*1 This case involves inventorship and ownership rights to nine patents.[1] On January 28, 2022, Plaintiff Pro Marketing Sales, Inc. (“PMS”) filed a Motion to Compel Discovery seeking documents from Defendants Secturion Systems, Inc. (“Secturion”) and Richard J. Takahashi (“Takahashi) (collectively “Defendants”).[2] On February 11, 2022, PMS filed a Motion for Spoliation Sanctions against Defendants.[3]

With regard to spoliation, PMS argues that Takahashi's duty to preserve evidence attached in August or September 2012 when he began his involvement with Cyber Solutions International (“CSI”), which was working with Priva under a license agreement approved by the United States Bankruptcy Court for the Western District of Michigan.[4] In turn, PMS argues that Secturion's duty to preserve attached in March 2013 when Takahashi converted Secturion Systems LLC to Defendant Secturion. Despite the alleged duty to preserve, PMS asserts that relevant evidence “is no longer available because Defendants admit to having destroyed it, despite knowledge of Pro Marketing's claims to the inventions and despite the existence of existing and foreseeable litigation at all times.”[5] Defendants respond that the “documents that PMS alleges were spoliated have been produced in this and prior litigation [and] Defendants’ duty to preserve, if any existed, was discharged when the documents were produced.”[6]

Based on the Court's review of the relevant legal authorities, briefing, exhibits and arguments submitted and consistent with the Court's oral ruling at the hearing held on July 20, 2022,[8] the Court now rules as follows.

Spoliation constitutes the “destruction or significant alteration of evidence, or failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.”[9] Electronically stored information (“ESI”) and hard copy documents, however, “implicate different standards for sanctions.”[10] “For hard copy documents, the court may sanction spoliation pursuant to its ‘inherent power to impose sanctions,’ when ‘the adverse party was prejudiced by the destruction of the evidence.’ ”[11] ESI is governed by Rule 37(e) of the Federal Rules of Civil Procedure.[12] In this case, the allegedly spoliated documents at issue are ESI and hard copy documents. Rule 37(e) provides:

Before a court can impose sanctions for spoliation, the movant must first demonstrate that the non-movant had a duty to preserve evidence.[14] A party has a duty to preserve evidence when it knows or should know that litigation is imminent,[15] or when litigation is “pending or reasonably foreseeable.”[16] The obligation to preserve, however, “does not continue indefinitely.”[17] Rather, after the duty arises, an individual “need do only what is reasonable under the circumstances.”[18]

Even if there is a duty to preserve, that duty must be breached for there to be spoliation. “There is no force to the argument that the destruction of duplicative materials constitutes spoliation of evidence.... The routine destruction of duplicative documents does not present the risk of denying an adversary access to relevant information, which is what the doctrine of spoliation is directed to.”[19]

Sanctions under Rule 37(e)(2) may only be applied if the loss of documents occurred in bad faith with an intent to deprive another party of the information in a litigation.[20] Although Rule 37(e)(2) permits an adverse inference sanction, “[c]ourts should exercise caution” in considering such a sanction given that it is a “very severe measure[ ].”[21] Furthermore, as the Advisory Committee Notes explain:

The party seeking sanctions bears the burden of showing that the non-movant acted with the intent to deprive the movant of the spoliated evidence's use in the litigation.[23]

Plaintiff's Motion for Spoliation

*3 The Motion is denied for the following reasons. First, Defendants’ duty to preserve documents did not attach until the start of the present litigation in October 2019. PMS asserts that in December 2011, Priva filed for bankruptcy in the United States Bankruptcy Court for the Western District of Michigan.[24] PMS further asserts that as of August 2012, Defendant Takahashi was involved with CSI. Therefore, PMS argues that a duty to preserve attached as early as August 2012, when Takahashi began work with CSI, who was working with Priva under a bankruptcy court approved license agreement between Priva and CSI. PMS points to various events in the timeline as support for the duty, including Defendants’ awareness of a license agreement between CSI and Priva, PMS's security interest, a 2013 subpoena, and a 2015 letter. However, such a duty did not arise under the objective legal standard. Given the extended temporal separation between these past events and the filing of the present lawsuit, no duty to preserve attached because this litigation was not imminent, and it was not reasonably foreseeable that PMS intended to assert rights to the Secturion Patents against Defendants several years after those events. As a result, the Court is not persuaded that the duty to preserve attached before the current litigation was filed.

Second, it is axiomatic that, if there is no duty to preserve, then there can be no breach. But in this case, even assuming there was a duty to preserve, the Court is equally unpersuaded that there was a breach of such duty. It is important to the Court that the USB does exist, is in the possession of Mr. Edward Cheever, and has been provided in discovery by Plaintiff to the Defendants. According to Mr. Takahashi's Declaration,[25] all information he possessed related to the TRSS technology was located on that USB drive and in schematics that have now been produced in this case. The Court recognizes that the Declaration and schematics provided by Mr. Takahashi may be self-serving. But, on balance, that this information still exists, and has been produced in this case, in combination with Mr. Takahashi's Declaration, the associated schematics, and the June 30, 2012, Business plan, demonstrates there is no breach.

Third, regarding prejudice, there is no indication that the absence of documents requires the spoliation inference PMS is requesting. Without prejudice to the positions of either party on the issues subject to the pending summary judgement motion, PMS is free to make the argument that the absence of information gives rise to concerns about ownership and inventorship. Therefore, there is no prejudice in this case to give rise to spoliation sanctions.

Finally, the act of the deletion of documents, especially in conjunction with the length of time between 2012, the 2013 subpoena, the 2015 letter, and the present litigation, is not sufficient to show bad faith. This is especially true when viewed in light of the imminency required as a threshold to the duty to preserve.

For these reasons and as set forth in more detail on the record, the Court denies Plaintiff's Motion

Plaintiff's Motion To Compel

On January 1, 2022, Plaintiff filed its short-form Discovery Motion seeking to compel Defendants to fully respond to Interrogatories and Requests for Production.[26] At oral argument, the court ordered the parties to conduct an additional meet and confer conference to further discuss the outstanding discovery requests and for Takahashi to file a certification.[27]

On July 27, 2022, Takahashi filed a certification indicating that his answer to Interrogatory 22, as supplemented, is true and complete.[28] On August 2, 2022, the parties filed a Status Report indicating that Defendants provided additional documents and also confirmed they were not in possession of certain documents.[29] Based on the information provided in the certification and status report, the Court denies Plaintiff's Motion to Compel.[30]

*4 As set forth above, the Court DENIES Plaintiff's Motion for Spoliation[31] and DENIES Plaintiff's Motion to Compel.[32]

DATED this 29th day of August, 2022.