Vringo Infrastructure, Inc v ZTE

Procedural background 5 On 25 February 2014, orders were made which included the following: 1. The respondent give discovery in the categories listed in Annexure A to these orders within the time specified by order 6 of the orders of Justice Yates made on 4 November 2013. 2. Without limiting order 1, by 25 March 2014, the respondent inform the applicant whether or not the respondent has in its possession, custody or power: (a) the documents referred to in paragraphs (a)(ii), (a)(iii), (b)(ii) and (b)(iii) of category 3 of the categories listed in Annexure A (or any of them); and (b) the source code for the software and firmware used in the Infrastructure Products, the User Devices, and the Mobile Switching Center (each as defined in the applicant's particulars of infringement dated 11 June 2013). 6 Paragraphs (a)(ii), (a)(iii), (b)(ii) and (b)(iii) of Category 3 are: (a) In relation to any User Devices or Infrastructure Products: … (ii) the technical or functional specifications or other documents that constitute, record or report the software or firmware architecture design for said products or otherwise identify, in relation to the components of said products, the aspects of any telecommunications standards which that component implements; and (iii) a complete list, in electronic form, of the file names and source code headers for the source code files (including hardware source code files) used in said products, but excluding the source code itself. (b) In relation to the Mobile Switching Center: … (ii) the technical or functional specifications or other documents that constitute, record or report the software or firmware architecture design for said products or otherwise identify, in relation to the components of said products, the aspects of any telecommunications standards which that component implements; and (iii) a complete list, in electronic form, of the file names and source code headers for the source code files (including hardware source code files) used in said products, but excluding the source code itself. 7 On 25 March 2014, in compliance with Order 2 made on 25 February 2014, the respondent's solicitors informed the applicant's solicitors as follows: Our client has instructed us that it does not have any documents falling with[in] the categories identified in paragraph 2(a), and does not have the source code referred to in paragraph 2(b), of the Order in its possession, custody or power. To the best of our client's knowledge, those documents and source code are in the possession of ZTE Corporation. 8 On 27 March 2014, the applicant's solicitors made the following request to the respondent's solicitors: Your client has stated that, to the best of its knowledge, those documents and source code are in the possession of ZTE Corporation. To avoid unnecessary expense and delay, we request that your client: 1 confirm with ZTE Corporation: (a) whether it has possession of any of the documents and/or source code referred to above; (b) if so, which of the documents and/or source code; and (c) whether it will agree to disclose them to our client in the context of this proceeding. 2 notify us of ZTE Corporation's response by 4 April 2014. If ZTE Corporation is in possession of any such documents and/or source code, we request those documents and/or source code be disclosed to us within the time frame for discovery specified by Justice Yates in the Order, that is to say by 10 June 2014. 9 On 15 April 2014, the respondent's solicitors advised the applicant's solicitors: We received our client's instructions in relation to your request set out in your letter of 27 March 2014 overnight. We are instructed that: (a) our client has asked ZTE Corporation to confirm the matters set out in paragraph 1(a) of your letter of 27 March 2014; and (b) ZTE Corporation has responded to that request as follows: (i) ZTE Corporation has in its possession documents and source code falling within the scope of the categories identified in paragraphs 2(a) and (b) of his Honour Justice Yates' Orders of 25 February 2014, but it has not identified which of those documents or source code it has in its possession; and (ii) ZTE Corporation declines to provide those documents and source code to your client for the purpose of this proceeding. 10 On 24 April 2014, the applicant filed an interlocutory application seeking a Sabre order. The form of the order ultimately sought is as follows: 1. Pursuant to section 23 of the Federal Court of Australia Act 1976 (Cth), on or before a date to be fixed by the Court, the Respondent/Cross claimant (Respondent) take all reasonable steps available to it to obtain documents and source code, or copies thereof, which fall within the categories set out in Annexure A to the [interlocutory application], which are in the possession, custody or power of ZTE Corporation; and 2. The Respondent be required to produce: (i) all documents mentioned in sub-paragraph (a) above; and (ii) a copy of each communication between the Respondent and ZTE Corporation in relation to the issues as to whether: (A) any and what documents and source code, or copies thereof, fall within the categories set out in Annexure A to the [interlocutory application] or within the categories identified in paragraphs 2(a) and 2(b) of the orders made by this Court on 25 February 2014; and (B) such documents and source code should or will be provided to the Applicant, to the Court for inspection by the Applicant's solicitors, on or before a date to be fixed by the Court. 11 Annexure A is as follows: In this Annexure, the following definitions apply: document has the same meaning set out in the Federal Court Rules. Infrastructure Products has the same meaning given to that term in paragraph 2 of the Particulars of Infringement filed by the Applicant/Cross-Respondent in this proceeding. Mobile Switching Center has the meaning given to that term in paragraph 14 of the Particulars of Infringement filed by the Applicant/Cross-Respondent in this proceeding. User Devices has the meaning given to that term in paragraph 10 of the Particulars of Infringement filed by the Applicant/Cross-Respondent in this proceeding. Categories 1. In relation to any User Devices: (a) documents that constitute, record or report the overall functional and architectural design for the User Devices; (b) the technical or functional specifications or other documents that constitute, record or report the software or firmware architecture design for any User Devices or otherwise identify, in relation to the components of any User Devices, the aspects of any telecommunications standards which that component implements; (c) a complete list, in electronic form, of the file names and source code headers (including any description of the file's contents) for the software and firmware source code files used in the User Devices; and (d) the source code for the software and firmware used in the User Devices. 2. In relation to any Infrastructure Products: (a) documents that constitute, record or report the overall functional and architectural design for the Infrastructure Products; (b) the technical or functional specifications or other documents that constitute, record or report the hardware, software or firmware architecture design for any Infrastructure Products or otherwise identify, in relation to the components of any Infrastructure Products, the aspects of any telecommunications standards which that component implements; (c) a complete list, in electronic form, of the file names and source code headers (including any description of the file's contents) for the hardware, software and firmware source code files used in any Infrastructure Products; and (d) the source code for the hardware, software and firmware used in the Infrastructure products. 3. In relation to the Mobile Switching Centre: (a) documents that constitute, record or report the overall functional and architectural design for the Mobile Switching Centre: (b) the technical or functional specifications or other documents that constitute, record or report the hardware, software or firmware architecture design for the Mobile Switching Centre or otherwise identify, in relation to the components of the Mobile Switching Centre, the aspects of any telecommunications standards which that component implements; (c) a complete list, in electronic form, of the file names and source code headers for the hardware, software and firmware source code files used in the Mobile Switching Centre; and (d) the source code for the hardware, software and firmware used in the Mobile Switching Centre. 12 The following matters should be noted. 13 First, paragraphs (a) and (d) of each of Categories 1, 2 and 3 seek documents in addition to those identified at [6] above. In other words, discovery of those additional documents was not ordered as against the respondent on 25 February 2014. 14 In the course of oral argument, the applicant submitted that paragraph (a), in each category, is sought to overcome what is perceived to be a gap in the wording of paragraphs (a)(ii) and (b)(ii) of Category 3 of the discovery ordered on 25 February 2014. Counsel for the applicant submitted: … 1(a) … seeks documents that constitute, record or report the overall functional and architectural design for the User Devices. This is something that has been added because there was concern on our side that that was not covered by the terms of 1(b). What 1(a) seeks is to show how the different software and firmware elements in each of the devices work together to achieve the particular functionality and the concern was that 1(b) would not provide the overall picture. The overall picture will assist in determining functionality but also assist in knowing which source code files to look at. We apprehend there's going to be a large number of source code files and we've said that to have the list of source code files and their titles would assist in working out what we should be asking for and looking at. An indication of the overall functional and architectural design of the devices, how they fit together, will also assist in working our which files, and that's the basis for 1(a). 15 Paragraph (d) stands in a different position. It seeks the production of the source code for the software and firmware used in the User Devices (as defined) and for the hardware, software and firmware used in the Infrastructure Products (as defined) and the Mobile Switching Centre (as defined). However, paragraphs (a)(iii) and (b)(iii) of Category 3 of the discovery ordered on 25 February 2013 was limited to the listing of the file names and source code headers for the source code files used in the relevant products. In that connection, on 25 February 2014, senior counsel for the applicant submitted that discovery of the file names and source code headers was required in order for the applicant to identify which elements of the source code might be needed. Senior counsel further submitted: … [W]hat we don't want to do is seek to obtain from our friends the whole of the source code of their products. What we are seeking to do in these two subparagraphs is to enable us to identify what elements of the source code we will require, and then we will seek to make a further application, if agreement can't be reached, to obtain that source code. 16 That submission plainly recognised that the discovery of the entire source code in respect of the relevant products was likely to be unnecessary. There is no material before me that suggests that this position has changed. In this connection, it must be remembered that a party must not apply for an order for discovery unless the making of the order sought will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible: Rule 20.11 Federal Court Rules 2011 (Cth). 17 Secondly, the orders now sought require the respondent to give discovery of all communications between itself and ZTE Corporation concerning the request to produce documents, including communications before the making of any Sabre order. Put another way, part of the discovery which the applicant now seeks from the respondent is of documents concerning communications between the respondent and ZTE Corporation leading up to ZTE Corporation's communication to the respondent that it declined to provide the documents or source code to the applicant for the purpose of this proceeding, pursuant to the request made on 27 March 2014.

The parties' submissions 18 The parties helpfully provided written outlines of submissions which were supplemented by oral argument at the hearing of the interlocutory application. The relevant legal principles are not in doubt. The parties referred me to the discussion of these principles and their application in Zapf Creation AG v OWT Australia Pty Ltd [2001] FCA 759; Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2002] FCA 581; SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 2) (2006) 155 FCR 150; and Australian Competition and Consumer Commission v Prysmian Carvi e Sistemi Energia SRL (No 8) [2014] FCA 376. I was also referred to passages in Gambro Pty Limited v Fresenius Medical Care Australia Pty Ltd (2002) 124 FCR 491 and Gambro Pty Ltd v Fresenius Medical Care South East Asia Pty Ltd (2004) 61 IPR 442 referring to the purported compliance with the Sabre order made in Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2002] FCA 581. 19 It is convenient to refer to the respondent's submissions, which mark out the area of contest between the parties in the present application. It is important to note that the respondent's submissions are made in the context where ZTE Corporation has advised the respondent that it has in its possession documents and source code falling within the scope of Orders 2(a) and (b) made on 25 February 2014. 20 The respondent's submissions focus on two matters. 21 The first matter is that, in its submission, there is no real likelihood that ZTE Corporation will give access to the documents now sought: Sabre at 431-432. In this connection, the respondent relies on Mr Zhang's evidence, to the following effect: The respondent only has the information set out in product brochures and manuals prepared and provided by ZTE Corporation in relation to the telecommunications products that the respondent supplies. These products are manufactured and supplied by ZTE Corporation. This information about the ZTE products includes some specifications, such as product dimensions, power consumption, colour and weight, as well as information on how to use the products. This information does not include information as to the identity of the overall functional and architectural design of the products; the identity of the software or firmware architecture for the products or the particular aspects of any telecommunication standards that the products might implement; file names and source code headers for the software and firmware source code files used in the products; or source code for the software and firmware used in the products (together, the technical and functional information). If a customer of the respondent were to have a technical inquiry concerning the function or design of a product, or which otherwise relates to the technical and functional information, the respondent would refer that inquiry to ZTE Corporation, as the supplier of the product, if that inquiry could not be answered by the respondent's sales staff based on their own knowledge and understanding of the products, or from information derived from the product brochures and manuals. The respondent does not have access to any documents containing the technical and functional information. ZTE Corporation is very protective of the technical and functional information. If the respondent wished to obtain documents containing the technical and functional information, the only way (of which Mr Zhang is aware) would be for the respondent to send a written request for such documents to ZTE Corporation's internal legal team, specifying why the respondent needed to access such documents and what use it proposed to make of them and the information contained in them. 22 The respondent submits that this evidence does not demonstrate that ZTE Corporation will share or will be likely to share information with the respondent of the kind sought and hence comply with any request from the respondent for documents of the kind sought. It points to the earlier request, which was declined, and submits that the fact that another request might be made under the auspices of a court order directed to the respondent, does not itself bear on the likelihood that ZTE Corporation will comply with the request. 23 The second matter concerns questions of form, should the Court be persuaded that a Sabre order should be made. Here, the respondent submits that: the order should not be made in terms that the respondent "take all reasonable steps available to it" to obtain the relevant documents, but should be confined to the respondent making a written request; the request should not extend beyond the documents in respect of which discovery was ordered against the respondent on 25 February 2014, and it is neither necessary nor appropriate that the respondent be ordered to produce documents in relation to all communications concerning the production of documents and source code beyond a copy of the request made to ZTE Corporation pursuant to the Sabre order, and any response thereto.

Consideration 24 The evidence establishes plainly that the respondent is the Australian sales arm of ZTE Corporation. Indeed, in oral submissions, counsel for the respondent properly described it as such. Although it would seem that the respondent's activities are limited to the marketing and sale of such products, it can be seen that those activities are carried on for ZTE Corporation's benefit, with ZTE Corporation, by virtue of its shareholding, having the entire economic interest in those activities. As an "arm", the respondent is part of ZTE Corporation's "body". It is in precisely such circumstances that it is appropriate to make an order in the nature of a Sabre order. The purposes intended to be served by orders for discovery ought not be frustrated because relevant documents are, or may be, held by a member of a group of companies other than the member who is a litigant: Zapf at [14]. 25 In Prysmian, a Sabre order was refused on the basis that it could not be found, on the facts of the case, that there was a real likelihood that documents would be produced, even though the party to the proceeding against whom the order was sought to be made and the corporation to whom the proposed request was sought to be directed, were related corporations. The respondent relied on Prysmian to submit that corporate structure or corporate relationships alone are not sufficient to justify the making of a Sabre order. I do not think that the decision in Prysmian stands for such a broad and unqualified proposition. Plainly, each case must stand or fall on its own facts, including the particular corporate structure involved. In my view, the facts of the present case are plainly distinguishable from those in Prysmian, particularly when it is understood that, here, an aspect of the respondent's corporate relationship with ZTE Corporation is that it is ZTE Corporation's Australian sales arm. 26 Although, in the present case, ZTE Corporation has declined to comply with the applicant's informal request made through the respondent for the production of documents, I do not think that this circumstance is of any significant weight. Indeed, it must be a background circumstance common to most, if not all, applications for Sabre orders. Were it otherwise, there would be no need to apply for the order. 27 ZTE Corporation's response, as communicated through the respondent to the applicant's solicitors on 15 April 2014, was a bare refusal with no explanation provided. In the course of the respondent's submissions it was suggested, based on Mr Zhang's evidence, that "ZTE Corporation, like telecommunications companies generally, is very protective of technical and functional information relating to its products". This may be so, but the particular circumstances under which disclosure is sought should not be ignored. The Court is in control of its own process and proceedings and may make orders, in an appropriate case, limiting access to documents and information provided as part of the discovery process. 28 In Sabre, Lockhart J at 432-433 said: Those documents should be produced by the applicant to the Court. The Court will then hear argument from the parties as to appropriate terms of inspection of the documents by or on behalf of the respondents. As at present advised I would need to be persuaded that inspection of the documents should not be confined to counsel and solicitors for the respondents and independent experts retained by them. Because of the highly sensitive nature of the material which the documents would contain it is important that their secrecy be preserved in the interests of Joico and the applicant. 29 In my view, production to the Court, as on subpoena, is the appropriate course to adopt when documents are produced in response to a request made under a Sabre order, unless, exceptionally, the non-party complying with the request consents to some informal mode of production. 30 It must also be recognised that such production is an incident of discovery given in the proceeding. So viewed, information obtained on discovery is subject to an implied obligation against disclosure and use outside the confines of the proceeding: for a discussion of the relevant principles, see Forty Two International Pty Limited v Barnes [2010] FCA 397 at [66]-[75]. If there were any doubt about that matter, an express undertaking as to non-disclosure and non-use outside the proceeding could be required as a condition for making the order. 31 Further, it does not follow that, simply because documents are produced on discovery, the information in them will become, or need be, evidence in the proceeding itself. The principles of case management lend themselves to putting in place regimes whereby the need to adduce evidence of the contents of documents can be avoided, given other procedures that may be available to secure the acceptance of certain facts for the purposes of an otherwise contested hearing. But in any event, in an appropriate case, the Court has power, in the proper administration of justice, to make orders concerning the non-publication of evidence: s 37AF of the Federal Court of Australia Act 1976 (Cth). 32 It seems to me that these considerations alter the landscape in which ZTE Corporation's initial refusal to the applicant's informal request was made. Given this altered landscape, I am not persuaded that an appropriate Sabre order, if made, would lack utility for the reason that it would be met, inevitably, with a refusal. I am far from convinced that, inevitably, ZTE Corporation would refuse to comply with a request for documents made by the respondent under order of the Court. When faced with a request made by an order of this Court, ZTE Corporation would appreciate the matters to which I have referred at [26]-[30] above. It would also have an understanding that the Court has considered that such an order against the respondent - its own Australian sales arm - is appropriate and necessary in the interests of justice, in a case in which it is alleged that its (ZTE Corporation's) products infringe the applicant's Australian patent rights. 33 In this connection, I should add that the applicant has made clear that, in the event that such a request were to be met with a refusal, it would invite the Court to draw an inference, adverse to the respondent's interests, on the question of infringement. I do not propose to discuss the merits of that contention now, other than to note that ZTE Corporation is on clear notice that the applicant may adopt that course at the final hearing of the matter in the event that ZTE Corporation refuses to produce the relevant documents: see, in that connection, the observations in Gambro 61 IPR 442 at [429]. 34 It is also possible that such a refusal may result - I say no more than that - in adverse costs consequences for the party subject to the order, especially if it be found that, in circumstances where, for example, a refusal to produce documents has been taken purely for forensic advantage, additional costs have been unnecessarily incurred in proving matters that could have been readily established by the reasonable production of documents or other information on a reasonable request having been made. 35 For these reasons, I am persuaded that it is appropriate to make an order in the nature of a Sabre order in the present case. I now turn to consider the question of the form of the order that should be made. 36 The first matter is whether the order should be made in terms that the respondent take "all reasonable steps available to it" to obtain the relevant documents or whether the orders should be more confined to stipulate that the documents be sought by making a written request. In Sabre, the order was to "make such requests and do such things as may reasonably be necessary to obtain" the relevant documents. In Zapf, the order was to "take all reasonable steps available to [the party]" to obtain the relevant documents. A similar form of order was made in Gambro [2002] FCA 581. 37 In SPI, Edmonds J declined to make a Sabre order on a number of grounds, one of which was that no attempt had been made by the party seeking the order to establish, by evidence, that there was a real likelihood that documents would be produced pursuant to the request. In that case, the order sought would have required every ministry, agency and instrumentality of the Russian Federation to undertake searches for documents in numerous, broadly-defined categories. Although it was not necessary for Edmonds J to deal with the matter, his Honour observed that the form of the order there sought was inappropriate because it omitted the requirement that the party subject to the order take all "reasonable" steps available to it to obtain the documents. His Honour acknowledged that this was the usual form of the order. However, his Honour observed (at [33]): … I agree … that it would be preferable for any such order to set out explicitly the steps which, if taken, would satisfy the order. This is particularly so given the potentially broad range of documents the subject of the order and the broad range of ministries, agencies and instrumentalities that may be subject to it. 38 It can be seen that these observations were made in the context of a very particular case. The particular circumstances in which Edmonds J was asked to make a Sabre order are not present here. Moreover, in the present case, there is no question that ZTE Corporation does possess documents falling within the categories sought. I can see no reason to depart from the usual form of order in the present case, requiring the respondent to take all reasonable steps available to it to obtain the relevant documents. 39 The second matter concerns the scope of the request. I am not persuaded that the request should be directed to the source code in relation to the User Devices, the Infrastructure Products and the Mobile Switching Centre (see paragraph (d) of each of Categories 1, 2 and 3). As I have noted, discovery of the source code in that regard was not part of the order made against the respondent on 25 February 2014. Indeed, it was not part of the applicant's request for discovery. There was good reason for the applicant not seeking an order extending to the source code itself. As the applicant itself realised, it is at least possible that not all elements of the source code would be required for the purpose of the applicant's case on infringement. As I have noted, there has been no change to that position. The only reason advanced by the applicant for including the source code in the categories of documents now sought as part of a Sabre order is expediency. In my view, that is not an appropriate basis, at least in the present case, on which the order should be sought. 40 The request for the production of documents directed to the overall functional and architectural design of the devices and products (see paragraph (a) of each of Categories 1, 2 and 3) stands in a different position. Such documents appear to be closely allied to the class of documents sought in paragraph (b) of the each category. As I have noted, paragraph (a) has been sought in each case to overcome a perceived or possible deficiency in the wording of paragraph (b) in each case. I am persuaded that the order should include paragraph (a) for each category sought. It may be, as counsel for the applicant submitted, that such a document may assist in identifying what elements of the source code may be relevant to the applicant's case on infringement. 41 The third matter concerns whether it is appropriate to require the respondent to discover documents in respect of all communications between itself and ZTE Corporation concerning the production of documents by ZTE Corporation. I am not persuaded that discovery of that kind is warranted in the present case at the present time. The focus should be compliance with the order that is to be made. 42 In Zapf, Branson J made an order, ancillary to a Sabre order, that the respondent, by a director with personal knowledge of the facts, file and serve an affidavit deposing to "the efforts it has made to obtain the documents or copies of the documents, including details of each of its requests to any company person or entity, and the responses thereto". It is apparent that, in making such an order, Branson J was directing attention to the efforts made to obtain documents consequent to the making of the Sabre order itself. In my respectful view, there is much to commend such a step. It reinforces in the mind of the party subject to the order the importance with which the Court views compliance with its order. 43 Although, in the present case, the respondent did not seek an affidavit of the kind referred to, the possibility that an affidavit might be required was raised in the course of argument. I invited the respondent's counsel to address me on that matter. It is fair to say that the respondent resisted the requirement for an affidavit, although it raised no objection to giving discovery of its request made pursuant to the Court's order and any response by ZTE Corporation thereto. Indeed, it has at all times accepted that it would be appropriate for it to give that discovery. Nevertheless, the course adopted by Branson J in Zapf, with regard to filing an affidavit, should be adopted in the present case.

Disposition 44 A Sabre order should be made which requires the respondent to take all reasonable steps available to it to obtain the documents, or copies of the documents, that fall within the categories identified by the applicant, save for the source code for the software and firmware used in the User Devices and the source code for the hardware, software and firmware used in the Infrastructure Products and the Mobile Switching Centre. The respondent, by a director having knowledge of the facts, should file and serve an affidavit deposing to the efforts made by the respondent, pursuant to the order, to obtain the documents or copies of the documents sought. Further, all documents produced pursuant to the request should then be produced by the respondent to the Court at a directions hearing. At that time, the Court is to be informed of any proper objection to access being granted to the documents. 45 The parties have not addressed me on the timing of these steps. In the absence of agreement, I will hear the parties on that question. Otherwise, the parties are to bring in draft orders giving effect to these reasons by no later than 4.00 pm on 28 May 2014. 46 The applicant has partly succeeded in its application over the respondent's opposition. The respondent has submitted, however, that the present application has been made in circumstances where it has already made a request, and where the orders sought by the applicant are "defective". I take this last mentioned submission to refer to the scope of the order sought by the applicant. In the circumstances, the respondent submits that the costs of the interlocutory application should be costs in the cause. I accept that this is the appropriate costs order. The applicant did not suggest otherwise. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.