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Ford Motor Co. v. Versata Software, Inc.

United States District Court, E.D. Michigan, Southern Division

October 25, 2017

FORD MOTOR COMPANY, Plaintiff,
v.
VERSATA SOFTWARE, INC. et al. Defendants.

          ORDER SUSTAINING IN PART VERSATA'S OBJECTIONS (ECF #305) TO REPORT AND RECOMMENDATION OF THE SPECIAL MASTER TO DENY VERSATA'S MOTION TO COMPEL PDOR2 SOURCE CODE (ECF ## 300, 301)

          MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE.

         In this action, Versata Software Inc. and other related Defendants (collectively, “Versata”) allege that Ford Motor Company infringed certain patents and misappropriated certain trade secrets when Ford developed an automotive configuration software program called “PDO.” During discovery, Versata asked Ford to produce the source code for computer software Ford called “PDOR2.” Ford refused. Versata thereafter filed a motion to compel with attorney Lawrence D. Graham, the Court-appointed discovery master in this action.

         Pursuant to the protocol established in the Court's order appointing Mr. Graham (see ECF #230), Mr. Graham issued a Report and Recommendation in which he recommended that the Court deny Versata's motion to compel (the “R&R”). (See ECF ## 300, 301.) On August 24, 2017, Versata filed objections to the R&R. (See ECF #305.) Ford filed a response (see ECF #308) and the parties filed supplemental submissions (see ECF ## 312, 315). The Court held a telephonic hearing on Versata's objections on October 19, 2017. For the reasons explained below, the Court SUSTAINS IN PART Versata's objections and will require Ford to produce the PDOR2 source code at Versata's expense.

         I

         For more than a decade, Ford licensed automotive software called “ACM” from Versata. (See First Am. Counterclaim at ¶8, ECF #163 at Pg. ID 8322.) ACM provided a rule-authoring function that assisted Ford in the configuration of its vehicles. (See Id. at ¶38, Pg. ID 8239-30.)

         Versata alleges that in 2011, “Ford began an internal project to replace [ACM] and develop software that would perform the same functions.” (Id. at ¶41, Pg. ID 8330-31.) Ford named this software “Product Definition and Offer” or “PDO.”[1] (Id.) Versata alleges that PDO, like ACM, is rule-authoring software that allows Ford to configure the vehicles it manufactures:

PDO]-like ACM-is a back-end system used to configure vehicles from billions of possible combinations of parts, features, and options. When a Ford dealer attempts to place an order through Ford's Web Based Dealer Ordering (“WBDO”) system-for example, an order for 250 Ford Mustangs in different colors with sunroofs and 20 inch wheels-[PDO] supplies the ‘rules' that ensure configuration results in an integrated, working vehicle system that Ford is able to manufacture and sell. Likewise, when a retail customer attempts to customize a Ford F-150 pickup using Ford.com, [PDO] ensures that the customer is only able to select options that Ford could build.

(Id. at ¶38, Pg. ID 8329-30.) Versata insists that “Ford incorporated Versata's patented technologies and trade secrets into [PDO] and used these technologies to replace [ACM].” (Id. at Pg. ID 8304; see also Pg. ID 8305.) Versata maintains that Ford “willfully continues to infringe [Versata's patents] by using [PDO].” (Id. at ¶¶ 73, 78, Pg. ID 8339-40.)

         In January 2017, while Versata was conducting a discovery review of the PDO source code, Versata “discovered that in addition to the PDO [source] code repository, Ford also maintain[ed] on the same server a ‘PDOR2' … code repository that Versata's reviewers could not access.” (Versata Objections, ECF #305 at Pg. ID 15781.) Versata sought access to the PDOR2 source code repository, and Ford refused. Ford insisted that PDOR2 was not an accused product in this action. (See R&R, ECF #301 at Pg. ID 15180.) Ford contended that PDOR2 did not include a rule-authoring function and that it therefore had distinct functionality from PDO (the product that Versata did accuse), and Ford argued that producing the PDOR2 source code would impose a significant burden. (See id.)

         On May 19, 2017, Versata filed a motion with Mr. Graham seeking entry of an order that compelled “Ford to produce all manuals and technical documents (including cases, design documents, and testing documents) related to PDOR2 and provide Versata with access to the PDOR2 source code.” (ECF #301-2 at Pg. ID 15197.) Versata argued that it was entitled to the PDOR2-related documents and to the PDOR2 source code because “PDOR2 is…the second revision or iteration of PDO - the very software accused of patent, trade secret, and copyright infringement in this case.” (Id. at Pg. ID 15195.) Versata further identified certain Ford documents that, according to Versata, demonstrated that “PDOR2 performs rule-authoring, ” just like PDO. (Id. at Pg. ID 15196, citing Pg. ID 15201.) Versata insisted that there was good reason to question the bright-line distinction Ford had drawn between the rule-authoring PDO software and PDOR2.

         Ford responded that that PDOR2 was “not accused in this litigation and [was] not relevant to either party's claims or defenses.” (See ECF #301-3 at Pg. ID 15243.) Ford explained that while PDO is a “rule-authoring application [that] replaced [Versata's] ACM application, ” PDOR2, in contrast, is “a set of [four] separate applications[] which provide a different set of functionality than the accused PDO[] rule-authoring application.” (Id.) Ford stressed that PDOR2 was “neither a replacement for, nor a new version of, the accused PDO[] application.” (Id.) Finally, Ford claimed that producing the PDOR2 source code would “impose a significant burden on Ford” that would require “months of work.” (Id. at Pg. ID 15245.)

         On August 14, 2017, Mr. Graham issued the R&R in which he recommended that the Court deny Versata's request for the PDOR2 source code and documents. (See R&R, ECF #301.) Mr. Graham first recounted the procedural history of Vesata's request that the Court described above. He then turned to the question whether “PDOR2 is a revised or upgraded version of PDO, as Versata contends, or whether it is a suite of separate applications, as Ford contends.” (Id. at Pg. ID 15184.) Mr. Graham acknowledged that Versata had identified some Ford documents which “strongly suggest that PDOR2 applications work in some fashion with either PDO or data that is created or used by PDO, but appear to blur the distinction between the two.” (Id. at Pg. ID 15185.) But Mr. Graham ultimately concluded that while those documents may “suggest certain functionality of the general type that is accused in this action (such as rule authoring) is performed by PDOR2 … the supporting documents do not clearly indicate that any of the four applications [that comprise PDOR2] provide such functionality.” (Id.)

         Next, Mr. Graham addressed whether PDOR2 was “relevant and discoverable.” (Id.) He explained that “[t]he record demonstrates that [PDOR2] comprises a suite of four applications and that Versata has neither accused those four applications of infringement nor articulated how production of the source code is reasonably likely to lead to such an accusation.” (Id. at Pg. ID 15188.) In reaching this conclusion, Mr. Graham rejected Versata's argument that its pleadings do accuse Ford of infringement with respect to PDOR2:

Here, Versata has not established relevance of the PDOR2 source code in the sort of ‘focused, particularized manner' that would make it relevant. As Ford points out, none of Versata's infringement contentions directly accuse the PDOR2 applications …. Versata argues that the pleadings refer to PDO, and that PDO should be understood to be a generic name for all versions of PDO, including PDOR2. Ford counters that PDOR2 is not a new version of PDO … and that its declaratory judgment claim related to PDO was ...

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