June 15, 2011 Via Electronic Delivery Dominick T. Gattuso Proctor Heyman LLP 1116 N.

West Street Wilmington, Delaware 19801

David A. White
Partner T. 302.984.6370 F. 302.691.1136 dwhite@mccarter.com

Jack B. Blumenfeld Morris, Nichols, Arsht & Tunnell LLP 1201 North Market Street, P.O. Box 1347 Wilmington, Delaware 19899 Re: XPRT Ventures, LLC v. eBay, Inc., et al. C.A. No. 1:10-cv-00595-SLR

McCarter & English, LLP Renaissance Centre 405 N. King Street, 8th Floor Wilmington, DE 19801-3717 T. 302.984.6300 F. 302.984.6399 www.mccarter.com

Dear Counsel: This letter shall serve as my decision and order concerning Plaintiff XPRT Ventures, LLCs (XPRT or Plaintiff) request for an order compelling Defendants eBay Inc., PayPal, Inc., Bill Me Later, Inc., Shopping.com, Inc. and Stubhub, Inc. (collectively, the Defendants) to produce documents from the

BOSTON

relevant time frame and from certain named custodians (the Motion). Procedural History On July 13, 2010, XPRT filed suit against the Defendants, in which XPRT sought declaratory relief and monetary damages, among other forms of relief, under the following legal theories: patent infringement; misappropriation of trade secrets; conversion; and unjust enrichment. XPRT filed the First Amended Complaint on September 30, 2010 which reduced the allegations to one of patent infringement

HARTFORD

NEW YORK

NEWARK

PHILADELPHIA

STAMFORD

WILMINGTON

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concerning six (6) specific patents (the Amended Complaint). XPRT alleges that its patents teach in alternative embodiments to the traditional payment vehicle of bank draft or credit card, thus allowing the user to streamline e-commerce transactions and electronic auctions by avoiding the necessity of using specific credit card and bank data for each and every purchase in an e-commerce transaction, or an electronic auction transaction. Amended Complaint, 16. The patents at-issue purportedly addressed a flaw in Defendant eBays operations, and its inventors, George Likourezos and Michael Scaturro, brought their yet-to-be published patent applications to the attention of eBay in 2001 (the Patent Applications). See

Amended Complaint, 29, 34-39. In 2003, individuals applied for a patent on behalf of eBay; the eBay patent application purportedly included the automatic payment system invented by Messrs. Likourezos and Scaturro[,] yet it did not reference the Patent Applications. See Amended Complaint, 64. The eBay patent application was ultimately rejected. See Amended Complaint, 76. Thereafter, eBay would purchase several entities, and the Defendants operating systems purportedly incorporated specifications of the Patent Applications. See Amended Complaint, 80. XPRT notified eBay of its suspicion in written form. See Amended Complaint, 53-54, 74. The patents at-issue were approved in 2009. See Amended Complaint, 86, 99, 109, 123, 134, 145. On October 18, 2010, Defendants filed their Answer to the Amended Complaint and Counterclaims against XPRT (the Answer). The Answer largely

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denied the allegations set forth in the Amended Complaint, and the Defendants asserted several affirmative defenses, including invalidity and non-infringement of the patents at-issue. See Answer, 155-65. The Answer also includes several counterclaims for declaratory relief, in which the Defendants seek a declaration that (a) they did not violate the patents at-issue; and (b) the patents at-issue are invalid. See Answer, 179-80, 182. XPRT filed an answer to the Defendants counterclaims on November 10, 2010 (Answer to Counterclaim). XPRT referenced the allegations set forth in the Amended Complaint where appropriate and denied the remaining allegations. See Answer to Counterclaim, 166-224. XPRT also asserted several affirmative See Answer to

defenses, most notably, the validity of the patents at-issue. Counterclaim.

On January 14, 2011, the Court entered a scheduling order which governs the administration of this litigation (the Order). The Order provides that

[d]iscovery will be needed on the following subjects: infringement, validity and the defenses asserted. Order, 2(b). The Order also states: In the absence of agreement among the parties or by order of the court: (a) e-discovery shall be limited to the initial custodians identified through the D. Del. 16.1(a) meeting; (b) e-discovery shall be limited to the period beginning January 1, 1998 to the present; (c) on or before April 8, 2011, each party may request ediscovery of additional custodians or for additional years, for good cause shown; and (iv) no deposition (other than those

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noticed under Fed. R. Civ. P. 30(b)(6) shall be scheduled prior to the completion of e-discovery. Order, 2(c)(4). The contents of the Order were purportedly the subject of

negotiation between the parties. Relevant Facts On or about March 21, 2011, Defendants served their Objections and Responses to XPRTs First Set of Document Requests. XPRT and the Defendants subsequently discussed their discovery efforts and reached an agreement as to a number of disputes. However, the parties have not been able to resolve the

Defendants objection as to the temporal scope of their document search. Specifically, the Defendants maintain that they will not conduct a keyword search for the entire period of time set forth in the Order; rather, the Defendants agreed to use certain keywords to search their custodians files during certain time periods for evidence of invalidity and infringement. See Motion, Exh. 9. Additionally, the parties have not been able to resolve XPRTs request to expand the number of custodians despite several teleconferences and an exchange of correspondence.1 On May 2, 2011, XPRT filed the Motion. The Motion seeks an order compelling the Defendants to (a) expand the temporal scope of their existing search

XPRT first sought to expand the number of custodians in its March 8, 2011 letter to the Defendants (the March 8 Notice). See Motion, Exh. 13. XPRT requested the search of the files of additional custodians in its April 14, 2011 letter (the April 14 Notice). See Motion, Exh. 15. XPRT purportedly learned of the individuals identified in its April 14, 2011 letter through the Rule 30(b)(6) Deposition of Defendant eBay, Inc. See id.

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for documents to the period of time set forth in the Order; and (b) to include the names of seventeen (17) additional custodians within their search for responsive documents.2 See Motion, p. 1. In support of their request to expand the temporal scope of the Defendants existing search, XPRT asserts that the Defendants conduct runs afoul of the dates identified in Paragraph 2 of the Order and the broad discovery standard followed in this jurisdiction. See Motion, pp. 8-9. XPRT also maintains that the requested relief will result in the discovery of documents relevant to the claims, counterclaims, and defenses at issue in the Amended Complaint. Motion, p. 10. With respect to their request to include additional custodians, XPRT questions why the Defendants did not disclose the identity of some of these individuals prior to the Rule 16 Conference, all of whom are or were employed by the Defendants. See Motion, p. 13. XPRT further asserts that although not required, it possesses good cause to allow for the inclusion of the additional custodians. See Motion, pp. 13-14. On May 16, 2011, the Defendants filed their written opposition to the Motion (the Opposition). The Defendants contend that the scope of the search must be limited, in some manner, on the basis of waiver, relevance and cost. See Opposition, pp. 12-15. They have taken the specific position that a search for documents should be limited, in light of the claims and defenses asserted, to: (a) the
XPRT seeks to include the following individuals: Brian Ankenbrandt; Matthew Brigham; Michael Jacobson; Andre L. Marais; Jay Monahan; Jeffrey Randall; Peter Thiel; Emily Ward; Renee Gentry; Jeffrey Herman; Ngan-Ha D. Nguyen; Hubie Chou; Paula Cramer; John Muller; Vamsee Nalamothu; Brian Phillips; and Jeffrey Spaulding.
2

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time period preceding the filing of XPRTs 09/746,618 2001 patent application; and (b) the time period following the date in January 2009 when XPRTs earliest patent was issued. See Opposition, p. 5. Additionally, they maintain that XPRT failed to show good cause under the Order to include the additional custodians as well as the contention that an expanded search is irrelevant to this phase of the litigation. See Opposition, pp. 15-16. The Defendants assert further argument with respect to the individual custodians sought to be included in the document search, like legal privilege. See Opposition, pp. 17-19. Finally, the Defendants contend that to the extent that the requested relief is granted, XPRT must bear some, if not all of the expenses incurred as a result of the expanded search. See Opposition, pp. 19-20. On May 23, 2011, XPRT submitted their reply brief in support of the Motion (the Reply). The Plaintiff maintains that the relief sought herein falls within the broad discovery standard, specifically that the requested information is relevant to the purported long felt, but unresolved need for the patents at-issue. See Reply, pp. 2, 5. Further, to the extent that the requests implicate privileged information, XPRT insists that the Defendants must produce a privilege log, rather than refuse to produce the discovery altogether. See Reply, p. 6. Finally, the Plaintiffs do not believe that its discovery requests are unreasonable, nor does it carry a significant expense to justify a fee shifting arrangement. See Reply, pp. 7-8.

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Following the conclusion of briefing and at the request of the Defendants, oral argument was held in the office of the Special Discovery Master (the Special Master or Court) on June 10, 2011. Legal Framework Federal Rule 37 provides that [o]n notice to other parties and all affected persons, a party may move for an order compelling disclosure or discovery. FED. R. CIV. P. 37(a)(1). The motion must include a certification that the movant has acted in good faith to resolve the discovery dispute without judicial intervention. See id. The moving party must establish that it sought discovery in accordance with the Federal Rules. See SWIMC, Inc. v. Hy-Tec Thermal Solutions, LLC, 2009 U.S. Dist. LEXIS 53528, at *7 (D. Del. June 24, 2009). Once the moving party has shown that discovery is proper, the responding party must demonstrate why its objection should be upheld. See generally Inventio AG v. Thyseenkrupp Elevators Americas Corp., 2009 U.S. Dist. LEXIS 67281, at *6 (D. Del. July 31, 2009). Federal Rule 26 provides that [p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any partys claim or defense - including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any

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discoverable matter. FED. R. CIV. P. 26(b)(1).3 The standard of relevance is not one of admissibility; rather, the sought-after information must appear[] reasonably calculated to lead to the discovery of admissible evidence. Id.; see also Norguard Ins. Co. v. Serveon, Inc., 2011 U.S. Dist. LEXIS 8371, at *10-11 (D. Del. Jan. 28, 2011). The courts have generally interpreted such standard to allow broad and liberal discovery. WebXchange, Inc. v. Dell, Inc., 2010 U.S. Dist. LEXIS 77449, at *3 (D. Del. July 30, 2010) (quoting Pacitti v. Macys, 193 F.3d 766, 777 (3d Cir. 1999)). Analysis And Discussion A. The Temporal Scope of the Document Search XPRTs demand that the Defendants conduct their search for documents based on the time period set forth in the Order is a question of relevance. For purposes of discovery, relevancy is broadly construed. Inventio AG, 2009 U.S.

The Inventio AG court explained that there are three concentric circles of discovery material which direct different obligations upon the parties depending upon the nature of the information involved. Inventio AG, 2009 U.S. Dist. LEXIS 94723, at *9. The obligations are as follows: First, Rule 26 envisions the exchange by the parties of information that is integral to the litigation, such as the identities of individuals likely to have discoverable information and copies of documents which support a claim or defense, without the necessity of a discovery request. [Citation omitted]. Second, Rule 26 provides for the disclosure of nonprivileged information that is relevant to any partys claim or defense upon a request from the party seeking the discoverable material. [Citation omitted]. Third, Rule 26 permits a court to order broader discovery of any matter relevant to the subject matter involved in the action, where such information is likely to lead to the discovery of admissible evidence and the party making the discovery request can establish good cause to support the request. Id.

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Dist. LEXIS 94723, at *11 (citing Pacitti, 193 F.3d at 777-78). Relevance, however, is not without limitation, as [t]he probative value of the information requested should be balanced against the costs and burdens imposed upon the producing party. Id. As the Defendants have questioned the relevance of the additional information sought herein, the burden falls upon XPRT to establish a connection between the requested discovery and the claims and defenses asserted in this litigation. See id. 1. Case Scheduling Order

XPRT first seeks to gain relief through its reliance upon Paragraph 2(c)(4)(ii) of the Order. This paragraph provides that e-discovery shall be limited to the period beginning January 1, 1998 to the present[.] Order, 2(c)(4)(ii). Contrary to XPRTs assertions, Paragraph 2(c)(4)(ii) of the Order itself does not establish the scope of relevance in this litigation. If the parties intended for Paragraph 2(c)(4)(ii) of the Order to define the boundaries of relevance, critical language, like the term relevance, should have been included, and the Special Master cannot alter the Order to remedy this omission. Therefore, XPRTs reliance upon the Order to establish the boundaries of relevance fails to pass muster. 2. Secondary Considerations Of Nonobviousness

XPRT seeks monetary damages and other relief based on its claim that the Defendants have infringed upon the patents at-issue. See Amended Complaint. The

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Defendants deny wrongdoing; assert that the patents at-issue are invalid; and seek declaratory relief that the patents at-issue are invalid and unenforceable. See

Answer. Accordingly, the issue of obviousness will prove relevant to this phase of the litigation. The concept of obviousness is well known to the parties.4 A patent may not be obtained if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. See 35 U.S.C. 103(a). The courts have held that obviousness is a question of law which requires a factual inquiry concerning (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the claimed subject matter and the prior art; and (4) secondary considerations of nonobviousness, such as commercial success, long felt but unresolved need, failure of others, and acquiescence of others in the industry that the patent is valid, and unexpected results.5 Alza Corp. v. Andrx Pharm., LLC, 607 F. Supp. 2d 614, 631 (D. Del. 2009) (citing Graham v. John Deere Co., 383 U.S. 1, 17-

A party seeking to challenge the validity of a patent based on obviousness must demonstrate by clear and convincing evidence that the invention described in the patent would have been obvious to a person of ordinary skill in the art at the time the invention was made. Aventis Pharma S.A. v. Hospira, Inc., 743 F. Supp. 2d 305, 336 (D. Del. 2010). 5 The courts may also consider evidence of copying of the invention by those within the industry; whether the invention was contrary to accepted wisdom of the prior art; skepticism by those skilled in the art upon learning of the invention; praise for the invention from those within the industry; and independent invention by others. See Scimed Life Sys., Inc. v. Johnson & Johnson, 225 F. Supp. 2d 422, 440 (D. Del. 2002) (citing Graham, 383 U.S. at 17-18).

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18 (1966)); see Leader Techs., Inc. v. Facebook, Inc., 2011 U.S. Dist. LEXIS 25308, at *40 (D. Del. Mar. 14, 2011) (An obviousness determination [under 103] is not the result of a rigid formula disassociated from the consideration of the facts of a case.). Secondary considerations of nonobviousness command substantial weight only when there is a nexus established between the merits of the claimed invention and the evidence proffered on secondary considerations. See Imperial Chem.

Indus., PLC v. Danbury Pharmacal, Inc., 745 F. Supp. 998, 1012 (D. Del. 1990); Proctor & Gamble Co. v. Teva Pharm. USA, 566 F.3d 989, 998 (Fed. Cir. 2009) (When present, such factors may often be the most probative and cogent evidence [of non-obviousness] in the record.) (quoting Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1538 (Fed. Cir. 1983)). XPRT argues that the requested information will support its underlying causes of action as well as claims concerning commercial success, long felt need and copying.6 See Motion, p. 10; Reply, p. 2. As the Defendants have not limited their document search and production related to the issue of commercial success, see Opposition, p. 14, XPRTs relevance argument solely relates to the patent infringement claims and secondary considerations of copying and long felt need. See Opposition, p. 14; Reply, p. 2.

Once a prima facie case of obviousness has been established, the burden shifts to the applicant to come forward with evidence of secondary considerations of non-obviousness to overcome the prima facie case. Santarus, Inc. v. Par Pharm., Inc., 720 F. Supp. 2d 427, 453 (D. Del. 2010).

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a.

Patent Infringement

XPRT bears the burden of establishing infringement. See Medtronic, Inc. v. Boston Scientific Corp., 2011 U.S. Dist. LEXIS 33581, at *25 (D. Del. Mar. 30, 2011). Generally speaking, a patent may not be infringed until it has been issued. While the law allows for specific causes of action which could implicate events preceding the issuance of a patent, XPRT has not asserted any such claims in this litigation. See Amended Complaint, 84-154. Thus, the requested relief is not relevant to the Plaintiffs claims of patent infringement. See FED. R. CIV. P. 26(b)(1). b. Copying

[C]opying requires evidence of efforts to replicate a specific product, which may be demonstrated through internal company documents, direct evidence such as disassembling a patented prototype, photographing its features, and using the photograph as a blueprint to build a replica, or access to the patented product combined with substantial similarity to the patented product. Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010) (citing Iron Grip Barbell Co. v. USA Sports, Inc., 392 F.3d. 1317, 1325 (Fed. Cir. 2004)). Further, every competing product that falls within the scope of the patent does not necessarily constitute proof of copying; otherwise, every infringement suit would automatically confirm the nonobviousness of the patent. Id. (quoting Iron Grip Barbell Co., 392 F.3d at 1325). Here, XPRT has not shown how or why the requested information touches

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upon the issue of copying. See Inventio AG, 2009 U.S. Dist. LEXIS 94723, at *11. A blanket statement that the sought-after information relates to the Defendants copying or use of [XPRT]s patent applications and patented materials[] is insufficient and, thus, XPRT has not met its burden. Motion, p. 10. c. Long Felt But Unresolved Need

A number of courts have evaluated evidence of long felt need from the time of the filing of the patent application. See, e.g., Perfect Web Techs., Inc. v. Infousa, Inc., 587 F.3d 1324, 1332 (Fed. Cir. 2009) (Evidence that an invention satisfied a long-felt and unmet need that existed on the patents filing date is a secondary consideration of evidence.); Proctor & Gamble Co., 566 F.3d at 998 ([W]e look to the filing date of the challenged invention to assess the presence of a long-felt and unmet need.); Astra-Sjuco, A.B. v. USITC, 629 F.2d 682, 689-90 (C.C.P.A. 1980). However, each of the above-referenced cases addressed the issue in the context of admissibility and/or the weight of the evidence. The present dispute concerns

discovery, which carries a less stringent standard. See Norguard Ins. Co., 2011 U.S. Dist. LEXIS 8371, at *11 (Relevance is measured not by admissibility, but by whether the information bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.). Here, the Plaintiff alleges that [t]hrough PayPal, eBay has become the preeminent leader in the online payment arena and significant portions of eBays PayPal

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activities read directly on XPRTs patents claims. Amended Complaint, 18. Further, personnel, on behalf of Defendant eBay, submitted a patent application which purportedly included the automatic payment concepts described in the Patent Applications. Amended Complaint, 65. The acquisition of Defendant PayPal and the filing of the patent applications on behalf of Defendant eBay each followed the date on which the Patent Applications were filed. It stands to reason that Defendant eBay and/or its agents possessed some motivation to take this action, for example, a recognized need of the company or an issue within the industry that needed to be addressed. In light of the allegations set forth in the Amended

Complaint, the Defendants likely possess documents concerning the need for technology similar to that covered in the Patent Applications. Accordingly, limited, additional discovery of long felt but unresolved need is warranted. d. Balancing Of Interests

XPRT demands that the Defendants undertake a search of their documents for evidence of long felt need over a thirteen (13) year period (January 1, 1998 Present). See Motion, p. 1. The scope of the request exceeds the broad discovery standard in its entirety in that a blanket search of the Defendants records for a thirteen (13) year period is not reasonably calculated to lead to the discovery of admissible evidence concerning long felt need. Compare Inventio AG, 2009 U.S. Dist. LEXIS 94723, at *11. Further, the burden and expense associated with a

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sweeping request of this nature must be considered. See id. at *11 (The probative value of the information requested should be balanced against the costs and burdens imposed upon the producing party.) (citing Pacitti, 193 F.3d at 777-78). Here, the balancing of interests tips in favor of a limited review of the Defendants documents concerning the Defendants knowledge of or appreciation for the purported long felt need for technology similar to that covered in the patents at-issue. Where personnel submitted a patent application on behalf of Defendant eBay on or about April 30, 2003, which included or related to the subject matter of the Patent Applications, the Defendants must expand the scope of their search for documents concerning the secondary consideration of long felt but unresolved need to April 30, 2003.7 Given the limited purpose for which the documents are sought and the courts evaluation of evidence of long felt need, an expanded window of discovery, beyond that provided by this decision and order, would prove too speculative and disproportionate to the anticipated costs. B. The Inclusion of Additional Custodians XPRTs request to include seventeen (17) additional custodians requires a showing of good cause.8 See Order, 2(c)(4)(iii). [T]he good cause standard under Rule 16(b) hinges on the diligence of the movant, and not on prejudice to the non-

This Order does not affect the parties ability to pursue alternate, less expensive methods of discovery available under the Federal Rules of Civil Procedure. 8 The partys prior discussions concerning this discovery dispute have centered on whether XPRT has provided good cause to warrant the inclusion of additional custodians. See Motion, Exh. 5-6, 13-19.

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moving party. Frederick v. Avantix Lab., Inc., 2011 U.S. Dist. LEXIS 32765, at *5 (D. Del. Mar. 29, 2011) (quoting Requette Freres v. SPI Pharma, Inc., 2009 U.S. Dist. LEXIS 43740, at *13 (D. Del. May 21, 2009)); Pettinaro Enter., LLC v. Continental Cas. Co., 2010 U.S. Dist. LEXIS 115305, at *6 (D. Del. Oct. 29, 2010). The movant must demonstrate that, despite diligence, the proposed claims could not have been reasonably sought in a timely manner. Requette Freres, 2009 U.S. Dist. LEXIS 43740, at *13 (discussing FED. R. CIV. P. 16(b) in the context of a plaintiff seeking to amend the pleadings following the expiration of the deadline set forth in the case scheduling order); see also Dow Chem. Can. Inc. v. HRD Corp., 2009 U.S. Dist. LEXIS 108802, at *3 (D. Del. Sept. 24, 2009) (finding, in the context of a discovery dispute, that the movant must demonstrate that the discovery sought could not have been obtained within the allowed discovery period.). Within this discussion, the attitude of the courts toward discovery cannot be ignored. See BAE Sys. v. Aircraft Controls, Inc., 224 F.R.D. 581, 589 (D. Del. 2004) (Courts in this jurisdiction have a liberal discovery policy, permitting full disclosure of information except in situations where compelling circumstances warrant protection of the information.). A liberal interpretation of the discovery rules will afford the parties opportunities to obtain the fullest possible knowledge of the issues and facts prior to trial. Hicks v. Feeney, 124 F.R.D. 79, 82 (D. Del. 1987). And, the courts possess broad powers to ensure full and fair disclosure of information between the parties. See Inventio AG, 2009 U.S. Dist. LEXIS 94723, at *11.

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The Defendants arguments emphasize the timing and manner in which XPRT sought to include the additional custodians. It is true that XPRT named seven (7) of the seventeen (17) custodians in the Amended Complaint, see Amended Complaint, 35, 45, 52, 54, 55, 66, 71, yet they failed to identify these individuals until their supplemental initial disclosures following the Rule 16 Conference. Further, the Plaintiff likely knew of three (3) additional custodians and their involvement in the preparation of Defendant eBays patent applications at the initial pleadings stage. However, XPRT did not think to include these persons in its initial disclosures until after the Rule 16 Conference. Despite this brief delay, the Plaintiffs subsequently took action, in the form of supplemental disclosures and the March 8 Notice, to demand that the Defendants search these individuals files for responsive documents.9 Finally, XPRT seeks to include six (6) individuals as custodians who were purportedly identified for the first time in the Rule 30(b)(6) Deposition of Defendant eBay, Inc. The Defendants do not appear to dispute the timeliness of XPRTs request or its offer of good cause as to five (5) of the individuals; rather, the dispute largely concerns the timing of the sixth member of this group, John Muller.10 See Opposition, pp. 8, 10, 17-19. While the Plaintiffs could have learned of Mr. Mullers position via the Internet, the Defendants notice argument assumes that the
The Defendants failure to include these individuals in their initial disclosures or supplement such disclosures to include others persons who may possess discoverable information is not lost on the Court. FED. R. CIV. P. 26(a)(1)(A). 10 Mr. Muller served as General Counsel for Defendant PayPal during a portion of the relevant time period, and his position at Defendant PayPal was listed on the companys website. See Opposition, p. 19.
9

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Plaintiff knew or should have known of his relevance to this litigation at the outset of the litigation. The Defendants position is speculative.11 Accordingly, the Court finds that XPRTs delay in identifying the additional custodians does not bar the requested relief and, although it is a close call on the record, XPRT possesses good cause, thereby necessitating a further analysis of the arguments posed. For ease of reference, the parties have sorted the additional custodians into three (3) separate categories, and the Court will address XPRTs proffer in this context. 1. Individuals Who Purportedly Interacted With The Inventors Of The Patents At-Issue12 a. Attorneys - Employees of Defendant

XPRT seeks to include four (4) of the Attorneys, each of whom are employed by one of the Defendants, as additional custodians.13 XPRT contends that these individuals possess documents useful in establishing XPRTs claims of infringement, and also to long-felt need and secondary considerations of obviousness. Motion, p. 16. XPRT also insists that this group possesses documents

11

Further, the Defendants argument only serves to encourage parties to seek discovery from every individual in a position of leadership, as opposed to those persons who may bear relevance to the specific litigation. 12 This group includes the following individuals: Brian Ankenbrandt; Matthew Brigham; Michael Jacobson; Andre L. Marais; Jay Monahan; Jeffrey Randall; Peter Thiel; and Emily Ward. See Motion, pp. 15-18. 13 This subheading addresses XPRTs request concerning Messrs. Jacobson, Monahan and Thiel as well as Ms. Ward.

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likely to be relevant to the defense and counter-claims asserted by Defendants[.] Id. Michael Jacobson - He served as Vice President and General Counsel for Defendant eBay during some or all of the relevant time period. XPRT alleges that Mr. Jacobson learned of the publication of four (4) patent applications on or about July 29, 2002. See Amended Complaint, 52. Plaintiff alleges that he was informed of the publication of an additional patent application in January 2007; Likourezos also notified him that Defendant eBays PayPal Buyer Credit Program and incentive program, which utilized the PayPal payment services, were within the scope of at least one of the published claims of his patent application. See Amended Complaint, 78. In his role as Vice President and General Counsel of Defendant eBay, he likely took part in subsequent discussions with business and legal personnel. These communications likely concerned the validity of and potential economic benefit to be derived from the information included in the Patent Applications. Jay Monahan - He served as Associate General Counsel for Defendant eBay during some or all of the relevant time period. XPRT alleges that Mr. Monahan learned of the Patent Applications in September 2001, and that Likourezos proposed an exclusive opportunity to eBay to review the applications under confidence during a period before they were publicly available. Amended Complaint, 33-34, 45. Plaintiff also contends that Mr. Monahan received written notice that Defendant eBays newlyannounced payment features were within the scope of the published claims of Likourezos and Scaturro. See Amended Complaint, 53. Mr. Monahan stood in a unique position related to Defendant eBays discovery and

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understanding of the Patent Applications. His relationship, as alleged in the Amended Complaint, suggests that he may possess documents which are relevant to the claims, defenses and counterclaims asserted in this litigation. Peter Thiel - He served as Chairman, President and CEO of Defendant PayPal, Inc. during some or all of the relevant time frame. XPRT alleges that he was notified that PayPals Winning Bidder Notification feature when used in the eBay auction system was within the scope of one or more of the [i]nventors published claims. Amended Complaint, 54. This allegation underlines Plaintiffs present discovery request in which XPRT has reason to believe [that] his files contain documents and information regarding XPRTs patents and patent applications, communications with XPRT, and the scope of Defendants infringement. Motion, p. 16; see also Motion, Exh. 13. His interaction with Likourezos, as alleged in the

Amended Complaint, suggests that he may possess documents which are relevant to the claims, defenses and counterclaims asserted in this litigation. Emily Ward - She served as Senior Patent Counsel for Defendant eBay during some or all of the relevant time period. XPRT alleges that Ms. Ward unilaterally changed an agreement between Defendant eBay and Likourezos. See Amended Complaint, 64. Plaintiff also alleges that she knew of the 2001 patent applications, yet failed to disclose its existence to the United States Patent And Trademark Office (USPTO) for a number of years. See Amended Complaint, 67-68. At the Rule 30(b)(6) Deposition of Defendant eBay, the corporate designee disclosed a document concerning the various deposition topics. See Motion, Exh. 1. This

document listed Ms. Ward under one of the topics - Intellectual Property, including, but not limited to eBays development of Patents, research regarding existing Patents, and legal opinions relating to Patents[.] Id. In

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light of the allegations and the deposition testimony elicited thus far, it is reasonable to conclude that Ms. Ward may possess documents which are relevant to the claims, defenses and counterclaims asserted in this litigation. The Defendants object to the inclusion of these individuals as additional custodians on the grounds that they previously agreed to produce all communications between XPRT and the Defendants as well as all non-privileged documents related to such communications; the responsive documents may be privileged and, thus, protected from disclosure; the requested relief is overly broad; and the process of identifying and gathering the sought-after documents carries an unreasonable expense. See Opposition, p. 11, 15-16. In light of the Courts finding that Messrs. Jacobson, Monahan and Thiel as well as Ms. Ward could possess relevant documents, the Defendants objections must be examined in greater detail. An objection to the inclusion of these individuals as custodians, on the basis of legal privilege, is premature. The Defendants bear the burden of establishing the legal privilege. See generally Robert Bosch LLC v. Pylon Manuf. Corp., 263 F.R.D. 142, 145 (D. Del. 2009) (A party seeking to invoke the attorney-client privilege has the burden of establishing the existence of an attorney-client privilege relationship and the confidential nature of the privilege.). However, they have not asserted the applicable privilege, stated to whom the protection applies or identified the allegedly-privileged document(s). See Opposition. The Defendants are likely

incapable of satisfying these basic requirements at this initial stage, as they have not

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included the individuals as custodians or undertaken any search for the requested documents. An assertion of legal privilege as a means to withhold documents, therefore, is premature. The Defendants also object to the inclusion of these individuals on grounds that the document collection will be absurdly overbroad, likely to result in a voluminous and costly privilege log, and not likely to result in relevant documents[.] Motion, p. 16. The Court, as explained above, has already concluded that certain individuals may possess relevant documents. While the Defendants have agreed to produce all communications between the parties and documents related thereto, it is likely that the subject of such communications, including, but not limited to discussions concerning the purported economic benefit and violation of the patents at-issue, resulted in a number of additional conversations among different groups of individuals. The inclusion of these individuals as custodians will allow for a thorough search and more complete production. Further, to the extent that the Defendants contend that a search of these individuals files will be duplicative, they have not offered any specific evidence, aside from a statement concerning the volume of their production thus far, which explains how or in what manner the search will lead to the production of documents that have already been exchanged. See Inventio AG, 2009 U.S. Dist. LEXIS 67281, at *6. Finally, the use of keyword search terms and de-duplication methods will reduce the scope of the electronic discovery effort.

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Notwithstanding the potential relevance of these individuals to the litigation, the case law requires that [t]he probative value of the information requested should be balanced against the costs and burdens imposed upon the producing party. See id. at *11. At oral argument, counsel for the Defendants represented that the

Defendants will produce documents related to the acquisition of Defendant PayPal. See Transcript of Oral Argument at 42, XPRT Ventures, LLC v. eBay, Inc., et al., C.A. No. 1:10-CV-00595 SLR (D. Del. June 10, 2011) (the Transcript). Counsel for the Defendants also stated that they will produce documents related to their communications with Likourezous and Scaturro. See Transcript, pp. 49-50. Further, the expanded search, as set forth in this decision and order, will likely result in the production of additional relevant documents. Altogether, these document

productions will likely alleviate the need to search the files of Mr. Thiel and, in light of the competing interests, the Defendants shall be required to include Messrs. Jacobsen and Monahan as well as Ms. Ward as custodians. b. Attorneys - Outside Counsel

XPRT seeks to include four (4) of the Attorneys, each of whom has served as outside legal counsel for one of the Defendants, as additional custodians.14 The Plaintiff maintains that this group of individuals possesses information regarding XPRTs patents and patent applications, communications with XPRT and the scope

14

Messrs. Ankenbrandt, Brigham, Marais and Randall have each served as outside legal counsel for one of the Defendants.

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of Defendants infringement. Motion, p. 18. It also contends that this group participated in discussions with Likourezos and therefore were likely to have additional, non-privileged correspondence that is likely relevant to XPRTs claims of infringement. Id. Brian Ankenbrandt - XPRT alleges that Mr. Ankenbrandt submitted a draft Agreement for Receipt of Patent Application Information (NDA) in November 2002; and that he received two (2) preliminary amendments from Likourezos concerning the Patent Applications. See Amended Complaint, 58, 71. In light of his initial involvement, Mr. Ankenbrandt could possess documents relevant to the claims, defenses and counterclaims asserted in this litigation. Matthew Brigham - While the Amended Complaint does not reference Mr. Brigham, the March 8 Notice states that he served as outside counsel for Defendants during some or all of the relevant time frame. [Accordingly,] XRPT has reason to believe his files contain information regarding XPRTs patents and patent applications, communications with XPRT, and the scope of[.] Motion, Exh. 13.15 No additional

information has been provided. Since Mr. Brighams role and level of participation in this litigation is not currently known, the Court cannot find that XPRT satisfied its burden under the rules of discovery. See Inventio AG, 2009 U.S. Dist. LEXIS 94723, at *11. Andre Marais - XPRT alleges that Mr. Marais received copies of the applications for the patents at-issue in September 2001. See Amended Complaint, 35-37. Plaintiff also alleges that Likourezos informed him
15

The March 8 Notice did not provide any additional information concerning Mr. Brigham other than the information quoted above. See Motion, Exh. 13.

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of the significant business advantage that the patents at-issue could provide. Amended Complaint, 38-39. Thereafter, Mr. Marais

purportedly conducted a review and analysis of the submitted materials on behalf of Defendant eBay. See Amended Complaint, 44. It is also alleged that Mr. Marais participated in the drafting of the Patent Applications, which Defendant eBay submitted for approval on or about April 30, 2003. See Amended Complaint, 63. Given the extent of Mr. Marais alleged involvement, the Court finds that he could possess documents relevant to the claims, defenses and counterclaims asserted in this litigation. Jeffrey Randall - XPRT alleges that Mr. Randall requested the file histories of the four patent applications, which, on information and belief, he could not obtain from the USPTO. Amended Complaint, 55. The Plaintiff did not make any additional averments concerning Mr. Randall, aside from a request that he execute a confidentiality agreement on behalf of Defendant eBay. See generally Amended Complaint. The nature of Mr. Randalls request suggests that he may possess documents relevant to the claims, defenses and counterclaims asserted in this litigation. The Defendants object to the inclusion of these individuals as additional custodians based on the argument that the requested information is not within their possession, custody or control; is likely protected from disclosure on account of legal privilege; is overly broad in scope; and poses an unnecessary and considerable expense. See Opposition, pp. 9, 15-16. The Defendants added that the Court should also consider their agreement to produce all communications between XPRT and Defendants as well as non-privileged documents relating to communications

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between eBay and XPRT[.] Motion, p. 16. In light of the Courts finding that Messrs. Ankenbrandt, Marais and Randall could possess documents relevant to this phase of the litigation, the Defendants objections must also be examined in greater detail. Federal Rule of Civil Procedure 34 provides that a party must produce all relevant, non-privileged documents within its possession, custody or control. FED. R. CIV. P. 34(a). None of the individuals identified above are employees of the Defendants or their subsidiaries. Rather, each of these individuals are attorneys employed by separate and distinct legal entities which are not parties to this litigation. The Court has defined the term, control, as the legal right to obtain the documents required on demand. Inline Connection Corp. v. AOL Time Warner, Inc., 2006 U.S. Dist. LEXIS 72724, at *3 (D. Del. Oct. 5, 2006) (quoting Power Integrations, Inc. v. Fairchild Semiconductor Intl, Inc., 233 F.R.D. 143, 145 (D. Del. 2005)). Notwithstanding developments in other circuits, this Court has resisted the urge to expand its definition of control beyond the legal rights of a litigant to include a partys practical ability to obtained the requested documents. See id. at *78 (citing Power Integrations, Inc., 233 F.R.D. at 146). Therefore, XPRTs reliance upon a 2000 decision from the District of Maryland is not persuasive. See Poole v. Textron, Inc., 192 F.R.D. 494, 501 (D. Md. 2000) (As long as the party has the legal right or ability to obtain the documents from another source on demand, that party is deemed to have control.). Where each of the above individuals are employed by a

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corporate entity which is legally distinct from the Defendants and not a party to this litigation, the Defendants objection is sustained, and they cannot be required to search the files of Messrs. Ankenbrandt, Marais and Randall which are not in their possession, custody or control.16 2. Inventors Listed On Defendant eBays April 30, 2003 Patent Application17 XPRT seeks to include the three (3) inventors listed on the patent application submitted on behalf of Defendant eBay as custodians (the Inventors). It contends that the Inventors likely possess documents concerning the patents at-issue and [the Defendants] need to draft around XPRTs patents, that would be relevant at least to claims of infringement, including defenses to obviousness. Motion, p. 18. Reason dictates that the Inventors could possess such documents. The Defendants argue that discovery related to the Inventors should not be allowed on account of legal privilege and waste. See Opposition, p. 17. The Defendants have not identified the applicable legal privilege, nor explained how the legal privilege bars discovery. See generally Robert Bosch LLC, 263 F.R.D. at 145. To the extent a legal privilege applies to the discovery sought herein, the Defendants

16

This Order does not affect a partys obligation to participate in discovery in good faith and to take reasonable efforts to comply with discovery, including, but not limited to an informal request for documents. However, the form of relief sought herein does not allow for the Court to compel a third party to produce documents. 17 This group includes the following individuals: Renee Gentry; Jeffrey A. Herman; and Ngan-Ha D. Nguyen. See Motion, p. 18.

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may prepare a privilege log. Further, the Defendants need not produce documents belonging to the Inventors which have been included in prior productions. However, blanket assertions of duplication and waste will not suffice, as the Defendants must show how a search of the Inventors files will be similar to a review already taken of an existing custodian. No such proof has been provided; in fact, counsel for the Defendants represented at oral argument that the Defendants have only offered to undertake a limited search concerning the patent applications filed on behalf of Defendant eBay. See Transcript, p. 56. The Defendants showing falls short, and the objections are overruled. Accordingly, the Defendants shall be required to include Messrs. Gentry, Herman and Nguyen as custodians. 3. Individuals Purportedly Identified Through The Rule 30(b)(6) Deposition Of Defendant eBay18 XPRT seeks to include six (6) individuals as record custodians who were purportedly identified for the first time in the Rule 30(b)(6) Deposition of Defendant eBay, Inc. on April 6, 2011 (the Newly-Discovered Personnel). The Plaintiff contends that each of the Newly-Discovery Personnel are relevant as follows:19

18

This group includes the following individuals: Hubie Chou; Paula Kramer; John Muller; Vamsee Nalamothu; Brian Philips; and Jeffrey Spaulding. See Motion, pp. 18-19. The Plaintiff requested a search of the Newly-Discovered Personnels files in the April 14 Notice. 19 Neither the Motion nor the Reply included excerpts from the Rule 30(b)(6) Deposition of Defendant eBay. XPRT did not offer additional argument or explanation concerning the NewlyDiscovered Personnel at oral argument. See Transcript, pp. 24-25. Thus, the Plaintiffs relevance argument is confined to its submissions in support of the Motion.

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Hubie Chou - Mr. Chou served as the Director of Product Management for Billpoint when Defendant eBay launched its Billpoint payment system. See Motion, p. 18. Mr. Chous position suggests that he possessed documents relevant to the claims, defenses and/or counterclaims asserted in this litigation.

Paula Kramer - Ms. Kramer served as the Director of Payment Strategy for Billpoint and a member of the Integration Project Team when Defendant eBay initiated its Billpoint payment system. See Motion, p. 18-19. Ms. Kramers position suggests that she possesses documents relevant to the claims, defenses and/or counterclaims asserted in this litigation.

John Muller - Mr. Muller has served as the General Counsel for Defendant PayPal for more than ten (10) years. See Motion, p. 19. Mr. Muellers position suggests that he possesses documents relevant to the claims, defenses and/or counterclaims asserted in this litigation.

Vamsee Nalamothu - Mr. Nalamothu was responsible for Defendant eBays Checkout and Payments program. See Motion, p. 19. Mr. Nalamothus position suggests that he possessed documents relevant to the claims, defenses and/or counterclaims asserted in this litigation.

Brian Phillips - Mr. Phillips was responsible for Defendant eBays Buyer Programs Management Checkout and Integration. See Motion, p. 19. Mr. Phillips position suggests that he possesses documents relevant to the claims, defenses and/or counterclaims asserted in this litigation.

Jeffrey Spaulding - Mr. Spaulding was responsible for Defendant eBays Seller Program Management, Acquisition, Optimization and Integration. See Motion, p. 19. Mr. Spauldings position suggests that he possessed

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documents relevant to the claims, defenses and/or counterclaims asserted in this litigation. The Defendants argue that they should not be compelled to search for and/or produce documents from the Newly-Identified Personnel, because several of the individuals are former employees. See Opposition, p. 18. The Defendants also contend that discovery related to the Newly-Identified Personnel will prove duplicative of the documents that have been or will be produced in the coming weeks. See id. Finally, with respect to Mr. Muller, the Defendants object to the requested discovery on the basis of legal privilege. See Opposition, p. 19. The Defendants may not escape their discovery obligations on account of the fact that several individuals are no longer in their employ. Federal Rules of Civil Procedure 26 and 34 require parties to produce all relevant, non-privileged documents in their possession, custody or control. See FED. R. CIV. P. 26(b), 34(a). XPRTs present request does not run afoul of the discovery rules, as the Plaintiff has demanded that the Defendants produce all relevant, non-privileged documents from the files of these six (6) individuals. While an individuals

termination or resignation may raise an issue as to certain forms of discovery, like a deposition, their files presumably remain in the possession, custody or control of the Defendants subject to a proper request for production. See FED. R. CIV. P. 34(a). Again, [t]he probative value of the information requested should be balanced against the costs and burdens imposed upon the producing party. Inventio AG, 2009

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U.S. Dist. LEXIS 94723, at *11. For each of the Newly-Discovered Personnel, XPRT did not submit a detailed argument concerning their relevance to the litigation. While each of the individuals titles suggest that they may possess documents relevant to the claims, defenses and counterclaims asserted in this litigation, the lack of detail weakens the relevance connection; this weakness must be considered in balancing the probative value of the requested discovery against the anticipated burden. See id. First, counsel for the Defendants has represented that they will run the keyword search terms and produce documents relevant to the operation of the Billpoint system from January 1, 1998 through January 1, 2003. See Transcript, pp. 41-42. At this point, the results of this search are not known. Whether the

anticipated production of documents from this search will address XPRTs relevance arguments is equally unclear. Mr. Chou and Ms. Kramer were employed by

Defendant eBay during the launch of the Billpoint system and each were purportedly involved with making changes and modifications to the Billpoint payment system[.] Motion, Exh. 17. Given XPRTs relevance proffer and the speculative nature of the Defendants objection on the basis of duplication, the balancing of interests tips in favor of permitting discovery. Thus, the Defendants shall be

required to search the files of and produce relevant, non-privileged documents belonging to Mr. Chou and Ms. Kramer.

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Second, the Defendants have produced documents from the files of several custodians - Cheong, Cutright and Onderonk - related to the checkout programs at Defendant PayPal. See Transcript, p. 57. Counsel for the Defendants has also represented that they will run the keyword search terms and produce documents relevant to Defendant eBays acquisition of Defendant PayPal. See Transcript, p. 42. Notwithstanding this production, XPRT seeks to include Messrs. Nalamothu, Phillips and Spaulding as additional custodians, all of whom were affiliated with Defendant eBays checkout programs. See Motion, Exh. 17. The Plaintiff contends that each of these individuals will possess documents relevant to long felt but unresolved need. See id. Given the representations made by counsel for the

Defendants concerning document production and the additional discovery permitted by this decision and order, the overlap in subject matter and relevance do not presently allow for the inclusion of Messrs. Nalamothu, Phillips and Spaulding as additional custodians. The Court denies this aspect of the Motion without prejudice to allow XPRT to file a limited application concerning Messrs. Nalamothu, Phillips and Spaulding upon its review of the Defendants production of documents. Finally, as stated above, the Defendants have represented that they will run the keyword search terms for documents relevant to Defendant eBays acquisition of Defendant PayPal. See Transcript at 42. Mr. Muller purportedly served as General Counsel for Defendant PayPal prior to, during and after the sale. However, the Defendants have not offered any proof that they have searched the files of or

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produced documents from an individual whose position was similar to that of Mr. Muller. See Inventio AG, 2009 U.S. Dist. LEXIS 67281, at *6. Thus, the

Defendants objection, with respect to duplication and waste, cannot be sustained. Likewise, the Defendants assertion of legal privilege is premature where they have not yet searched Mr. Mullers file for relevant documents. See generally Robert Bosch LLC, 263 F.R.D. at 145 (finding that the attorney-client privilege requires proof beyond the mere presence of an attorney). The Defendants shall be required to search the file of and produce relevant, non-privileged documents belonging to Mr. Muller. To the extent that Mr. Mullers file contains privileged information, the Defendants may produce a privilege log. C. Defendants Request For XPRT To Share In The Discovery Costs

The courts may shift all or part of the costs of producing electronic discovery to the requesting party. Major Tours, Inc. v. Colorel, 2009 U.S. Dist. LEXIS 97554, at *16 (D. N.J. Oct. 20, 2009) (citing Peskoff v. Faber, 251 F.R.D. 59, 61 (D. D.C. 2008)). In this jurisdiction, the Honorable Sue L. Robinson, with the assistance of several federal court practitioners, has issued the default standard for the discovery of electronically stored information. Ad Hoc Committee for Electronic Discovery, Default Standard For Discovery Of Electronically Stored Information (E-Discovery), revised on March 2, 2007,

http://www.ded.uscourts.gov/SLRmain.htm (last visited June 15, 2011) (the Default

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Standard). The Default Standard provides that [g]enerally, the costs of discovery shall be borne by each party. Id. at 8. However, the court may apportion the costs of electronic discovery upon a showing of good cause. Id. The Special Master elects to follow the Default Standard in the absence of binding precedent, and this decision is supported by the finding that other jurisdictions allow for the shifting of costs under a comparable standard, albeit somewhat more detailed. See, e.g.,

Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 322 (S.D.N.Y. 2003) (established a set of criteria for determining whether to hold the requesting party responsible for discovery costs).20 The Defendants have not put forth sufficient record support for their request for an allocation of the costs associated with electronic discovery. The Defendants have not shown that the requested documents are inaccessible or incapable of being searched electronically. See FED. R. CIV. P. 26(b)(2)(B). While they have produced hundreds of thousands of pages thus far, the Defendants must have expected this result in light of the allegations asserted, the number of parties involved and the nature of their respective businesses. See Transcript at 32-33. Further, the costs incurred by the Defendants in responding to XPRTs discovery requests are not

20

The Zubulake court provided the following criteria for consideration: (1) the extent to which the request is tailored to allow for the discovery of relevant information; (2) the availability of the requested information from other sources; (3) the cost of the document production in comparison to the amount in controversy; (4) the cost of the document production in comparison to the expense of other available resources; (5) the ability of each party to control costs; (6) the importance of the issues in dispute; and (7) the relative benefit of the information sought to the parties. See Zubulake, 217 F.R.D. at 322.

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