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` Case 3:18-cv-02838-K Document 179 Filed 05/14/19 Page 1 of 7 PageID 3360 Case 3:18-cv-02838-K Document 179 Filed 05/14/19 Page 1 of 7 PageID 3360
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF TEXAS
`DALLAS DIVISION
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`FRACTUS, S.A.
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`Plaintiff,
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` CIVIL ACTION NO.
` 3:18-CV-2838-K
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`§
`§
`§
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`§
` §
`§
`§
`§
`§
`§
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`v.
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`ZTE CORPORATION,
`ZTE (USA), INC., and
`ZTE (TX), INC.,
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`
`
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`Defendants.
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`MEMORANDUM OPINION AND ORDER
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`Before the Court is Plaintiff Fractus' Amended Motion to Compel (the "Motion")
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`(Doc. No. 144). Also before the Court is ZTE’s Opposed Motion for Leave to File Sur-
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`Reply in Opposition to Plaintiff Fractus’ Amended Motion to Compel (the “Motion
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`for Leave”) (Doc. No. 168). The Court GRANTS the Motion for Leave. After
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`considering the Motion, brief in support, response, reply, and sur-reply, as well as all
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`supporting material and relevant law, the Court GRANTS the Motion.
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`This is a patent infringement case in which Fractus, S.A. ("Fractus") has alleged
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`that the Defendants ZTE Corporation; ZTE (USA), Inc.; and ZTE (TX), Inc.
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`(collectively, the "Defendants") have infringed certain patents assigned to Fractus. The
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`patents in suit relate to antenna technology. The patents claim multiband antennas
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`with particular geometric configurations so that the antennas are multilevel antennas.
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`Fractus asserts that the Defendants, who sell cellular phones, have infringed Fractus'
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`patents by making, using, offering to sell, or selling phones that have antennas that are
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`claimed inventions of the patents in suit.
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`In the Motion, Fractus has moved this Court to compel the Defendants to
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`produce certain information regarding the Defendants' sales of accused devices. In
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`particular, Fractus requests the Court to order the Defendants to produce sales records
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`for the accused devices. Fractus argues that the Defendants' attempts to produce this
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`information are incomplete, inconsistent, and not verifiable. Fractus further asserts that
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`this information is critical to the issues in this case because it is necessary to prove
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`damages. In addition to production of these records, Fractus also asks the Court to
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`order the Defendants to designate a representative to be deposed concerning the sales
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`data production and the accuracy and completeness of that sales data.
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`The Defendants respond that they have attempted to produce reliable
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`information regarding the number of accused devices sold and have cooperated with
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`Fractus to correct any deficiencies in the production. The Defendants originally
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`attempted to provide this information in the form of data tables. When Fractus raised
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`issues with these data tables, the Defendants further supplemented the data tables
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`multiple times. The Defendants then produced a data extract from ZTE's Oracle E-
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`Business Suite system, which the Defendants assert is an Oracle created database used
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`by ZTE for accounting and purchase order information. The Defendants assert that
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`since this database is used to record all purchase information related to the accused
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`devices, the production of the data extract sufficiently provides Fractus with the
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` Case 3:18-cv-02838-K Document 179 Filed 05/14/19 Page 3 of 7 PageID 3362 Case 3:18-cv-02838-K Document 179 Filed 05/14/19 Page 3 of 7 PageID 3362
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`requested information. For these reasons, the Defendants argue that they should not
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`have to produce actual sales records documents. The Defendants claim that the cost
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`and burden to produce these records outweigh the importance of the records, since the
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`same information is included in the data extract.
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`The scope of discovery is controlled by Federal Rule of Civil Procedure 26(b)
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`which provides that "[p]arties may obtain discovery regarding any nonprivileged matter
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`that is relevant to any party's claim or defense and proportional to the needs of the
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`case, considering the importance of the issues at stake in the action, the amount in
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`controversy, the parties' relative access to relevant information, the parties' resources,
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`the importance of the discovery in resolving the issues, and whether the burden or
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`expense of the proposed discovery outweighs its likely benefit.” FED. R. CIV. P.
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`26(b)(1).
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`The Court first notes that the parties do not appear to dispute the relevancy of
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`the information requested by Fractus. Fractus asserts that the requested sales
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`documents are directly relevant to the issue at hand in this case because the information
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`is necessary to prove Fractus' damages if infringement did in fact occur. The Defendants
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`appear to acknowledge this because they do not contest the relevance of the
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`information contained in the requested documents. Instead, the Defendants simply
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`argue the burden of producing actual sales documents outweighs the need for the
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`information because they have already produced the information in the form of a data
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`extract. The Court finds that the requested sales records are directly relevant to the
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`issues in this case and holds that Fractus has a right to obtain this information through
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`discovery.
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`The Court now turns to the sufficiency of what was produced. The Defendants
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`originally produced data tables containing sales data that the Defendants originally
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`appeared to assert provided the information needed to calculate damages. It also
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`appears that when Fractus questioned the reliability of this data, the Defendants
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`attempted to supplement these tables multiple times with new sales numbers. Fractus
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`also raised issues with what Fractus perceives as a discrepancy between the numbers
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`produced and an IDC estimate of ZTE's cellular phones sales. (IDC is a third-party
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`industry group that provides sales estimates for various cellular phone manufacturers.)
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`According to Fractus, this discrepancy brings into question the reliability of the data
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`produced by the Defendants in these data tables. In addition, the data tables appear to
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`have been produced solely for the purpose of this litigation and that some versions of
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`this information were created by the Defendants' counsel. Fractus asserts that this also
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`raises questions regarding the reliability of the information provided.
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`The Court agrees with Fractus that the data tables provided by the Defendants
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`are insufficient as a reliable, credible response to the request for sales figures of accused
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`devices. The Court is not persuaded, however, by Fractus' IDC argument. The IDC
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`sales estimates are just that, estimates by a third party that does not have direct access
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`to ZTE's sales information and that creates these estimates from some apparently
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`proprietary method. Considering this, the fact that a discrepancy exists between the
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`IDC estimates and the information produced by the Defendants is not surprising. This
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`does not mean the Defendants’ information is unreliable or incorrect. The Court is
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`concerned, however, about the fact that these data tables appear to be created solely
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`for the purpose of this litigation and that when pressed about discrepancies and other
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`issues with the data, the Defendants repeatedly amended the tables and changed the
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`sales numbers. These facts seriously bring into question the reliability of this
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`information.
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`The Defendants argue that the production of and the supplements to the data
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`tables are irrelevant to the issues here because the Defendants subsequently produced
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`data extracts from its Oracle database that reflect the sales of the accused devices. The
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`Defendants assert that this information is directly from the Defendants' database that
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`is used to track sales and that it is more reliable than producing actual sales records
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`such as purchase orders because, for example, a purchase order may have been
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`subsequently changed or cancelled. The Defendants also assert that the costs and
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`burden to produce actual sales documents outweigh the need for the information, since
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`the Defendants have produced the same information in the form of a data extract.
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`The Court is not persuaded by the Defendants' argument that the burden of
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`production outweighs the need and importance of the information. The requested
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`information is directly relevant to the issues of infringement and damages. This is a
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`critical issue in Fractus' case against the Defendants. Each occurrence of a sale of a
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`phone containing a claimed antenna may be an act of patent infringement, and for
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`each act of patent infringement proven, Fractus must prove damages of that
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`infringement. For these reasons, the records of sales of the accused devices are
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`elemental to Fractus' case against the Defendants. The sales records are not a side or
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`ancillary issue in this case. For these reasons, the ability of Fractus to obtain credible
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`and reliable sales information of the accused device is very important to Fractus' case.
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`Another consideration in determining the importance of the discovery is the
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`parties' relative access to relevant information. The relevant information sought
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`through this Motion are the Defendants' sales records. The Defendants have easy access
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`to these records. Fractus does not. This consideration weighs in favor of allowing the
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`production.
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`The Court is sympathetic to the Defendants' concern regarding the burden that
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`this places on the Defendants to produce these records. The Court notes, however, that
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`the Defendants simply make the conclusory assertion that the burden will be
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`"extremely burdensome to ZTE." The Defendants fail to provide any actual evidence of
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`what that burden may actually be. For this reason, the Court cannot determine the
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`weight to place on the Defendants’ assertion of "extremely burdensome." Even if the
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`Defendants had provided evidence in support of its assertion, this does not change the
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`fact that the requested information is pivotal to Fractus being able to fully and fairly
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`present its case with credible and reliable information. So, it is not clear that in this
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`situation that proof of the Defendants’ extreme burden would change the Court's
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`analysis.
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`The Court has also considered the other factors listed in Rule 26(b)(1) used to
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`determine the proportionality of the discovery considering the needs of the case. These
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`remaining factors are the parties' resources and the amount in controversy. There is no
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`indication or argument that the parties' resources affect the Court's analysis. The
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`amount-in-controversy factor weighs in favor of allowing the discovery because the
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`sales records directly relate to the amount of damages claimed by Fractus.
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`Overall, the importance of the issues at stake in the action, the parties' relative
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`access to relevant information, and the importance of the discovery in resolving the
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`issues all weigh heavily in favor of allowing the discovery.
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`Since these factors outweigh the claimed burden on the Defendants, the Court
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`GRANTS the motion. The Court ORDERS the Defendants to produce all documents
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`reflecting or indicating sales of the accused devices for the time periods for which
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`Fractus has asserted the Defendants infringed the patents in suit. The Court ORDERS
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`the Defendants to produce these records within 30 days of the date of this Order. The
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`Court also ORDERS the Defendants to, within 30 days of the date of this Order,
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`designate a representative to be deposed concerning the sales data production and the
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`accuracy and completeness of that sales data.
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`SO ORDERED.
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`Signed May 14th, 2019.
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`__________________________________
`ED KINKEADE
`UNITED STATES DISTRICT JUDGE
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