Cal. Expanded Metal Prods. Co. v. Klein
Cal. Expanded Metal Prods. Co. v. Klein
2020 WL 9182723 (W.D. Wash. 2020)
October 19, 2020
Robart, James L., United States District Judge
Summary
The court granted Plaintiffs' motion to initiate contempt proceedings against Defendants and granted Plaintiffs' motion for discovery to determine the extent of any violations of the permanent injunction. The court also ordered Plaintiffs to provide Defendants with ESI relevant to the contempt proceedings, including emails, text messages, and other documents, as well as a privilege log for any ESI that is withheld on the basis of privilege. The court noted that ESI may provide evidence of infringement and has not yet ruled on the admissibility of ESI.
Additional Decisions
CALIFORNIA EXPANDED METAL PRODUCTS COMPANY, et al., Plaintiffs,
v.
JAMES A. KLEIN, et al., Defendants
v.
JAMES A. KLEIN, et al., Defendants
CASE NO. C18-0659JLR
United States District Court, W.D. Washington
Signed October 19, 2020
Counsel
Dylan C. Dang, Pro Hac Vice, Francis Wong, Pro Hac Vice, R. Joseph Trojan, Pro Hac Vice, Trojan Law Offices, Beverly Hills, CA, Brian G. Bodine, Paul Douglas Swanson, Lane Powell PC, Seattle, WA, Ira G. Rivin, Rutan and Tucker LLP, Costa Mesa, CA, for Plaintiff California Expanded Metal Products Company.Ann G. Schoen, Pro Hac Vice, Jeffrey F. Kersting, Pro Hac Vice, Frost Brown Todd LLC, Cincinnati, OH, Francis Wong, Pro Hac Vice, Trojan Law Offices, Beverly Hills, CA, Robert J. Carlson, Lee & Hayes, Seattle, WA, for Plaintiff Clarkwestern Dietrich Building Systems LLC.
Patrick C. Bageant, Hollystone Law, Thomas J. Lloyd, III, Pro Hac Vice, Elam & Burke, P.A., Boise, ID, Thomas E. Loop, Pro Hac Vice, Loop Intellectual Property Law, Seattle, WA, Bassil A. Hamideh, The Hamideh Firm, P.C., Los Angeles, CA, for Defendant James A. Klein.
Patrick C. Bageant, Hollystone Law, Thomas J. Lloyd, III, Pro Hac Vice, Elam & Burke, P.A., Boise, ID, Thomas E. Loop, Pro Hac Vice, Loop Intellectual Property Law, Seattle, WA, for Defendants BlazeFrame Industries Ltd., Safti Seal, Inc.
Robart, James L., United States District Judge
ORDER ON MOTION TO REOPEN AND MOTION FOR DISCOVERY
(PROVISIONALLY FILED UNDER SEAL)
I. INTRODUCTION
*1 Before the court are Plaintiffs California Expanded Metal Products Company (“CEMCO”) and Clarkwestern Dietrich Building Systems’ (“ClarkDietrich”) (collectively, “Plaintiffs”) motion to reopen (Mot. to Reopen (Dkt. ## 166 (redacted), 173-1 (sealed)); Reply to Mot. to Reopen (Dkt. ## 183 (redacted), 185-1 (sealed))); and Plaintiffs’ motion for discovery (Mot. for Disc. (Dkt. ## 167 (redacted), 173-2 (sealed)); Reply to Mot. for Disc. (Dkt. ## 182 (redacted), 185-2 (sealed))). Defendants James A. Klein, Safti-Seal, Inc., and BlazeFrame Industries Ltd. (collectively, “Defendants”) oppose both motions. (Resp. to Mot. to Reopen (Dkt. ## 174 (redacted), 179 (sealed)); Resp. to Mot. for Disc. (Dkt. ## 175 (redacted), 180 (sealed)).) The court has reviewed the motions, the parties’ submissions in support of and in opposition to the motions, the relevant portions of the record, and the applicable law. Being fully advised, the court GRANTS in part and DENIES in part Plaintiffs’ motion to reopen and GRANTS in part and DENIES in part Plaintiffs’ motion for discovery.[1]
II. BACKGROUND
A. The Parties’ History
The parties to this patent infringement action have tumultuous history. Mr. Klein, a former CEMCO employee, is the named inventor of four related Patents: U.S. Patent No. 7,681,365 (“the '365 patent”), U.S. Patent No. 7,814,718 (“the '718 patent”), U.S. Patent No. 8,136,314 (“the '314 patent”), and U.S. Patent No. 8,151,526 (“the '526 patent”) (collectively, “the Patents”). (See 11/22/19 MSJ Order (Dkt. # 135) at 3 (citations omitted).) The Patents cover head-of-wall assemblies that are used in commercial construction to prevent the spread of smoke and fire. (See id. at 5-6.) In May 2012, Mr. Klein assigned the Patents to BlazeFrame, a Washington corporation that he co-founded. (Id. at 3 (citations omitted).)
Later that year, CEMCO sued Mr. Klein and ClarkDietrich in the United States District Court for the Central District of California. See Cal. Expanded Metal Prods. Co. v. Clarkwestern Dietrich Bldg. Sys., LLC, No. CV12-10791-DDP-MRW (C.D. Cal.) (“the first California case”). CEMCO alleged that Mr. Klein breached a contractual obligation to offer CEMCO an exclusive license to any construction products he invented after leaving CEMCO. Id., Dkt. # 1. In October 2015, the parties reached a settlement agreement under which Mr. Klein and BlazeFrame sold the Patents to CEMCO in exchange for, inter alia, a license to sell head-of-wall assemblies covered by the Patents in a geographically restricted area (“the first settlement agreement”). (See 5/10/19 Trojan Decl. ¶ 7, Ex. 6.)
In August 2016, CEMCO—this time joined by ClarkDietrich—filed a second suit against Mr. Klein and BlazeFrame. See Cal. Expanded Metal Prods. Co. v. Klein, No. CV16-5968-DDP-MRW (C.D. Cal.) (“the second California case”). Plaintiffs alleged that BlazeFrame breached the first settlement agreement by selling licensed products outside the agreed-upon area. (See generally 5/10/19 Trojan Decl. (Dkt. # 103) ¶ 8, Ex. 7.) Plaintiffs further alleged that Mr. Klein and BlazeFrame had infringed the Patents that CEMCO acquired in the first settlement agreement. (See id.) In June 2017, the parties settled the second California case through a confidential agreement (“the second settlement agreement”), and the suit was dismissed. See No. CV16-5968-DDP-MRW, Dkt. # 119. CEMCO remains the owner of the Patents, and ClarkDietrich is the Patents’ exclusive licensee. (See Compl. (Dkt. # 1) ¶ 84.)
B. The Current Lawsuit and Settlement
*2 On January 10, 2018, Plaintiffs filed this suit against Mr. Klein, BlazeFrame, and Safti-Seal, a Washington corporation that Mr. Klein founded in September 2017. (See Compl.; 8/6/18 Klein Decl. (Dkt. # 82-1) ¶ 4.) Plaintiffs alleged that Mr. Klein and Safti-Seal sold multiple products that infringed at least one claim of each Patent. (Compl. ¶¶ 82-85.) In its summary judgment order, the court divided these products into two groups: “(1) a tape product that includes intumescent material, called Safti-Strip ... and (2) sheet metal tracks suitable for installation in commercial construction projects.”[2] (11/22/19 MSJ Order at 7.) Additionally, Plaintiffs brought a breach of contract claim against Mr. Klein and BlazeFrame for alleged violations of the second settlement agreement. (Id. ¶¶ 73-81, 86-94.)
The parties settled this case on the eve of trial. (See 12/9/19 Min. Entry (Dkt. # 157).) As part of the settlement agreement, the parties agreed to a consent judgment and permanent injunction. (See Consent J.) The consent judgment entered judgment “against Defendants and in favor of Plaintiffs on Plaintiffs’ claims that the Accused Products infringe the Asserted Patents.” (Id. at 2.) The judgment defined the “Accused Products” as “(1) Safti-Frame with an intumescent strip on the surface of a sidewall of a U-shaped track, and (2) Safti-Strip if applied to the outer surface of a sidewall of a U-shaped track”; and the “Asserted Patents” as the four patents at issue in this suit—the '365 patent, the '718 patent, the '314 patent, and the '526 patent. (Id.) Pursuant to the terms of the permanent injunction, Defendants are enjoined from directly, indirectly, or contributorily infringing the Patents by marketing and selling the Safti-Frame and Safti-Strip products or by assisting third parties in selling those products. (See id. at 3.) Defendants also consented to “the continuing jurisdiction of the [c]ourt for purposes of enforcement” of the consent judgment and injunction and agreed that the court “shall maintain jurisdiction over the parties for the purpose of enforcing” the consent judgment and injunction. (Id.)
In conjunction with the consent judgment and permanent injunction, the parties separately entered into a third settlement agreement (the “Settlement Agreement,” or the “Agreement”). (See 6/22/20 Trojan Decl. (Dkt. # 173-4 (sealed)) ¶ 2, Ex. D.1 (“Settlement Agmt.”).) The Settlement Agreement requires Defendants to stop accepting new orders for Safti-Frame and Safti-Strip products, but allows Defendants to fulfill existing orders for those products until March 31, 2020. (See id. at 1.) The Agreement also states that Mr. Klein “may develop a new product(s) (‘the New Product’) that is not covered by any claim of the patents-in-suit,” but specifies that Defendants may not sell the New Product. (Id. at 2.) Instead, “[Mr.] Klein is permitted to sell the design to a bona fide third-party company over which he has no ownership role or right to control.” (Id.) The Agreement allows Mr. Klein to be employed by the third party, but it states that “in no event shall he direct its operations or sales.” (Id.) More specifically, the Settlement Agreement dictates that “[Mr.] Klein will not speak to, or otherwise communicate with, customers about intumescent track products” in any future role with third parties. (Id. at 3.)
The Settlement Agreement also contains a number of provisions regarding future disputes. To the extent that Plaintiffs believe the New Product infringes any of the Patents, the Agreement indicates that the parties will submit that dispute to a third party neutral. (Id. at 3.) For any dispute involving breach of the Agreement outside of an infringement claim, Defendants also agree to “submit[ ] themselves ... to the personal jurisdiction of any court in Los Angeles County having subject matter jurisdiction and will not file a motion to transfer on any basis.” (Id. at 4.) Finally, despite the presence of these dispute resolution terms, the Settlement Agreement explicitly states that “[n]othing in the dispute resolution procedures contained in the settlement agreement shall be a pre-requisite to enforcement of the permanent injunction, i.e., the dispute resolution procedures and enforcement of the permanent injunction may each be pursued separately.” (Id.)
C. The Present Dispute
*3 Regrettably, the third time was not the charm for the parties. On June 22, 2020, Plaintiffs moved to reopen this case to initiate contempt proceedings against Defendants and various third parties for violations of the permanent injunction. (See generally Mot. to Reopen.) Plaintiffs allege that Defendants are selling a Fire Rated Gasket (“FRG”) line of products that continue to infringe the Patents in violation of the permanent injunction. (See id. at 1-2.) According to Plaintiffs, third party Steeltec Supply, Inc. (“Steeltec”) and its governors, Jaroslaw Sydry and Leszek Orszulak, acted in concert with Defendants to create a new company, Seal4Safti, to sell the FRG products in an attempt to circumvent the consent judgment and injunction. (See id. at 10-11.) Plaintiffs also seek leave to take discovery against Defendants, Steeltec, Seal4Safti, Mr. Sydry, Mr. Orszulak, and other third parties in order to determine the extent of any violations of the permanent injunction. (See generally Mot. for Disc.)
III. ANALYSIS
A. Motion to Reopen
Plaintiffs’ motion to reopen and initiate contempt proceedings seeks to reopen this case in order to determine whether Defendants and those “acting in concert” with Defendants—namely, Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak—are violating the court's permanent injunction by infringing the Patents. (See Mot. to Reopen at 1-2, 10-11.) Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak are not parties to this lawsuit. (See generally Dkt.) Thus, Plaintiffs’ motion for contempt presents two distinct issues: (1) whether contempt proceedings are warranted against Defendants, who are parties to this lawsuit and explicitly bound by the permanent injunction; and (2) whether contempt proceedings are warranted against non-parties Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak. The court first addresses the applicable legal standard before turning to each issue.
1. Legal Standard
Violating an injunction in a patent case harms the patent owner and is “an affront to the court for failure to obey its order.”[3] KSM Fastening Sys., Inc. v. H.A. Jones Co., Inc., 776 F.2d 1522, 1524 (Fed. Cir. 1985), overruled on other grounds by TiVo Inc., 646 F.3d 869. A party who violates an injunction that prohibits patent infringement may be held in civil contempt. See, e.g., TiVo Inc., 646 F.3d at 879-83 (outlining the appropriate standard for civil contempt proceedings based on allegations that a party has infringed a patent in violation of an injunction). “Contempt proceedings are generally summary in nature and may be decided by the court on affidavits and exhibits without the formalities of a full trial.” KSM Fastening Sys., Inc., 776 F.2d at 1524 (citations omitted).
As a threshold matter, the court clarifies that although Plaintiffs make clear that they ultimately intend to ask the court to hold Defendants in contempt for violating the permanent injunction, the current motion is not a motion for contempt. (See Mot. to Reopen at 1-2.) Instead, Plaintiffs move to reopen this case to initiate contempt proceedings against Defendants. (See id.) The Federal Circuit holds that the initial determination of whether to initiate contempt proceedings based on allegations that a defendant is violating an injunction in a patent infringement case “is left to the broad discretion of the trial court to be answered based on the facts presented.” TiVo Inc., 646 F.3d at 881 (citations omitted). “What is required for a district court to hold a contempt proceeding is a detailed accusation from the injured party setting forth the alleged facts constituting the contempt.”[4] Id.
2. Application to Defendants
*4 The court rejects Defendants’ threshold arguments that this court is somehow not entitled to consider Plaintiffs’ motion and enforce its own injunction based on language in the parties’ Settlement Agreement. (See Resp. to Mot. to Reopen at 1 (“[T]he Settlement Agreement ... contains forum and venue agreements that direct further litigation away from this [c]ourt: it requires that the allegations of patent infringement in Plaintiffs’ Motion be resolved by a third-party neutral (rather than the Federal Courts), and that its [sic] allegations of failure to comply with the Settlement Agreement be brought in Los Angeles, California (and not this [c]ourt).”).) These arguments misunderstand Plaintiffs’ motion and misconstrue the Settlement Agreement. Although the Settlement Agreement allowed Mr. Klein to make a “new” product and required Plaintiffs to submit infringement contentions about that new product to a third party (see Settlement Agmt. at 2-3), Plaintiffs’ motion does not submit new infringement claims. Instead, Plaintiffs seek to initiate contempt proceedings against Defendants for violations of the permanent injunction because Plaintiffs believe that Defendants’ “new” FRG products are not new at all and continue to infringe Plaintiffs’ Patents in the same way that the Safti-Strip and Safti-Frame products infringed the Patents. (See Mot. to Reopen at 1 (“[R]ather than obey this Court's injunction and honor their contractual obligations in the parties’ Settlement Agreement, Defendants continue making and selling products that are the same as the infringing products. They have merely slapped a different name on the same old products.”).) Nothing in the Settlement Agreement precludes the court from enforcing its own injunction. Indeed, the Settlement Agreement explicitly states that “[n]othing in the dispute resolution procedures contained in the [S]ettlement [A]greement shall be a pre-requisite to enforcement of the permanent injunction.” (Settlement Agmt. at 4.)
Defendants’ argument that Plaintiffs are improperly raising breach of contract claims, which Defendants claim must be adjudicated in California according to the Settlement Agreement (see Resp. to Mot. to Reopen at 2), is disingenuous on multiple levels. First, the jurisdiction and venue provision in the Settlement Agreement is quite clearly permissive, not mandatory. (See Settlement Agmt. at 4) (“Defendants submits themselves, and any company in which Defendants has more than 10% ownership interest or over which he exercises managerial control, to the personal jurisdiction of any court in Los Angeles County having subject matter jurisdiction and will not file a motion to transfer on any basis.”). Moreover, even if this jurisdiction and venue language was mandatory, it is inapplicable. Although the court agrees that Plaintiffs make passing reference to Defendants’ alleged violations of the Settlement Agreement (see, e.g., Mot. to Reopen at 2, 11), Plaintiffs did not file a motion to enforce the Settlement Agreement or assert breach of contract claims. Plaintiffs move to initiate contempt proceedings based on alleged violations of the permanent injunction. (See id. at 1-2.) Thus, the jurisdiction and venue provisions of the Settlement Agreement are irrelevant.
On the merits of Plaintiffs’ motion, the court concludes that Plaintiffs have set forth a detailed accusation regarding Defendants’ alleged contempt sufficient to merit contempt proceedings against Defendants. As other courts have noted, “TiVo’s requirement of ‘a detailed accusation ... setting forth the alleged facts constituting the contempt’ is vague at best.” i4i Ltd. P'ship v. Microsoft Corp., 398 F. Supp. 3d 90, 97 (E.D. Tex. 2019) (citing Tivo Inc., 646 F.3d at 881). The court agrees with the i4i court, however, that “TiVo’s facts are instructive” even if the applicable standard is not well-defined. Id. As the i4i court noted, TiVo moved to find the defendant in contempt “[l]ess than a month after the injunction took effect,” based on accusations that the defendant's modified product “was not more than colorably different from the infringing software.” See id. (citing Tivo Inc., 646 F.3d at 878-81). In the trial court, TiVo explained how the modified product continued to infringe TiVo's patents and also detailed other ways that the defendant violated the injunction. See id. (citing TiVo Inc. v. EchoStar Corp., No. 2:04-cv-0001, Dkt. No. 824 at 3-6 (E.D. Tex. May 16, 2008)). Based on these allegations, the district court conducted “a series of hearings on TiVo's motion” and later “ruled that [the defendant] was in contempt of both provisions of its permanent injunction.” TiVo, 646 F.3d at 878. On appeal, the Federal Circuit held that, “[g]iven [the district court's] familiarity with the parties, the patent at issue, and the infringing products, we do not find an abuse of discretion in the district court's decision to hold contempt proceedings.” Id. at 881.
Here, Plaintiffs’ showing as to Defendants’ continued violation of the permanent injunction mirrors TiVo's. Plaintiffs moved to reopen this case and initiate contempt proceedings on June 22, 2020—approximately three months after Seal4Safti was formed for purposes of selling the FRG product. (See Sydry Decl. (Dkt. # 178) ¶ 7.) The declaration of Don Pilz, CEMCO's research and development product manager, sets forth Plaintiffs’ infringement allegations in painstaking detail.[5] (See generally Pilz Decl.) Mr. Pilz offers a side-by-side comparison of Safti-Seal's products and Seal4Safti's products that appears to show substantial similarities between the old and new products. (See id. ¶ 24, Ex. 14.) The Material Safety Data Sheet for the FRG strip product indicates that the FRG products use the same intumescent material that the Safti-Frame and Safti-Strip Products used. (See id. ¶ 44, Ex. 33.) Mr. Klein informed at least one customer that the FRG products are nothing more than a “rebrand” of the infringing Safti-Seal and Safti-Frame products. (See id. ¶ 4 Ex. 1a (email from Mr. Klein to customers stating that the FRG product line is the “same product” with the same “performance, support, and certifications” and that the change in business is “just a rebrand from Safti-Strip (SSR) to Fire Rated Gasket (FRG)”); see also id. ¶ 5, Ex. 1b (email from Safti-Seal employee informing customer that “[w]hat was referred to as ‘Safti-Strip’ will be ‘FRG’ (fire rated gasket)”).) Mr. Pilz also offers 24 infringement charts that attempt to explain how the new FRG products infringe the Patents. (See Pilz. Decl. ¶¶ 40-43, 45-52, 84-87, 89-97, Exs. 29-32, 34-41, 71-74, 76-83.) Although these charts are dense and difficult to follow, at this stage of the contempt process, they appear to adequately set forth Plaintiffs’ infringement contentions for the new FRG products.
*5 On the merits of Plaintiffs’ claims that the FRG products violate the Patents and the permanent injunction, Defendants’ only defense is that Plaintiffs are improperly imputing Steeltec and Seal4Safti's conduct to Defendants. (See Resp. to Mot. to Reopen at 6 (“Plaintiffs’ primary argument for initiating a contempt proceeding against Defendants fails because it attempts to make Defendants answerable to conduct by another.”).) Defendants claim that Steeltec and Seal4Safti—not Defendants—are the parties making and selling FRG products. (See id. at 6-7; 7/6/20 Klein Decl. (Dkt. # 177) ¶ 12.) Thus, Defendants’ claim that Plaintiffs’ claims should be directed at Seal4Safti and Steeltec. (See Resp. to Mot. to Reopen at 6-7.) The court agrees with Defendants that it appears at this juncture that Steeltec or Seal4Safti are the parties currently manufacturing and selling the allegedly infringing FRG products. (See Klein Decl. ¶ 12 (stating that Steeltec, Seal4Safti, or both make and sell FRG products); Sydry Decl. ¶ 7 (stating that Seal4Safti was formed in March 2020 to “make, use, sell, and offer for sale” FRG products).) That does not mean, however, that Defendants are not violating the injunction.
The permanent injunction enjoins Defendants from directly infringing the Patents, inducing others to infringe the Patents, or contributorily infringing the Patents. (See Consent J. at 3.) A party directly infringes a patent when the party “makes, uses, offers to sell, or sells any patented invention.” See 35 U.S.C. § 271(a). Additionally, a defendant may be liable for induced infringement where “(1) a third party directly infringed the asserted claims of the [relevant] patents; (2) [the defendant] induced those infringing acts; and (3) [the defendant] knew the acts it induced constituted infringement.” Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 843 F.3d 1315, 1332 (Fed. Cir. 2016). Finally, to succeed on a claim of contributory patent infringement, the plaintiff must establish: “(1) that there is direct infringement, (2) that the accused infringer had knowledge of the patent, (3) that the component has no substantial non-infringing uses, and (4) that the component is a material part of the invention.” Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1326 (Fed. Cir. 2010). Defendants can be held liable for contempt under any of those three theories of infringement.
Defendants’ attempts to deflect and blame Steeltec and Seal4Safti for any infringement undersells and ignores key evidence suggesting that Defendants remain personally involved in the manufacture and sale of the allegedly infringing FRG products. Mr. Klein acknowledges that he designed the FRG product, sold the FRG product and all of Safti-Seal's intellectual property to Steeltec, and then accepted an employment position with Steeltec. (7/6/20 Klein Decl. ¶¶ 4-6, 10.) Although Mr. Klein claims that Steeltec hired him as a “consultant to provide technical assistance in connection with the FRG product” (see id. ¶ 10), Mr. Pilz's declaration includes emails and social media posts from Mr. Klein to customers about the FRG products that appear to show that Mr. Klein was acting well-beyond a mere technical assistance role (see Pilz Decl. ¶¶ 4, 7, Exs. 1a, 2b). Mr. Pilz also obtained an email from an individual purporting to be a Safti-Seal, Inc. employee to a customer about the FRG products. (See id. ¶ 5, Ex. 1a, 1b.) Further, Plaintiffs note that the new UL certifications for the FRG products are owned by Safti-Seal, not Seal4Safti or Steeltec.[6] (See id. ¶¶ 18, 55, Ex. 68.)
This evidence suggests that Defendants—not just Steeltec or Seal4Safti—may have violated the permanent injunction, either via direct infringement, induced infringement, or contributory infringement. Because this is not a motion for contempt, the court need not decide at this juncture whether Defendants have, in fact, violated the permanent injunction. Instead, as noted above, Plaintiffs merely need to make a “detailed accusation” of the facts setting forth Defendants’ contempt. TiVo Inc., 646 F.3d at 881. Here, the court is satisfied that Plaintiffs have made that showing. Thus, the court concludes that contempt proceedings are warranted against Defendants and GRANTS Plaintiffs’ motion insofar as it seeks to initiate contempt proceedings against Defendants.
3. Application to Third Parties
*6 Plaintiffs also seek to initiate contempt proceedings against parties “acting in concert with” Defendants. (See Prop. Order on Mot. to Reopen (Dkt. # 166-1) at 1-2). That request presents more complicated issues than Plaintiffs’ request to initiate contempt proceedings against Defendants. “[C]ourts of equity have long observed the general rule that a court may not enter an injunction against a person who has not been made a party to the case before it.” Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 96 F.3d 1390, 1394 (Fed. Cir. 1996) (citations omitted). “A soundly issued injunction can, however, affect such non-parties in at least two important respects—those who are legally identified with an enjoined party may be bound as if they themselves were named in the injunction, and those who act in concert with an enjoined party to assist in violating the injunction may also be held in contempt.” Merial Ltd., 681 F.3d at 1304 (citing Fed. R. Civ. P. 65(d)). The Federal Circuit recognizes at least two situations in which the “legally identified” category could apply to bind a non-party to an injunction: (1) “situations in which the non-liable person is a successor of the liable person in a relevant respect”; and (2) “situations in which a party's litigation of a case is sufficiently controlled by another person that the latter may be said to have had its day in court and on that ground be subject to the injunctive obligations.” Asetek Danmark A/S v. CMI USA Inc., 852 F.3d 1352, 1367-68 (Fed. Cir. 2017). The “active concert” form of liability applies “to non-parties that ‘act with an enjoined party to bring about a result forbidden by the injunction ... if they are aware of the injunction and know that their acts violate the injunction.’ ” Merial Ltd., 681 F.3d at 1304-05 (quoting Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d 1345, 1353 (Fed. Cir. 1998)).
In their opening brief, Plaintiffs argue that the permanent injunction can apply to third parties Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak because they are acting in concert with Defendants. (See Mot. to Reopen at 10-11.) On reply, Plaintiffs pivot and ask the court to find that these third parties are subject to the injunction because they are “legally identified” with Defendants. (See Reply on Mot. to Reopen at 4-6.) Regardless of which theory Plaintiffs pursue, Plaintiffs lack sufficient evidence to show that Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak's acted in concert with Defendants or are legally identified with Defendants. As noted above, the “active concert” form of liability requires evidence of the non-party's subjective intent, see Merial Ltd., 681 F.3d at 1304-05, and the “legally identified” category requires a detailed analysis of the factual relationship between Defendants and these third parties and the legal significance of that relationship, see, e.g., Asetek Danmark A/S, 852 F.3d at 1369 (Fed. Cir. 2017) (listing some of the relevant factual inquiries needed to determine whether a non-party is “legally identified” with a party subject to an injunction). Plaintiffs’ current showing falls well short of establishing the kind of “detailed accusation ... setting forth the alleged facts constituting the contempt” that TiVo requires to initiate contempt proceedings against these third parties. See TiVo Inc., 646 F.3d at 881.
Because Plaintiffs lack the evidence they need to establish that Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak are in active concert with Defendants or are “legally identified” with Defendants, the court DENIES Plaintiffs’ motion to initiate contempt proceedings against these parties. However, as discussed in more detail, below, Plaintiffs are entitled to leave to take additional discovery in order to determine the full extent of any violations of the permanent injunction. See infra § III.B. If Plaintiffs unearth evidence sufficient to establish that Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak's should be subjected to contempt proceedings, the court invites Plaintiffs to renew their motion and seek an order to show cause as to why these third parties should not be held in contempt.[7]
B. Motion for Discovery
*7 Plaintiffs’ motion for discovery seeks the court's permission to take three categories of discovery: (1) discovery directed to the alleged violations of the permanent injunction (see Mot. for Disc. at 5); (2) discovery directed to alleged breaches of the Settlement Agreement (see id. at 5-10); and (3) discovery directed to third parties regarding alleged infringement (see id. at 10-11). Plaintiffs attach their proposed discovery requests (see 6/22/20 Trojan Decl. ¶¶ 15-26, Exs. 11-22), and ask the court to order Defendants to respond to those request within 10 days of the filing date of this order and to order third parties to respond within 14 days (see Mot. for Disc. at 12). The court addresses each requested category of discovery in turn.
First, for the reasons set forth above regarding the sufficiency of Plaintiffs’ contempt allegations, the court concludes that Plaintiffs are entitled to take discovery from Defendants regarding alleged violations of the permanent injunction. See supra § III.A.2. Specifically, the Plaintiffs shall be entitled to discover information related to the FRG product line and Defendants’ involvement in the production and sale of that product line.
Second, the court rejects Plaintiffs’ request for discovery related to alleged breaches of the Settlement Agreement. The Settlement Agreement is not incorporated into the permanent injunction (see generally Consent J.), Plaintiffs have not filed a motion to enforce the Settlement Agreement (see generally Dkt.), and Plaintiffs do not have a breach of contract claim against Defendants for violations of the Settlement Agreement in this case (see generally Compl.). Thus, the court concludes that Plaintiffs are not entitled to take discovery directed at alleged breaches of the Settlement Agreement.
Third, the court acknowledges that limited third party discovery may be relevant to Plaintiffs’ contempt claims against Defendants and to Plaintiffs’ attempts to show that the court should initiate contempt proceedings against Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak. Because the court has reopened this case for purposes of the contempt proceedings against Defendants and has left open the possibility of opening contempt proceedings against Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak, Plaintiffs are entitled to utilize the Federal Rule of Civil Procedure 45 process to take discovery from third parties related to those topics. See Fed. R. Civ. P. 45. However, the court will not circumvent the procedural protections in Rule 45 and pre-approve Plaintiffs’ third-party subpoenas. Instead, the court notes that Plaintiffs are entitled to utilize the rules regarding non-party discovery in order to discover information from third parties relevant to these contempt proceedings.
In sum, the court GRANTS Plaintiffs’ motion for discovery insofar as Plaintiffs seek discovery from Defendants regarding Plaintiffs’ contempt allegations; DENIES Plaintiffs’ motion for discovery on topics related to the breach of the Settlement Agreement; and GRANTS Plaintiffs’ motion to take discovery from third parties, but only insofar as that discovery is relevant to the contempt proceedings and complies with Rule 45 of the Federal Rules of Civil Procedure. The court ORDERS Defendants to respond to Plaintiffs’ discovery requests within 21 days of the filing date of this order. The court will not comb through Plaintiffs’ discovery requests on a line-by-line basis in order to determine which specific discovery requests are permissible and which are not. Instead, for discovery requests directed to Defendants (see 6/22/20 Trojan Decl. ¶¶ 15-18, Exs. 11-14), the court ORDERS the parties to meet and confer within seven days of the filing date of this order and attempt to reach agreement on which discovery requests fall within the bounds of this order. Although the court urges the parties to cooperate in good faith, if the parties are unable to reach agreement, the parties may contact the court via the procedures outlined in the scheduling order to resolve the dispute. (See Sched. Order (Dkt. # 79) at 3.) As to Plaintiffs’ third-party discovery requests (see 6/22/20 Trojan Decl. ¶¶ 15-18, Exs. 11-14), the court rejects Plaintiffs’ request to order third parties who are not before this court to respond to the discovery on an expedited basis. Instead, as noted above, Rule 45 shall control any third-party discovery Plaintiffs’ seek.
C. Schedule for Contempt Proceedings
*8 The court appreciates that both Plaintiffs and Defendants would prefer a speedy resolution of these proceedings. As discussed above, however, it is clear to the court that Plaintiffs are entitled to discovery. Moreover, that discovery may yield evidence showing that non-parties need to be added to these proceedings, which would yield additional procedural complications. Finally, the court remains mindful that the “[p]rocess of contempt is a severe remedy.” See TiVo Inc., 646 F.3d at 881-82. Thus, these proceedings are not ones that can be rushed.
Accordingly, the court ORDERS the parties to submit a joint status report within 30 days of the filing date of this order. That status report shall (1) detail the status of the parties’ discovery efforts; (2) indicate whether Plaintiffs intend to seek contempt sanctions against third parties; and (3) propose a briefing schedule for Plaintiffs’ motion for contempt or indicate why additional time is necessary to prepare for the contempt hearing. The status report shall not exceed five pages in length. Although the court urges the parties to submit a joint status report, if the parties are unable to agree on the contents of the report, the parties may file separate reports, each of which shall not exceed five pages in length. Upon receipt of the joint status report, the court will issue a briefing and hearing schedule for the contempt proceedings or, if it appears that the parties need additional time to prepare for the contempt proceedings, order the parties to submit an additional status report.
D. Sealing
Because this order relies on materials filed under seal, the court DIRECTS the Clerk to provisionally file this order under seal. The court ORDERS the parties to meet and confer regarding which, if any, portions of this order they seek to redact. Counsel must then submit one joint statement or, if they cannot agree on a joint statement, competing statements indicating the portions of the order they seek to have redacted and on what basis. See Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1179-80 (9th Cir. 2006). The statement or statements must attach a proposed redacted order that incorporates the redactions requested in the corresponding statement. The parties must file any such statement within seven days of the date of the filing date of this order. The court will consider the parties’ redaction requests, if any, and then file the order on the docket with any necessary redactions.
IV. CONCLUSION
For the reasons set forth above, the court GRANTS in part and DENIES in part Plaintiffs’ motion to reopen this case to initiate contempt proceedings (Dkt. # 166) and GRANTS in part and DENIES in part Plaintiffs’ motion for discovery (Dkt. # 167). The court further ORDERS the parties to meet and confer regarding Plaintiffs’ discovery requests within seven days of the filing date of this order and ORDERS Defendants to respond to the discovery within 21 days of the filing date of this order. Finally, the court ORDERS the parties to submit a joint status report regarding the status of these contempt proceedings within 30 days of the filing date of this order. The court DIRECTS the Clerk to provisionally file this order under seal.
Footnotes
The parties refer to these products as the “SaftiStrip” and “SaftiFrame” products. (See Mot. to Reopen at 1; Resp. to Mot. to Reopen at 6.) To maintain consistency with the consent judgment and permanent injunction, however, the court refers to these products as “Safti-Strip” and “Safti-Frame” products. (See Consent J. (Dkt. # 164).)
The Federal Circuit has expressly held that the “criteria for adjudicating a violation of a prohibition against continued infringement by a party whose products have already been adjudged to be infringing is a matter of Federal Circuit law.” TiVo Inc. v. EchoStar Corp., 646 F.3d 869, 881 (Fed. Cir. 2011).
If the court concludes that contempt proceedings are warranted, then the court turns to TiVo’s standard for adjudicating the merits of a contempt claim, which “requires proof that (1) the newly accused product is no more than colorably different from the previously adjudged infringing product, and (2) the newly accused product actually infringes the asserted patent.” Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012) (citing TiVo Inc., 646 F.3d at 882).
Plaintiffs submitted more than 1000 pages of exhibits in support of their motion to reopen. (See generally Pilz Decl.; 6/22/19 Trojan Decl.) Although the court concludes that the factual allegations in Mr. Pilz's declaration are sufficient to reopen this case and initiate contempt proceedings against Defendants, the court notes that Plaintiffs’ reliance on sweeping evidentiary statements and the fact that their exhibits are voluminous is not persuasive or useful to the court. (See, e.g., Mot. to Reopen at 2 (“The violation of the injunction is shown in 24 infringement charts and supported by over 80 exhibits.”).) The court cautions Plaintiffs—for a second time—to remain mindful that “[j]udges are not like pigs, hunting for truffles buried in briefs.” Indep. Towers of Wash. v. Washington, 350 F.3d 925, 929 (9th Cir. 2003) (quoting United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)); (see also 11/22/19 MSJ Order at 24 (“Plaintiffs’ infringement contentions are, for summary judgment purposes, woefully imprecise: despite a good-faith effort, the court cannot determine which of the accused metal track products allegedly infringe all elements of the asserted claims.”) (citing Indep. Towers of Wash., 927 F.3d at 929).)
Given that this is now the third time that Mr. Klein has been accused of running afoul of a settlement agreement with Plaintiffs, Plaintiffs may be able to uncover additional evidence showing that Defendants are involved in Seal4Safti or Steeltec's infringement if given the opportunity to conduct discovery. The court addresses this in more detail, below. See infra § III.B.
The court also notes, as the Asetek court did, that additional proceedings against these third parties may prove unnecessary if Plaintiffs chose to file a new infringement action against Steeltec, Seal4Safti, Mr. Sydry, and Mr. Orszulak. See Asetek Danmark A/S, 852 F.3d at 1369 (“[Further] proceedings [against a non-party] might be unnecessary, at all or for a time, if Asetek chooses, in the meantime, to file a new injunctive infringement action against [the non-party].”).