Free Letter - District Court of Delaware - Delaware

Case 1:04-cv-00418-SLR

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1425 K Street, N.W. 11th Floor Washington, DC 20005 Telephone 202 783-5070

Fish & Richardson p.c.
Frederick P. Fish 1855-1930 W.K. Richardson 1859-1951

VIA HAND DELIVERY August 1, 2005 The Honorable Sue L. Robinson J. Caleb Boggs Federal Building 844 N. King Street, Room 6124 Lockbox 31 Wilmington, DE 19801 Re:

Facsimile 202 783-2331 Web Site www.fr.com

Seagate Technology LLC v. Cornice, Inc., Civil Action No. 04-418-SLR

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b o s ton da llas de la war e n e w yor k s an di ego s i lico n va l le y twi n c i ti e s wa sh in gton , dc

Dear Chief Judge Robinson: Through this letter, Seagate Technology, LLC respectfully requests an order compelling Cornice, Inc. to provide discovery on the 4.0 GB Storage Element disc drive that has been marketed and actually sold to customers before the June 30, 2005, discovery cut-off date. Seagate summarizes below Cornice's marketing activities related to the 4.0 GB drive. Pursuant to the Court's request, Seagate also highlights the cited Cornice 30(b)(6) testimony, and relevant exhibits which Cornice produced during the deposition. I. Cornice should be ordered to produce discovery on the 4.0 GB product

At the May 11,CONFIDENTIAL INFORMATIONthat Seagate may 2005 discovery conference, the Court ruled REDACTED obtain discovery of all products "marketed" by the close of discovery. 1 [Ex. 1 (Tr. of 2 May 11, 2005 hearing) at 20:11-12.] As recently discovered evidence demonstrates, Cornice has not only marketed the drive before the discovery cut-off date, but it actually sold this product to at least two OEM customers by then:

1

Discovery related to the 4.0 GB is relevant to, inter alia, infringement and Cornice's efforts to design-around (or continued willful infringement) the asserted patents. E.g., Exxon Chem Patents Inc. v. Lubrizol Corp., 131 FRD 668 (S.D. Tex. 1990) (rejecting defendants continued obstruction of discovery into products being tested and evaluated for two customers because such information is relevant to infringement). In addition and particularly salient to this case, discovery into these marketed products -- which allegedly embody Cornice's design around efforts -- significantly undermines Cornice's counterclaims that Seagate's lawsuit is "objectively baseless." Under Rule 26, discovery related to the 4.0 GB drive is directly probative of the parties' claims and defenses. 2 All exhibits cited in this letter are attached herewith.

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F i s h & R i c h a r d s o n p.c .
Hon. Sue L. Robinson August 1, 2005 Page 2

1. In June 2005, Cornice already shipped 4.0 GB units to customers. ­ Cornice's 30(b)(6) witness testified that Cornice sold 10 units to Archos, and 20 units to SimpleTech in June 2005, for $1,640.00 dollars. [Ex. 2 (Tr. Jul. 15, 2005 Holt Depo.) at 107:18-22 & 112:1-5; Ex. 3 (Shipment history) at 6; Ex 4 (Cornice presentation).] 2. Since the beginning of June 2005, Cornice has also conducted extensive marketing of its 4.0 GB drive to its OEM customers. For example, before the June 30 cut-off date, o During the May 31-June 4, 2005 Computex trade show (a large worldwide consumer electronics trade show in Taiwan), Cornice met with customers and provided them with 4.0 GB Marketing Slicks [Ex. 2 at 48:21-50:21.] These Marketing Slicks contained promotional information about the "[c]apacity of the product, configuration of the product, the various features." [Id. at 50:15-21.] o At this Computex trade show, Cornice provided "demos" of its 4.0 GB drive to customers and other interested parties. [Ex. 2 at 132:13-19.] o Cornice has promoted CONFIDENTIAL INFORMATION (Philips, Samsung, its 4.0 GB drive to at least 5 large customers Archos, Creative, and Rio) through "typical sales, sit down and discuss customers CONFIDENTIAL INFORMATION REDACTED opportunities and how [Cornice's] product might match their requirements." [Ex. 2 at REDACTED 53:6-54:12] o In addition to actual units of the 4.0GB drive, Cornice provided technical specifications of the 4.0 GB drive to Samsung, Philips, and Archos [Ex. 2 at 50:23-51:4 & 51:13-52:17; Ex. 4 (showing Archos received CTU's (i.e., "customer test units") in June 2005).] o Cornice has made PowerPoint presentations about the 4.0 GB drive to its customers "since the first part of June." [Ex. 2 at 53:6-54:12.] o Before the discovery cut off date, Cornice had already committed to shipping, on specified dates, 4.0 GB units to the following 10 customers: Philips; Apple; Samsung; Sanyo; Archos; Creative; Rio; iRiver; Tatung; and SimpleTech. [Ex. 2 at 53:16-54:12, 108:5-109:23, and 111:7-15; Ex. 4.] 3. Cornice promoted its existing 4.0 GB drive to potential investors in June 2005. ­ During a June meeting with investors to obtain a new round of financing, Cornice discussed its business model and its products, including "[t]he existing ones, the 3 and 4 gigabyte." [Ex. 2 at 84:15-85:1 & 85:23-86:11.] 4. In May and June 2005, Cornice broadly marketed the 4.0 GB drive to the media and industry analysts. o Cornice discussed the 4.0 GB drive with the press (in the US and overseas) and analysts through interviews, in many instances without any restriction as to what they can publish [Ex. 2 at 126:3-8, 132:6-12 & 134:22-135:4].

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F i s h & R i c h a r d s o n p.c .
Hon. Sue L. Robinson August 1, 2005 Page 3 o In addition to interviews, Cornice undertook "prebrief short lead press" which is "just another marketing activity" to give the press information that quickly transfers to the marketplace and to "prepare them for a coming press release." [Ex. 2 at 133:2-13; Ex. 5 (Launch PR Activities schedule).] o These marketing activities were part of an orchestrated marketing plan designed to "[p]osition Cornice as a significant entrant into the 4GB market; secure visibility...." [Ex. 6 (marketing plan); Ex 2 at 128:22-129:8.] o As part of this plan, Cornice mapped out a "4.0-Gigabyte Product Launch PR Activities" schedule, with very specific and dated planned activities for the 4.0 GB drive. The schedule indicates that Cornice completed most of these activities by the first week of June 2005. [Ex. 5; Ex. 2 at 131:5-23.] o As a result, Cornice marketed the 4 GB drive through discussions with the following 38 reporters or analysts:

INFORMATION 1) Erika Stutzman, fromCONFIDENTIAL19) James Harrison, from Electronic Products Daily Camera 2) Bob Mook, from Denver Business REDACTED 20) Michelle Cheng, from DigiTimes Journal 21) Mark Hachman, from ExtremeTech 3) Rob Reuteman, from Rocky Mountain 22) Sean Gibson, from News NextGenElectronics.com 4) Benny Evangelista, from San Francisco 23) Rich Nass, from Portable Design Chronicle 24) Lisa Arrigo, from Product Design & 5) Mark Boslet, from Dow Jones News Development Service 25) Mark Alpert, from Scientific American 6) Martyn Williams, from IDG News 26) Marlene Bourne, from Small Times 7) Duncan Martell, from Reuters 27) Mark Ferelli, from Storage and 8) Mark Schlack, from Storage Magazine Entertainment Magazine 9) Joanne Maitland, from 28) Jim Bray, from TechnoFILE SearchStorage.com 29) Sucheta Kabra, from TechTree 10) Dave Raffo, from Byte & Switch 30) Paul Jastrzebski, from VRZone.com 11) Mike Kanellos, from CNET 31) Dan Jones, from Unstrung 12) Karen Field, from Design News 32) Dylan Tweney, from Mobile PC 13) Andrew MacLellan, from Electronic Magazine Business 33) David Shier, from PocketPC Magazine 14) Adrian Mello, from Electronic Business 34) Mike Dano, from RCR Wireless 15) Steve Ohr, from EE Times 35) Monica Alleven, from Wireless Week 16) Bill Wong, from Electronic Design 36) Andy Pargh, from Gadgetguru.com 17) David Bursky, from Electronic Design 37) John Biggs, from Gizmodo.com 18) Brian Dipert, from EDN Magazine 38) Joel Johnson, from Gizmodo.com
[Ex. 6; Ex. 2 at 130:2-5.]

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Hon. Sue L. Robinson August 1, 2005 Page 4 Despite all of these marketing activities and the actual sales of existing 4.0 GB drives, Cornice represented to Seagate and this Court during the June 28, 2005 Discovery Conference that, "[t]he 4.0, the product is not a product yet. There is nothing that's completed. There's nothing that has been sold." [Ex. 11 at 12:5-8.] Contrary to Cornice's statements, the evidence discussed above demonstrates that Cornice marketed its 4.0 GB drive before the June 30, 2005 discovery cutoff date in this case. In fact, Cornice has more than marketed its 4.0GB drive ­ it has conducted activities that constitute acts of infringement under 35 U.S.C. § 271(a) by using, offering for sale, selling and importing the 4.0 GB drives. II. Cornice cannot shield the 4.0 GB drive from discovery through recent, self-coined "code name" distinctions Realizing the scope of its infringement, Cornice is now attempting to circumscribe discovery on this 4.0 GB product through a novel tactic. Just two weeks ago, it indicated for the CONFIDENTIAL INFORMATION first time that the 4.0 GB drive has now two "code names": Tornado and Earth. And, on that basis, Cornice is willing to provide limited REDACTED discovery regarding Tornado, but not Earth. That is specious. This "code name" distinction is clearly of recent vintage. During the March 21, 2005, deposition on the status of the 4.0 GB drive, Mr. Holt testified that this drive has only one internal name: Earth. [Ex. 7 (Tr. of Mar. 21, 2005 Holt Depo) at 9:4-10:2.] As recently as the June 28 discovery conference, Cornice represented that: The 4.0, the product is not a product yet. There is nothing that's completed. There's nothing that has been sold. [Ex. 11 at 12:5-8.] Yet, in the space of two weeks, there were 2 products. Moreover, any document drawing any distinction between the code-named products was created July 5, 2005-- after the June 28, 2005 Discovery Conference Order compelling Cornice to produce a 30(b)(6) witness regarding the status of the 4.0 GB product. [Ex. 4 (dated July 25, 2005); Ex. 2 at 108:25109:9 (admitting document was created July 5, 2005).] Regardless of the propriety of this tactic, Cornice's novel "code name" difference is a distinction without meaning. Assuming arguendo that this distinction is even legitimate, Cornice cannot deny the overwhelming evidence that the so-called Earth product is already marketed: Cornice has an actual Earth 4.0 GB drive available and has already marketed the drive to existing customers: o Cornice has made PowerPoint presentations regarding both Earth and Tornado to its customers, including Creative, Rio, Samsung, Philips, and Archos. [Ex. 2 at 123:4-16.] PUBLIC VERSION

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F i s h & R i c h a r d s o n p.c .
Hon. Sue L. Robinson August 1, 2005 Page 5 o Cornice introduced both products to its existing customers, because the products share common specifications. According to Cornice's 30(b)(6) witness, Tornado's technical specification is "a deviation from the Earth specification." [Ex. 2 at 122:17-21.] o Testing of the Tornado is a key marketing step in the sale of the Earth product. At best, the "Tornado" 4.0 GB is a "prequalification" unit for the "Earth" 4.0 GB drive, because the "Tornado" will not go into production. [Ex. 2 at 39:1-12, 119:1-120:4).] o Cornice's "Milestone Calendar" for the Earth product shows that 800 units of Earth 4.0 GB drives were available for engineering verification testing (EVT). [Ex. 10 (Milestone Calendar slide).] Cornice's corporate designee confirmed that such verification testing began on June 20th . [Ex. 2 at 121:11-14.] o In June, Cornice had CTU's (i.e., customer test units) of the Earth drive at its facilities in Longmont, CO. [Ex. 2 at 205:20-206:2.]

CONFIDENTIAL INFORMATION o As evidence that Cornice already marketed Earth, Samsung actually requested REDACTED that Cornice "put a wrap around the printed circuit board" of the Earth drive to protect the drive from ESD (i.e., electrostatic discharges). [Ex. 2 at 204:3- 11.]
Given this lack of real distinction, Cornice has only identified one single product to the public: the 4.0 GB drive. o Cornice's announcements of the 4.0 GB drive on its website and through press releases only mentioned one product, not two. [Exs. 8-9 (print-out of Cornice website and press release).] o Cornice's marketing plan only refers to one 4.0 GB product. [Ex. 6.] o Cornice's product launch schedule and task list for the 4.0 GB drive only refer to one product, without distinguishing between Tornado and Earth. [Ex. 5.] o Cornice has only one Marketing Slick for the 4.0 GB drive, that does not distinguish between Tornado and Earth. [Ex. 2 at 122:22-24.] o At the Computex trade show, Cornice did not distinguish between Tornado and Earth; it only discussed a single 4.0 GB product. [Ex. 2 at 125:9-16.] o In interviews with members of the press about the 4.0 GB drive, Cornice did not distinguish between Earth and Tornado either. [Ex. 2 at 125:17-22.] Any discovery into the 4.0 GB Earth product should not require extensive additional discovery, given the apparent technical identity between the Earth and Tornado products. ­ Indeed, Cornice's corporate designee acknowledged that, except for the mounting, "the Earth product has the same mechanics as the Tornado product." [Ex. 2 at 187:13-22.]

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Hon. Sue L. Robinson August 1, 2005 Page 6 This evidence supports only one conclusion: Even if Cornice's "code-name" game were not litigation-driven, Cornice has marketed the so-called Earth 4.0 GB drive since at least this past June. Under the Court's order, Cornice should produce all discovery regarding this drive. III. Conclusion

CONFIDENTIAL INFORMATION REDACTED

As the evidence discussed above demonstrates, Cornice's 4.0 GB disc drive has gone beyond the marketing stage. Cornice has made, imported, used, offered for sale, and sold actual 4.0 GB drives. Pursuant to this Court's previous ruling, Seagate respectfully requests an order compelling Cornice, Inc. to provide discovery on the 4.0 GB disc drive, regardless of whatever code-name Cornice has recently created.

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