Qualcomm Inc. v. Broadcom Corp., 2008 WL 5047675 (Fed. Cir. Dec. 1, 2008)

On December 1, 2008, the Court of Appeals for the Federal Circuit issued its opinion affirming the lower court’s findings that Qualcomm breached its duty to disclose the patents at issue in the underlying case and thus waived the enforceability of those patents.  The Court of Appeals also upheld the lower court’s finding that this constituted an “exceptional case,” and the resulting award of attorney’s fees to Broadcom.  The Court of Appeals took exception, however, to the scope of the waiver remedy articulated by the lower court, vacated that portion of the order and remanded the case with instructions to narrow the scope.

Background

In this case, Qualcomm brought suit against Broadcom alleging that Broadcom infringed two patents, ‘104 and ‘767, by making products compliant with the new H.264 video compression standard.  It was later revealed that Qualcomm belonged to the standards-setting organization that adopted the H.264 standard and that the organization required the disclosure of relevant intellectual property rights, prior to the adoption of a standard, to prevent one member’s ability to hold up the process of implementing the standard upon adoption.  Pursuant to that duty, Qualcomm should have revealed its ownership of the ‘104 and ‘767 patents, but did not.  This breach of duty was revealed by evidence produced only days before the trial ended, after the existence of documentation establishing Qualcomm’s membership in the standards-setting organization was made known for the first time.  The jury’s subsequent advisory verdict included a finding that the patents at issue were unenforceable due to inequitable conduct and due to waiver.

The district court agreed and entered an order finding in favor of Broadcom on its affirmative defense of waiver, and setting a hearing on an Order to Show Cause regarding the appropriate remedy for Qualcomm’s waiver, among other things.  Following that hearing, the court entered its Order on Remedy for Finding of Waiver which ordered the ‘104 and ‘767 patents unenforceable against the world.  Qualcomm appealed.

Appeal

The Court of Appeals upheld the findings of the district court, save one exception:  the scope of the unenforceability remedy.  The appellate court stated:  “[W]e conclude that a district court may in appropriate circumstances order patents unenforceable a result of silence in the face of an SSO disclosure duty, as long as the scope of the district court’s unenforceability remedy is properly limited in relation to the underlying breach.”  The appellate court went on to state:

While the scope of an unenforceability remedy in the patent misuse context is limited to rendering the patent unenforceable until the misuse is purged, the scope of the district court's unenforceability remedy in the present case was not limited in relation to Qualcomm's misconduct in the SSO context.  The basis for Broadcom's waiver defense was Qualcomm's conduct before the JVT during development of the H.264 standard, including intentional nondisclosure of patents that it knew "reasonably might be necessary" to practice the standard.  The district court correctly recognized that the remedy for waiver in the SSO context should not be automatic, but should be fashioned to give a fair, just, and equitable response reflective of the offending conduct.  In determining the appropriate equitable remedy in this case, the district court properly considered the extent of the materiality of the withheld information and the circumstances of the nondisclosure relating to the JVT proceedings.  While we agree with the district court that there is an "obvious connection between the '104 and '767 patents and H.264 compliant products," we do not discern such a connection between the asserted patents and products that are not H.264- compliant, and neither party points us to any such connection.

Accordingly, based on the district court's findings, the broadest permissible unenforceability remedy in the circumstances of the present case would be to render the '104 and '767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against all H.264-compliant products (including the accused products in this case, as well as any other current or future H.264-compliant products).  Accordingly, we vacate the unenforceability remedy and remand with instructions to enter an unenforceability remedy limited in scope to any H.264- compliant products.

A copy of the full decision is available here.

Rhoads Indus., Inc. v. Bldg. Materials Corp. of Am., 2008 WL 4916026 (E.D. Pa. Nov. 14, 2008)

In this breach of contract case, plaintiff Rhoads Industries, inadvertently produced over eight hundred privileged, electronic documents.  Defendants filed a motion to deem the claim of privilege waived arguing that plaintiff’s production was careless, that its response in seeking the return of the documents was delayed, and that it failed to produce complete and accurate privilege logs as to those documents.

In February 2007, Rhoads began preparing for its anticipated litigation against Building Materials Corporation of America.  Realizing the likelihood of extensive electronic discovery, Rhoads directed its IT consultant to research software to assist with the electronic discovery effort.  The IT consultant eventually purchased Discovery Attender (or “Sherpa”) to perform the necessary electronic data searches.  Shortly thereafter, the IT consultant and his team began work to identify locations of potentially relevant information.

Shortly after discovery began, Rhoads’s counsel met to discuss the scope of discovery and the search terms to be used.  Using terms received from Rhoads’s attorneys, the IT consultant identified a large volume of potentially responsive documents.  He then ran a keyword search intended to filter the privileged material and removed those documents from the group.  The search was run a second time to verify its accuracy.  The documents identified by the search were not placed on a privilege log.

Given the large volume of documents remaining even after removing materials hit by the privilege search, Rhoads’s counsel modified the original search terms and reduced the volume of potentially responsive documents to 78,000.  Because of the prior privilege keyword search, Rhoads believed there were no privileged materials in that remaining group.  Rhoads’s counsel then manually reviewed a separate group of emails from specific accounts, as well as 22 boxes of hard copy documents, to identify and remove privileged documents, which were then added to separate privilege logs.

On May 13, 2008 three hard drives of documents were produced to defendants, including the 78,000 documents identified by the Sherpa search.  In response to a court order, Rhoads produced two separate privilege logs on June 6, 2008, one containing entries for the documents identified during the manual email review and one containing entries from the hard copy review.

On June 5, 2008, defense counsel notified Rhoads’s counsel that Rhoads had produced what appeared to be privileged documents.  Rhoads responded that the production was inadvertent and asserted that no privilege had been waived.  Rhoads then proceeded to conduct nine depositions and engage in motions practice over the next two and a half weeks before turning to the issues of privilege.  Rhoads then re-reviewed the 78,000 documents and identified 812 privileged documents that it placed on a new privilege log.  The log was produced to defendants on June 30, 2008.  Nevertheless, the defendants thereafter sought an order finding the privilege had been waived.

At hearing on the issue of waiver, Rhoads revealed that the 2,000 privileged documents originally identified by the Sherpa search had not been entered on any privilege log.  Rhoads’s counsel indicated though, that she believed her manual review of particular email accounts would have captured those documents and they would therefore have appeared on the log produced June 6th.  The court ordered any documents not on a privilege log at the time of the hearing should be produced and took the issue of inadvertent production under advisement.  At a second hearing to address Rhoads’s failure to properly log the 2,000 documents, the court once again affirmed that any privileged documents not placed on a privilege log as of June 30th should be produced.

In its written opinion, the court first acknowledged the applicability of recently enacted Evidence Rule 502 establishing standards for determining waiver by inadvertent disclosure.  In its discussion, the court noted that the Committee Notes to the rule acknowledge the traditional factors commonly employed by a majority of courts in determining waiver but that the rule stops short of explicitly codifying any test in light of the need for flexibility.  The traditional factors, were:  1) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production, 2) the number of inadvertent disclosures, 3) the extent of the disclosure, 4) any delay in measures taken to rectify the disclosure, and 5) whether the overriding interests of justice would be served by relieving the party of its errors.  The court then turned to a discussion of those factors and their application by other courts.

In its ruling, the court indicated its belief that “the most appropriate approach is to first determine whether the producing party has at least minimally complied with the three factors stated in Rule 502, i.e., that the waiver was inadvertent, the party took reasonable steps to prevent disclosure, and attempted to rectify the error.”  Acknowledging that the reasonableness of Rhoads’s review was the crux of the dispute, the court then concluded, “that once the producing party has shown at least minimal compliance with the three factors in Rule 502, but ‘reasonableness” is in dispute, the court should proceed to the traditional five factor test.”

The court found that the first four factors favored the defendants.  Most significant, according to the court, was Rhoads’s failure to adequately prepare for the review of privileged documents in light of the inevitable production of a large volume of documents.  The court stated: “An understandable desire to minimize costs of litigation and to be frugal in spending a client’s money cannot be an after the fact excuse for a failed screening of privileged documents…”

However, the fifth factor, the interest of justice, strongly favored Rhoads in light of the severity of the sanction of waiver.  The court also determined that no prejudice would result where defendants had no expectation of receiving the privileged communications and because some of the documents would be produced anyway in light of the court’s ruling that Rhoads must produce any documents not appearing on a privilege log before June 30, 2008.  Having also considered that the burden lay with the defendants,  the court found that defendants had not met their burden as to any documents that had been appropriately logged prior to June 30, 2008 and entered its order accordingly.

A full copy of the decision is available here.

Barnett v. Simmons, 2008 WL 4853360 (Okla. Nov. 14, 2008)

In this case, plaintiff Barnett sued defendant Rock Oil Company seeking unpaid oil royalties allegedly owed to him.  Discovery in the case established that plaintiff maintained files on his computer related to his claims against Rock Oil. Accordingly, Rock Oil sought production of plaintiff’s hard drive.  Plaintiff objected, but the parties attempted to reach agreement as to how to accomplish production.  No agreement was reached.  Rock Oil filed a motion to compel and the court granted the motion.  Although the parties were then able to agree on a neutral examiner, the plaintiff dismissed his claims prior to the examination, but expressed his intent to re-file within three months.

Several weeks later, Rock Oil filed a motion for the appointment of a neutral computer examiner and for sanctions and contempt of court based on plaintiff’s apparent spoliation of electronic computer files.  In support of this motion, Rock Oil indicated that it learned through a third party that the plaintiff’s computer had been worked on by others and may have been compromised.  Plaintiff responded that the files were not produced prior to dismissal and admitted that he had work done on his computer.  He further argued that Rock Oil made no showing of willful destruction and that he did nothing inappropriate.

Despite Barnett’s voluntary dismissal, the trial court retained jurisdiction to impose sanctions for violations of court orders entered prior to the dismissal.  The court granted Rock Oil’s motion, and the drive was examined by a neutral third party.  During a hearing on the matter, Rock Oil argued that plaintiff was aware of Rock Oil’s attempts to inspect his computer, as well as the order allowing such inspection and further contended that he acted deliberately to destroy evidence.  Plaintiff countered that he was a novice computer user who had merely employed an expert after he experienced problems with his computer due to viruses, spyware and adware.  He maintained that no relevant evidence was intentionally deleted.

Nonetheless, the record reflected that at least three kinds of “wiping” software had been downloaded to plaintiff’s computer during the time of his negotiations for inspection with Rock Oil and that one program was accessed on the day Rock Oil’s motion to compel was granted.  Moreover, after defendant’s motion to compel was granted, plaintiff contacted the computer expert to work on his computer but did not inform him that the computer was the subject of a court order or of the need to preserve certain files.  The expert subsequently testified that he could have preserved the files had he known it was necessary.  Instead, the expert removed the hard drive, used a “drive wiper” and performed targeted destruction of files because plaintiff allegedly did not want to lose the settings on his computer.  Plaintiff claimed the use of wiping software was the expert’s idea.  The neutral examiner’s analysis of the hard drive indicated that no files associated with viruses were destroyed by the wiper and that the log indicating which files had been deleted had itself been deleted.

The trial court declined to impose sanctions finding that Rock Oil had failed to show that the plaintiff’s actions were willful “rather than those of a computer novice.”  Rock Oil appealed and in a split decision, the Court of Appeals affirmed the trial court’s finding that plaintiff’s conduct was not willful but remanded for reconsideration of sanctions in light of whether the conduct was negligent. Both parties filed petitions for write of certiorari and both were granted.

Initially, the Oklahoma Supreme Court found that despite dismissal, the trial court retained jurisdiction over the issue of plaintiff’s violation of the trial court’s order compelling production of the hard drive.

The court’s analysis then turned to the issue of sanctions and the “willfulness” required in the destruction of evidence sufficient to impose sanctions.  The court first pointed to Oklahoma’s discovery code which allowed the imposition of sanctions for a party’s failure to obey an order to provide or permit discovery.  The court also noted that even absent an order, a trial court has inherent authority to impose sanctions for discovery abuse.  The court continued in its analysis, relying in part on interpretations of Federal Rule 37, upon which the relevant Oklahoma code was modeled, pointing out that a party need not act willfully or in bad faith, but rather that a party refuses to obey simply by failing to comply with the order.  The court concluded that “willfulness of a party’s conduct is relevant to the severity of the sanction to be imposed, not whether a sanction should be imposed.”

The court then discussed the inherent authority of a court to sanction, even where no order was in place.  Specifically, it noted that Holm-Waddle v. William D. Hawley, M.D., Inc., held that “an examination reasonably foreseeably destructive of evidence without notice to opposing counsel which does result in destruction of evidence should expose a party to severe sanction.”  1998 OK 53, 967 P.2d 1180 (1998).  In that case, the court stated:

When an expert employed by a party or his attorney conducts an examination reasonably foreseeably destructive without notice to opposing counsel and such examination results in either negligent or intentional destruction of evidence, thereby rendering it impossible for an opposing party to obtain a fair trial; [sic] it appears that the court would not only be empowered, but required to take appropriate action, either to dismiss the suit altogether or to ameliorate the ill-gotten advantage.

Providing a laundry list of the plaintiff’s questionable actions, including plaintiff’s retention of a computer expert to work on his computer without informing defendant’s counsel or the expert performing the alleged repairs, the Supreme Court then found “that the trial court in this case erred…by applying an erroneous standard and failing to make necessary findings.”  The court further stated that the trial court “failed to take into account varying degrees of willfulness and failed to consider the standard of the above quoted case.

Accordingly, the Supreme Court vacated the opinion of the Court of Appeals and reversed the order of the trial court. The case was remanded for further consideration.

A full copy of the decision is available here.
 

Pennsylvania Bar Institute: e-Discovery

December 2, 2008
9:00 AM – 4:30 PM EST
Several Locations, Webcast

K&L Gates partner David Cohen will speak at two sessions during this event. The first presentation, “ABCs of EDD” will begin at 9:05 a.m. The second presentation, “E-Discovery Ethics” will begin at 3:30 p.m.

December 9, 2008
9:00 AM – 4:30 PM EST
PBI Professional Development Conference Center
Heinz 57 Center
339 Sixth Ave., 7th Floor
Pittsburgh, PA

K&L Gates partner Tom Smith and associate Daniel Miller will present “Cases Under the New Rules” at 10:05 a.m.

Click here for more information or to register.

Strafford Publications Live Telephone Conference – Ethical Risks of Offshore Outsourcing of Legal Services

December 3, 2008
Live Telephone Conference
1-3:00 PM EST

K&L Gates partner David Cohen will be amongst the speakers at this event. The panel will address issues including how the ABA and state bar opinions have dealt with confidentiality and privacy concerns arising from outsourcing, how outsourcing may implicate questions about the unauthorized practice of law, and what firms and companies can do to protect themselves from liability.

Click here for more information or to register.

IQPC 6th Annual E-Discovery Conference

December 8-11, 2008
The New Yorker Hotel
New York, NY

K&L Gates partners David Cohen and Tom Smith will be among the presenters at this conference.

On Monday, December 8th at 10:00 a.m., David and Tom will be co-presenting “A Stepwise Approach to E-Discovery Readiness for the Enterprise.” This presentation will provide tips and strategies for becoming litigation ready and how to avoid the pitfalls many enterprises face as their needs change over time.

On December 10th at 9:00 a.m., David will also be a member of the panel presenting “Risk Management and Cost Management for E-Discovery.” This presentation will cover topics including risk assessment, reducing risk, early case assessment, vendors, outside counsel, and more.

Click here for more information or to register.

According to a Revisor’s note:

The former Nebraska Discovery Rules for All Civil Cases have been renumbered in the revised Nebraska Court Rules as Chapter 6, Article 3, Nebraska Court Rules of Discovery in Civil Cases. Thus, former rule 26 is now Neb. Ct. R. Disc. § 6-326, etc., with the last two numbers of the newly renumbered sections corresponding to the former rule.

This affects recent amendments to former rules 33, 34, and 34A, addressing e-discovery issues. Those rules are now known as follows:

§ 6-333     Interrogatories to Parties
§ 6-334     Production of documents, electronically stored information, and things and
                   entry upon land for inspection and other purposes
§ 6-334A  Discovery from a nonparty without a deposition

Effective July 18, 2008

For a current list of all states that have enacted special e-discovery rules, see our updated post here.
 

Arizona’s Supreme Court has approved amendments to Arizona’s Rules of Family Law Procedure that will address several major e-discovery issues.  The amended rules are based on Arizona’s Rules of Civil Procedure and will become effective January 1, 2009.  The amendments include changes to the following rules:

Ariz. R. Family Law P. 49      Disclosure
Ariz. R. Family Law P. 51      Discovery
Ariz. R. Family Law P. 52      Subpoena
Ariz. R. Family Law P. 62      Production of Documents and Things and Entry
                                                  Upon Land for Inspection and Other Purposes
Ariz. R. Family Law P. 65      Failure to Make Disclosure or Discovery; Sanctions

To read the order and see the amendments, click here.

For a current list of all states that have enacted special e-discovery rules, see our updated post here.
 

Qualcomm Inc. v. Broadcom Corp., 2008 WL 4858685 (S.D. Cal. Nov. 7, 2008)

At trial in this case, Broadcom made an oral motion for sanctions related to Qualcomm’s failure to disclose documents corroborating its participation in the Joint Video Team (“JVT”), a standards body related to video coding specifications.  Qualcomm’s claimed lack of participation in the JVT was a core element of its claims for patent infringement against Broadcom.  Judge Brewster referred the discovery aspects of that motion to Magistrate Judge Major and then issued an Order on Remedy for Finding of Waiver based on his determination that Qualcomm’s attorneys had participated in a sequence of discovery misconduct throughout the litigation process.  However, because those attorneys had not had an opportunity to be heard before the order was issued impugning their behavior and in order to afford them an opportunity to be heard on the potential imposition of attorney sanctions, the court issued an Order to Show Cause Why Sanctions Should not be Imposed.

Following briefing and hearings on the sanctions issues, the court denied the motion brought by Qualcomm outside counsel seeking an order that the self-defense exception to the attorney-client privilege applied.  Shortly thereafter, Qualcomm filed four employee declarations indicating that outside counsel was to blame for the discovery failures in the case.  The following week, the court heard oral argument on the Order to Show Cause.

On January 7, 2008, the court granted in part and denied in part Broadcom’s oral motion for sanctions, and imposed sanctions on Qualcomm and six of its outside attorneys (the “Responding Attorneys”).  After the sanctioned attorneys filed objections, Judge Brewster determined that the four declarations previously filed by Qualcomm “introduced accusatory adversity between Qualcomm and its retained counsel regarding the issue of assessing responsibility for the failure of discovery.”  Accordingly, he found that “this accusatory adversity changed the factual basis which supported [this] court’s earlier order denying the self-defense exception to Qualcomm’s attorney-client privilege.”  Judge Brewster then vacated the order regarding Broadcom’s oral motion for sanctions and remanded the issues to Magistrate Judge Major for further proceedings.

As part of the Remand Proceedings, Broadcom and the Responding Attorneys served documents requests on Qualcomm and on each other.  Eventually, Broadcom and the Responding Attorneys filed motions to compel Qualcomm’s production of the requested documents.  The Responding Attorneys sought documents related to their contention that Qualcomm affirmatively misled them during the discovery process, that the attorneys made reasonable inquiries of Qualcomm, and that there were no “red flags” in Qualcomm’s representations to them in light of the totality of circumstances. Broadcom sought to compel responses to similar requests.

Qualcomm objected to most of the requests and sought to limit their scope significantly.  Qualcomm also sought a protective order specifying who could view the documents, that the filings in the Remand Proceedings be sealed, and for clarification that any documents produced would be pursuant to the self-defense exception and not a result of any waiver by Qualcomm.

The court rejected Qualcomm’s attempts to limit the requests, especially in light of the Responding Attorneys’ needs to defend themselves against the imposition of sanctions, although it did recognize Qualcomm’s ability to withhold privileged communications with counsel who took over the representation after trial.  The court also addressed several of Qualcomm’s specific objections, but sustained only the request to exclude documents pertaining specifically to discovery procedures in other litigation.

However, recognizing the vulnerable position of Qualcomm, the court granted Qualcomm’s request for a protective order, which restricted the persons permitted to view the documents, limited the use of the documents to the Remand Proceedings and the attorneys’ defense of themselves before the State Bar, and clarified that the documents were produced subject to the court’s order and the self-defense exception to attorney-client privilege and not waived.

Regarding how best to carry out discovery, the parties agreed that Qualcomm would provide a list of custodians likely to have documents responsive to each request and that the parties would then meet and confer regarding search terms.  Qualcomm also agreed to provide the responsive documents in an electronic, searchable format.  The court then scheduled a telephonic hearing for Thursday, December 4th to monitor compliance and discuss deadlines and scheduling.

A full copy of the decision is available here.

At least 41 United States District Courts now require compliance with special local rules, forms or guidelines addressing the discovery of electronically stored information.  In some districts where there are no local rules or court-mandated forms, individual judges have created their own forms or set out their own preferred protocols for e-discovery.

The following Districts have just been added to our collection of United States District Court local rules, standards, guidelines and judge-mandated forms and protocols:

Northern District of Illinois
Judge Virginia Kendall’s Case Management Procedures, Discovery
Magistrate Judge P. Michael Mahoney’s Suggested Case Management Order

District of Massachusetts
Notice of Scheduling Conference (District Judge Richard G. Stearns) (Boston)

District of Nebraska
Report of Parties' Rule 26(f) Planning Conference

The following rules, standards, guidelines and judge-mandated forms and protocols have also been added to our collection:

District of Colorado
Stipulated Scheduling and Discovery Order for Cases Assigned to Judge Kane
Senior District Judge Richard P. Matsch’s Instructions for Scheduling Conference

Southern District of New York
Order to Prepare Civil Case Management Plan (all civil cases assigned to
the WP4 docket)

For a complete listing of local federal rules and guidelines addressing electronic discovery, see our updated post here.
 

Ross v. Abercrombie & Fitch Co., 2008 WL 4758678 (S.D. Ohio Oct. 27, 2008)

In this securities case, the parties reached agreement that discovery was best accomplished by allowing Abercrombie to perform keyword searches to identify relevant information for production.  Plaintiff identified and provided the key words to the defendant.

The first key words list contained 120 terms.  After efforts to ensure the search would be productive, including converting certain files to a different format, Abercrombie ran the search. There were many hits.  To reduce the volume, plaintiffs crafted a revised list of 123 terms.  Another search was run and when the results came in, the parties agreed that some data sets from among the results would be reviewed and produced.  Abercrombie produced those documents.  The parties also agreed that further refinements of the search would be necessary to cut down the remaining results.  Accordingly, plaintiff’s counsel sent 6 additional terms to Abercrombie to be run in proximity to other specified terms. 

At “some point” the parties realized that they were operating under different assumptions regarding the searching.  Abercrombie ran the last search using only the 6 new terms provided.  However, plaintiff had intended the 6 new terms to be added to the previously provided 123 terms, not for them to be run separately.  The parties agreed to run another search using both lists which “hit” almost 100,000 documents, or what Abercrombie estimated as equating to approximately 1.3 million pages.  Plaintiff requested all the documents captured by the search hits, and indicated a willingness to return any privileged documents in the event Abercrombie chose to produce them without review to reduce costs.  Abercrombie was unwilling to produce the documents without review, and was unwilling to spend the time or money necessary to review the documents itself, arguing that most were irrelevant to the issues in the case.

Plaintiff argued that if Abercrombie had performed the search properly in the first place, the documents would have been produced and that it would be unfair to allow Abercrombie to withhold documents because of its mistake.  Abercrombie argued, essentially, that the volume was too great and the likelihood of irrelevance too high to justify requiring review and production and that regardless of any misunderstanding, it would have resisted reviewing and producing the documents at any time for those reasons.

The court agreed with Abercrombie stating, “[a]t some point, given the large amount of time and money which has been spent so far on document production, it becomes the plaintiff’s burden to show that the cost to review and produce even more documents is outweighed by their likely relevance to the case.”  The court also noted that Abercrombie had already reviewed and produced a “very large number of documents” and that it would take “a lot more” time and money to review the documents in dispute.  Accordingly, the court declined to compel production without “some showing that the plaintiff is likely to get at least a moderate benefit from that process.”

Reluctant to bar the plaintiff from the requested information altogether, the court outlined the possibility that the search terms could be revised and run against a sampling of documents to determine whether the revisions resulted in “hits” to more relevant information.  If they did, the court opined, it “would be reasonable” for the plaintiff to ask for the search to be run on the documents at issue in the case and for the parties to discuss how they might economically review that subset of documents.  “In the meantime,” the court noted that there were a number of persons who could be deposed based on the existing documents produced and stated that if documents turned up later that might prompt additional questioning of those witnesses, “the parties ought to be able to agree on a way to get that done without incurring significant additional expense.”

A full copy of the decision is available here.
 

State v. M.A., 954 A.2d 503 (N.J. Super. Ct. App. Div. 2008)

In this case of first impression in New Jersey, defendant argued that personal information found on his work computers should be suppressed because his employer had no authority to consent to the search.  Defendant argued that he, not his employer, owned the computers and that he therefore had a reasonable expectation of privacy as to the personal information stored on them.  Finding that the employer, in fact, owned the computers and therefore had every right to consent to the search, the court denied defendant’s motion to suppress.

Defendant was initially hired by his employer as a part time bookkeeper but was eventually hired full time and given additional computer responsibilities because he was “an expert” and maintained a used computer sales business on the side. Upon being hired, the defendant was made aware that “the computers or anything else in the office is company property.”  Eventually, the defendant sold at least ten computers to his employer.  Among those were the laptop and the desktop at issue in the case.  In addition to his employer’s password protection, the defendant created his own password protected areas on both computers and used them to store personal information, at least some of which indicated theft from his employer.  When the employer discovered that the defendant had fraudulently raised his own salary, the defendant was immediately fired.  His employer subsequently discovered evidence of additional and extensive theft and contacted the police.  The employer provided police with written consent to search the two computers.  On them was found additional evidence of the defendant’s illegal activities.

Defendant argued that he was the true owner of the computers and that he had a reasonable expectation of privacy on them, especially in the password protected areas.  In support of his contention, the defendant argued that he had reimbursed the company for the purchase of the laptop and that he kept it at home three out of five days a week.  As to the desktop, the defendant argued that it had merely been delivered to his employer’s business because no one was available at the defendant’s computer business to sign for it and that he brought it to work when a temporary intern was using the computer in his office.  Rejecting his arguments as “implausible”, the court found ownership properly resided with the employer in light of several facts, including, among other things, the employer’s payment for the computers, the placing of the laptop on the depreciation schedule of the employer’s corporate tax returns and the specific instruction to defendant that all computers were company property.  Accordingly, the court upheld the validity of the warrantless search and denied the defendant’s motion to suppress.

A copy of the full decision is available here.