How the long arm of the law could reach cleantech investors when their portfolio companies become embroiled in green patent litigation
This blog’s readers are well aware of the critical role private-sector funding, whether through venture capital, investment banks, or other funding mechanisms, plays in furthering Cleantech innovation. And followers of this blog are increasingly being regaled with dispatches from the burgeoning world of Cleantech patent litigation.
While the natural temptation of those on the “money” side is to leave the “legal” side to the lawyers, a recent decision in a decidedly non-Cleantech patent litigation serves to put the folks on the “money” side on notice that their Cleantech investment activities may be subject to potentially costly and disruptive ediscovery in current and future patent litigations.
A Model Order for Discovery Cost Management in Patent Litigation
By way of background, a few months ago a new Model Order (available here) for conducting ediscovery in patent litigations was announced to great fanfare by Chief Judge Rader of the Court of Appeals for the Federal Circuit. The Model Order seeks to “promote economic and judicial efficiency by streamlining ediscovery, particularly email production…”
Importantly, the Model Order is directed to the parties in the litigation, which in a typical patent case would include the patentee or patent owner and the alleged infringer or infringers.
Recent Decision Extends the Model Order’s Ambit to Non-Party Discovery
In a recent Order (Google_Order) Magistrate Judge Paul Grewal of the U.S. District Court for the Northern District of California’s San Jose Division granted-in-part a Motion to Compel Production of Documents from a non-party in the pending In Re Google patent litigation.
In that case, the patentee, a company called Software Rights Archive LLC (SRA), filed a patent infringement lawsuit in 2007 accusing technology companies, including AOL, Google, and Yahoo, of patent infringement.
As part of the festivities in the case, SRA subpoenaed venture capital firm Kleiner Perkins (KPCB) for 34 categories of documents related to KPCB’s investments in AOL and Google, as well as KPCB’s analysis of the technology and valuation of its portfolio companies now named as patent infringement defendants.
KPCB objected to the subpoena, and after SRA filed a motion to compel, KPCB undertook a limited search of its email archives for documents it felt were sought by the subpoena.
In deciding the motion, the Court was not persuaded that KPCB should be forced to look for and turn over responsive documents in all of the requested categories, but did find merit in SRA’s general claim that KPCB’s limited initial search was inadequate.
Importantly, the Court looked to “pertinent portions” of the Model Order discussed above, and decided that the “objective of appropriately scaling the burden of electronic document production to its legitimate benefit” extended to non-party discovery – even as the Model Order is “directed to discovery from parties.”
Having looked to the Model Order for guidance, and upon deciding that it was applicable to non-party discovery, the Court then ordered KPCB to undertake an immediate search of its “email and electronic document files of the five persons most involved in the (sic) KPCB’s investments in Google and AOL”, using targeted search terms to be supplied by SRA.
And KPCB was to absorb the cost of that search, unless SRA’s search terms were found to be “beyond the limits”, in which case SRA would need to bear the fees and costs of that additional discovery.
The Implications for Cleantech
It is uncommon for investors in alleged infringers to be named as a party in a patent case (although one clean tech exception was discussed in a previous post).
However, as the Order from In re Google demonstrates, what is becoming increasingly common, particularly in industries such as software/ecommerce and biotech that are heavily-driven by private-sector funding, is for those investors to become the target of subpoenas seeking information regarding their relationship with their portfolio company that is ensnared in a litigation, as an alleged infringer or even as a patentee.
And the Cleantech investment community is sure to join those other industries as a subpoena target as patent litigation involving investor-backed Cleantech companies increases.
In light of the recent Order in the In Re Google patent litigation, the Cleantech investment community should prepare for a limited ability to completely quash discovery subpoenas in current or future patent litigation involving their respective portfolio companies as litigants.
Investors should be proactive in confronting an inevitable future of increased Cleantech patent litigation, which is sure to be accompanied by increased attempts at procuring discovery via subpoena from non-parties like Cleantech investors.
Cleantech investors and their in-house counsel should take steps now to review their document retention and retrieval policies, and evaluate their subpoena response strategies in light of the Model Order governing ediscovery in patent cases, and its recent extension to non-party discovery by at least one Court in an ongoing patent dispute.
Gaston Kroub is a partner in the New York office of Locke Lord Bissell & Liddell LLP. Gaston serves as the co-chair of the Greentech Committee of the NYSBA’s IP Section and has been accredited as a LEED Green Associate. Gaston is a registered patent attorney whose practice focuses on intellectual property litigation and counseling.
Article appearing courtesy Green Patent Blog.