Au New Haven, LLC v. YKK Corporation

Background

The plaintiffs asserted claims involving a United States patent, foreign patents in Japan and Taiwan, an exclusive license agreement, and statements that the defendants allegedly made about who had the right to manufacture patented zippers. Ownership of the Japanese and Taiwanese patents mattered because the defendants argued that the plaintiffs lacked rights relevant to their claims.

During discovery, the defendants requested documents concerning ownership and transfers of the patents. The plaintiffs produced more than 30 related documents, including drafts and older materials, but did not produce documents later found by the defendants in the Japanese Patent Office and Taiwan Intellectual Property Office records. The court referred to these as the “Withheld Documents.”

The Japanese records included 2016 assignment documents and related filings. The court explained, based on the submitted evidence about Japanese law, that patent transfers generally had no effect unless notified to and registered with the Japanese Patent Office. The court stated that the records showed the Japanese patent rights were not transferred to the plaintiffs in 2006 and 2014, as previously represented, but instead were transferred no earlier than the 2016 assignment that was registered. The Taiwanese records showed an attempted inheritance-related transfer, but the application was canceled after the patent office requested additional supporting evidence; the records did not show that ownership was transferred to either plaintiff.

Legal standard

Federal Rule of Civil Procedure 26(e) requires a party to supplement or correct a discovery response when it learns that the response is materially incomplete or incorrect and the information has not otherwise been made known to the opposing parties. The court treated this as a continuing obligation, including for responsive documents created or obtained after the initial response.

Under Rule 37(c), a court may impose sanctions when a party fails to provide information required by Rule 26. The court applied a three-part test asking whether the party had a duty to produce the evidence, whether it acted with a culpable state of mind such as negligence or gross negligence, and whether the evidence was relevant to a claim or defense.

Court’s analysis

The court held that the plaintiffs were required to produce the Withheld Documents. The documents concerned the assignment and transfer of the foreign patents and were responsive to the defendants’ requests. Producing some related documents or drafts did not excuse failing to produce the final, executed documents. The court also rejected the plaintiffs’ argument that the documents did not have to be produced because they were publicly available. The court found that the documents were not equally accessible, particularly because the Taiwanese records were not available online and required local counsel to obtain access to physical files.

The court found that the plaintiffs’ failure was at least grossly negligent. The plaintiffs had created or commissioned the documents, had produced related materials showing that they knew this category of information was responsive, and had not objected to the discovery requests’ continuing-update requirement. The court also noted that plaintiffs’ counsel had previously described Rule 26(e) as imposing a continuing obligation to provide later-acquired information.

The court found the Withheld Documents relevant. Ownership of the foreign patents affected the plaintiffs’ contract claim during the discovery period. The documents also affected the remaining claim under the federal Lanham Act because an earlier summary-judgment ruling had treated the plaintiffs’ rights as part of the reason a claim could proceed. If the plaintiffs did not own the Japanese and Taiwanese rights, the defendants could argue that the earlier ruling rested on an incorrect premise.

Sanctions and disposition

The defendants asked the court to strike the plaintiffs’ entire Lanham Act claim. The court found that sanction excessive because the Withheld Documents related to ownership of the foreign patents and did not undermine the claim to the extent it involved domestic conduct. The court stated that barring claims based on conduct in Japan and Taiwan might be an appropriate and proportionate sanction, but held that issue in abeyance while the Supreme Court considered Abitron Austria GmbH v. Hetronic International, Inc., which the court said could affect the viability of claims based on foreign sales.

The court held the defendants entitled to reasonable attorney’s fees and costs attributable to their investigation that uncovered the Withheld Documents, their briefing of the sanctions motion, and any approved supplemental briefing concerning sanctions. It directed the defendants to submit an application for the fees and costs in the first two categories by April 11, 2023. The court concluded that the defendants’ motion for sanctions was granted in part and directed the clerk to terminate the pending motion.