Haptic, Inc. v. Apple, Inc.

Background

Haptic, Inc. sued Apple, Inc. for infringement of U.S. Patent No. 9,996,738. Before filing suit, Haptic retained Susman Godfrey and communicated with several litigation-funding entities. Haptic entered confidentiality or nondisclosure agreements before sharing substantive information about its anticipated claims. It eventually entered an agreement with Siltstone Capital Litigation Fund, LP, which lent Haptic money for litigation costs. According to Haptic and the funder, the funder had no present or future ownership interest in Haptic or the patent and no authority over litigation or settlement decisions.

Apple sought discovery of documents and communications between Haptic and litigation funders. Its requests included materials concerning the patent’s valuation, validity, potential infringement, and damages; the parties’ interests in the litigation; communications with potential funders; and the funding agreement. Haptic produced a privilege log identifying 16 entries and claimed work-product protection and the common-interest doctrine.

Relevance

The court found that the logged damages analyses were relevant. Those documents contained royalty-base or damages analyses prepared by Haptic’s counsel and a non-testifying expert before the case was filed. The court concluded that they could inform the reasonable-royalty analysis used to calculate patent damages, including the Georgia-Pacific factors concerning a hypothetical negotiation and expert opinion.

The court also found that the logged patent-evaluation and merits-analysis documents were relevant because they concerned Haptic’s views about the strength and possible weaknesses of its infringement claims and could relate to Apple’s invalidity defenses. The documents could also support or contradict testimony by Haptic’s CEO, Mr. Boshernitzan.

The court rejected Apple’s argument that the funding agreement and related documents were relevant to Haptic’s standing. Haptic and the funder attested that the funder had no ownership or other interest in the patent and no control over litigation or settlement decisions. The court found that Apple’s concerns about future standing and the identity of decision-makers were based on suspicion and did not justify discovery.

The court also found that the non-logged documents were not relevant. Apple did not show that communications about Haptic’s initial inquiries, nondisclosure agreements, or the funder’s decision to provide financing were needed to counter a “David v. Goliath” trial theme or challenge witness credibility. The court likewise found that Apple had not shown that analyses held by the funder would be more relevant than analyses by other third parties, and that speculation about additional documents was insufficient.

Work-Product Protection

The work-product doctrine generally protects documents prepared by or for a party or its representative because of anticipated litigation. The court held that Haptic made an initial showing that the logged documents qualified for this protection. Haptic’s privilege log described the documents, their creators, recipients, and dates, and Haptic’s CEO stated that counsel or counsel’s agents prepared them while investigating anticipated patent litigation and potential damages.

The court rejected Apple’s argument that the documents were created for a business purpose rather than litigation. Applying the Ninth Circuit’s “because of” standard, the court held that the documents would not have been created in substantially similar form without the prospect of litigation, even if they also helped Haptic seek litigation funding.

Waiver and Common Interest

The court held that the common-interest doctrine did not apply. That doctrine can prevent waiver of an existing privilege when parties represented by separate counsel communicate confidentially about a shared legal interest. The court concluded that Haptic and potential funders had only a shared desire for a favorable litigation outcome while they were negotiating funding, not a joint legal strategy. The court also concluded that Haptic and the eventual funder did not have the required common legal interest because the funder had no interest in the patent.

However, the court separately held that Haptic’s disclosures did not waive work-product protection. Haptic shared the documents under nondisclosure and common-interest agreements with entities that were not its adversaries. The disclosures concerned anticipated litigation against Apple, not litigation against the funders, and did not substantially increase the opportunity for Apple or another adversary to obtain the information. Apple also did not show a substantial need for the logged documents.

Disposition

The court held that Haptic’s logged documents were protected from production by the work-product doctrine and that the other documents Apple sought were not relevant and therefore not discoverable. The court DENIED Apple’s motion to compel and GRANTED the Funder’s and Haptic’s joint motion to quash subpoenas.