Cadence Design Systems, Inc. v. Syntronic AB

Background

Cadence sued Syntronic, alleging unlicensed use of Cadence software. Judge Susan Illston referred the case to Magistrate Judge Joseph C. Spero to resolve discovery disputes. The court had previously ordered Syntronic Beijing to produce 24 computers in the United States for inspection and to answer certain interrogatories.

Syntronic sought reconsideration of that discovery order. It relied on China’s Personal Information Protection Law, or PIPL, and argued that Article 39 required the consent of employees and former employees before personal information on the computers could be transferred outside China. Syntronic said some users had refused consent and that some others could not be located. It asked to have the computers inspected in China instead.

Cadence argued that Syntronic had waived the objection by failing to identify the relevant Chinese-law provisions earlier. Cadence also argued that the PIPL contains an exception for processing personal information when necessary to fulfill legal obligations. The parties submitted competing opinions from Chinese-law experts.

Reconsideration standard

The court first held that Syntronic had not satisfied Civil Local Rule 7-9(b), which requires a party seeking reconsideration to show reasonable diligence and a material difference in fact or law, new material facts or a change in law, or the court’s failure to consider material facts or dispositive legal arguments. The court found that Syntronic had previously referred generally to Chinese data-privacy restrictions but had not identified the specific law or explained how it applied. The court also found that Syntronic’s failure to determine earlier whether employees would consent reflected a lack of reasonable diligence.

The court stated that this failure alone was sufficient reason to deny reconsideration. It nevertheless addressed the PIPL issue.

PIPL analysis

The court assumed, without deciding, that the computers contained protected personal information. Article 39 requires separate consent before personal information is provided to an overseas recipient. Article 13, however, lists circumstances in which personal information may be handled without individual consent, including when necessary to fulfill obligations provided by law.

The court found Cadence’s expert’s interpretation more persuasive than Syntronic’s. It held that Article 13’s exceptions apply to Article 39’s consent requirement, even though the provisions appear in different chapters of the PIPL. The court also declined to limit the legal-obligation exception to obligations under Chinese law. Nothing in the PIPL, the court said, indicated that the exception was limited in that way.

The court further held that Syntronic Beijing’s obligation to comply with U.S. discovery rules and the court’s order was a qualifying legal obligation. The order did not need to be confirmed or enforced by a Chinese court because Cadence was not seeking enforcement through Chinese courts; Syntronic Beijing was a party to the U.S. case and was required to follow the court’s discovery orders.

Disposition

The court held that the PIPL did not prohibit compliance with the prior discovery order and that there was no conflict between Chinese law and that order. Because of that conclusion, the court did not reach the parties’ remaining arguments about waiver, international comity, or other PIPL exceptions. It also rejected Syntronic’s suggestion that discovery should not proceed because Syntronic Beijing might renew its motion challenging personal jurisdiction, explaining that a federal court may require discovery relevant to determining its own jurisdiction.

Judge Joseph C. Spero denied the motion for reconsideration. The court ordered Syntronic to produce the computers for inspection in the United States no later than July 15, 2022.