Bytemark, Inc. v. Xerox Corp.

Background

Bytemark, Inc. brought claims against Xerox Corp., ACS Transport Solutions, Inc., Xerox Transport Solutions, Inc., Conduent Inc., and New Jersey Transit Corp. for patent infringement, breach of contract, trade-secret misappropriation, unfair competition, and unjust enrichment.

The order concerned a discovery dispute. Bytemark asked the defendants to produce documents and communications concerning the creation and development of defendants’ allegedly infringing mobile ticketing application, including materials concerning the New Jersey Transit and MyTix applications. The requests included documents shared through project-management and cloud-storage systems, communications from 2012 through 2016, app versions, original application-programming-interface documentation, and source code for the first released version of the MyTix application.

The defendants did not dispute that the requested materials were relevant or that they had an obligation to produce them. They argued, however, that Bytemark first had to identify its alleged trade secrets with “reasonable particularity.” They sought an order compelling that disclosure and a protective order postponing production of the defendants’ confidential information until Bytemark made the disclosure.

Review of the Magistrate Judge’s Orders

Magistrate Judge Kevin N. Fox had denied both sides’ original discovery motions with prejudice and denied Bytemark’s motion to strike as moot. He found that the parties had violated his filing instructions by serving papers and filing certificates of service by the deadline instead of filing the fully briefed motions on the docket. He later denied both sides’ requests for reconsideration.

The district court reviewed those nondispositive pretrial orders under the standard requiring correction of findings that are clearly erroneous or contrary to law. The court concluded that Judge Fox had acted clearly erroneously and contrary to law. It found no willful effort to violate his order because the parties were attempting to follow the district court’s individual filing rules. Even assuming the parties had erred, the court held that denying the motions with prejudice was not proportional to a nonwillful filing mistake.

The court therefore sustained the parties’ objections to Judge Fox’s January 13, 2021 and January 21, 2021 orders and stated that it would decide the original discovery motions on their merits.

Discovery Rulings

The court rejected the defendants’ argument that Bytemark had to identify its trade secrets in the detail they demanded before obtaining relevant discovery. The court explained that the reasonable-particularity standard generally requires enough information to inform a defendant about the nature of the claims and allow it to determine the relevance of discovery requests. The standard is flexible and depends on the facts and stage of the case.

The court emphasized that the litigation was at a very early stage: the defendants had not produced confidential documents and no depositions had occurred. At that stage, Bytemark was not required, as a prerequisite to obtaining relevant discovery, to identify its trade secrets with the demanded specificity. The court also noted that discovery can proceed in any sequence and that one party’s discovery does not necessarily require the other party to delay its own discovery.

The court found that the defendants had not shown that they lacked notice of the nature of Bytemark’s claims or could not determine the relevance of Bytemark’s requests. Their assertions that uncertainty would cause future disputes and inefficient discovery were speculative. The court also considered Bytemark’s statement that it was willing to identify its trade secrets by producing the source code and confidential information underlying its claims before the defendants produced confidential or proprietary materials.

Disposition

The parties’ objections to Judge Fox’s January 13, 2021 and January 21, 2021 orders were sustained. Bytemark’s motion to strike was denied. Bytemark’s motion to compel was granted. The defendants’ motion to compel and motion for a protective order were denied. The defendants were directed to respond to Bytemark’s Requests 38–40 and 60–62 of its Second Request for Production by January 19, 2022.