Truswal Systems Corp. v. Hydro-Air Engineering, Inc.

• Decision Date: 11 March 1987
• Docket Number: No. 86-1390,HYDRO-AIR,86-1390
• Parties: , 2 U.S.P.Q.2d 1034 TRUSWAL SYSTEMS CORP., Appellant, v.ENGINEERING, INC., Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 1207

813 F.2d 1207

9 Fed.R.Serv.3d 1274, 2 U.S.P.Q.2d 1034

TRUSWAL SYSTEMS CORP., Appellant, v. HYDRO-AIR ENGINEERING, INC., Appellee.

Appeal No. 86-1390.

United States Court of Appeals, Federal Circuit.

March 11, 1987.

Jack C. Goldstein, Arnold, White & Durkee, of Houston, Tex., argued, for appellant. With him on the brief, was Timothy N. Trop.

Michael E. Godar, Senniger, Powers, Leavitt & Roedel, of St. Louis, Mo., argued, for appellee. With him on the brief, was Stuart N. Senniger.

Before MARKEY, Chief Judge, RICH and SMITH, Circuit Judges.

MARKEY, Chief Judge.

Appeal from an order of the United States District Court for the Eastern District of Missouri granting Hydro-Air Engineering, Inc.'s (Hydro-Air's) motion to quash a subpoena served by Truswal Systems Corp. (Truswal). No. 86 Misc. 178 (E.D.Mo. May 16, 1986). We vacate the order in part and remand.

Background

Truswal owns U.S. Patent Re. 31,807 ('807 patent), entitled "Truss-Web Connectors", issued January 22, 1985 to James Knowles. The claimed invention relates to wooden truss-like joists for use in constructing floors and roofs.

On January 22, 1985, Truswal sued Gang-Nails Systems, Inc. (Gang-Nails) in the Southern District of Florida, No. 85-171-Civ. (Florida action), for infringement of the '807 patent. That same day, Truswal wrote to Hydro-Air, accusing it of infringement. Because of the venue statute, 28 U.S.C. Sec. 1400(b), Truswal could not sue both alleged infringers in the same action. Though Hydro-Air had protested issuance of the '807 patent in the Patent and Trademark Office under 37 C.F.R. Sec. 1.291, it neither intervened in the Florida action nor sought a declaratory judgment in any court.

On April 29, 1986, Truswal served notice in the Florida action that it would depose officers of Hydro-Air in St. Louis, Missouri on May 16, two weeks before the date set for completion of non-expert discovery in the Florida action. On May 1, the Missouri district court issued a subpoena ordering Hydro-Air to designate an officer to testify and to produce documents relating to its product samples, drawings, manufacturing methods, the design and operation of its product, comparative test data, and sales information.

On May 12, Hydro-Air moved to quash pursuant to Fed.R.Civ.P. 45(b), on the grounds that "the information sought is not reasonably calculated to lead to the discovery of admissible evidence in the pending litigation, and that the discovery of such information would be unreasonable, unduly oppressive and burdensome."

At a May 16 hearing, the parties agreed to delete some demands from the subpoena, leaving only those for test data and sales information. Hydro-Air argued that the test data and sales information is confidential and would not be adequately protected by any protective order, including one employed in the Florida action and proposed by Truswal for use here. Truswal asserted that Hydro-Air's comparative testing and sales information is relevant to its proof in rebuttal of an anticipated defense of obviousness of the '807 patent in the Florida action. Because neither party submitted testimony or affidavits, the record consists solely of attorney argument and colloquy.

On that same May 16, the district court issued an order which in its entirety reads:

IT IS HEREBY ORDERED that the motion of Hydro-Air Engineering, Inc. to quash the subpoena duces tecum served upon it by plaintiff be and is granted with respect to the requested sales information and product test results.

Plaintiff at a hearing held May 16, 1986 presented the Court with case authority in which records of sales by party-defendants of allegedly infringing products were held discoverable as leading to evidence of commercial success of the patented product. None of these cases supports production of this information by non-party witnesses.

The part of the order quashing the subpoena for comparative test data remains unchallenged. Truswal appeals from only that part of the order that quashes the subpoena for Hydro-Air's sales information. That part of the subpoena sought:

Any and all documents relating to the dollar amount and number of units sold of Posi-Strut v-shaped metal web connectors by year or month, or if such documents do not exist then any and all documents showing the dollar amount and number of units sold of Posi-Strut v-shaped metal web connectors.

The part of the subpoena on appeal also sought the testimony of a person on:

The number of units and dollar value of all sales of v-shaped metal web connectors sold by Hydro-Air or any related company from March 14, 1978 to date. ^*

ISSUE

Whether on the present record the district court abused its discretion in granting the motion to quash the subpoena for the sales information sought.

OPINION

A. Appealability

Truswal appeals an order quashing a subpoena issued to a nonparty. The order was entered in a supplementary proceeding brought in one district to obtain evidence for use in an action pending in another. Because a party in Truswal's position would effectively be denied appellate review, courts of appeals have uniformly held such orders final and appealable. See, e.g., Heat & Control, Inc. v. Hester Industries, Inc., 785 F.2d 1017, 228 USPQ 926 (Fed.Cir.1986); Ariel v. Jones, 693 F.2d 1058 (11th Cir.1982); National Life Insurance Co. v. Hartford Accident and Indemnity Co., 615 F.2d 595 (3d Cir.1980); Republic Gear Co. v. Borg-Warner Corp., 381 F.2d 551 (2d Cir.1967); Horizons Titanium Corp. v. Norton Co., 290 F.2d 421 (1st Cir.1961); see also 9 J. Moore, B. Ward & J. Lucas, Moore's Federal Practice p 110.13, at 157 (1986) (Moore's Federal Practice ); Annot., 36 A.L.R.Fed. 763, 840 (1975).

B. Quashing the Subpoena

An order quashing a subpoena is not unique to patent law. Hence, we would normally apply the law of the Eighth Circuit to the merits of the order. Heat & Control, Inc., 785 F.2d at 1022 n. 4, 228 USPQ at 929 n. 4; Panduit Corp. v. All States Plastic Manufacturing Co., 744 F.2d 1564, 1572-75, 223 USPQ 465, 469-72 (Fed.Cir.1984). Because there is a dearth of Eighth Circuit case law applicable to the merits of the appealed order, however, we must look to other regional circuits and to the Federal Rules of Civil Procedure. See Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 875, 228 USPQ 90, 99-100 (Fed.Cir.1985).

The Federal Rules of Civil Procedure allow examination of a deponent concerning "any matter, not privileged, which is relevant to the subject matter involved in the pending action." Fed.R.Civ.P. 26(b). Rules 30 and 31 provide that "any party may take the testimony of any person, including a party...." Rule 30(b)(6) requires a subpoenaed nonparty corporation to designate a person to testify and that such person "shall testify."

Rule 45(d)(1) provides that a "person" served a discovery subpoena may move either for a protective order under Rule 26(c) or for an order quashing or modifying the subpoena under Rule 45(b). Rule 26(c) authorizes district courts, upon a showing of "good cause" by "a party or by the person from whom discovery is sought" to "make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense including one or more of the following: (1) that the discovery not be had ... (7) that a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way." (Emphasis added.) Rule 45(b) provides that the court may "quash or modify the subpoena if it is unreasonable and oppressive."

Hydro-Air moved to quash under Rule 45(b) (which relates to trials and subpoenas for documents) and thus undertook the burden of showing that the subpoena is unreasonable and oppressive. "The burden is particularly heavy to support a 'motion to quash as contrasted to some more limited protection.' " Westinghouse Electric Corp. v. City of Burlington, 351 F.2d 762, 766 (D.C.Cir.1965) (denying a motion to quash supported by two affidavits); Horizons Titanium Corp., 290 F.2d at 425; see Northrop Corp. v. McDonnell Douglas Corp., 751 F.2d 395, 403-04 (D.C.Cir.1984). The district court must balance "the relevance of the discovery sought, the requesting party's need, and the potential hardship to the party subject to the subpoena." Heat & Control, Inc., 785 F.2d at 1024, 228 USPQ at 931 (citing Deitchman v. E.R. Squibb & Sons, Inc., 740 F.2d 556, 560, 564 (7th Cir.1984)); 5A Moore's Federal Practice, p 45.05, at 45-44. Orders on motions to quash subpoenas are reviewed under an abuse of discretion standard. Heat & Control, Inc., 785 F.2d at 1022, 228 USPQ at 930; Premium Service Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir.1975).

C. The Order

It is apparent from the order that the district court based its decision solely on Truswal's failure to cite case authority supporting discovery "of this information" from a nonparty witness. Hydro-Air argues that it is immune from giving its evidence for that reason alone. Nothing in the Rules, however, makes controlling a distinction between parties and nonparties in respect of the type of information sought.

As above indicated, the Rules are applicable to a party and to a "person." The Federal Rules do distinguish in some circumstances between parties and nonparties regarding the manner in which information is to be obtained. For example, Rule 33 allows interrogatories to be directed only to parties. However, Rule 45 is applicable to "any person" (Rule 45(f)), and Heat & Control, Inc., Ariel, National Life Insurance Co., Republic Gear Co., and Horizons Titanium Corp., supra, dealt with subpoenas served upon nonparties. In assessing the burden of complying with a subpoena, a court may consider as one factor that a deponent is not a party. See Richards of Rockford, Inc. v. Pacific Gas & Electric Co., 71 F.R.D. 388, 390 (N.D.Cal.1976); cf. Dow Chemical Co. v. Allen, 672 F.2d 1262, 1277 (...