In Re: Motion to Compel Compliance With Subpoena Directed to Department of Veteran Affairs ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
In re: Motion to Compel Compliance )
with Subpoena Direct to Department )
of Veterans Affairs )
)
BURLODGE LIMITED, )
)
Petitioner, )
)
v. ) Misc. Action No. 08-525 (CKK/JMF)
)
STANDEX INTERNATIONAL CORP. and )
DEPARTMENT OF VETERANS AFFAIRS, )
)
Respondents. )
)
MEMORANDUM OPINION
Currently before the court is a Motion to Compel Compliance with a subpoena, pursuant
to Rule 45 of the Federal Rules of Civil Procedure, filed by Burlodge Limited. Motion of
Burlodge Limited for an Order Compelling the Department of Veterans Affairs to Comply with
Subpoena [#1] (“Mot. to Comp.”).
BACKGROUND
This Motion to Compel arises out of a patent infringement case, currently pending in the
U.S. District Court for the Middle District of Tennessee, regarding a method of preparing and
serving food using “rethermalization” or “retherm” food carts. Both parties in the underlying
case have a right to sell the retherm carts, but only Burlodge Limited (“Burlodge”), the defendant
and counter-plaintiff, has the ability to grant others the right to use its patented method of
preparing and serving food. Burlodge claims that Standex International Corporation (“Standex”),
the plaintiff and counter-defendant in the underlying case, has been selling retherm carts and
providing third-parties with Burlodge’s patented method of preparing and serving food. During
discovery, Burlodge found that Standex had sold retherm carts, called Unitron 7's, to the
Department of Veteran’s Affairs (“DVA”).
On April 4, 2008, Burlodge served a subpoena on the DVA seeking information related to
the DVA’s use, and purchase of the Unitron 7, as well as the DVA’s correspondence with
Standex related to the purchase and training for the use of Unitron 7's.
Specifically, Burlodge first served a notice of deposition pursuant to Rule 30(b)(6) of the
Federal Rules of Civil Procedure, denominating the following topics for the deposition:
1. The meal preparation, delivery and dispensation methods
employed by any Veteran’s Affairs Medical Center
(“VAMC”) facility using Unitron 7 equipment;
2. The purchase of each Unitron 7 product;
3. Communications or correspondence between USECO
(and/or Standex Corporation) and the DVA;
4. The cost to prepare, deliver and dispense a meal; and
5. Costs billed or recovered in connection with meal
preparation, delivery, and dispensation services to patients
and other companies and organizations (such as a sister
company, for example).
Mot. to Comp. Ex. 1, at 4. Burlodge also asks that the DVA produce the following documents:
1. All documents related to the purchase of Unitron 7
equipment;
2. All requests for proposal that led to the purchase of
Unitron 7 equipment;
3. All proposals for rethermalization systems;
4. The file relating to the Unitron 7 system;
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5. Documents relative to systems considered in
addition to the Unitron 7;
6. Documents sufficient to show the costs involved in
preparing and dispensing a meal;
7. Documents sufficient to establish what amounts are
billed and/or recovered for meals prepared and/or
dispensed with Unitron 7 equipment (or what
amounts are recovered for receiving a meal prepared
and dispensed by any VAMC facility utilizing
USECO/UNITRON brand equipment);
8. Documents which evidence (or are sufficient to
establish) any profit made in providing meals to
customers or consumers (or other recipients of
meals (e.g. one entity to another entity)); and
9. All videos showing the Unitron 7 equipment.
Mot. to Comp. Ex. 1, at 5.
The DVA decided not to comply with Burlodge’s entire subpoena based upon
the DVA’s so-called Touhy regulations,1 which establish certain factors that the DVA considers
when deciding whether to comply with a request for production of documents or testimony in
legal proceedings where the DVA is a third party. See 38 C.F.R. § 14.800.2A. Burlodge
First, Burlodge contends that Rule 45, and not the Touhy regulations, provides the
controlling standard as to whether DVA must comply with the subpoena. Mot. to Comp. at 4-5.
Second, Burlodge contends that in order to prove its underlying claim against Standex, it
must prove (1) direct infringement of its patent by Standex customers and (2) that Standex either
1
The name derives from the plaintiff in United States ex rel. Touhy v. Regan, 340 U.S. 462, 468 (1951), a case that
allowed agency heads to promulgate regulations regarding subpoenas.
2
All references to statutes or regulations are to the most recent versions that appear on Lexis or W estlaw.
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knew that its customers would infringe the patent or assisted its customers in infringing the
patent. Id. at 3-4. The DVA’s potential use of Burlodge’s method would provide Burlodge with
the “direct infringement” necessary to prove its claim. Id. Burlodge also seeks information
related to communications between the DVA and Standex in order to prove that Standex assisted
the DVA or had knowledge that the DVA would use Burlodge’s patent. Id. The “central
inquiry,” according to Burlodge, is (1) whether the DVA purchased retherm carts from Standex
and (2) whether Burlodge’s patented method of dispensing food was used. Id. at 2. Accordingly,
Burlodge contends that the information sought is “highly relevant” to its claim and within the
scope of discovery under Federal Rule of Civil Procedure 26(b)(1). Id. at 3-4.
Lastly, Burlodge contends that the Narrowing Table it has provided to the DVA to limit
discovery to those VAMC facilities that potentially use its patented method cures any potential
undue burden imposed on the DVA by the subpoena. Id. at 5. The forty facilities provided in the
Narrowing Table were discovered by Burlodge from Standex pursuant to discovery in the
underlying case. Reply Memorandum in Support of Burlodge Limited’s Motion to Compel [#8]
(“Reply”) at 3; see Exhibit 13 to Reply.
B. DVA
The DVA takes the position that the Touhy regulations should provide the appropriate
standard to determine whether it has to comply with the subpoena. In denying compliance with
Burlodge’s original subpoena, the DVA General Counsel found that several factors in the DVA’s
Touhy regulations militated against complying with Burlodge’s request for discovery, and
accordingly denied the request. Opposition to Burlodge Limited’s Motion to Compel [#5]
(“Opp.”) at 3. Alternatively, the DVA claims that if the government has directly infringed upon
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Burlodge’s patent, the plaintiff’s sole remedy is a suit against the Federal government in the
Court of Federal Claims. See 28 U.S.C. § 1498(a).
Second, according to the DVA, Burlodge’s only basis for suspecting that the DVA is
engaging in direct infringement is that the Atlanta VA bought retherm carts from Standex. Id. at
5-6. It argues that suspicion is an insufficient basis upon which to obtain discovery and that
Burlodge is attempting to “use discovery against the government to show that it had a legitimate
claim . . . against Standex alleging infringement.” Id. at 8. The DVA further states that if the
government had used the patented method, Burlodge’s sole remedy would be against the
government alone in the Court of Federal Claims and is irrelevant to the underlying suit. Id. The
DVA contends that Burlodge’s motion is irrelevant to the underlying case and is a “fishing
expedition” to confirm Burlodge’s suspicion that the government is infringing its patent. Id. at 1.
Third, the DVA contends that the information requested is overbroad because the request
is not limited to the methods the DVA uses with respect to its retherm carts. Id. at 10. Burlodge
has asked instead for all information related to the purchase of the retherm equipment, including
proposal information related to such purchases by the DVA (not solely those from Standex), as
well as information on cost and profit margins made in providing meals to DVA consumers. Id.The Narrowing Table does not cure the defect of overbreadth, according to the DVA, because it
is a tool that will be used to seek further discovery. Id. at 11.
Finally, the DVA argues that the subpoena imposes an undue burden because it requires
the DVA to disrupt the daily work of its employees and seek information from 40 independently-
operated facilities in a number of different states. Id. at 11-12. The DVA asks the Court to take
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into consideration that it is a non-party to the suit and that it is a government agency with a
unique interest in conserving scarce public resources. Id. at 12.
ANALYSIS
A. Legal Standards
1. Controlling Standard for Whether the Government Must Comply With a
Subpoena
The Touhy regulations were enacted by various government agencies under the authority
of the so-called “Federal Housekeeping Statute.” 5 U.S.C. § 301. This statute allowed
government agencies to create procedures for responding to subpoenas and requests for
testimony. See, e.g., Comm. for Nuclear Responsibility, Inc. v. Seaborg, 463 F.2d 788, 793
(D.C. Cir. 1971). They do not, however, confer a separate privilege upon the government, nor
create a legal basis to withhold information pursuant to a federal subpoena. See Houston Bus.
Journal v. Office of the Comptroller of the Currency, 86 F.3d 1208, 1212 (D.C. Cir. 1996); see
also Watts v. SEC, 482 F.3d 501, 508-09 (D.C. Cir. 2007) (“[T]he legal basis for any opposition
to a subpoena must derive from an independent source of law such as government privilege or
the rules of evidence or procedure.” (citing James WM. Moore et. al., MOORE ’S FEDERAL
PRACTICE § 45.05(1)(b) (3d ed. 2006)). In the instant case, where a valid subpoena has been
served upon a government agency, the controlling legal standard by which the court reviews
whether the agency must comply is based on the Federal Rules of Civil Procedure. See Linder v.
Calero-Portocarrero, 251 F.3d 178, 181 (D.C. Cir. 2001); see also Watts, 482 F.2d at 508 (“Rule
45's privilege and undue burden standard thus applies to both document and testimonial
subpoenas.”).
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2. Whether this Court has Jurisdiction Over this Motion
This suit has been brought pursuant to section 35 of the United States Code, which
provides recovery for inducement to infringe and contributory infringement. 35 U.S.C. §§
271(b), (c), respectively. The DVA contends, however, that Burlodge’s sole remedy for
infringement of a patent by the government is in the Court of Federal Claims pursuant to 28
U.S.C. § 1498.3 Opp. at 8. It therefore follows, according to DVA, that since Burlodge’s sole
remedy would be a suit against the government alone in the Court of Claims, the discovery
Burlodge seeks is “irrelevant to a district court proceeding between two private parties involving
the same infringement claim.” Opposition to Burlodge’s Limited Motion to Compel at 8.
First of all, the Federal Circuit has stated that § 1498 does not deprive district courts of
jurisdiction to decide a patent infringement suit between private parties, but is rather best read as
an affirmative defense going to the “merits of the case” that must be asserted by the alleged
infringer to shift liability from itself to the United States. Manville Sales Corp. v. Paramount
Sys., Inc., 917 F.2d 544, 554 (Fed. Cir. 1990) (citing Sperry Gyroscope Co. v. Arma Eng’g Co.,
271 U.S. 232, 235-36 (1926)); see also Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379, 1382 (Fed.
Cir. 2002) (“1498(a) does not deprive a district court of jurisdiction.”).
Although other courts have interpreted § 1498 to be a jurisdictional bar, see, e.g., Croll-
Reynolds Co. v. Perini-Leavell-Jones-Vinell, 399 F.2d 913, 915 (5th Cir. 1968), cert. denied, 393
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The relevant portion states: “W henever an invention described in and covered by a patent of the United
States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or
manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of
Federal Claims. . . .” 28 U.S.C. § 1498(a).
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U.S. 1050 (1969), this Circuit has never directly addressed the question.4 The Federal Circuit’s
interpretation of § 1498 is highly persuasive, particularly because the Supreme Court precedent
cited for its authority, Sperry, continues to be good law. See, e.g., Alma Motor Co. v. Timken-
Detroit Axle Co., 329 U.S. 129, 141 (1946) (“[W]e do not think that section 2 reflects a decision
by Congress that all suits involving licenses under the Act and presenting questions of coverage
or validity should be tried in the Court of Claims.”); Crater Corp v. Lucent Tech., Inc., 255 F.3d
1361, 1369-70 (Fed. Cir. 2001), cert. denied, 535 U.S. 1073 (2002). Cf. Identification Devices,
Inc. v. United States, 121 F.2d 895, 896 (D.C. Cir. 1941) (bar of what is now § 1498 applies only
to action in which the United States is itself sued for infringement; “[w]hether the statute
exempts from liability a manufacturer who produces materials for the Government is, of course,
an entirely different question from whether the Government itself has consented to be sued.”),
cert. denied, 314 U.S. 615 (1941).
Thus, § 1498 cannot be read to displace jurisdiction over a patent suit against a third party
merely because that third party provides goods or services to the government and the plaintiff
claims that the goods or services being used by the government infringe its patent.
Perhaps more importantly, DVA’s position is non sequitur. That the Court of Claims has
jurisdiction over a particular lawsuit or type of lawsuit does not displace the jurisdiction this
Court unquestionably has to resolve a motion to quash a subpoena directed against the
government.
4
Two D.C. Circuit cases have addressed this question tangentially without deciding whether § 1498 is a
jurisdictional bar or affirmative defense: Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 196 n.3 (D.C. Cir. 1992)
(questioning a party’s assertion that § 1498(b) is an affirmative defense, but declining to make a decision on the issue
because he raised the argument for the first time in his reply brief on appeal); Auerbach v. Sverdrup Corp., 829 F.2d
175, 181 (D.C. Cir. 1987) (reversing the district court’s dismissal for lack of jurisdiction based upon § 1498(b)
because the defendant raising the jurisdictional bar failed to show that the government consented to or authorized
any copyright infringement), cert. denied, 485 U.S. 905 (1988).
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B. The Subpoena Must Be Quashed
The DVA contends that Burlodge may not seek discovery based on mere suspicion that
evidence exists to support the underlying contention. Opp. at 7. It relies on the Federal Circuit’s
decision in Micro Motion, Inc. v. Kane Steel Co., Inc., 894 F.2d 1318 (Fed. Cir. 1990). The
Federal Circuit reversed a district court’s refusal to quash a subpoena finding that the district
court had ignored the crucial distinction between permitting a plaintiff to “flesh out a pattern of
facts already known” and the illegitimacy of permitting discovery against a third party premised
on an unfounded suspicion that, for example, the third party had infringed the patent. The
Federal Circuit stated:
There appears to be little case law on what is required to show that
a particular inquiry is relevant to the subject matter of damages
involved in the pending case. By analogy, however, were suit
brought against K-Flow on a mere suspicion of infringement,
discovery would not be allowed based on an allegation alone. “A
bare allegation of wrongdoing . . . is not a fair reason for requiring
a defendant to undertake financial burdens and risks to further a
plaintiff's case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,
363 (1978). The discovery rules are designed to assist a party to
prove a claim it reasonably believes to be viable without discovery,
not to find out if it has any basis for a claim. See, e.g., Netto v.
AMTRAK, 863 F.2d 1210, 1216 (5th Cir. 1989); MacKnight v.
Leonard Morse Hosp., 828 F.2d 48, 52 (1st Cir. 1987); Marshall v.
Westinghouse Elec. Corp., 576 F.2d 588, 592 (5th Cir. 1978);
Hinton v. Entex, Inc., 93 F.R.D. 336, 337-38 (E.D. Tex. 1981);
Isaac v. Shell Oil Co., 83 F.R.D. 428 (E.D. Mich. 1979). That the
discovery might uncover evidence showing that a plaintiff has a
legitimate claim does not justify the discovery request.
Id. at 1327. DVA points out that the only evidence to which Burlodge points is a statement in a
deposition of a man named Thomas Taylor 5 that a VA Hospital in Atlanta purchased a Unitron 7
5
Mr. Taylor is not identified so I will assume he works for or has some affiliation with Standex.
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system. Opp. (quoting Mot. to Compel, Exhibit 7 at 111, lines 7 to 12).
For its part, Burlodge explains that it alone has the right to grant its customers the right to
use retherm carts to practice the patented method to use the cars in a certain way. It therefore
argues that it should be permitted to discover whether (1) Standex made statements that whatever
system Standex used and sold “performs equivalent steps of Burlodge’s patented methods” and
(2) statements by Standex “concerning active inducement to infringe made by Standex to the
DVA, or training the DVA on how to utilize the Standex equipment to perform the steps of
Burlodge’s patented methods.” Reply Memorandum in Support of Burlodge Limited’s Motion to
Compel at 4.
The narrow question first presented is whether Burlodge has made a sufficient showing
that its demand is not based on what the Federal Circuit has described as an unfounded suspicion
because Burlodge has a reasonable basis to believe, premised on the information already in its
possession, that it has a viable claim that the DVA’s use of the carts, as instructed in their use by
Standex, violates Burlodge’s patent. Micro Motion, Inc., 894 F.2d at 1327.
As the Federal Circuit pointed out in that case, Rule 26 (g)(1) of the Federal Rules of
Civil Procedure deems any signed discovery request to be a certification by the attorney
submitting it as not to be interposed for any improper purpose.
Building on that rule, I will deem as true Burlodge’s representation, set out above, that
the carts can be used in a manner that violates its patent to be true. It would then follow that the
DVA’s use of the carts in that manner would violate the patent and that possibility permits me to
conclude that there is a reasonable basis, independent of the discovery sought, for Burlodge to
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assert a potential patent violation. With that said, it hardly follows that the DVA’s motion to
compel must be granted.
Rule 45(c)(1) requires that the party or attorney serving a subpoena “take reasonable
steps to avoid imposing undue burden or expense on the person subject to the subpoena.” Fed.
R. Civ. P. 45(c)(1). The court then has the obligation to quash or modify a subpoena when it
“subjects a person to an undue burden.” Id. Its obligation is particularly acute lest public
resources be commandeered for private purposes. See Watts, 483 F.3d at 508-09.
Moreover, Watts also teaches that in assessing whether a burden is undue under Rule 45,
the court should look to the standards articulated in Rule 26(b)(2) of the Federal Rules of Civil
Procedure. The court of appeals stated in Watts:
One additional point warrants mention: The Rule 45 “undue
burden” standard requires district courts supervising discovery to
be generally sensitive to the costs imposed on third parties. See,
e.g., Cusumano v. Microsoft Corp., 162 F.3d 708, 717 (1st
Cir.1998) (“concern for the unwanted burden thrust upon
non-parties is a factor entitled to special weight in evaluating the
balance of competing needs” in Rule 45 inquiry); Misc. Docket
Matter No. 1 v. Misc. Docket Matter No. 2, 197 F.3d 922, 927 (8th
Cir.1999) (quoting id.); see also Fed. R. Civ. P. 45(c)(2)(B) (any
court order to compel compliance with document subpoena “shall
protect any person who is not a party or an officer of a party from
significant expense” of compliance). In addition, Federal Rule of
Civil Procedure 26(b)(1)-(2) requires district courts in “[a]ll
discovery” to consider a number of factors potentially relevant to
the question of undue burden, including: whether the discovery is
“unreasonably cumulative or duplicative”; whether the discovery
sought is “obtainable from some other source that is more
convenient, less burdensome, or less expensive”; and whether “the
burden or expense of the proposed discovery outweighs its likely
benefit, taking into account the needs of the case, the amount in
controversy, the parties’ resources, the importance of the issues at
stake in the litigation, and the importance of the proposed
discovery in resolving the issues.”
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Id. at 509. When Burlodge’s demands are first judged by the more forgiving standard of
relevance to its case against Standex, most of them fail.
The topics of the deposition of a DVA official demand information as to use (topic 1) but
also demand information as to costs to prepare a meal. Similarly, the requests for production,
while seeking information about the purchase by the DVA of the Unitron 7 equipment, also seek
information about costs and profits (Demands 6-8). The amount of money saved by the DVA in
preparation of meals does not relate to the issue of whether there has been direct infringement,
and is equally irrelevant to the “central inquiry” of (1) whether the DVA purchased retherm carts
from Standex and (2) whether Burlodge’s patented method of dispensing food was used. See
Opp. at 2. Further, the patent laws do not concern themselves with the infringer’s profits from
the infringement, but rather with the patent holder’s damages, i.e., the amount it would have
made if the infringement never occurred. See Glenayre Elec., Inc. v. Jackson, 443 F.3d 851, 869
(Fed. Cir. 2006) (citing Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 508
(1964)), cert. denied, 549 U.S. 1030 (2006); Minn. Mining & Mfg. Co. v. Lake Country Mfg.,
Inc., 918 F. Supp. 1307, 1316-19 (D. Minn. 1996) (to recover for lost profits, patent holder must
show (1) demand, (2) absence of acceptable non-infringing substitutes, (3) capability to exploit
demand, and (4) amount of profit he would have made), dismissed without opinion upon
agreement of the parties, 106 F.3d 426 (Fed. Cir. 1997). The money that the DVA may have
made because of the alleged infringement is irrelevant.
Clearly, the only proper topic of any discovery would be (1) the information as to how the
system was to be used that Standex provided to the DVA when it sought to sell whatever system
it sold to the DVA; and (2) instructional material, whether in writing or some other media, such
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as video, provided by Standex as to the use of its system. Additionally, Burlodge’s demand to
inspect the DVA premises is, in my view, premature and disruptive until that information has
been provided.
Yet, even modifying the subpoena to seek this limited information is unduly burdensome
because of the absence of any showing that the information sought is not available from other
sources.
First, there is no indication that Burlodge sought the information that the DVA had about
its relationship with Standex by filing a demand under the Freedom of Information Act, and there
is no showing whatsoever that there is any impediment to the use of that statute by Burlodge.
Second, the only statement about Burlodge’s effort to secure the information it seeks
from the DVA from Standex is the following:
Burlodge knows, from a Rule 30(b)(6) deposition of Standex, that
the DVA purchased those retherm carts from Standex for the use at
a number of facilities. (Exhibit 7)6 Unfortunately, Standex would
not provide details as to how the DVA facilities use/used the
Standex manufactured retherm carts. Id. This is what brought
about the present non-party subpoena at issue.
Mot. to Compel at 2. Surely, counsel for Burlodge knows of the resources and remedies
available to Burlodge under the Federal Rules of Civil Procedure to compel Standex to produce
relevant information in the discovery process. Until Burlodge at least makes the effort and fails
for some reason not attributable to its own fault, this Court cannot possibly determine whether
any subpoena to DVA, no matter how limited, is still unduly burdensome because the
information sought “can be obtained from some other source that is more convenient, less
6
This is a reference to the testimony of Thomas Taylor about there being one potentially infringing system
in the DVA facility in Atlanta.
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burdensome, or less expensive.” Fed. R. Civ. P. 26(b)(2)(C)(I). Thus, I must conclude that the
subpoena constitutes an undue burden to the DVA and order it quashed.
CONCLUSION
In accordance with the limitations set above, Burlodge’s Motion will be denied. An
Order accompanies this Memorandum Opinion.
Date: April 28, 2009 /S/
JOHN M. FACCIOLA
U.S. MAGISTRATE JUDGE
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