ORDER GRANTING DEFENDANTS' MOTION FOR LEAVE TO SERVE SUBPOENA AFTER DISCOVERY DEADLINE

Re: Dkt. No. 663

HAYWOOD S. GILLIAM, JR., District Judge.

Defendants HTC and Microsoft moved to reopen discovery for the limited purpose of issuing a subpoena on co-defendant Acer to obtain a sales report for products that Plaintiff Philips has accused of infringing. Dkt. Nos. 663, 691-11 ("Mot."). For the reasons articulated below, the Court GRANTS Defendants' motion for leave to serve subpoena after discovery deadline.

I. BACKGROUND

Fact discovery concluded in January 2019 (with limited exceptions to which the parties stipulated with the Court's permission) and expert discovery is scheduled to close in August 2019. Defendants now seek to reopen discovery for the limited purpose of issuing a subpoena to Acer for a sales report. See generally Mot. Philips and Acer executed a settlement agreement at the end of May 2019, which Phillips produced to Defendants. Dkt. Nos. 679-2, 691-5 ("Reply") at 5-6. Under the settlement, Acer paid Philips a lump sum of money in exchange for a license agreement. Mot. at 4. Defendants assert that Acer's sales report for the accused infringing products may be relevant to rebut the opinions of Philips' expert on royalty damages. Id. Because the damages expert calculated royalty damages on a per-unit basis, Defendants argue that they can use Acer's sales report to extrapolate the per-unit royalty rate of the accused products under the Acer license to more properly evaluate the expert's calculation (i.e. Defendants would like to take the settlement amount and divide the quantities from the sales report to determine the per-unit value). Id.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 16 provides that "[a] schedule may be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16. "Rule 16(b)'s `good cause' standard primarily considers the diligence of the party seeking the amendment." Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir.1992); see also Fed. R. Civ. P. 16 Advisory Committee's Notes (1983 amendment) (noting court may modify schedule "if it cannot reasonably be met despite the diligence of the party seeking the extension"). Thus, "Rule 16(b)'s `good cause' standard primarily considers the diligence of the party seeking the amendment." Id.; see also Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). Where the moving party has not been diligent, the inquiry ends, and the motion should be denied. Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002); Johnson, 975 F.2d at 609. Whether or not to reopen discovery is in the discretion of the district court: the district court has "wide latitude in controlling discovery." United States v. Reliance Ins. Co., 799 F.2d 1382, 1387 (9th Cir. 1986).

III. DISCUSSION

The Court finds that Defendants have established good cause to reopen discovery for the limited purpose of issuing a subpoena to Acer for its sales report. Philips' main opposition is that Defendants' discovery request will not lead to relevant evidence, as using a settlement agreement to calculate a reasonable royalty may yield misleading results. Dkt. Nos. 672-4, 691-3 ("Opp.") at 4-7. The Court recognizes the potential unreliability of extrapolating royalty damages based on a settlement agreement, given that the settlement amount may have been highly influenced by the desire to avoid litigation costs. See Rude v. Westcott, 130 U.S. 152, 164 (1889) ("Many considerations other than the value of the improvements patented may induce the payment in such cases. The avoidance of the risk and expense of litigation will always be a potential motive for a settlement."). But at this juncture, the Court need not evaluate the reliability of an expert's methodology or whether evidence of royalty damages calculated through a settlement agreement and sales report is admissible. Rather, the court must consider "the likelihood that the discovery will lead to relevant evidence." U.S. ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1526 (9th Cir. 1995), vacated on other grounds, 520 U.S. 939 (1997). The Court finds that at this stage, Defendants' limited request may lead to evidence relevant to determining royalty damages, as the Federal Circuit has held that settlement agreements may in limited circumstances be used to establish reasonable royalty damages. See LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 77 (Fed. Cir. 2012) ("Despite the longstanding disapproval of relying on settlement agreements to establish reasonable royalty damages, we recently permitted such reliance under certain limited circumstances."); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872 (Fed. Cir. 2010) ("This court observes as well that the most reliable license in this record arose out of litigation."). The admissibility of this evidence is a different question to be addressed at a later stage.

Having found that Defendants' requested discovery is relevant, the Court next considers whether Defendants were diligent in seeking to reopen discovery. Defendants requested documents from Philips shortly after Philips and Acer began settlement discussions. See Dkt. No. 646; Dkt. Nos. 666-6, 691-2, Ex. 2. Defendants filed their motion to reopen discovery on May 31, 2019, soon after Philips and Acer executed their settlement agreement. Therefore, the Court finds that Defendants were diligent in bringing this motion.

Philips would not be unduly prejudiced by any supplemental damages expert reports, as Philips has apparently agreed to serve limited supplemental damages reports to address the Acer settlement. See Opp. at 3. The Court does not find that adding this limited discovery request would disproportionately "stretch" the scope of the supplemental reports beyond reason. See id. Defendants represent that the case schedule would not be substantively impacted, as the hearing for any dispositive and Daubert motions is not until November 14, 2019. Dkt. No. 631. Any extensions for expert discovery and motions deadlines (if warranted) may still be accommodated without affecting the hearing deadline. Further, trial is not imminent, as the case against Microsoft is not set for trial until February 2020. See Dkt. No. 573.

IV. CONCLUSION

Accordingly, the Court GRANTS Defendants' motion and will reopen discovery for the limited purpose of allowing Defendants to serve a subpoena on Acer for the sales report. If the parties believe any extensions to the expert discovery deadline and dispositive and Daubert motions briefing schedule are necessary, they must meet and confer and submit a stipulation with their proposed schedule by August 5, 2019. The dispositive and Daubert motions hearing date of November 14, 2019 must remain unchanged in any proposed modifications.

IT IS SO ORDERED.