FEDERAL COURT OF AUSTRALIA

Motorola Solutions, Inc. v Hytera Communications Corporation Ltd (Amendment and Interrogatories) [2019] FCA 1237

ORDERS

THE COURT ORDERS THAT:

1.    The parties bring in a minute of order to give effect to these reasons within 21 days.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

Introduction

1    There are two applications before the Court. The first, brought by the Respondents (‘Hytera’), is an application pursuant to r 16.53 of the Federal Court Rules 2011 (Cth) (‘FCR’) for leave to amend their defence by filing a Third Further Amended Defence. The second, brought by the Applicant (‘Motorola’), is for leave to issue to Hytera a series of interrogatories pursuant to FCR 21.01. The trial of the present action commenced on Monday, 22 July 2019. The procedural steps to which the present applications relate, however, are connected to a tranche of the trial (concerned with separate allegations of copyright infringement) which is not scheduled to start until 4 May 2020. As such they do not relate to the matters currently being tried. The applications are unrelated and may be conveniently dealt with separately.

Hytera’s application to file a Third Further Amended Defence

2    At the hearing of the amendment application there was some confusion as to which document Hytera was seeking leave in respect of. The version provided to the Court as part of the Court Book was not the same as the version from which senior counsel was addressing (which was annexure MAV-26 to the thirteenth affidavit of Mark Vincent affirmed on 19 July 2019). Further, during the hearing, senior counsel made it clear that the amendments then being sought were no longer reflected in the document which was before the Court (‘… and what we seek to do – and this is not reflected in this document – is to proceed by way of paragraphs 35B(a) which has been deleted’). This made it rather unclear what Hytera actually wanted in terms of strict text. Nevertheless, its written submissions identified three areas of disagreement between the parties on the issue of amendment and this seemed to match up with most, but not all, of what was said during the amendment application. What I propose to do, in that circumstance, is to resolve those three disagreements at the level of principle.

3    The first area of disagreement relates to what Hytera referred to as the ‘delay amendments’. To understand these it is necessary to appreciate that Motorola presently alleges at paragraph 35 of its Further Amended Statement of Claim that Hytera not only infringed its three patents but that it did so flagrantly, knowing they were in force and that what it was doing was an infringement of them. That allegation has been in the proceeding for some time now. It makes a similar allegation in paragraph 36 in relation to the copyright which it alleges was also infringed by Hytera in copying its code. This is a more recent allegation, having been included for the first time in the Further Amended Statement of Claim, which was filed on 19 December 2018.

4    The basic claim made by Motorola is that three of its former employees decamped to Hytera and before doing so downloaded and retained Motorola’s information which they then took with them to Hytera. This was the basis of the original claim for additional damages in relation to the patent case and is now also the basis of the more recent claim for additional damages for copyright infringement.

5    Hytera now wishes to argue that it did not know that the three former employees had taken Motorola’s information and that if Motorola had been more timely in bringing the matter to Hytera’s attention then it would have had an opportunity to change its firmware at an earlier time. It says that it has suffered prejudice and has lost opportunities to take some defensive steps by reason of the same delay.

6    I do not think that such an amendment should be allowed for two reasons. First, the allegation Motorola makes is that that Hytera in fact infringed the copyright flagrantly as part of a course of conduct involving knowing and intentional copying. Whether Motorola eventually makes good that contention is a different matter, but if it does it will be well beside the point at that time to be submitting that Hytera’s acts in flagrantly and knowingly copying the code should somehow be put in a lesser light because Hytera did not know that the former Motorola employees had brought the information with them. The two propositions pass like ships in the night and, as Motorola put it, lack coherence.

7    Secondly, this contention by Hytera was equally open to be made in response to Motorola’s claim for additional damages for patent infringement and could, in that form, have been raised long ago. The claim for additional damages for patent infringement was included in the original Statement of Claim and Originating Application filed on 31 July 2017. Had Hytera’s contention been raised earlier, then it is likely that Motorola would have been entitled to discovery in relation to Hytera’s contentions about its ignorance of the employees’ conduct. Hytera’s explanation for its delay in raising this matter is not satisfactory. It says that it only became aware of the possibility of alleging that Motorola had delayed after the same defence was raised by it in a parallel United States proceeding. Its explanation for not raising the point in the Australian proceeding contemporaneously with it in the US proceeding is that Hytera’s US lawyers were bound by confidentiality orders not to discuss the matter with its Australian lawyers. This is an unconvincing argument. If those orders did have that effect then Hytera should have applied in the US proceeding to permit the issue to be raised with the Australian lawyers. Consequently, even if the claim were viable, which it is not, I would refuse leave on this discretionary basis.

8    In that circumstance, I decline to permit the delay amendments.

9    The second and third sets of amendments were referred to by Hytera as the ‘discount amendments’ and the ‘ETSI amendment’. There was some overlap between these amendments both in the written submissions and at the hearing. At an earlier time, Hytera alleged that all three of the patents in dispute were standards essential and that it had paid Motorola a licence fee on FRAND terms. Consequently, it claimed in its defence that Motorola was not entitled to damages (presumably on the basis that the acts of infringement were licenced). A variant was that if the patents were standards essential then any damages or account of profits should be reduced by the quantum of the licence fee paid in FRAND terms. Since then Hytera has progressively narrowed its claims about standards essential patents. When the draft Third Further Amended Defence was delivered it referred to all three patents as being standards essential but in its written submissions it only relied upon the 355 Patent (without any elaboration). A letter sent just before the interlocutory hearing by Hytera’s solicitors dated 23 July 2019 then withdrew the allegation that any of the patents were standards essential. Consequently, it is difficult to see how this defence works in any sense. I will not permit the amendments on this basis.

10    There was a hybrid form of this argument pursued at the interlocutory hearing. As I understood the argument, it was that if Hytera was found to have infringed the patents and Motorola then pursued a claim for damages on a lost sales basis, then it would be necessary to bring to account in any such analysis any licence fee which had been paid on FRAND terms. This argument did not actually appear in Hytera’s draft but it submitted that it should be granted leave even so because it did not currently know how Motorola was going to put its damages claim. That may well be so. If and when Motorola does make that clear, this issue can be revisited.

11    Hytera also sought to support the amendments on the basis that the licence on FRAND terms showed that Hytera had licensed certain intellectual property (not being any of the patents in suit) and this went to flagrancy. This argument is not coherent and I reject it.

12    Consequently, I will not permit any of the proposed amendments. Hytera’s amendment application will be refused with costs.

Motorola’s application for interrogatories

13    Motorola has sought leave under FCR 21.01 to issue eight interrogatories concerning the recent discovery by Hytera of a volume of Motorola documents in its possession (the ‘Category 12 Documents’). Those documents were discovered as falling within category 12 of the orders made on 18 December 2018. The interrogatories Motorola now seeks to administer fall into three classes. The first concerns the source of the Category 12 Documents (Questions 1-3), the second the use of the Category 12 Documents by Hytera (Questions 4-7), and the third the identification of the authors of the source code (Question 8).

14    The power of the Court to permit a party to interrogate another party was not in doubt. Nor was there any substantive debate about the relevant principles (save as to one matter I deal with below concerning interrogating about the contents of a document).

The source of the Category 12 Documents

15    Category 12 as ordered on 18 December 2018 was as follows:

All Source Code in Hytera’s custody, control or possession in respect of functions relevant to the Hytera Copyright Devices and which Source Code was written or created at Motorola Solutions, or belongs to Motorola Solutions (to the extent not already discovered).

16    Around 1,550 documents have been discovered by Hytera in this category. At this stage, little is known about the documents since Hytera has claimed confidentiality over them which has, pursuant to a pre-existing confidentiality protocol, restricted who presently has access to them. Those who have seen them suggest that the documents are Motorola’s. The question arises: why does Hytera have any documents in this category? One answer may be that it obtained the material from publicly available sources. That question does not need to be addressed now. It suffices for present purposes that there is sufficient material to justify a contention that Hytera has copied Motorola’s source code as alleged.

17    Motorola wishes to know more about the source of the Category 12 Documents which is understandable. Proposed Question 1 is as follows:

In respect of each Category 12 Document, identify:

 (a)    the custodian or custodians of the document;

 (b)    the department within Hytera where the document was stored;

(c)    the unit, division, or other sub-set of the department within Hytera where the document was stored.

18    In principle, these questions seem to be reasonable in the circumstances. It is relevant to know where within Hytera’s organisation these documents came to be. Was it in the Open Source Department or the Industrial Espionage Department? Although Hytera does not consent to Question 1 by and large it does not oppose it either subject to some drafting alterations that it suggested by letter on 22 July 2019. The first of these sought to limit the documents caught by the question to those which relate to the copyright works infringement which is alleged in the proceeding. Motorola resists this, submitting that material that shows that Hytera copied other materials will support its case that the infringements were not accidental but deliberate. I consider that a marginal matter and not one justifying the burden of discovery. Consequently, I accept Hytera’s submission about this. This submission was advanced in relation to all eight of the proposed interrogatories and I accept it. The questions are to be limited to source code involved in this case.

19    The second amendment proposed by Hytera was that the material not be freely licenced to third parties. Evidence was led that at least 143 of the Category 12 Documents related to source code that was on its face freely licenced. I follow the point with this and it may ultimately give rise to a defence. However, I do not think the interrogatory should be so limited. Too little is known about what this means at this stage to be confident that it could not be relevant. The third proposed amendment sought to limit the question as to origins so that it was to be asked at the time the document was collected for discovery. This seems to me to be inappropriate. The real issue lies at an earlier time. I will issue a form of Question 1 subject to Hytera’s first proposed alteration but not the others.

20    Question 2 is as follows:

In respect of the “further source documents” referred to in the letter from MinterEllison to Herbert Smith Freehills dated 26 May 2019, identify:

(a)    the “further source documents”, including any custodian;

(b)    each Category 12 Document obtained from the “further source”;

(c)    the individual(s) from Hytera that identified the “further source documents”;

(d)    when Hytera first identified the “further source of documents”.

21    Hytera suggested alterations to Question 2 which did not appear to be materially different to that which Motorola proposed. The only exception was Question 2(d) where Hytera proposed this (presented in mark-up):

when When did Hytera first identifyied that the “further source of documents” may hold documents relevant to category 12?

22    I accept Motorola’s submission that worded in this way it would limit the question potentially only to an operation arising after category 12 was ordered. I permit the question without Hytera’s amendments.

23    Question 3 is as follows:

For each custodian identified in response to question 1 and 2(a) above, identify:

(a)    whether the custodian is a current employee of Hytera;

(b)    the date the custodian commenced employment with Hytera;

(c)    each role or position held by the custodian during their employment with Hytera, including identification of the department and a description of the custodian’s responsibilities in the identified role(s) or position(s);

(d)    the name(s), position(s) or title(s) of the individual(s) to which each custodian reported;

(e)    whether, and if so when and how, each custodian was involved in the development, design, creation or modification of any part of any of Hytera’s digital mobile radio products, including the source code or firmware;

(f)    if the custodian is no longer a current employee of Hytera:

   (i)    the date the custodian ceased employment with Hytera; and

(ii)    if the custodian’s employment was terminated, the reason(s) for the termination.

24    Hytera made a number of drafting suggestions which were not material. However, it did also suggest that the question should be limited to custodians who are only presently employed by Hytera. I do not see why that should be so. It may be that in relation to former employees it will not ultimately be able to answer but that is no reason not to ask the question. I permit the question.

The use of the Category 12 Documents

25    Questions 4 to 7 are as follows:

(4)    In respect of each source code file contained in the Category 12 Documents, identify whether the source code file (in whole or part) has been incorporated into any version of the firmware for any Copyright Hytera Devices.

(5)    For any source code file contained in the Category 12 documents that is identified as having been incorporated (in whole or in part) into firmware for any Copyright Hytera Device in response to question 4, identify:

(a)    each version of firmware that each source code file has been incorporated into; and

(b)    where in each version of firmware the source code file has been incorporated.

(6)    To the extent not covered by questions 4 and 5, identify any use that was made by Hytera of any of the Category 12 Documents, including:

  (a)    the nature of the use;

  (b)    when the use occurred;

  (c)    the individual(s) involved in the use.

(7)    For each individual identified in response to paragraph 6(c) above and to the extent not already provided in response to question 3, identify:

  (a)    whether the individual is a current employee of Hytera;

  (b)    the date the individual commenced employment with Hytera;

(c)    each role or position held by the individual during their employment with Hytera, including identification of the department and a description of the individual’s responsibilities in the identified role(s) or position(s);

(d)    the name(s), position(s) or title(s) of the person(s) to whom each individual reported;

(e)    when and how each individual was involved in the development, design, creation or modification of Hytera’s digital mobile radio products, source code or firmware;

   (f)    if the individual is no longer a current employee of Hytera:

    (i)    the date the individual ceased employment with Hytera; and

(ii)    if the individual’s employment was terminated, the reason(s) for the termination.

26    Hytera opposed these questions being asked at all on a number of bases. First, it submitted that it would be difficult for Hytera to determine the answer to Question 4 and that it would need to ask an expert. I see no such difficulty. It is not obliged to obtain an expert. It is required to determine whether it knows whether the source code was used in the devices. To be clear, the task which Hytera confronts is not to assess from a forensic perspective whether it now believes that the code was incorporated. It is to ask those who would know whether it was so incorporated. Hytera recognised this in its written submissions in citing Adams v Dickeson [1974] VR 77 as authority for the proposition that a party interrogated is only required to answer to the best of its own knowledge, information and belief at the time that it is interrogated.

27    Secondly, Hytera submitted that Questions 4 and 5 were tantamount to interrogating about the contents of documents (which is not permitted: see, eg, Lynch v Cash Converters Personal Finance Pty Ltd (No 4) [2018] FCA 988 at [26]-[31] per Gleeson J). Whilst I accept that, in general, it is wasteful to allow a party to interrogate about the contents of a document (for example, ‘does the letter contain the following paragraph…’) when looking at the document is almost always much more useful, I do not accept that that principle applies in this case. The source code here has been compiled into object code. Looking at the object code will tell one very little about the role of the source code (at least not without a lot of effort). On the other hand, asking Hytera’s own employees whether the source code was used in the relevant object code would be easy to do.

28    I accept that some of the employees involved may have left Hytera. But this makes no difference to the inquiry. Those persons can be traced, and if contacted, asked. If they cannot be contacted, then so be it. However, it is unpersuasive to point to all the problems which might arise as a reason not to issue the interrogatories when there is no certainty any of the problems will arise or, if they do, how serious they will be.

29    Questions 4-7 are permitted.

Identification of authors

30    Question 8 is as follows:

In relation to each of the “authors of the portions of each (Hytera) source code file identified in Confidential Annexure 2 to Motorola’s Particulars of Copyright Infringement as filed on 19 December 2018” referred to in paragraph 17 of the Crooks Affidavit, identify:

 (a)    the name of each author;

 (b)    whether the author is a current employee of Hytera;

 (c)    the date the author commenced employment with Hytera;

(d)    each role or position (including department) held by the author during their employment with Hytera;

  (e)    where the author is no longer a current employee of Hytera:

   (i)    the date the author ceased employment with Hytera; and

(ii)    if the author’s employment was terminated, the reason(s) for the termination.

31    Hytera made some drafting suggestions but these appeared to be immaterial to the substance of the matter. It then suggested a date limitation based on the earliest time a former Motorola employee joined Hytera. I do not think it should be so limited. It is not self-evident that the information came over only after that person’s employment commenced.

32    I will allow the question.

Conclusions

33    I have not disregarded Hytera’s submission that since Motorola has now delivered its evidence in chief it could not be in need of interrogatories. That submission does not fit at all well with ordinary trial process. Nor have I disregarded Hytera’s submission that it would be oppressive to require it to answer. I accept that there may be a degree of difficulty in doing so but having regard to what seems to me their obvious relevance, I do not think it unwarranted.

34    The parties are to bring in a minute of order to give effect to these reasons. On the issue of the interrogatories, costs are to be costs in the cause.

Associate:

Dated:    9 August 2019