United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
Plaintiff Henryk Oleksy filed this action against Defendant General Electric Co. ("GE") in March 2006. Oleksy alleges that GE infringed his patented method for determining machining instructions to cut the root sections of turbine blades. This protracted litigation continues to involve substantial motion practice and multiple discovery disputes. As explained herein, this Court: (1) grants in part and denies in part Oleksy's motion to compel and for sanctions with respect to "old code;" (2) denies Oleksy's motion for spoliation sanctions with respect to code sequences from GE's subsidiaries; (3) grants in part and denies in part each party's motion concerning the protective order; and (4) continues GE's motion seeking leave to move for summary judgment.
I. Oleksy's Motion to Compel and for Sanctions - Old Code (Dkt. No. 342)
Oleksy's "old code" motion claims that GE did not comply with an order this Court issued to GE during a December 19, 2012, hearing that required GE to produce three complete samples of old code and three complete samples of new code ( see Dkt. No. 295, Hr'g Tr. 54:10-19 and 55:17-21 (Dec. 19, 2012)). During its initial hearing on Oleksy's motion, this Court determined that an evidentiary hearing was necessary to determine whether spoliation occurred when GE failed to preserve certain information related to the manufacture of root sections of turbine blades. ( See Dkt. No. 400, Hr'g Tr. 101:19-103:18 (July 23, 2013).) This Court identified three factual determinations necessary to its spoliation determination: (1) whether GE's old code was ephemeral; (2) whether industry standards required GE to preserve the old code; and (3) whether GE acted in bad faith by failing to preserve its old code. This Court held an evidentiary hearing on December 9-10, 2013, during which each side presented evidence related to Oleksy's motion.
A. Findings of Fact
Oleksy worked at Preferred Machine & Tool Products Corporation in Bedford Park, Illinois. (Dkt. No. 382 at 2.) While there, he developed a computer-controlled process for improving the manufacture of turbine blades at the Bedford Park plant. ( Id. ) A turbine consists of a rotary wheel and turbine blades. ( Id. ) Root section components connect the turbine blades to the rotary wheel. ( Id. ) Specifically, projections on the interior surface of the root sections, called "hooks, " attach to and hold the turbine blades to the rotary wheel. ( Id. ) Hook curvatures of root sections machined to specific dimensions prevent the blades from wobbling. ( Id. ) On April 23, 1998, which appears to be after Oleksy disclosed his process to his employer, Richard Harvey of Preferred Machine told Oleksy that Preferred Machine could not accommodate Oleksy's process and that Oleksy was free to take his process elsewhere. (PHX-035 at 3.)
Oleksy took his process to the United States Patent and Trademark Office, which issued U.S. Patent No. 6, 449, 529 ("the '529 Patent") to Oleksy on September 10, 2002. ( See Dkt. No. 382 at 2.) The '529 Patent covers Oleksy's process, which is a method of determining the machining instructions for purposes of milling root sections of turbine blades. ( Id. ) This method uses a CNC milling machine to cut a concave internal hook in the root section of a turbine blade. ( Id. )
After receiving his patent, Oleksy asked GE whether GE had any interest in licensing the '529 Patent. ( See, e.g., PHX-028.) GE told Oleksy that GE did not have any interest in licensing the '529 Patent and that GE did not use the process disclosed in the '529 Patent. (PHX-036.) As of December 3, 2002, Oleksy did not accuse GE's process for manufacturing root sections having a dovetail shape milled into them of infringement of the '529 Patent. (PHX-032.) Oleksy did not accuse GE of infringement until March 8, 2006, when he filed a complaint for patent infringement. (Dkt. No. 1.)
GE's process at its Bangor, Maine facility starts with a drawing. (Dkt. Nos. 495 and 496, Spoliation Hr'g Tr. 143:1-19.) An operator takes the pertinent information from the drawing and enters that information into a software program. ( Id. at 143:25-145:9.) The operator also enters other pertinent information such as which machine will run the process into the software program. ( Id. at 144:14-22.) The operator must also enter two measurements into the software program: the "X-Off" and the "Z-Off." ( Id. at 145:11-14.) The X-Off and Z-Off essentially identify where the part to be machined is relative to the machine itself. ( Id. at 145:17-146:17.)
After the operator enters the necessary information into the software program, the software program creates an.INP file. ( Id. at 147:9-15.) The.INP file contains the information entered into the software program in a format that a second software program can read. ( Id. at 147:16-19.) APT is the second software program. ( Id. at 147:16-22.) APT takes the information entered, combines it with files related to the part to be made and the machine to be used, and produces three output files. ( Id. at 147:20-22, 148:9-14, 149:3-8, 149:11-19, 149:23-24.) The first output file from the APT program is a.TAP file. ( Id. at 149:25-150:1.) The.TAP file, or g-code, is the file that directs the machine in making the part. ( Id. at 150:8-13.) The second output file from the APT program is the.ACL file, which lists the movement of the machine along the X, Y, and Z axes. ( Id. at 155:12-22.) The third output file from the APT program is the.LST file, which catalogs the processing that occurred in the APT program. ( Id. at 156:1-6.)
GE's process at its Bangor, Maine facility creates these four files-the.INP, .TAP, .ACL, and.LST files-every time GE uses its process to manufacture a dovetail root section or a batch of dovetail root sections. GE could have saved these files either manually or automatically. ( Id. at 179:7-21.) Therefore, this Court finds that GE's old code was not ephemeral.
GE's practice at its Bangor, Maine facility since at least 2002 has been to overwrite these files every time it uses its process to manufacture a dovetail root section or a batch of dovetail root sections. ( Id. at 176:24-177: 179:2-6; 229:25-230:7; 307:17-23). GE's practice of overwriting files every time GE used its process to manufacture a dovetail root section or a batch of dovetail root sections did not violate any industry standard. ( Id. at 127:17-128:6; 318:5-7.) GE did not alter its practice in 2006 when Oleksy filed its lawsuit. ( Id. at 260:3-20.)
B. Legal Standard
In patent cases, district courts apply the law of the regional circuit when determining whether to impose discovery sanctions. See, e.g., Monsanto Co. v. Ralph, 382 F.3d 1374, 1380 (Fed. Cir. 2004) ("In reviewing sanction orders, this court applies the law of the regional circuit from which the case arose....") District courts have broad discretion in discovery matters and may impose reasonable discovery sanctions. James v. Hyatt Regency Chicago, 707 F.3d 775, 784 (7th Cir. 2013). Under Fed.R.Civ.P. 37(b)(2), district courts may sanction parties that fail to obey a discovery order. Any discovery sanction must be proportionate to a party's discovery failure. See Collins v. Illinois, 554 F.3d 693, 696 (7th Cir. 2009) ("the sanction imposed must be proportionate to the circumstances.")
One sanction permitted by Rule 37(b)(2) is "directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims." But this sanction, an adverse inference, requires a finding that a party intentionally destroyed evidence in bad faith. See Northington v. H&M International, 712 F.3d 1062, 1066 (7th Cir. 2013) (bad faith destruction of evidence is a required element for allowing an adverse inference). A party destroys ...