Rosenthal Collins Group LLC v. Trading Technologies Int'l Inc

• Decision Date: 23 February 2011
• Docket Number: No. 05 C 4088,05 C 4088
• Parties: ROSENTHAL COLLINS GROUP, LLC, Plaintiff, v. TRADING TECHNOLOGIES INTERNATIONAL, INC., Defendant. TRADING TECHNOLOGIES INTERNATIONAL, INC., Counterclaimant, v. ROSENTHAL COLLINS GROUP, LLC, Counterclaim Defendant.
• Court: U.S. District Court — Northern District of Illinois

ROSENTHAL COLLINS GROUP, LLC, Plaintiff,

v.TRADING TECHNOLOGIES INTERNATIONAL, INC., Defendant.

TRADING TECHNOLOGIES INTERNATIONAL, INC., Counterclaimant,

v.ROSENTHAL COLLINS GROUP, LLC, Counterclaim Defendant.

No. 05 C 4088

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Dated: February 23, 2011

Judge Sharon Johnson Coleman

Magistrate Judge Young B. Kim

MEMORANDUM OPINION AND ORDER

This matter comes before the Court on defendant and counterclaimant, Trading Technologies International, Inc.'s motion for default judgment and monetary sanctions based on misconduct by plaintiff and counterclaim defendant, Rosenthal Collins Group, LLC, and its counsel [308]. This Court has reviewed the parties' submissions and heard oral argument on the motion on January 7, 2011. For the reasons that follow, the motion is granted.

I. Background

The instant case is one of a several involving Trading Technologies International, Inc.'s ("TT") U.S. Patent Nos. 6, 766, 304 ("the '304 patent") and 6, 772, 132 ("the '132 patent") (collectively "the TT patents"). The patents relate to software developed by TT for use in the futures trading industry that allows traders to enter electronic orders. The primary features at issue in the various lawsuits are (i) a "static display of prices, " and (ii) a "single action order entry." Plaintiff, Rosenthal Collins Group, LLC, ("RCG") filed this declaratory judgment action contending that the "double-click +" functionality of its software is a "single action" that invalidates the TT patents. TT filed corresponding counterclaims alleging patent infringement.

On April 26, 2006, RCG filed a motion for summary judgment claiming TT's patents were invalid as a matter of law because the Wit Capital Digital Stock Market software ("Wit DSM") anticipated TT's patents. RCG's motion asserted that software written in 1998-99 was prior art that invalidated TT's patent applications because it preceded the March 2, 1999, "critical date" for TT's patents. In support of its motion, RCG relied primarily on the declaration of RCG's retained consultant, Walter D. Buist, a computer programmer that developed the source code for the Wit DSM. RCG also supported its motion with an exhibit of removable computer "zip" disks alleged to contain a back-up copy Wit DSM source code originally written by Buist in 1998/1999. RCG claimed that the source code written by Buist at that time contained the features that TT sought to patent, and that Buist had found the exhibit disks in his barn.

Buist was deposed on June 23, 2006. During the deposition, Buist revealed that, contrary to RCG's summary judgment claims, the software code containing the functionality at issue in this case had not been written onto the exhibit disks in the 1998-99 period. Buist stated that thecode he found on the disks had not contained that functionality, and that he added it in December 2005. (Buist Dep. I, June 23, 2006, p. 197-198, Dkt. #306-8.) Additionally, Buist made modifications that were required to permit the code to run on current operating systems. Id. Buist further testified that he sent Mr. Geoffrey Baker, counsel for RCG, a CD with a "differences" list that set forth the modifications to the source code. Buist testified that he modified the source code labeled "9902" in a similar manner to add the "double-click +" functionality sometime in January 2006. (Buist Dep. I, June 23, 2006, p. 197-198, Dkt. #306-8.) A. TT's First Motion for Default and Sanctions

Based on Buist's revelation that he had modified the code to add the "double-click +" functionality, and the inconsistencies between his declaration for the summary judgment motion and his deposition testimony, on August 10, 2006, TT filed a motion for default judgment and monetary sanctions. (Dkt. # 90.) Notwithstanding Buist's deposition testimony, on March 14, 2007, Judge James Moran found that TT had not presented "clear and convincing evidence that Buist or RCG's counsel willfully and intentionally fabricated evidence to deceive this court or the judicial system." (Dkt. # 142.) However, Judge Moran found that "RCG's motion for summary judgment was somewhat misleading, could be deemed disingenuous, and at the very least was prematurely filed." Id. Based on the evidence before the court at that time, Judge Moran found that "TT had not presented clear and convincing evidence that Buist or RCG's counsel had willfully and intentionally fabricated evidence to deceive this court or the judicial system." Id. Although Judge Moran declined to enter a default judgment, he granted monetary sanctions, struck Buist's declaration, and struck the summary judgment motion with leave torefile. The Court ordered RCG to pay costs for TT's software programming consultant and costs and attorneys' fees associated with the motion for sanctions.¹

RCG filed a motion to vacate the sanctions, continuing to defend Buist and the authenticity of its evidence. In opposition to RCG's motion to vacate, TT voiced a suspicion it had had since Buist's first deposition, on June 23, 2006, that the "last modified" dates² on the zip disks had been altered. In reply, RCG argued that:

"TT provides no evidentiary support for its Oliver-Stone-esque theory that Walter Buist, a disinterested non-party, literally turned back the clock on his computer (a computer that TT examined thoroughly on no fewer than three occasions). There is simply NO evidence to support its libelous charge against Mr. Buist. TT knows that any such attempts will fail because TT knows that the reason the source code files have a last modified date in the 1998 and 1999 time period is because the last time the zip prefix files were modified was in 1998 and 1999." (Dkt. # 204.)

Judge Moran denied RCG's motion to vacate the sanctions on July 17, 2007. In denying the motion, Judge Moran reiterated his prior ruling and emphasized that, while he did not dismiss the case as requested by TT, "throughout the opinion [the Court] labeled RCG's conduct as, alternatively, 'somewhat misleading, ' 'disconcerting, ' 'troubling, ' 'less than forthcoming, ' and a 'poor strategic decision.'" (Dkt. # 225.) Judge Moran when on to state, "Contrary to RCG's argument, we did not, nor do we now, believe that RCG's actions were merely mistakes or slight errors in judgment. At best, they were grossly negligent... Any attempt by the court to soften the tone of its disapproval should not be mistaken for leniency. RCG's actions were improper and we sanctioned it accordingly." Id.

After ruling on TT's first motion for sanctions, Judge Moran granted TT's request for further discovery. On March 27, 2007, TT filed its first motion to compel documents and equipment that it had requested following the deposition of Buist in June 2006, and also a second deposition of Buist. (Dkt. # 146.) In its May 16, 2007, order granting TT's first motion to compel, the Court noted that TT had waited nearly nine months for a response to its letter to RCG requesting production of material following Buist's deposition in June 2006. (Dkt. #168.) The Court compelled RCG to produce ten categories of documents and materials, including thumb drives (USB keys), and three computers ("the personal Dell laptop, " "the IBM ThinkPad, " and "the test machine") that Buist had testified that he had used to "recompile" the source code from the zip disks he found in his barn. Id. The Court also ordered a second deposition of Buist. RCG failed to comply with that order. On September 3, 2007, TT moved to show cause. RCG opposed the motion, claiming that it believed all discovery was stayed pending an appeal in the related eSpeed case. On July 17, 2008, the Court once again gave RCG the benefit of the doubt and denied TT's motion to show cause. (Dkt. #227.) Instead of issuing further sanctions, the Court directed RCG to produce the materials outlined in the Court's May 16, 2007, order within 14 days and to set a mutually agreeable date for Walter Buist's deposition. Id.

RCG produced the personal Dell laptop ("declaration machine")³ and all the zip disks for inspection within the 14-day period. On August 8, 2008, RCG produced the USB thumb drives, the personal Dell, and IBM ThinkPad for imaging by TT's designated forensic company, Impact Forensics ("Impact"). RCG still had not produced the "test machine." By agreement, Impactheld the images in escrow and provided file listings from which TT could request particular files from RCG. Due to the numerous objections made by RCG to TT's requests for files, TT again sought the Court's assistance to obtain full images of the devices. On November 6, 2008, Judge Milton Shadur, substituting for Judge Moran, ordered RCG to produce the images to TT in their entirety on an "Attorneys-Eyes-Only" basis under a protective order. RCG still had not provided the test machine or an agreeable date for Buist's second deposition. On March 3, 2009, Judge Amy St. Eve, substituting for Judge Moran, ordered that Buist be produced for a second deposition by April 17, 2009. Buist was finally produced for a second deposition on June 11, 2009.

At his second deposition, on June 11, 2009, Buist admitted that he had, in fact, turned back the clock on his computer when he was overwriting the source code on the zip disks with modified code, to make it appear that the files on the zip disks had last modified dates in 1998 and 1999 when, in fact, the actual last modified date should have been 2006. (Buist Dep. II, June 11, 2009, 36:5-38:2, Dkt. #306-14.) For one zip disk, Buist changed the clock to November 1998, for another he changed the date to February 1999, and for another he changed the date to April 1999. Id. at 37:12-19, 39:10-17, 40:11-41:10. Notably, Buist testified that he knew that if he changed the date back no one would be able to tell that the files had been modified in 2006. Id. at 42:21-43:6.

TT's computer forensic analyst, David Klausner, stated that there was no valid technical...