Signify Holding B.V. v. TP-Link Research America Corporation

Background

Signify Holding B.V. moved to compel TP-Link Research America Corporation and TP-Link USA Corporation, together called TP-Link, to produce three files concerning sales of LED Retrofit Bulbs by TP-Link Corporation Limited, a non-party Hong Kong-based affiliate. Signify claimed that the sales were covered by a patent license agreement and that the files were relevant to determining royalties or damages.

The license agreement defined “Affiliate” based on direct or indirect ownership or control, including ownership of more than 50% of voting stock or the ability to direct a company’s business activities. The parties disputed whether TP-Link Corporation Limited was an affiliate under that definition. TP-Link Research America was no longer in business, and Signify alleged that TP-Link USA was its alter ego and therefore subject to the license agreement. TP-Link Corporation Limited was not alleged to share management with TP-Link, although it was under the same corporate umbrella, used the same attorneys, and supplied LED Retrofit Bulbs to TP-Link USA.

During joint negotiations about the royalty dispute, TP-Link Corporation Limited provided the sales information to Signify. TP-Link and TP-Link Corporation Limited used joint counsel in those negotiations. The court had previously directed Signify to return or destroy documents obtained through the settlement discussions, on the condition that TP-Link produce responsive documents within its possession, custody, or control during ordinary discovery.

Parties’ Arguments

TP-Link refused to produce the files, arguing that they were not relevant and that TP-Link did not possess, have custody of, or control them. TP-Link characterized TP-Link Corporation Limited as a separate corporation and argued that Signify should obtain the documents through the process used to seek records from a foreign corporation under the Hague Convention.

Signify argued that TP-Link had control because TP-Link Corporation Limited gave the files to attorneys who also represented TP-Link during the joint negotiations. The court rejected the proposition that TP-Link automatically controlled another client’s documents merely because its attorneys possessed them. A client controls its own documents held by its attorneys, but that does not ordinarily give the client control over another client’s documents held by the same attorneys.

Legal Standard

Federal Rule of Civil Procedure 26 permits discovery of information relevant to claims and defenses and proportionate to the needs of the case. Rule 34 requires a party to produce requested information within its “possession, custody, or control.” Courts in the Second Circuit apply a “practical ability” standard: a party has control if it has the practical ability to obtain and produce the documents.

That standard can sometimes require a company to produce documents held by a parent, subsidiary, or sister company. Relevant considerations may include whether the company has routine access to the other company’s documents, whether the entities operate practically as one company, and whether foreign law restricts production. The party requesting the documents bears the burden of showing possession, custody, or control.

Court’s Analysis

The court found that Signify had identified facts suggesting TP-Link might have the practical ability to obtain the files. Those facts included TP-Link Corporation Limited’s participation in joint royalty negotiations, its supply of bulbs to TP-Link, the companies’ shared corporate umbrella, and their use of the same counsel. But the court concluded that these facts were not enough to make a definitive ruling that TP-Link controlled the files.

The court also found that TP-Link had not clearly stated whether the sales records existed on its email servers or in the files of its corporate witness and executive, Deyi Shu. The records might have been shared with TP-Link during the joint negotiations, rather than only with Signify. TP-Link also had not stated that it had formally requested the records from TP-Link Corporation Limited and that the company had refused to provide them.

Disposition

The court denied Signify’s motion to compel without prejudice. Under the order, TP-Link must state whether it, as opposed to its counsel, possesses the requested documents and must produce them if it does. Signify may question Deyi Shu and others about the corporate relationship and other facts bearing on TP-Link’s practical access to the files. If Signify learns facts establishing that TP-Link has possession, custody, or control, it may renew the motion if necessary. The clerk was directed to terminate docket entry 63.