Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 1 of 9
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`SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
`A Limited Liability Partnership
`Including Professional Corporations
`STEPHEN S. KORNICZKY, Cal. Bar No. 135532
`MARTIN R. BADER, Cal. Bar No. 222865
`ERICKA J. SCHULZ, Cal. Bar No. 246667
`MICHAEL J. HOPKINS, Cal. Bar No. 326621
`12275 El Camino Real, Suite 100
`San Diego, California 92130-4092
`Telephone:
`858.720.8900
`Facsimile:
`858.509.3691
`E mail
`skorniczky@sheppardmullin.com
`mbader@sheppardmullin.com
`eschulz@sheppardmullin.com
`mhopkins@sheppardmullin.com
`
`Attorneys for Defendants TikTok Inc., TikTok
`Pte. Ltd., ByteDance Ltd. and ByteDance Inc.
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA, OAKLAND DIVISION
`
`10TALES INC.,
`Plaintiff,
`
`v.
`TIKTOK INC., TIKTOK PTE. LTD.,
`BYTEDANCE LTD., and BYTEDANCE
`INC.,
`
`Defendants.
`
`Case No. 4:21-cv-03868-YGR
`DEFENDANTS’ NOTICE OF MOTION
`AND MOTION TO STAY FACT
`DISCOVERY PENDING RESOLUTION
`OF DEFENDANTS’ MOTION TO
`DISMISS
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`Date:
`
`Time:
`Courtroom:
`Judge:
`
`March 1, 2022
`2:00 p.m.
`1 – 4th Floor
`Hon. Yvonne Gonzalez
`Rogers
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`Case No. 4:21-cv-03868-YGR
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STAY DISCOVERY
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 2 of 9
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`NOTICE OF MOTION AND MOTION
`TO ALL PARTIES AND THEIR COUNSEL OF RECORD:
`PLEASE TAKE NOTICE that on March 1, 2022, at 2:00 p.m., or as soon thereafter as the
`motion may be heard, in the courtroom of The Honorable Yvonne Gonzalez Rogers, located at
`Courtroom 1, 4th Floor, of the United States District Court for the Northern District of California,
`Oakland Courthouse, 1301 Clay Street, Oakland, CA 94612, Defendants TikTok Inc., TikTok Pte.
`Ltd., ByteDance Ltd., and ByteDance Inc. (collectively “Defendants”) will and hereby do move
`this Court under Local Rule 7-1(a), Fed. R. Civ. P. 26(c), and the Court’s discretion, to stay fact
`discovery in this case pending the resolution of Defendants’ Motion to Dismiss 10Tales’ Amended
`Complaint for Failure to State a Claim Pursuant to Fed. R. Civ. P. 12(b)(6) and 35 U.S.C.§ 101.
`(ECF No. 132.) The motion is based on this notice, the supporting memorandum of points and
`authorities, the pleadings and records on file in this action, all matters of which the Court may take
`judicial notice, and any other argument or evidence that may be presented in support of this
`motion.
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`Case No. 4:21-cv-03868-YGR
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STAY DISCOVERY
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 3 of 9
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`I.
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`MEMORANDUM OF POINTS AND AUTHORITIES
`INTRODUCTION
`Defendants respectfully request a protective order from the Court to stay production of
`source code under Local Patent Rule 3-4 and any additional fact discovery until after the Court
`rules on Defendants’ Motion to Dismiss 10Tales’ Amended Complaint for Failure to State a Claim
`Pursuant to Fed. R. Civ. P. 12(b)(6) and 35 U.S.C.§ 101 (the “Motion to Dismiss”). (See ECF No.
`132.) The stay requested by Defendants in this motion is narrow. It seeks only to stay the
`production of source code and prohibit Plaintiff 10Tales, Inc. (“10Tales”) from serving any
`additional fact discovery (e.g., interrogatories, requests for production, fact depositions), not the
`claim construction and initial disclosure deadlines set by the Court. Moreover, the stay would end
`(either by dismissal of the case or lifting of the stay) as soon as the Court decides the Motion to
`Dismiss.
`Given the limited scope of the requested stay, and the nature of Defendant’s Motion to
`Dismiss, Courts in this District need only determine two factors are satisfied to find the proposed
`stay is warranted—both are satisfied in this case. First, Defendants’ Motion to Dismiss could
`quickly resolve this entire case, if granted, because the only asserted claim will be found invalid
`for claiming patent-ineligible subject matter. Second, no discovery is needed for a decision on
`Defendants’ Motion to Dismiss, which can be decided solely on the pleadings and asserted patent.
`Additionally, extenuating circumstances in this case demonstrate that there is good cause for
`staying discovery because Defendants will suffer undue burden and expose Defendants’ most
`valuable asset and protected trade secret to unnecessary risk of disclosure. Finally, the requested
`stay will not prejudice 10Tales.
`II.
`STATEMENT OF FACTS
`On September 2, 2020, 10Tales filed its Complaint in this matter in the Western District of
`Texas. (ECF No. 1.) On May 24, 2021, the case was transferred to this District. (ECF No. 90.)
`Following the November 29, 2021 Initial Case Management Conference, on December 23, 2021,
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 4 of 9
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`Defendants filed their Motion to Dismiss.1 (See ECF No. 132.) The Motion to Dismiss requests
`dismissal of the entire case because the only asserted claim in U.S. Patent No. 8,856,030 (“the
`’030 patent”) fails to recite patent-eligible subject matter under 35 U.S.C. § 101 (“§ 101”). On
`January 20, 2022, 10Tales filed its opposition to the Motion to Dismiss. (ECF No. 134.) A
`hearing on the Motion to Dismiss is scheduled for February 15, 2022. (See ECF No. 132.) Under
`Patent Local Rule 3-4 (a), and this Court’s schedule, Defendants are required to produce by
`January 27, 2022, “[s]ource code, specifications, schematics, flow charts, artwork, formulas, or
`other documentation sufficient to show the operation of any aspects or elements of an Accused
`Instrumentality identified by the patent claimant in its Patent L.R. 3-1(c) chart.” The Court has
`not yet issued a deadline for the close of fact discovery, nor set a trial date.
`III. LEGAL STANDARD
`The Court “may, for good cause, issue an order to protect a party or person from
`annoyance, embarrassment, oppression, or undue burden or expense, including . . . forbidding . . .
`discovery.” Fed. R. Civ. P. 26(c)(1)(A). The Court has “wide discretion in controlling
`discovery.” Little v. City of Seattle, 863 F.2d 681, 685 (9th Cir. 1989) (affirming district court’s
`stay of discovery until defendant’s immunity from claims was resolved). The Court’s discretion
`extends to staying discovery upon a showing for good cause. Id. A stay of discovery is
`appropriate to address threshold dispositive issues, like Defendants’ case-dispositive Motion to
`Dismiss. See, e.g., In re Nexus 6p Prods. Liab. Litig., No. 17-cv-02185-BLF, 2017 WL 3581188,
`at *2 (N.D. Cal. Aug. 18, 2017) (granting stay where a threshold challenge could be dispositive of
`defendant’s involvement in case); Little, 863 F.2d at 685 (affirming district court’s stay of all
`discovery irrelevant to the district court’s determination of a threshold issue).
`Courts in this District apply a two-prong test to determine whether to stay discovery
`pending resolution of a dispositive motion: the motion “must be potentially dispositive of the
`entire case, or at least dispositive on the issue at which discovery is directed,” and the court should
`
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`1 A more thorough recitation of the procedural history between the filing of 10Tales’ initial
`Complaint on September 2, 2020 and Defendants’ Motion to Dismiss on December 23, 2021 is
`recited in the Motion to Dismiss and will not be repeated here. (See ECF No. 132 at 3-5.)
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 5 of 9
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`consider “whether the pending dispositive motion can be decided absent additional discovery.”
`Pac. Lumber Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 220 F.R.D. 349, 351–52 (N.D.
`Cal. 2003). “If these two questions are answered affirmatively, the court may issue a protective
`order.” Cellwitch, Inc. v. Tile, Inc., No. 4:19-CV-01315, 2019 WL 5394848, at *1 (N.D. Cal. Oct.
`22, 2019). Both prongs are easily satisfied here, as well as a strong showing that a stay would
`avoid the undue burden caused by producing source code, should the Court decide to ultimately
`dismiss the case.
`IV. ARGUMENT
`Defendants’ Motion to Dismiss is dispositive of the entire case if granted, and can be
`decided without additional discovery. Likewise, Defendants only seek a limited stay of fact
`discovery (e.g., source code, interrogatories, requests for production, and fact depositions).
`Defendants do not seek a stay of the Court’s scheduling deadlines set at the November 29, 2021
`Initial Case Management Conference (e.g., claim construction and initial disclosure deadlines).
`Moreover, staying discovery will save significant resources for Defendants —which could be
`completely avoided if this case is dismissed—and protect their most valuable asset from risk of
`disclosure and damage to Defendants’ success in the video-share marketplace. Thus, in this
`context, Defendants’ Motion to Dismiss satisfies this District’s test for staying discovery pending
`resolution of a motion to dismiss. Therefore, Defendants request an order staying fact discovery.
`A.
`Defendants’ Motion to Dismiss is Potentially Dispositive of the Entire Case
`The first prong assessed in determining whether to stay discovery pending resolution of a
`dispositive motion is whether the motion is “potentially dispositive of the entire case.” See Pac.
`Lumber, 220 F.R.D. at 351. There is no question that Defendants’ Motion to Dismiss will fully
`dispose of this entire case, because, if granted, the motion will invalidate 10Tales’ only asserted
`patent claim.
`Defendants’ Motion to Dismiss shows that the sole independent claim in the ’030 patent is
`invalid for claiming patent ineligible subject matter under § 101. As 10Tales’ Amended
`Complaint only “allege[s] patent infringement, every claim in its [Amended] [C]omplaint would
`be subject to dismissal.” Cellwitch, 2019 WL 5394848, at *2. Accordingly, Defendants’ Motion
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 6 of 9
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`to Dismiss “satisfie[s] the first prong of the Pacific Lumber test.” Id. (staying discovery pending
`resolution of defendant’s motion to dismiss for failure to state a claim based on § 101).
`B.
`Defendants’ Motion to Dismiss Can be Decided Without Additional Discovery
`The second prong assessed in determining whether to stay discovery pending resolution of
`a dispositive motion is “whether the pending dispositive motion can be decided absent additional
`discovery.” Pac. Lumber, 220 F.R.D. at 352. Defendants’ Motion to Dismiss satisfies this prong
`because it can be based entirely upon the deficiencies in 10Tales’ pleadings, without any
`discovery. See, e.g., Micron Tech., Inc. v. United Microelectronics Corp., No. 17-cv-06932-JSW,
`2018 WL 7288018, at *2 (N.D. Cal. March 16, 2018) (staying discovery where pending motion to
`dismiss did not require full discovery for resolution); In re Nexus 6P Prods. Litig., 2017 WL
`3581188, at *2 (“[t]he Court also notes that the pending motions to dismiss are fully briefed, and
`can be decided without additional discovery”); see also Hamilton v. Rhoads, No. C 11-0227 RMW
`(PR), 2011 WL 5085504, at *1 (N.D. Cal. Oct. 25, 2011) (“any discovery is unnecessary for
`resolution of the [defendant’s] motion [to dismiss]”).
`By its nature, Defendants’ Motion to Dismiss—a Rule 12(b)(6) motion—must be decided
`on the pleadings without discovery. Courts in this district routinely grant motions to dismiss for
`failure to state a claim based on § 101 relying on nothing more than the operative pleading and the
`patent, not discovery. See, e.g., Blackbird Tech LLC v. Cloudflare, Inc., No. 17-CV-06112-VC,
`2018 WL 10689659, at *1 (N.D. Cal. Feb. 12, 2018) (granting motion to dismiss based on § 101
`analyzing only the asserted patent); Coop. Ent., Inc. v. Kollective Tech., Inc., No. 5:20-CV-07273-
`EJD, 2021 WL 2531069, at *6 (N.D. Cal. June 21, 2021) (granting motion to dismiss based on
`§ 101 analyzing only the complaint and asserted patent). The same applies here, where the
`resolution of Defendants’ Motion to Dismiss requires nothing more than 10Tales’ Amended
`Complaint and the asserted ’030 patent. (See ECF No. 132.)
`In its opposition to Defendants’ Motion to Dismiss, 10Tales alleges that claim construction
`issues and the need for fact discovery prevent resolution of the § 101 issue at the Rule 12(b)(6)
`stage. (ECF No. 134 (“Opp.”) at 21-25.) As already shown in Defendants’ Motion to Dismiss
`(ECF No. 132 at 20-21) and as will be shown in Defendants’ reply in support of the Motion to
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 7 of 9
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`Dismiss due on February 1, 2022, these arguments are meritless. More importantly, however,
`neither are relevant to the present motion to stay fact discovery. The present motion to stay only
`seeks a stay of fact discovery. This does not include the claim construction related deadlines set at
`the Initial Case Management Conference. That is, the claim construction process, including the
`discovery related to claim construction undertaken pursuant to Patent Local Rule 4-4, will proceed
`as scheduled.
`Further, the only purported fact discovery that 10Tales incorrectly alleges is necessary to
`resolve the Motion to Dismiss (see Opp. at 23) is claim construction discovery, which the present
`motion does not seek to stay. Therefore, even assuming that claim construction and discovery that
`10Tales alleges is necessary to resolve the Motion to Dismiss is necessary (it is not), the present
`motion is not asking for a stay of that discovery. Therefore, the arguments in 10Tales’ Opposition
`to the Motion to Dismiss are irrelevant to the present motion to stay.
`Thus, Defendants have satisfied the second prong of the Pacific Lumber test. See
`Cellwitch, 2019 WL 5394848, at *2 (in a patent case, finding defendant “met its burden under the
`second prong” where it filed a motion to dismiss for failure to state a claim based on § 101).
`C.
`Substantial Good Cause Supports the Requested Stay Because it will Prevent
`Significant Undue Burden on Defendants and will Not Prejudice 10Tales
`Although not part of this District’s two prong test when determining whether to stay
`discovery pending resolution of a dispositive motion, the Court may take into consideration that
`there is good cause for the requested stay, and the stay will not prejudice 10Tales. Conversely, if
`the stay is denied, there is a potential for Defendants to suffer substantial undue burden and harm.
`If granted, the stay requested by this motion will last only so long as the Court requires to
`resolve Defendants’ Motion to Dismiss. Because there is no set deadline for the end of fact
`discovery, the stay would not prejudice 10Tales by cutting a discovery window short. See Orchid
`Biosciences, Inc. v. St. Louis Univ., 198 F.R.D. 670, 675 n. 7 (S.D. Cal. 2001) (a limited stay until
`resolution of a dispositive motion would not disrupt administration of the case as “the Court has
`not yet issued a scheduling order establishing a discovery cut-off date”). Moreover, the asserted
`’030 patent issued in 2014 and, although 10Tales claims the allegedly infringing TikTok
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 8 of 9
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`application launched in the United States in 2017 (ECF No. 78, Ex. A at 3), 10Tales waited nearly
`three years until September 2020 to bring this action (ECF No. 1). Thus, any claim of prejudice
`based on the short stay of fact discovery requested here rings hollow. 10Tales will not be
`prejudiced.
`On the other hand, Defendants may be unduly burdened if required to disclose their source
`code unnecessarily, and risk substantial harm if the source code is inadvertently disclosed. First,
`forcing Defendants to make their highly protected source code available for 10Tales’ review will
`be all but wasted if Defendants’ Motion to Dismiss is granted. Thus, it will cause significant
`undue burden by wasting numerous employee hours (both technical and administrative) necessary
`to prepare the source code for review. Additionally, once made available for review, Defendants
`must have security, monitoring, and technical personnel all on site during 10Tales’ review. This
`significant burden and expense could be avoided by staying fact discovery.
`Second, any review of Defendants’ source code by third parties exposes Defendants to an
`extremely high risk of severe harm should the source code be inadvertently disclosed or leaked.
`This risk is unique to Defendants given the TikTok application’s extensive success in the highly
`competitive video-share application marketplace. The risk is highlighted by the fact that
`Defendants’ competitors are repeatedly trying to copy and/or create products that mimic the
`TikTok application. So far, none have succeeded.
`For example, multiple media outlets have reported how the TikTok mobile application is
`one of the fastest growing and most popular social media applications in the marketplace. (Schulz
`Decl., Exs. 1-2.) Likewise, media outlets have reported on Defendants’ primary competitors’
`attempts to copy the functionality of the TikTok mobile application. (Schulz Decl., Exs. 3-4.)
`Thus, any inadvertent disclosure of the TikTok application source code, Defendants’ most
`valuable trade secret, to a competitor would be devasting to the Defendants’ business.
`It is not unheard of during patent litigation proceedings for a party’s highly confidential
`source code to be inadvertently disclosed. See Bradford Techs., Inc. v. NCV Software.com, No. C
`11-04621 EDL, 2013 WL 75772, at *8 (N.D. Cal. Jan. 4, 2013) (discussing potential sanctions for
`patentee’s disclosure of source code that violated protective order, noting that because there is
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`Case 5:21-cv-03868-VKD Document 135 Filed 01/25/22 Page 9 of 9
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`nothing that can “un-ring the bell” of the improper disclosure, that dismissal sanctions may be
`considered “remedial”). Defendants’ concern in this particular case is heightened given the value
`in the entirety of its source code and the blatant attempts by competitors to copy aspects of the
`TikTok application.
`Thus, the undue burden and potential for substantial harm facing Defendants in relation to
`making their source code available for review weighs far more heavily than a short delay caused
`by waiting for a decision on the Motion to Dismiss. This undue burden and potential for harm can
`be avoided, potentially entirely, with a short stay of fact discovery pending resolution of
`Defendants’ Motion to Dismiss.
`V.
`CONCLUSION
`For the foregoing reasons, Defendants respectfully request that the Court grant their
`motion to stay fact discovery pending resolution of their motion to dismiss.
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`Dated: January 25, 2021
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`Respectfully submitted,
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`SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
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`By
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`/s/ Ericka J. Schulz
`Stephen S. Korniczky
`Martin R. Bader
`Ericka J. Schulz
`Michael J. Hopkins
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`Attorneys for Defendants TikTok Inc., TikTok Pte
`Ltd., ByteDance Ltd. and ByteDance Inc.
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