In\u00a0Drone Technologies, Inc. v. Parrot S.A., [2015-1892, 2015-1955] (September 29, 2016), the Federal Circuit\u00a0vacated the final judgment and the\u00a0awards of damages ($7.8 millon) and attorney fees ($1.7 million), finding that the district court abused its discretion in issuing\u00a0the two discovery orders and in entering a default judgment\u00a0against Parrot for its failure to comply with those\u00a0orders.<\/p>\n
Parrot first contested jurisdiction, arguing that Drone did not have standing to bring suit. Relying on the presumption that the named inventors \u00a0are the true and only inventors, the Federal Circuit saw no reason\u00a0why Parrot should be allowed to reassert an\u00a0invalidity challenge under the guise of a motion to dismiss\u00a0for lack of standing.<\/p>\n
Parrot\u2019s main argument on appeal is that the district\u00a0court twice abused its discretion: first, when it directed\u00a0Parrot to turn over its on-board source code; and, second,\u00a0when it sanctioned Parrot by entering a default judgment\u00a0against it after it failed to produce the source code. \u00a0Parrot contended that it produced documents sufficient to show the operation of the accused\u00a0products as required by LPR 3.1, while Drone argued, and the Court agreed, that Parrot had to produce its source code. \u00a0 Parrot failed to produce the Source Code, the district court rejecting Parrots attempts to avoid having to disclose its source code. \u00a0The district concluded that\u00a0\u201clesser sanctions\u201d\u00a0would have been inadequate, and entered a default\u00a0judgment against Parrot as to liability and struck its
\nanswer and counterclaims. \u00a0The Federal Circuit denied Parrot’s petitions for mandamus, and the case went to trial on the issue of damages.<\/p>\n
The Federal Circuit found that\u00a0the district court twice\u00a0abused its discretion: first, when it issued the July 1 and\u00a0July 25 Orders; and second, when it imposed a default\u00a0sanction on Parrot for not complying with those orders. Regarding the discovery orders, the Federal Circuit said found that the district court failed to follow its local patent\u00a0rules (as well as the Federal Rules) and also failed to\u00a0provide any explanation for its deviation from those rules. The Federal Circuit noted that there was no finding that Parrot did not comply with\u00a0LPR 3.1. \u00a0The \u00a0Federal Circuit also found no explanation why the source code had to be produced, instead of the inspection and copying mentioned in the rule. was not sufficient. \u00a0The Federal Circuit also found no explanation why the orders were not limited to the products “identified in the claims pled.” \u00a0Finally the Federal Circuit noted the absence of any showing of relevance or need for the source code.<\/p>\n
The Federal Circuit observed\u00a0district court should have compared\u00a0the needs of the case with both the burden placed\u00a0on Parrot to produce \u201call source code\u201d and the significant
\nconsequences that might result from unauthorized or\u00a0inadvertent disclosure, noting that\u00a0protective orders are not fool -proof.<\/p>\n
Turning to the propriety of the sanctions, the Federal Circuit reviewed the Poulis factors applied by the Third Circuit:<\/p>\n
(1) the\u00a0extent of the party\u2019s personal responsibility; (2) whether\u00a0the party had a history of dilatoriness; (3) whether the\u00a0conduct of the party or the attorney was willful or in bad\u00a0faith; (4) the meritoriousness of claims or defenses; (5) the\u00a0prejudice to the adversary caused by the party\u2019s conduct;\u00a0and (6) the effectiveness of sanctions other than dismissal\u00a0or default.<\/p><\/blockquote>\n
Because the apparent prejudice\u00a0to Drone is unsubstantiated, the Federal Circuit said\u00a0that the fifth factor\u00a0disfavors a severe sanction.Turning to the effectiveness of the sanctions, the Federal Circuit said that the district\u00a0court\u2019s analysis suggests it did not seriously consider\u00a0alternative sanctions, observing:<\/p>\n
Notwithstanding\u00a0the \u201cstrong presumption\u201d against a \u201cdrastic\u201d\u00a0sanction like default, the court rejected all alternatives\u00a0without explanation.<\/p><\/blockquote>\n
The Federal Circuit found that Parrot’s offers of alternative production were not indicative of a party trying to hide a\u00a0smoking gun. Accordingly, it found that the district court\u00a0abused its discretion in concluding that default was the\u00a0only available remedy.<\/p>\n
The Federal Circuit did not find Parrot blameless, however, and noted that if Drone should bring a further motion for actions, the Court was free to consider whether lesser sanctions were warranted.<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
In\u00a0Drone Technologies, Inc. v. Parrot S.A., [2015-1892, 2015-1955] (September 29, 2016), the Federal Circuit\u00a0vacated the final judgment and the\u00a0awards of damages ($7.8 millon) and attorney fees ($1.7 million), finding that the district court abused its discretion in issuing\u00a0the two discovery … Continue reading