GlobalFoundries U.S. Inc. v. International Business Machines Corporation

Background

GlobalFoundries (GF) objected to Magistrate Judge Andrew Krause’s denial of its motion to compel production of one IBM document, referred to as the “GDM Draft.” The motion concerned discovery—the exchange of relevant, nonprivileged information during litigation. Judge Krause denied the motion at a June 14, 2024 hearing, reasoning that the internal document was outside the discovery parameters previously established and was not necessary because GF could argue its theory through comparisons and inferences.

Earlier, Judge Krause had ordered IBM to produce ultimate or final drafts provided to Intel and Rapidus, but had not required production of every purely internal version. IBM produced at least three ultimate or final drafts. GF later found an IBM email stating that the GDM Draft contained “carry-overs from old documents.” Another email stated that a reference to “7nm” should be changed to “NS3 technology.” GF argued that these references could connect its earlier documents and protected processes to materials IBM later disclosed.

The parties’ positions

GF argued that the GDM Draft was relevant to its claims and defenses, including alleged misappropriation of trade secrets, breach of the parties’ agreement, IBM’s alleged willfulness, and IBM’s independent-development defense. GF maintained that the draft could serve as a link between its documents and the documents IBM ultimately disclosed to Intel and Rapidus.

IBM argued that GF’s objection was waived because GF had not objected earlier to Judge Krause’s April 17 ruling. IBM also argued that the purely internal draft was irrelevant because GF’s misappropriation theory concerned improper disclosure and because GF could rely on indirect evidence rather than the draft itself.

Court’s analysis

The court rejected IBM’s waiver argument. It treated the April 17 and June 14 rulings as distinct because the earlier ruling did not address the GDM Draft or GF’s particular arguments about it. The court also concluded that the earlier ruling did not categorically decide that internal drafts could never be discoverable. To the extent the two rulings involved the same issue, the court exercised its discretion to consider GF’s objection because the law on waiver in this situation was unsettled.

Under Federal Rule of Civil Procedure 26(b), discovery may include any nonprivileged matter relevant to a claim or defense, considering whether the burden or expense of the discovery outweighs its likely benefit. The court viewed Judge Krause’s decision primarily as a relevance determination. It noted that Judge Krause had not found that producing the GDM Draft would be unduly burdensome, and IBM did not make that argument in opposition to GF’s objection.

The court concluded that the GDM Draft and accompanying email were relevant even if GF’s claim was limited to improper disclosure. The materials could help show what IBM disclosed and where the disclosed information came from. They could also tend to refute IBM’s positions that the material resulted from independent development or from the use of a common template rather than copying.

The court recognized that GF could attempt to prove misappropriation through circumstantial evidence, meaning a combination of facts from which a factfinder could draw an inference. But the court found that the ability to use such evidence did not make the GDM Draft irrelevant. The draft could provide an additional link that would reduce the inferential gap between GF’s original materials and IBM’s later disclosed documents.

Ruling and limits

The court sustained GF’s objection. It did not decide whether the GDM Draft was a trade secret, a derivative of a trade secret, or otherwise contained trade-secret material. The court also did not decide whether other internal drafts or communications should be produced. The ruling was limited to the GDM Draft referenced in the exhibit to GF’s supporting declaration and the accompanying email, whose description of the draft and IBM’s edits contributed significantly to the court’s relevance analysis.