conferred by telephone, with local counsel and
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`lead counsel in attendance, on two occasions regarding the relief requested in this motion: on
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`October 4, 2019, and on November 4, 2019. The most recent meet and confer was attended by:
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`(i) Luann Simmons, Vincent Zhou, Tony Beasely, and Melissa Smith for Apple; and (ii) Jamie
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`Beaber, Kfir Levy, Tripp Fussell, Geoff Culbertson for Maxell. The parties could not agree
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`whether Maxell has an obligation and/or the ability to produce the requested Hitachi discovery,
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`and discussions on this issue have conclusively ended in an impasse, leaving an open issue for the
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`court to resolve.
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`/s/ Melissa R. Smith
`Melissa R. Smith
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`9
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