Federal Circuit Denies Mandamus Relief and Orders Disclosure of Documents

cafc-federal-circuit102013-3In re Rearden LLC, (Fed. Cir. Nov. 17, 2016) (Before Moore, Hughes, Stoll, J.).

In February 2015, Shenzhenshi Haitiecheng Science and Technology Co. Ltd. (“SHST”) filed suit against Rearden LLC in the Northern District of California concerning the ownership of “MOVA,” a visual effects technology that is capable of capturing an actor’s facial performance and using it in motion pictures and video games. SHST sought a declaration that it owned the MOVA assets. Rearden counterclaimed, alleging that it owned the assets, and seeking damages for infringement of related patents.

The factual background involves transactions between Rearden, SHST, and Virtue Global Holding Limited (“VGHL”). According to VGHL, Rearden declined an offer to acquire the MOVA assets and instead suggested that the assets be sold to a Rearden employee. With the help of Rearden’s attorney, the employee established MO2, LLC, to facilitate the sale. Rearden later demanded that the employee turn over the MOVA assets to Rearden, and fired him when he refused. After his termination, the employee transferred the MOVA assets to SHST, who transferred them to VGHL.

During discovery, Rearden was compelled to produce documents transferred between MO2, LLC and Rearden’s corporate attorney regarding the MOVA assets. The magistrate judge ruled that Rearden could not assert attorney-client privilege for the documents on behalf of MO2. The district court agreed and refused to take more evidence or have an evidentiary hearing. Rearden petitioned the Federal Circuit for a writ of mandamus, challenging the district court’s order compelling it to produce allegedly privileged documents.

As a threshold matter, the Court considered whether it had jurisdiction over the writ of mandamus. The Court noted the America Invents Act broadened its jurisdiction to cases including compulsory counterclaims “arising under” patent. Here, the Court found that the patent infringement counterclaims were compulsory because Rearden’s infringement counterclaim shared a critical factual dispute with its claims regarding ownership and rightful use of the technology claimed in the MOVA patents. Therefore, the Court found it did have jurisdiction over the writ of mandamus.

The Court denied Rearden’s request for mandamus relief because Rearden failed to carry the high burden needed to overturn the district court’s order.  First, Rearden asserted that the district court erred when it refused to take additional evidence and hold a hearing. Second, Rearden argued that it was error to rule on a privilege nominally belonging to MO2, before resolving who originally controlled MO2.

The Court’s review in mandamus petitions is limited: a district court’s ruling will be overturned only on showing that the petitioner has a “clear and indisputable” right to relief and that no adequate alternative legal channels exist. The Court found that Rearden was unable to meet this high standard because the district court did not manifestly abuse its discretion to review evidence and order the conduct of its cases. Moreover, the Court found that Rearden’s arguments about attorney-client privilege were essentially attacks on the district court’s preliminary factual findings regarding ownership of the MOVA assets.

The Court’s jurisdiction over patent cases includes mandamus relief when connected to compulsory counterclaims. When entertaining such relief, the Court is deferential to a district court’s findings and looks for a “clear and indisputable” right to relief, with no adequate alternative.

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