Recalibrating functional claiming: A way forward
What are the misconceptions and what should be done to recalibrate functional claiming standards accordingly?
Companies engaged in proceedings outside of the United States have an important US discovery tool at their disposal, 28 U.S.C. § 1782, and that tool often is overlooked.1 More recently, however, it is being used by international litigants as a powerful process to leverage US discovery procedures. This usage has been endorsed by the US Supreme Court2 and provides that essentially any “interested party” may obtain US discovery for use in a foreign tribunal proceeding.
Section 1782 is not specific to intellectual property. Nonetheless, it can be effective in assisting intellectual property disputes outside the United States, where a party encounters difficulties gathering evidence. For instance, consider the following two examples:
In each situation, discovery would be helpful to one of the parties. If it turns out that the needed information is in the United States then the information can be obtained, since the difference between discovery in the US and the foreign jurisdiction can be significant – even dispositive. Successfully navigating the requirements and jurisprudence of 28 U.S.C. § 1782 therefore, to obtain otherwise unavailable information, can be a significant advantage in obtaining a positive outcome in a foreign proceeding.
Entitled “Assistance to foreign and international tribunals and to litigants before such tribunals,” Section 1782 has three basic statutory requirements that must be met before a party is able to obtain discovery:
Looking at each of these individually:
1. In the District: The “person”—regardless of whether an individual or business4—from whom discovery is sought (i.e., the target of the Section 1782 application) must “reside” or be “found” in the district in which the Section 1782 application is made. This can be a simple requirement when applied to an individual or single entity; in the context of multiple parties who do not all reside in the same district, however, finding a single forum where discovery can be obtained may be very difficult. However, because of the language of the statute and the manner in which courts have interpreted the language, this requirement can be met under numerous factual circumstances.
For a legal entity to be “found” in a particular district, the Section 1782 applicant must demonstrate that the legal entity has “continuous and systematic” affiliations in that district5 such that venue is appropriate in that district.6 This can be established, for example, by showing that the target legal entity “maintains an office in [the district].”7 Alternatively, this statutory requirement can be met if the target would be subject to a district court’s personal jurisdiction such as in a domestic litigation.8 This broad interpretation lets an applicant of Section 1782 easily meet this requirement.
2. Tribunal: Turning to the second requirement of Section 1782, the statute requires that the desired discovery be for use in a “proceeding in a foreign or international tribunal.” To meet this requirement, according to the Supreme Court decision in Intel, the foreign proceeding must lead to a dispositive ruling that is reviewable in a court.9 In the context of international intellectual property disputes, this requirement is typically met, even where the “proceeding in a foreign or international tribunal” is by an administrative agency empowered to render a final administrative action and whose actions are reviewable in court.10
3. Interested Person: The last requirement of Section 1782 has been broadly construed as including anyone with “a reasonable interest in obtaining judicial assistance.”11 Again, because of the language of the statute and willingness of courts to interpret this requirement in a broad manner, it often is not difficult for applicants to establish that they are interested persons.
Merely meeting these requirements, however, does not guarantee a US court will order discovery and judicial assistance; instead, meeting these statutory requirements only authorizes a district court to provide such assistance. If a Section 1782 application successfully demonstrates that it meets these requirements, district courts must then consider discretionary factors established by the Supreme Court’s Intel decision.
The seminal Supreme Court decision on this subject is Intel. In that case, the Court acknowledged that Congress intended Section 1782 to provide a means for “provid[ing] federal-court assistance in gathering evidence for use in foreign tribunals.”12 The Court made clear that “[w]hile comity and parity concerns may be important touchstones for a district court’s exercise of discretion in particular cases, they do not permit our insertion of a generally applicable foreign-discoverability rule into the text of § 1782.”13 As guidance, the Supreme Court set out several factors that a court must consider when making such a determination:
If a target is a participant in the foreign proceeding, “the need for § 1782(a) aid generally is not as apparent because a foreign tribunal has jurisdiction over those appearing before it, and can itself order them to produce evidence.”15 If, on the other hand, the target is not a participant and the foreign proceeding has no authority over the target, US courts recognize that the nonparticipating target “may be outside the foreign tribunal’s jurisdictional reach; hence, their evidence, available in the United States, may be unobtainable absent § 1782(a) aid.”16 In other words, if a Section 1782 applicant is already subjected to the foreign tribunal’s authority, then that weighs against a Section 1782 application.
The second Intel factor is based on a Senate Report explaining the purpose of Section 1782:
In exercising its discretionary power, the court may take into account the nature and attitudes of the government of the country from which the request emanates and the character of the proceedings in that country, or in the case of proceedings before an international tribunal, the nature of the tribunal and the character of the proceedings before it.17
At one end of this spectrum, the Supreme Court has made it clear that if the discovery sought by the Section 1782 application is not admissible in the foreign proceeding, then this “discoverability” requirement does not by itself prevent a district court from authorizing its jurisdiction and granting a Section 1782 application.18 A court’s discretion is not unlimited, however, and when the foreign or international tribunal has expressly addressed the issue of whether to admit evidence sought under a Section 1782 application and objected to that discovery, this factor dictates that courts should deny the Section 1782 application.19
In order to promote international comity, the third factor requires district courts to consider whether the applicant is actively seeking to “circumvent foreign proof-gathering restrictions.”20 Courts have examined this fact-specific inquiry using various factors. For example, where a court determined that an applicant is merely attempting to “avoid or preempt an unfavorable decision” in the foreign or international tribunal,” the court has denied the application.21 Absent evidence of an applicant trying to avoid an unfavorable decision, courts typically examine the discovery procedures of the foreign tribunal to determine if there are any restrictions placed on discovery; if none exist, this factor weighs in favor of granting the application.22
As mentioned above, Section 1782 can provide an applicant with the discovery tools available under the US Federal Rules of Civil Procedure.23 As such, applicants must adhere to the requirements of obtaining discovery under those rules, including that the discovery must be “proportional to the needs of the case.” Even when a Section 1782 application requests discovery that is not proportional needs to the case, courts have exercised their authority to modify or reject unduly intrusive or burdensome discovery requests and requiring applicants to revise the discovery requests.24
An examination of recent cases is useful to understand Section 1782.
Lufthansa sued Astronics Advanced Electronic Systems for patent infringement in Germany, France, and the United Kingdom, and if successful also contemplated bringing additional patent infringement cases in Spain and Japan.25 Lufthansa filed a Section 1782 application in the Western Division of Washington, using the pending and contemplated proceedings as the basis for its application, and Astronics intervened opposing the application.
The district court began by holding that Astronics had a main office in the court’s district and was sued by Lufthansa in foreign jurisdictions so, therefore, Lufthansa’s Section 1782 application met the first and third statutory requirements. Turning to the second requirement, the district court noted that Lufthansa already had successfully established infringement in the German patent infringement case, the pending applications were “for use” in the pending damages-related proceedings, and the “contemplated” lawsuits in Spain and Japan were “within reasonable contemplation.”26 Accordingly, the district court concluded that Lufthansa’s application met the statutory requirements of Section 1782.
The district court then turned its attention to the Intel factors, addressing each individually. With respect to the first factor, the district court reasoned that although Astronics was a participant in at least the pending proceedings, Lufthansa had adequately shown that the “discovery procedures available to [Lufthansa] in the pending proceedings [were] insufficient to procure the requested discovery,” and that the foreign proceedings may address the admissibility of any US discovery obtained by Lufthansa, if such a dispute arises in those jurisdictions.27 Based on these considerations, the district court determined the first Intel factor weighed in favor of granting the Section 1782 application. Turning to the second factor, the district court reasoned that because there was no evidence indicating the German tribunal would object to the discovery obtained pursuant to Section 1782 – the evidence was expected to be used in Germany to show damages in a bifurcated proceedings – and no evidence regarding the receptivity of admitting US discovery by the United Kingdom, France, Spain, and Japan tribunals, the second factor was neutral.28
Addressing the third Intel factor, the district court recognized that Lufthansa had been successful in establishing Astronics’ infringement in Germany; therefore, the Section 1782 damages-related discovery that could also be used in the United Kingdom, France, Spain, and Japan cases, was not circumventing proof-gathering restrictions in those countries since these jurisdictions allow damages-related discovery to be obtained prior to adjudicating liability. As such, the third Intel factor weighed in favor of granting the application.29
Addressing the proportionality Intel factor, the district court reviewed the discovery requests and was satisfied that the specific requests were not unduly intrusive or burdensome.30 Noting that Astronics did not argue that Lufthansa’s discovery request should be narrowed, the district court dismissed Astronics’ additional arguments, holding the discovery sought is not premature and informing Astronics that it was not responsible for producing documents more than once or for producing documents that were not within its possession.31 Finally, the court explicitly stated that if complying with a specific discovery requests proved overly burdensome or costly, Astronics could move for a protective order or seek other relief. Because of the above, the district court held that the fourth Intel factor weighed in granting the application. Balancing the factors and its determination on each, the district court granted Lufthansa’s Section 1782 application.32
AIS instituted a patent infringement suit in Germany, asserting Thoratec infringed certain European and German patents.33 In conjunction with the German proceedings, AIS filed a Section 1782 application in the Northern District of California, seeking US discovery from Thoratec related to a medical device product that had not been commercially launched in Germany.34 After reviewing the application and considering the Intel factors, the assigned magistrate judge granted the application and noted that Thoratec was free to respond to the Section 1782 subpoena once served or could move to quash it.35
Seeking relief from the magistrate judge’s determination, Thoratec presented arguments to the district court judge, contending that the magistrate judge had “misapplied the factors relevant to a determination under § 1782.”36 Briefly confirming that the magistrate judge had correctly concluded that the Section 1782 statutory requirements had been met, the district court judge turned to the Intel factors and was unpersuaded by Thoratec’s arguments, adopting, instead, AIS’ explanation that
(1) [AIS] could not compel [Thoratec] to produce discovery through the German patent infringement proceedings, (2) the German courts do not preclude the admission of evidence obtained through § 1782, (3) [AIS] was not seeking to circumvent German discovery procedures, and (4) the subpoena was narrowly tailored to documents and testimony directly relevant to its German infringement claims.37
The district court dismissed Thoratec’s other arguments as well, holding that production of three medical devices was not “unduly burdensome or intrusive” under Intel.38
Thoratec eventually appealed the district court’s decision, and in March 2019, the Court of Appeals for the 9th Circuit reviewed the district court’s decision and held the district court did not abuse its discretion in granting the Section 1782 application, essentially reasoning that Thoratec “reargue[d] the Intel factors,” which was unpersuasive, as the Court of Appeal’s review is not de novo and must defer to the district court’s “broad discretion.”39
A group of Mexican investors and American asset management firms filed two Section 1782 applications in the Southern District of New York, seeking documents from Spanish bank Banco Santander S.A. and its New York-based affiliate, Santander Investment Securities.40 The information related to ongoing cases before European tribunals concerning the losses suffered as a result of the Spanish government ordering the sale of Banco Popular Española to Banco Santander S.A. for a nominal fee of 1 euro.41
The Second Circuit initially examined the Section 1782 targets separately and held that the Southern District of New York had general jurisdiction over Santander Investment Securities because it is headquartered in New York; however, the Second Circuit reasoned that since Banco Santander S.A. only had contact with the district after the acquisition of Banco Popular Española, the Southern District lacked specific jurisdiction over Banco Santander S.A. The court then turned to the Intel factors, finding that they weighed in favor of granting the Section 1782 application with respect to Santander Investment Securities.
Once that was decided, the Second Circuit considered whether the Section 1782 application could be used to “reach documents stored overseas.” Noting that there is currently a Circuit split on this issue,42 the Second Circuit joined the Eleventh Circuit in ruling that Section 1782 applications can be used to obtain evidence abroad. Specifically, the panel reasoned that although there is a presumption against extraterritoriality, disclosure of foreign discovery is permitted under the Federal Rules of Civil Procedure if that discovery is within the subpoenaed party’s possession, custody, or control. Therefore, because Section 1782 authorizes discovery pursuant to the Federal Rules of Civil Procedure, a Section 1782 application may properly seek similar foreign discovery.43 This reach has its limits, however, and the Second Circuit cautioned that district courts should “consider the location of documents and other evidence when deciding whether to exercise [their] discretion to authorize such discovery.”44
Section 1782 is a powerful tool for litigants involved in global disputes, providing an option for parties to invoke the authority of the US Federal Rules of Civil Procedure to obtain discovery in the US. As both US and international companies become more familiar with this statute and its potential impact on foreign proceedings, it is becoming increasingly beneficial for parties to familiarize themselves with the statute’s procedure and the current treatment in US courts. Furthermore, because the Supreme Court in Intel made it clear that the district courts have broad discretion in determining whether to grant a Section 1782 application, litigants, as applicants or potential targets of a Section 1782 application, should be aware of this statute and its implications.
28 U.S. Code § 1782:
Assistance to foreign and international tribunals and to litigants before such tribunals.
a) The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal … . The order may be made … upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. …”
What are the misconceptions and what should be done to recalibrate functional claiming standards accordingly?
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