IBM Corporation v. Micro Focus, Inc.

Background

Micro Focus objected under Federal Rule of Civil Procedure 72(a) to Magistrate Judge Victoria Reznik’s May 17, 2024 order. That order denied Micro Focus’s motion under Rule 37 to exclude IBM Corporation’s allegedly untimely disclosures. Rule 37 permits courts to impose consequences, including excluding evidence, when a party fails to make required disclosures on time.

The disputed evidence concerned later versions of IBM’s CICS TS software, versions 5.3 through 6.2. Micro Focus argued that allowing the evidence improperly permitted IBM to add copyrighted works to its infringement claims without amending its pleadings. IBM explained, and Judge Reznik accepted, that it was not adding those later versions as asserted copyrighted works. Instead, IBM relied on them as evidence related to damages. IBM’s theory was that the later versions contained some copyrighted material from the nine earlier versions identified in its amended complaint and therefore could affect the calculation of lost sales.

Standard of Review

Under Rule 72(a), a district judge must modify or set aside a magistrate judge’s ruling on a non-dispositive matter if the ruling is clearly erroneous or contrary to law. A factual finding is clearly erroneous only when the reviewing court is firmly convinced that a mistake occurred. A legal conclusion is contrary to law when it conflicts with controlling legal authority. The court described this as a highly deferential standard that placed a heavy burden on Micro Focus.

Court’s Analysis

The court rejected Micro Focus’s argument that Judge Reznik had allowed an unrequested amendment. It concluded that the order did not add new asserted works or grant IBM permission to amend its pleadings. The court also noted that, although IBM had been unclear about the relevance of the later software versions and should have clarified the scope of its claim during fact discovery, Judge Reznik did not commit legal error by declining to exclude the evidence.

The court also upheld Judge Reznik’s application of the four factors used to decide whether to exclude untimely evidence: the party’s explanation for the delay, the importance of the evidence, the prejudice to the opposing party, and whether a continuance could address that prejudice. Judge Reznik found that the importance and continuance factors favored IBM and that, overall, the factors weighed against exclusion.

The district court agreed that evidence affecting the amount of damages can be important even when it concerns only part of the claimed damages. It further agreed that any prejudice to Micro Focus could be addressed through limited additional fact discovery and supplemental expert reports. Because there was no trial date or summary-judgment briefing schedule, the court found no reason a continuance would be infeasible. Micro Focus’s disagreement with those assessments did not establish clear error or a legal mistake.

Disposition

The court found no clear error and no ruling contrary to law in Judge Reznik’s order. It therefore overruled Micro Focus’s Rule 72(a) objections. The opinion addressed the admissibility of the allegedly late disclosures and did not decide the parties’ underlying copyright-infringement claims.