eTopus Technology, Inc. a Delaware v. Liu

Background

Etopus Technology, Inc. alleges that Hanli Liu misappropriated trade secrets around the time of his departure from Etopus, where he had worked as an engineer. The matter was referred to the undersigned judge for discovery. The order resolves disputes raised in a joint discovery letter brief and related filings.

Legal standard

Under Federal Rule of Civil Procedure 26(b)(1), discovery may cover nonprivileged information relevant to a claim or defense and proportional to the needs of the case. Information does not have to be admissible at trial to be discoverable. The court explained that relevance is broad, but discovery must still be limited when its burden or expense outweighs its likely benefit. The party seeking discovery must show relevance; the party resisting discovery must specifically explain why the request should not be allowed.

Five USB drives

Liu had produced a personal laptop and desktop hard drive for inspection. Etopus’s forensic expert found no Etopus confidential information on those devices because they had been reformatted. The expert also identified five USB devices that had been connected to Liu’s computers around the time of his resignation. Etopus argued that examining the devices could show whether Liu had copied confidential files onto them. Liu argued that three devices were used by him and his family for personal purposes and that their last connection dates postdated the reformatting of his computers.

The court found that files from the five devices were relevant, but held that requiring Liu to surrender the devices for immediate wholesale forensic inspection was not proportional on the current record. The court directed the parties to use ordinary electronic-discovery procedures instead. Liu’s counsel was ordered to take possession of the devices if necessary, preserve them, create accurate searchable copies using qualified electronic-discovery personnel or a service provider, and complete that imaging within 30 days of the order. Etopus had to propose targeted search terms within five business days, and the parties had to finish negotiating those terms within 45 days. Liu then had to produce nonprivileged responsive information found through the agreed searches within 60 days.

The court granted Liu leave to surrender the five devices to Etopus’s forensic expert instead of using those procedures. Liu had to notify the court within three business days if he chose that option. The order imposed confidentiality protections for personal information belonging to Liu or his family, required the expert to retain only responsive, relevant, nonprivileged information, and required the devices to be returned after the examination. Etopus’s expert also had to provide an undertaking under oath agreeing to follow the order.

Employment and corporate documents

Etopus sought documents about Liu’s current employment and his ownership interests or relationships with specified companies or persons. The court found employment information relevant because employment by Zhejiang University could potentially relate to Liu’s defense, while employment by an Etopus competitor could potentially relate to Etopus’s claims. But the court found a request for all documents concerning current employment disproportionate.

The court ordered Liu to produce documents sufficient to show his current employment, current employer or employers, and sources of income from any entity or person worldwide. The order specifically included employment contracts, recent pay records or receipts, and certain Zhejiang University webpages, directories, or staff manuals. It also covered contracts, consulting agreements, and other agreements under which Liu had received or was receiving compensation, income, or revenue since January 1, 2023, other than from Etopus. That production was due within 30 days of the order.

The court also found relevant, but limited, requests concerning Liu’s ownership interests in or relationships with specified companies and persons. It ordered production of documents sufficient to show any ownership interest Liu owned or controlled in Xin Zhi Yuan (Shanghai) Technology Ltd., San Ya Fu Guang Lin, San Ya Xin Zhi Yuan No. 1, or any company, partnership, or corporation worldwide for which Xi Liu, Hong Yin, or Zheng Wang had an ownership interest, served as an officer, director, or partner, or exercised control. Liu also had to produce contracts or agreements between him and those entities. If a reasonable search found no responsive documents, defense counsel had to provide a supplemental, Rule 11-certified response describing the search and confirming the lack of documents.

Disposition

The court ordered production of files from the five USB devices through the specified electronic-discovery procedures, while allowing Liu to choose delivery of the devices to Etopus’s forensic expert instead. It also ordered production of the employment and corporate ownership or relationship documents described above. The court denied Liu’s objection to footnote 6 in the joint letter brief as moot and resolved Docket Nos. 41, 42, and 46. The order concerned discovery and did not decide the underlying trade-secrets claims.