In the race to develop a web “tablet,” former business partners Interserve, Inc. dba TechCrunch and CrunchPad, Inc. and Fusion Garage PTE, Ltd., duel over whether to expedite discovery. Interserve, Inc. v. Fusion Garage PTE, Ltd., 2010 U.S. Dist. LEXIS 6395 (N.D. Cal. Jan. 7, 2010).
Prior to the litigation, the companies had the mutual goal to develop an affordable, touch screen notebook computer. Interserve, Inc., at *2.
After 15 months of development, the parties were going to launch the CrunchPad. However, the Defendant suddenly left the project THREE DAYS before the launch date. Interserve, Inc., at *2.
The Defendant told the Plaintiff via email they owned the intellectual property rights to the product and that they would launch their own product. Interserve, Inc., at *2.
The Defendant launched their own digital tablet 20 days later (ironically on Pearl Harbor Day). Interserve, Inc., at *2.
The Plaintiff argued it was “inconceivable” that the Defendant could have developed a market ready product and found a manufacture in the 20 days between severing their relationship and the product release. Interserve, Inc., at *3. Adding a red flag to the Defendant’s conduct, they registered the domain name for their product 8 days before ending their relationship with the Plaintiff. Interserve, Inc., at *3.
The Plaintiff’s further argued:
(1) Fusion Garage has begun accepting “pre-orders” for the JooJoo tablet and promised delivery within 8-10 weeks;
(2) Customers may pay for the JooJoo tablet using Pay Pal;
(3) Fusion Garage is liable to plaintiff for a share of the profits;
(4) Fusion Garage is concealing its previous public statements regarding the prior collaboration between the parties; and
5) Fusion Garage is a Singapore-based company which may abscond with the proceeds abroad.
Interserve, Inc., at *3.
The Defendant claimed expedited discovery was improper, because the Plaintiff did not demonstrate any specific harm they would suffer; claimed there were defects with the Complaint; and the unavailability of counsel. The Defendant also claimed the need to collect discovery abroad went against expediting discovery. Interserve, Inc., at *3-4.
Rules for the Express Lane
In order to expedite discovery, a party must show “good cause.” Interserve, Inc., at *4.
Case law states:
“Good cause may be found where the need for expedited discovery, in consideration of the administration of justice, outweighs the prejudice to the responding party.” Interserve, Inc., at *4-5, Semitool, Inc. v. Tokyo Electron America, Inc., 208 F.R.D. 273, 276 (N.D. Cal. 2002).
“It should be noted that courts have recognized that good cause is frequently found in cases involving claims of infringement and unfair competition.” Interserve, Inc., at *5, Semitool, Inc. v. Tokyo Electron America, Inc., 208 F.R.D. 273, 276 (N.D. Cal. 2002).
The Judicial Green Light on Expedited Discovery
The Court saw the warning signs very clearly that there was “good cause” to give the green light on expedited discovery by 8 weeks for the Plaintiff to determine possible injunctive relief. Interserve, Inc., at *5-7.
The Court justified the finding of good cause for expedited discovery based on the following facts:
The extremely short passage of time between the Defendant ending their business relationship and releasing their sole product. Interserve, Inc., at *5-6.
The fear was the Defendants taking the profits to Singapore, making any recovery extremely difficult. Interserve, Inc., at *6.
The Defendant’s registering a product domain name 8 days before ending their partnership. Interserve, Inc., at *6.
The joint product blog suddenly going dark after the domain name registration. Interserve, Inc., at *6.
The Court held the administration of justice outweighed any prejudice to the Defendant. As to the unavailability of counsel argument because the defense lawyer was on vacation, the Court stated other attorneys within the firm could respond to the discovery. Interserve, Inc., at *6-7.
Bow Tie Thoughts
Electronically stored information can be created in the blink of an eye; it can also be lost in a heartbeat. Given the transitory nature of RAM data, text messages and other ESI that can disappear into the ethos, expedited discovery orders will likely become more frequent.