First, SCO has not filed a motion for sanctions for spoliation. That's the way to get an issue regarding missing evidence properly before a judge. It has not happened. I checked Pacer.
Second, SCO didn't file any motions in March of 2006, sealed or otherwise, despite Forbes "reporting" that SCO filed the allegations as part of a sealed motion that month ("Hatch, SCO's attorney, says SCO learned about the destruction of code when it took depositions from IBM programmers. This is the first time SCO has made the allegation in public, though Hatch says the claim was part of a motion SCO filed in March 2006, which has remained sealed.").
Well, I don't know who got it wrong, Hatch or Forbes, but that's just not true. I note for the record that it was not Boies Schiller who did the interview. It also isn't true it's the first time they've mentioned it in public, as I pointed out in the previous article. They mentioned it at the last hearing.
There were some procedural matters handled in motions, like a motion for leave to file excess pages. The only substantive thing that SCO did in March that could conceivably relate to this matter that I could find was file a sealed memorandum of opposition to a motion of IBM's. Maybe they threw in their allegations about destroyed evidence in there, but that's not how it's done, if you wish a matter addressed by the court. That may explain why the judge told SCO at the hearing that the matter was not properly before her. And it explains why IBM apparently didn't even bother to answer the allegation, after saying it doesn't believe it's true, according to SCO's account. IBM doesn't have to respond unless SCO brings the matter to the court in the proper way. SCO has now thrown it in to its Redacted Objections to Judge Wells' Order, but whether IBM will decide to respond or not, we'll have to wait and see. But there is no March motion. And there is no motion for sanctions for spoliation. So any implication that SCO brought a motion over IBM's allegedly destroying evidence is poppycock.
Those are two facts that any reporter could have and should have checked prior to publishing a story implying either was true. They could have just looked on the Docket on Pacer. If they don't know how, they could have asked me. Just because you get a call from SCO, it doesn't mean you publish as is, without even checking the facts. If you don't want to check Pacer, just look on the IBM Timeline page Groklaw provides as an educational service to the public, and look for yourself. This is all just a media event, as far as I can see, in SCO's primary case, the one it is trying in the court of public opinion.
Third, what is spoliation?
I thought you might like to see a 10th Circuit case where the judge explains spoliation of evidence, what the law is about retaining evidence, and what happens if somebody really does destroy evidence. As you will see, they don't take you out and shoot you at dawn if you can't find an email. There are factors, or elements, that a judge weighs to decide if it was deliberate, if it actually matters to the case, if there is any damage, if other evidence duplicates, those sorts of things. And then, based on all the factors, the judge decides if there will be any sanctions at all and if so, which one?
It's from a case where both sides had destroyed evidence, and each indignantly accused the other of doing it deliberately. Each side brought a motion for sanctions for spoliation, and of course they each wanted the other side sanctioned to the max. The max is that the other side's case is dismissed. One side was partially sanctioned; the other was not at all. Also, you will see how a party is supposed to address such an allegation, so that it is properly before a judge, as this is the Report and Recommendation Regarding Spoliation Motions [PDF] on two motions for sanctions for spoliation. As you will see, the matter was referred to a Magistrate Judge to handle, Judge David Nuffer, by the presiding judge, Judge Ted Stewart, in the case of Adams v. Gateway. Oddly enough, one of the Novell attorneys represents an amici in the case, trying to get some things unsealed. Anyway, the point is, this is the same circuit, same court, as the one SCO v. IBM is being heard in, just a different judge.
I couldn't possibly explain spoliation any better than this report does. Enjoy.
Update: I have heard from Dan Lyons of Forbes. He says the error about the March motion was his, not Hatch's and he'll get the editors to fix it. He says: "Good catch on your part." He also wants me to tell you this, and these are his words:
I wish you would point out to your readers (some of whom are writing to me) that I am not the one saying that IBM destroyed evidence; SCO is. I am the one reporting on SCO's latest ploy. There's a difference. You might also point out my headline which suggests SCO is "grasping at straws" and my lead sentence which says the case is growing "ever more desperate -- and ever more weird." Would appreciate it.
So I have done as he asked, because I believe in being fair even to those who are not fair to me. I also believe in kindness, in the value of decency, and I try to treat others the way I'd like to be treated. The Golden Rule, if you will.
By the way, I doubt any of you are writing to Forbes, but if a few are, don't write to him or his editors as far as I'm concerned. When contacted with information that should have resulted in a correction in an earlier Lyons article falsely accusing Groklaw of a number of things, no correction ever resulted, so I think writing is pointless. Perhaps he will correct the record now. If not, I've done the decent thing personally. I refuse to ever let these guys make me behave the way they do. And Groklaw is about the truth, not pushing an agenda at the expense of truth. So you have the entire picture now, thanks to Groklaw, not Forbes. The entire picture would have to include that the Forbes headline I see in Google News doesn't say anything about grasping for straws. What I see is, "SCO Claims IBM Destroyed Crucial Evidence." (Lyons says to look at the subhead, which is what he meant.)
2nd Update: Marbux reminds me that I should provide you with this support citation for my statement that throwing allegations into a memorandum isn't how it's done if you wish a matter addressed by the court,
Fed. R.Civ.P. 7(b)(1):
An application to the court for an order shall be by motion which, unless made during a hearing or trial, shall be made in writing, shall state with particularity the grounds therefor, and shall set forth the relief or order sought.
Marbux: "Note that a response or reply brief is not a 'motion.' That and the part from
'shall state with particularity' to the end is why you can't just make a motion in a footnote."
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH CENTRAL DIVISION
ADAMS & ASSOCIATES, L.L.C.,
Case No. 2:02-CV-106
District Judge Ted Stewart
Magistrate Judge David Nuffer
This is an unsealed version of a document filed under
seal March 29, 2005, as docket no. 347.
The parties' motions for sanctions for spoliation1 were referred to the undersigned under
28 U.S.C. §636(b)(1)(B).2 The undersigned was directed to consider the motions, hear oral
argument, conduct evidentiary hearings as deemed appropriate and submit to the District Judge a
report and recommendation for the proper resolution of dispositive matters presented.
IT IS HEREBY ORDERED that this unsealed, redacted version of
a document filed under seal March 29, 2005, as docket no. 347, is FILED.
Dated this 25th day of April, 2005.
U.S. Magistrate Judge
Table of Contents
Overview of Facts Giving Rise to Litigation . . . . . . . . . . . . . -3-
Overview of Plaintiffs' Motion . . . . . . . . . . . . . . . . . . . . -5-
Overview of Defendant's Motion . . . . . . . . . . . . . . . . . . . . . -6-
Spoliation . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . -6-
Duty to Preserve Evidence - The Foundation of Spoliation Law . . . -7-
The Spoliation Tort . . . . . . . . . . . . . . . . . . . . . . -8-
The Evidentiary Inference . . . . . . . . . . . . . . . . . . . -9-
Judicial Sanctions for Spoliation . . . . . . . . . . . . . . . -10-
Sanctions Under Rule 37 . . . . . . . . . . . . . . . -10-
Tenth Circuit Case Law . . . . . . . . . . . . . . . . . . . . -14-
Inherent Judicial Authority . . . . . . . . . . . . . -13-
Remedies for Spoliation . . . . . . . . . . . . . . . -13-
Plaintiffs' Allegations of Spoliation . . . . . . . . . . . . . . . . . -16-
Should Gateway be Sanctioned for Spoliation? . . . . . . . . . -20-
Is Entry of Judgment Appropriate? . . . . . . . . . . . . . . . -22-
Spoliation Sanctions Against Gateway . . . . . . . . . . . . . .-22-
Warning . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
Defendant's Allegations of Spoliation . . . . . . . . . . . . . . . . . -24-
Adams' Response . . . . . . . . . . . . . . . . . . . . . . . . . -25-
Should Adams Be Sanctioned for Spoliation? . . . . . . . . . . . .-26-
RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-28-
Notice to Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
Service and Redaction . . . . . . . . . . . . . . . . . . . . . . . . . -29-
Overview of Facts Giving Rise to Litigation
The individual plaintiff, Phillip M. Adams, discovered a defect in the floppy disk
controller (FDC) of some computers in the late 1980's. The defect causes random and sometimes
undetected destruction of data on computers.3Dr. Adams has developed several patented
computer technologies to detect and resolve the defect.4He claims this technology is worth
hundreds of millions of dollars.5Adams says Hewlett-Packard and other computer companies
have licensed his Detector and Solution for approximately $30 million.6He describes the
industry impact of the defect and solutions:
The scope and seriousness of the [floppy disk controller] Defect were
recently illustrated by the $2.1 billion Toshiba class-action settlement in the
Eastern District of Texas. A Wall Street Journal article dated November 9, 1999
describ[ed] the Toshiba settlement . . . . In addition to the Toshiba class-action
settlement, the United States Government recently settled False Claims Act claims
against Toshiba for $33.5 million. A Wall Street Journal article dated October 16,
2000 describ[ed] Toshiba's settlement with the United States Government . . . .
The State of California recently settled California State False Act [sic] Claims
against Toshiba for $33 million. Several billion dollar class-action lawsuits are
presently pending against different computer companies in various Federal and
As early as November 8, 1999, Gateway began its inquiry into the Defect.8Adams'
contact with Gateway began in March 2000.9 In May, 2000, Adams' counsel contacted
Gateway,10 and after a non-disclosure agreement was signed, the parties met in Salt Lake City on
July 12, 2000, and in San Diego on February 26, 2001.11 At the first meeting, Adams
demonstrated his detection and solution software on Gateway computers.12
Shortly after that first meeting, on July 26, 2000, Gateway sent a letter to its suppliers,
requesting that each "certify in writing to Gateway as soon as possible that its FDC products
correctly detect and process data underrun conditions . . . ."13 Gateway also undertook testing
and evaluation of its computers. This process involved many e-mail exchanges, and at least two
detection software applications that are referred to in documents produced by Gateway.14
At the second meeting, in San Diego, Adams again demonstrated his software on
Gateway computers. All or some of the six computers present were apparently problem free.15
Adams says that sometime between the Salt Lake City and San Diego meetings, Gateway
violated the non-disclosure agreement16 and began infringing on his patents.17
Overview of Plaintiffs' Motion
Plaintiffs allege that Defendant spoliated evidence, pointing to Gateway's inability to
a. copies of some of the letters sent to Gateway's suppliers in July, 2000;18
b. some of the computers present at the meeting between Gateway and Plaintiff
Adams on February 26, 2001;19
c. e-mail messages sent in June and August 2000;20 and
d. test utility programs.21
Adams asks that the court enter judgment against Gateway "on the issues of liability based upon
Gateway's repeated acts and pattern of spoliation of evidence in this litigation."22
Overview of Defendant's Motion
Defendant alleges that Adams destroyed many documents in the development of his
invention and in the patent application process. Gateway complains that it does not have access
to many categories of communications between Adams and patent counsel (1) communications
substantively discussing the invention; (2) drafts of applications, drawings and inventor and
attorney notes; (3) communications from the attorneys to Adams describing the progress of the
patent prosecution; and (4) responsive communications from Adams to the attorneys.23These
items are neither contained in the Patent Office files nor in files held by Adams or his patent
counsel.24Gateway asks that an inference be imposed that the patents are invalid and
Spoliation claims arise when one party's actions make evidence unavailable to another
party. "The term `spoilation' [sic] encompasses a third party's intentional or negligent
destruction or loss of tangible evidence, which destruction or loss impairs a person's ability to
prove or defend a prospective civil action."26Spoliation may be a tort, the basis for an
evidentiary inference, or a basis for a judicial sanction.
Duty to Preserve Evidence - The Foundation of Spoliation Law
The power to punish spoliation is founded on the parties' fundamental obligation to
preserve evidence. A party has a common law duty to preserve evidence. "A litigant has a duty
to preserve evidence that he knows or should know is relevant to imminent or ongoing
litigation."27The duty to preserve is violated when evidence is lost or destroyed even before suit
is filed. "The duty to preserve material evidence . . . extends to that period before the litigation
when a party reasonably should know that the evidence may be relevant to anticipated
The doctrine finds frequent application in cases in which allegedly defective products
were unavailable by reason of a plaintiff's actions. Cases have been dismissed when
- a car was destroyed before suit was filed,29
- a space heater was discarded two years before filing suit,30
- a truck trailer was disposed of as wreckage two months before suit was filed after
saving the allegedly defective part,31
- parts of a gas grill were discarded two years before litigation,32 and
- a vehicle was sold for salvage three years before litigation.33
At least one jurisdiction has a rule that a product liability case alleging a defect in the specific
item and not in the run of production must be dismissed if the product is unavailable for a reason
attributable to the plaintiff, even if the destruction is inadvertent.34When it is a defendant who
has made evidence unavailable, default judgment may be entered.35
The Spoliation Tort
While the spoliation tort is not an issue here, examination of its typical elements allows a
contrast with the term as used in making evidentiary inferences and imposing discovery
sanctions. The negligent tort of spoliation has six elements:
At a minimum, a person claiming negligent spoilation must establish the
following elements: (1) existence of a potential civil action; (2) a legal or
contractual duty to preserve evidence relevant to that action; (3) destruction of
that evidence; (4) significant impairment in the ability to prove the lawsuit; (5) a
causal relationship between the evidence destruction and the inability to prove the
lawsuit; and (6) damages.36
The spoliation tort is intended to substitute for a lost opportunity to litigate, compensating the
wronged party and penalizing the destroyer of evidence. It provides a remedy for the destruction
of evidence by monetary compensation for the loss of a valid claim. The measure of damage is
the measure of the lost claim.
Similarly, spoliation evidentiary inferences and judicial sanctions compensate for the loss
of evidence. Their elements, purposes and implementations are different, however.
The Evidentiary Inference
The evidentiary inference which arises on spoliation is that the evidence which was lost
or destroyed was unfavorable to the party which destroyed it. In effect, the act of destruction
admits the quality of the evidence destroyed. "[T]he general rule is that bad faith destruction of a
document relevant to proof of an issue at trial gives rise to an inference that production of the
document would have been unfavorable to the party responsible for its destruction."37
The adverse inference to be drawn from destruction of records is usually predicated on
bad conduct of the destroying party. "[T]he circumstances of the act must manifest bad faith.
Mere negligence is not enough, for it does not sustain an inference of consciousness of a weak
case."38The mental state coupled with the destruction gives rise to the inference, as an
evidentiary substitute. The inference arises to cancel the beneficial effect of the wrongful act.
Some authorities hold that bad faith need not be shown, since trial courts have broad
discretion to impose inferences for loss of evidence or failure to present it.
As a general proposition, the trial court has broad discretion to permit a
jury to draw adverse inferences from a party's failure to present evidence, the loss
of evidence, or the destruction of evidence. While a finding of bad faith suffices
to permit such an inference, it is not always necessary.39
The evidentiary inference is imposed "for the purpose of leveling the evidentiary playing
field and for the purpose of sanctioning the improper conduct."40
Judicial Sanctions for Spoliation
Judicial sanctions for spoliation may be based on discovery rules or on the court's
inherent power to manage its processes.
Sanctions Under Rule 37
The more formulaic spoliation sanctions result from a party's breach of duties to disclose
or discover. That conduct makes available the remedies of Fed. R. Civ. P. 37 which may be as
extreme as "dismissing the action or proceeding or any part thereof, or rendering a judgment by
default against the disobedient party."41
The duty to disclose evidence arises shortly after suit is filed.42The duty continues
throughout the case.43That duty obviously includes a duty to preserve.
Each discovery method is governed by a rule imposing a duty of compliance, from which
a duty to not spoliate arises.44Fed. R. Civ. P. 37(a)(2) provides a procedure for relief for failures
to disclose or to respond to discovery. If spoliation occurs, Rule 37 sanctions for failure to
disclose or respond to discovery may be available. Under Fed. R. Civ. P. 37(a), courts may order
compliance with disclosure or discovery obligations (which would be ineffective in the case of
spoliated evidence), and may impose monetary sanctions for the "reasonable expenses incurred in
making the motion, including attorney's fees."45
If an order compelling discovery has been issued and violated by spoliation, the court's
options are very broad. Fed. R. Civ. P. 37(b)(2) enumerates an illustrative variety of sanctions,
including an order that certain facts be taken as true, that the disobedient party be barred from
taking certain positions, that pleadings be stricken, and that default judgment be entered, as well
as invoking contempt powers. The Rule also specifies that the court "shall require the party
failing to obey the order or the attorney advising that party or both to pay the reasonable
expenses, including attorney's fees," and has expansive powers to make "such orders . . . as are
Guidelines for imposition of the extreme sanction of dismissal (against a violating
plaintiff) or judgment (against a violating defendant) which apply generally to discovery
sanctions also apply to spoliation sanctions.
Before choosing dismissal as a just sanction, a court should ordinarily consider a
number of factors, including: (1) the degree of actual prejudice to the defendant;
(2) the amount of interference with the judicial process; (3) the culpability of the
litigant; (4) whether the court warned the party in advance that dismissal of the
action would be a likely sanction for noncompliance; and (5) the efficacy of lesser
Dismissal and entry of judgment are remedies of last resort because "a court should impose the
least onerous sanction that will remedy the prejudice and, where applicable, punish the past
wrongdoing and deter future wrongdoing."48Those extreme remedies divest a party of the right
to participate in the judicial process, but are appropriate where a party's actions have had that
same effect on an opponent.
Inherent Judicial Authority
Beyond the evidentiary inference and sanctions under the discovery rules, the court has
distinct and inherent authority to impose a broad range of sanctions for spoliation. This inherent
power of the court protects the essential fairness of proceedings. "Federal courts possess
inherent powers necessary `to manage their own affairs so as to achieve the orderly and
expeditious disposition of cases.'"49 "The policy underlying this inherent power of the courts is
the need to preserve the integrity of the judicial process in order to retain confidence that the
process works to uncover the truth."50If a spoliator were to proceed unchecked, with no penalty
for obfuscation, confidence in the judicial process would be undermined. Spoliation sanctions
Remedies for Spoliation
Remedies which may be imposed for spoliation under the inherent authority of the court
are case specific.
While a district court has broad discretion in choosing an appropriate
sanction for spoliation, "the applicable sanction should be molded to serve the
prophylactic, punitive, and remedial rationales underlying the spoliation doctrine."
. . . . We have recognized that when imposing spoliation sanctions, "the trial court
has discretion to pursue a wide range of responses both for the purpose of leveling
the evidentiary playing field and for the purpose of sanctioning the improper
"Sanctions for destruction of evidence may include dismissal of the case, the exclusion of
evidence, or a jury instruction on the `spoliation inference.'. . . . The primary aim of the sanction
is remedial, although deterrence may play a role."52
Tenth Circuit Case Law
The most recent published Tenth Circuit case to consider spoliation sanctions evaluated
the evidentiary inference. The inference was not imposed where records were lost inadvertently
and similar information was available from other records.53
An earlier published case from the District of Colorado entered a default judgment
against a party which had destroyed computer source code after infringement litigation started.
Prior to [the time this suit was filed], [Defendant] at any one time had
retained only the then current version of PC-Fund's source code. Under that
procedure, as the program was revised, previous versions were destroyed.
[Defendant] continued this practice until September 1987, long after
commencement of this lawsuit. The record indicates that such a practice is
commonly followed in the industry, for legitimate reasons, and is not inherently
wrongful. However, it is not the general propriety of the practice that is at
The court found that the duty to preserve the source code versions actually arose before filing of
suit, when the defendant knew or should have known that the plaintiff claimed infringement.
The case illustrates application of severe sanctions when central evidence is destroyed in the
context of a dispute.
An unpublished Tenth Circuit case, Jordan F. Miller Corp. v. Mid-Continent Aircraft
Serv., Inc.,55 determined that the sanction of dismissal would be imposed under the court's
inherent authority where evidence was discarded before the case was filed. While noting that
"bad faith" was necessary to support an inference that destroyed evidence was unfavorable, the
court relied on cases holding that bad faith was not necessary to support exclusion of evidence or
even dismissal.56The court held that two factors were of most importance in the imposition of
sanctions for spoliation under a court's inherent power.
When deciding whether to sanction a party for the spoliation of evidence,
courts have considered a variety of factors, two of which generally carry the most
weight: (1) the degree of culpability of the party who lost or destroyed the
evidence, and (2) the degree of actual prejudice to the other party.57
Miller cited another opinion58 which enumerated factors to be considered in imposing
- whether the prejudice can be cured;
- the practical importance of the evidence;
- amount of interference with judicial process;
- good faith or bad faith;
- the potential for abuse; and
- if dismissal is considered, whether party was warned of possibility of dismissal for
noncompliance with discovery, and efficacy of lesser sanction than dismissal.
In addition to the foregoing, a court might also consider any other statutory, regulatory or
self-imposed duties a party might have to retain evidence, and whether a party's retention
practice is reasonable in light of potential claims and third party interests.
Plaintiffs' Allegations of Spoliation
Plaintiff makes allegations of spoliation as to many different items. Because the remedies
for spoliation are so fact sensitive, the allegations must be examined separately. Gateway offers
no explanation of the unavailability of these items. Their absence is puzzling because some
similar items are available.
Copies of Letters to Suppliers. Gateway admits that it does not have and has not
produced two of the letters it sent to suppliers on June 26, 2000.59 But Gateway has produced
three others, which Gateway says are essentially identical to the missing letters and has named all
five of the recipients.60Further supporting its claim of lack of prejudice to Adams, Gateway
alleges that the letters did not violate the non-disclosure agreement61 so that the absence is not
legally significant. Adams does not respond to these arguments.62
Two computers used in San Diego. Again, Gateway admits that it does not have two of
the computers present at the February 26, 2000, San Diego meeting. Gateway claims Adams
delayed inspection of the four computers which were made available and that Gateway has
provided identical motherboards in lieu of the two missing computers.63While Adams claims
the missing computers (along with the test utilities discussed below) are "the proverbial
`smoking guns' in this litigation" and "will demonstrate beyond a reasonable doubt that Gateway
infringed Dr. Adams' patented Detector and Solution,"64 the magistrate judge has found no
factual support for this assertion.
E-mails. Adams' motion also points out that Gateway is unable to come up with two e-
mails generated in June and August 2000.65 These e-mails are referred to in e-mails which
Gateway has produced.66
A June 13, 2000 e-mail67 contains a reference to an e-mail Thomas (GT) Stepp, a
Gateway engineer,68 sent the prior week to Steven Chen and Charles Chiang at MSI,69
These questions from the June
13 e-mail appear to repeat the missing e-mail's inquiries about the origin and nature of the
An August 4, 2000, e-mail from Chris Wetzel, a Gateway Product Manager, to various
Gateway and MSI employees, asks the recipients to "[r]efer to the email from GT Stepp
regarding the testing of boards with the 3.60TEST utility sent earlier today to MSI."70The
subject of the missing e-mail is much closer to the central issues of this case, because the missing
email discussed testing of computer motherboards with a test utility. The referencing e-mail is
not clear whether the item sent earlier that same day to MSI was the missing e-mail or the
3.60TEST utility itself. If Gateway was sending a detector to MSI, that fact would fly in the face
of Gateway's assertions that it never possessed or used a detector.71
Another e-mail of importance, also related to a software detector, is missing. The
existence of this e-mail became known after Adams' spoliation motion was filed. Gateway
admits that Charlie Ma of Quanta e-mailed Plaintiffs' detector software to YC Woon, a Gateway
employee, in early January 2001. But Gateway claims it does not have this e-mail.72Adams
claims Gateway's failure to produce this e-mail means it has been spoliated.73The context of
this e-mail makes it quite significant, as it was the means by which Gateway came into
possession of Adams' detector in the very time frame that Gateway appeared to be negotiating
for a license of Adams' software.
Test Utilities. Gateway produced two e-mails referring to two test utilities. Neither of
the utilities have been produced. The first is the 3.60TEST utility referred to above in the
August 4, 2000 e-mail. While Adams contends "the test utility will demonstrate conclusively
that Gateway has violated Dr. Adams' patented Detector,"74 that assertion is not supported by
The second test utility is referred to in minutes of a conference call dated August 1,
2000.75 The notes reflect a cooperative effort between Gateway and its supplier to test
motherboards, including FDC testing.76
Adams has not shown that this utility was in Gateway's possession, but it was
certainly in the possession of its supplier and used at Gateway's direction.
Again, Adams claims that these "various test utilities and programs . . . infringe Dr.
Adams' patented Detector."77 But there is no evidence to support this claim.
Should Gateway be Sanctioned for Spoliation?
The magistrate judge expressed early concern about the disappearance of the two letters
to suppliers and the two computers.78Those expressions about Gateway's record keeping and
inventory did not, however, reflect an analysis of the centrality of the evidence to the case or of
the propriety of sanctions.
While it is perplexing, frustrating and even suspicious that these two letters, two
computers, three e-mails, and two test utilities are missing, only two items missing from
evidence would clearly be very important to this case: the e-mail from Charlie Ma to YC Woon
and the 3.60TEST utility. And the absence of these items does not appear to be remediated or
minimized by other evidence.
The e-mail from Ma conveyed Adams' detector, the very software that is the subject of
this litigation, to Gateway at a critical time in the Gateway-Adams relationship. There are many
e-mails available from the time period,79 but none of them shed any light on the substance of the
The 3.60TEST utility would show if Gateway was or was not, by use of that utility,
infringing on Adams' patents. The absence of the utility leaves us entirely without proof. The
absence of the utility referenced in the conference call notes has similar significance.
The loss of all nine items is prejudicial to the evidentiary record, and the missing Ma e-mail and 3.60TEST utility are central to the overall case. The missing August 2000 e-mail
pertaining to the 3.60TEST utility and the other missing test utility might also be important. The
test utilities could possibly be case dispositive but we lack evidence to make that evaluation. The
e-mail from Ma is less likely to contain case dispositive information, but it is the very means by
which Adams' software was conveyed to Gateway, without Adams' permission, at a very critical
There is no evidence that the loss of these items was rooted in bad faith, because there is
no explanation of their absence. Gateway only admits to their absence.
There is potential for abuse in the absence of these items. It is entirely possible, given
their central nature, that they were destroyed in bad faith, or to impede the litigation process. On
this point, it is relevant to consider Gateway's conduct in delaying to disclose its possession of
Adams' detector until just one year ago three years after Gateway obtained the detector, two
years after the inception of this litigation, 20 months after representing to the court that Gateway
had no such detector, and 15 months after providing sworn discovery denials of possession.80
That conduct heightens the court's concern about the potential for abuse.
Gateway argues81 that there is no evidence that it destroyed or intentionally lost any of the
nine items (two letters, two computers, three e-mails, and two test utilities) under consideration.
However, it is undisputed that Gateway had these items in its control and has no explanation for
their loss. It would really be remarkable if there were direct evidence of a party's destruction or
intentional loss of evidence. If concealment were the goal, the means would also be concealed.
On balance, the magistrate judge concludes that sanctions should be imposed against
Gateway for the unexplained absence of the nine pieces of evidence, and that the magnitude of
the sanctions should be measured by the potential significance of the two most central missing
items, the Charlie Ma e-mail and the 3.60TEST utility, and also consider the other important
missing e-mail and missing test utility.
Is Entry of Judgment Appropriate?
While the missing items are all discoverable evidence, only two are clearly central to the
case, and two others are important. There is not enough collateral evidence about any item to
conclude that it would, if available, be a case dispositive piece of evidence. There is no evidence
that the absence of these items is due to purposeful destruction. Because the disappearance of
these items is unexplained, there is no way to know if the items became unavailable before filing
of the suit or after. That timing could reflect culpability. Entry of judgment for liability, the
sanction requested by Adams, is essentially case dispositive. The court has not warned Gateway
about the possibility of entry of judgment. Therefore, the magistrate judge declines to
recommend entry of judgment as a sanction.
Spoliation Sanctions Against Gateway
The magistrate judge will recommend that the district judge include in the eventual
findings82 the following facts and inferences:
The following facts have been established by findings previously entered
in this case:
Some evidence which Gateway should have had in its possession is
missing. Gateway has offered no explanation of the reason this evidence is not
available. The missing items include:
E-mails. An August 4, 2000, e-mail from Chris Wetzel, a Gateway Product
Manager, to various Gateway and MSI employees, asks the recipients to "[r]efer to the
email from GT Stepp regarding the testing of boards with the 3.60TEST utility sent
earlier today to MSI."
An e-mail sent in January 2001 from Charlie Ma of Quanta Computers to YC
Woon, a Gateway employee, which Gateway says was the means by which Gateway came
into possession of Adams' detector software.
Neither of these e-mails has been produced.
Test Utilities. Gateway produced two e-mails referring to two test utilities.
Neither of the utilities have been produced. The first is the 3.60TEST utility referred to
above, in the August 4, 2000, e-mail. The second test utility is referred to in minutes of a
conference call dated August 1, 2000, reflecting a cooperative effort between Gateway
and its supplier to test motherboards, including FDC testing.
As the court has confronted issues which these items of evidence would
resolve, it has inferred that the missing evidence would have been favorable to
In addition, as a further sanction for Gateway's actions regarding the detector, the
magistrate judge recommends attorneys' fees and expenses be awarded as discussed later in this
document. Also, a warning is appropriate.
In consideration of this missing evidence and Gateway's conduct regarding Adams'
detector software (described in the Report and Recommendation Regarding Gateway's
Possession of Adams' Detector and Designation of Consulting Experts) which has impeded the
disclosure and discovery of relevant evidence, it is appropriate to warn Gateway that if more
evidence of a central nature is missing for any reason or is tardily disclosed, impairing the ability
of the court to adjudicate the parties' rights, entry of judgment may be an appropriate remedy.
Further, Gateway should be warned that conduct which impedes the disclosure or discovery of
relevant evidence may also result in dismissal of its counterclaims, striking some defenses or
claims, or the entry of conclusive findings on discrete issues. The court must have the
cooperation of counsel and parties "to secure the just, speedy, and inexpensive determination"83
of this case.
Defendant's Allegations of Spoliation
As mentioned above, Gateway alleges Adams destroyed many documents related to his
patent applications, including correspondence with his attorneys, and drafts and notes. Like
Adams, Gateway claims this is spoliation and seeks a conclusive sanction. "Gateway requests an
adverse inference that the Adams patents are invalid and unenforceable, thereby placing the risk
of an erroneous judgment on Adams as the party responsible for creating the risk by destroying
Gateway is "shocked to learn that Adams has knowingly and intentionally destroyed these
crucial Documents."85Gateway claims:
Adams instituted and followed a policy of purging his patent files of all documents that
reflect non-public material or information . . . . As a direct consequence, Adams
destroyed all handwritten materials, including drawings, fax transmittals, drafts, his notes,
his attorneys' notes, and all other correspondence between Adams and his attorneys
substantively discussing the inventions patented.86
Gateway elicited testimony from Adams and his patent counsel that this destruction
occurred.87Further, Gateway claims "Adams' sole reason . . . was to preemptively preclude any
future challenges to his Patents' validity and enforceability;" that his destruction of documents
was selective; and that he destroyed documents "at a time he knew he would license or enforce
Adams claims that the policy of cleaning up patent files is an "industry-standard
document retention policy."89"This document retention policy had been in effect for over ten
years" at the three patent firms used by Adams to prosecute the patents that are the subject of this
case.90Adams submitted a practice guide by a patent lawyer referring to similar retention
As Gateway points out,92 the practice guide says its advice is inapplicable "when your
patent has been or is about to be litigated."93Indeed, the wisest document retention or
destruction policy must be suspended and re-evaluated in the event of litigation, and the policy
should assume the possibility of litigation and the legitimate needs of opposing litigants.
However, there are other advocates94 for practices similar to those employed by Adams' three
reputable law firms, and Gateway has pointed to no industry practice to the contrary.
Nonetheless, documents were destroyed. The documents were created in the patent
application process. Gateway contends the information destroyed could be probative on the
issues of best mode, enablement, prior art, inequitable conduct in withholding prior art from the
Patent Office, and patent ownership.95Adams claims that the specific documents and
information Gateway claims are unavailable are actually available,96 and this appears likely.
Even though Gateway asserts there are documentary gaps and that Adams "must have
communicated"97 the information to his attorneys by documents not before the court, Gateway
admits it "cannot tell."98There is no way to determine whether we are missing documents.
Should Adams Be Sanctioned for Spoliation?
In sum, the spoliation claim by Gateway is very similar to the spoliation claim by Adams
as to the non-central items. There is no indication of the actual extent, content or significance of
the unavailable items. There is no contextual record, as there is with the Charlie Ma e-mail, or
the 3.60TEST detector, to suggest that these items are of central significance. Therefore, it is
very difficult to find prejudice to Gateway. The practical importance of the evidence is
unknown, but there should be other evidence on the issues (best mode, enablement, prior art,
inequitable conduct in withholding prior art from the Patent Office, and ownership) for which
Gateway sought these materials. It would be odd if documents created by the inventor or
exchanged between attorney and client were the sole evidence of these external realities (prior
art, inequitable conduct in withholding prior art from the Patent Office, and ownership) or
inherent characteristics (best mode and enablement). The level of prejudice is minimal, or at
least hard to quantify.
However, responsibility for the loss is clear. The destruction is admitted and it is claimed
to have been a matter of deliberate policy. Because it was a matter of policy, to some extent
universally practiced, there is relatively low potential that this destruction was abusive of the
judicial process or Gateway's rights. The situation is not at all comparable to that in the leading
case cited by Gateway in which a non-lawyer was put in charge of a document destruction project
in which employees were given little guidance so that an administrative law judge characterized
the process as "virtually unsupervised."99In one day, the destruction amounted to approximately
20,000 pounds of documents estimated to be two million pages.100In that case the destruction
was undertaken after the party had simultaneously made patent applications and drafted industry
standards that would infringe on those patents.101While the responsibility for the loss is clear in
this case, the level of culpability is very low.
Another important factor in evaluating the sanction of an inference of invalidity and
unenforceability is that the level of proof required for such defenses is clear and convincing
evidence.102Therefore, it would seem that an inference compensating for spoliation in that
subject area should only be imposed in clear and aggravated circumstances. Given the relatively
low culpability and prejudice, Gateway's motion for sanctions will be denied.
The magistrate judge recommends that Adams' motion for sanctions103 be GRANTED in
that the district judge should make the findings and apply the inference specified above, warn
Gateway as specified above, and direct that Adams submit documentation of expenses, including
attorney's fees incurred as a result of Adams' motion for sanctions. Gateway should be
permitted a period of 15 days thereafter to respond to Adams' submission and the magistrate
judge should thereafter recommend an award of expenses.
The magistrate judge recommends that Gateway's motion for sanctions104 be DENIED.
Notice to Parties
Within 10 days after being served with a copy of this recommended disposition, a party
may serve and file specific, written objections. A party may respond to another party's
objections within 10 days after being served with a copy thereof. The rules provide that the
district judge to whom the case is assigned shall make a de novo determination upon the record,
or after additional evidence, of any portion of the magistrate judge's disposition to which specific
written objection has been made in accordance with this rule. The district judge may accept,
reject or modify the recommended decision, receive further evidence, or re-commit the matter to
the magistrate judge with instructions.
Service and Redaction
This sealed document shall be served only on lead counsel for Adams and Gateway, by
conventional means and by email. Within fifteen days, the parties shall meet and confer and
return to the magistrate judge via e-mail an electronic copy marking all portions the parties agree
should be redacted in an unsealed order.
Redacted, unsealed version of order signed and filed
under seal March 28, 2005.
Dated this 28th day of March, 2005
BY THE COURT:
U.S. Magistrate Judge
Plaintiff's [sic] Motion for Judgment Based upon Gateway's Spoliation of Evidence (Plaintiffs'
Spoliation Motion no. 101), docket no. 101, filed under seal September 26, 2003; Defendant's Motion Requesting
Inference of Patent Invalidity and Unenforceability Pursuant to the Spoliation Doctrine (Gateway's Spoliation
Motion no. 186), docket no. 186, filed under seal April 1, 2004.
Docket no. 127, filed December 10, 2003, and docket no. 330, filed March 15, 2005.
Memorandum in Support of Plaintiff's [sic] Motion for Judgment Based Upon Gateway's
Spoliation of Evidence (Adams' Spoliation Memorandum no. 102), at 2, docket no. 102, filed under seal September
Id. at 3.
Id. at 2.
Plaintiffs ' Memorandum in Support of Plaintiffs' Motion for Judgment and Sanctions Based upon
Failure to Disclose Stolen Detector and Deceptive Use of "Consulting Expert" Designation in Privilege Logs
(Adams' Memorandum no. 177) at 2, docket no. 177, filed March 16, 2004.
Adams' Spoliation Memorandum no. 102, at 3.
Document no. 230 in Gateway's Supplemental Notebook with Documents to Which Gateway Does
Not Claim Privilege, docket no. 174, filed under seal March 10, 2004, pursuant to the Court's December 15, 2003,
Order, docket no. 131. For some reason, Gateway has taken the position that its investigation began in May 2000.
[Third] Declaration of Mark Walker ¶4, dated October 3, 2003, filed as Exhibit 1 to Defendant's Response to
Plaintiff's Motion to Compel Documents, docket no. 106, filed under seal October 14, 2003.
Adams' Spoliation Memorandum no. 102 at 5; Adams' Memorandum in Support of Plaintiffs'
Motion to Compel Documents Improperly Withheld on the Basis of Privilege (Adams' Memorandum no. 82) at 3,
docket no. 82, filed under seal September 3, 2003.
[Third] Declaration of Mark Walker ¶ 7.
Adams' Memorandum no. 177 at 2; Adams' Spoliation Memorandum no. 102 at 6.
Id. at 2.
An example is attached as Exhibit A to Defendant's Response to Adams' Motion for Judgment
Based Upon Gateway's Spoliation of Evidence (Gateway's Spoliation Memorandum no. 107), docket no. 107, filed
October 17, 2003.
Exhibits F and G to Adams' Spoliation Memorandum no. 102. See also Exhibit D in Sealed
Exhibits to Sealed Order Regarding Motion to Compel Documents Improperly W ith held on Basis of Privilege,
docket no. 118, filed November 17, 2003, listed in Index to Sealed Exhibits to Sealed Order Regarding Motion to
Compel Documents Improperly Withheld on Basis of Privilege, docket no. 132, filed December 15, 2003.
15 Adams' Spoliation Memorandum no. 102 at 5; Transcript of Hearing July 3, 2003 (Transcript
7/3/03) , at 55-56.
16Second Amended Complaint, Count II at 7-8. docket no. 39, filed April 17, 2003.
17 Id. Count I at 6-7.
18 Adams' Spoliation Memorandum no. 102 at 5.
19 Id. at 5-6.
20 Id. at 6-7
Plaintiff's Spoliation Memorandum no. 102 (cover page).
Defendant's Reply in Support of Its Motion Requesting Inference of Patent Invalidity and Unenforceability
(Gateway's Spoliation Reply no. 203) at 3, docket no. 203, filed April 27, 2004.
Adams waived the attorney-client privilege as to Patent application materials. Plaintiffs' Opposition
to Gateway's Motion Requesting Inference of Patent Invalidity and Unenforceability Pursuant to the Spoliation
Doctrine at 3 (Adams' Spoliation Opposition no. 198), docket no. 198, filed April 16, 2004.
Spoliation Motion no. 186 at 4.
Talmadge v. State Farm Mut. Auto. Ins. Co., No. 96-8044, 1997 W L 73476, at *3 (10 th Cir. Feb.
21, 1997)(unpublished decision).
Jordan F. Miller Corp. v. Mid-Continent Aircraft Serv., Inc., No. 97-5089, 1998 W L 68879, *5
(10th Cir. Feb. 20, 1998)(unpublished decision).
Silvestri v. General Motors Corp., 271 F. 3d 583, 591 (4th Cir. 2001).
Dillon v. Nissan Motor Co., 986 F.2d 263 (8th Cir. 1993).
Unigard Security Ins. Co. v. Lakewood Eng. & Mfg. Corp., 982 F.2d 363, 367 (9 th Cir.
1992) (citing two other cases imposing sanctions for pre-filing destruction of evidence).
Stubli v. Big D Int'l Trucks, Inc., 810 P.2d 785 (Nev. 1991).
Allstate Ins. Co. v. Sunbeam Corp., 53 F.3d 804 (7th Cir. 1995) .
v. Boyle-Midway Household Prods, Inc., 792 F. Supp. 1001, 1005-06 (W.D. Pa. 1992) (citing Roselli
v. General Elec. Co., 599 A.2d 685 (Pa. Super. 1991).
Computer Associates Int'l, Inc. v. American Fundware, Inc., 133 F.R.D. 166, 170 (D. Colo. 1990).
Talmadge, 1997 WL 73476, at *3.
Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997).
Vick v. Texas Employment Comm'n, 514 F.2d 734, 737 (5th Cir. 1975) (quoting McCormick, Evidence
§ 273 at 660-61 (1972)); (also citing 31A C.J.S. Evidence § 156(2) (1964)). See also Aramburu, 112 F.3d
Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995) (citing Glover v. BIC Corp., 6
F.3d 1318, 1329 (9th Cir.1993)).
Id (citing Welsh v. United States, 844 F.2d 1239, 1246 (6th Cir. 1988)); (also citing Nation-Wide
Check Corp. v. Forest Hills Distrib., Inc., 692 F.2d 214, 218 (1st Cir. 1982)).
Fed. R. Civ. P. 37(b)(2)(c).
[A] party must, without awaiting a discovery request, provide to other parties:
(A) the name and, if known, the address and telephone number of each individual likely to
have discoverable information that the disclosing party may use to support its claims or defenses,
unless solely for impeachment, identifying the subjects of the information;
(B) a copy of, or a description by category and location of, all documents, data compilation, and tangible things that are in the possession, custody, or control of the party and that
the disclosing party may use to support its claims or defenses, unless solely for impeachment;
(C) a computation of any category of damages claimed by the disclosing party, making available
for inspection and copying as under Rule 34 the documents or other evidentiary material, not
privileged or protected from disclosure, on which such computation is based, including materials
bearing on the nature and extent of injuries suffered; and
(D) for inspection and copying as under Rule 34 any insurance agreement under which any
person carrying on an insurance business may be liable to satisfy part or all of a judgment which
may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.
Fed R. Civ. P. 26(a)(1)
Fed R. Civ. P. 26(e)(1).
Fed. R. Civ. P. 30 (depositions); 33(b) (interrogatories); 34(b) (requests for production, inspection
o r entry); and 36(a) (requests for admissions).
Fed. R. Civ. P. 37(a)(4).
Fed. R. Civ. P. 37(b)(2).
Ehrenhaus v Reynolds, 965 F.2d 916, 921 (10th Cir. 1992) (citations and quotation marks omitted).
Miller, 1998 WL 68879 at *6.
Id, at *3 (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)).
Silvsstri, 271 F. 3d at 590.
Silvestri, 271 F.3d at 590 (citations omitted)(quoting respectively West v. Goodyear Tire & Rubber
Co., 167 F.3d 776, 779 (2d Cir. 1999) and Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995)).
v. Sea-Land Serv., Inc., 172 F.R.D. 10, 13-14 (D.P.R. 1997).
53 Aramburu, 112 F.3d at 1407.
54 Computer Associates, 133 F.R.D. at 168.
No. 97-5089, 1998 WL 68879 (10th Cir. Feb. 20, 1998).
Id. at *4.
58 Vazquez-Corales, 172 F.R.D. at 13.
Gateway's Spoliation Memorandum no. 107 at 5.
Plaintiffs' Reply Memorandum in Support of Plaintiffs' Motion for Judgment Based upon
Gateway's Spoliation of Evidence (Adams' Spoliation Reply no. 115), docket no. 115, filed November 5, 2003.
Gateway's Spoliation Memorandum no. 107 at 8.
Adams' Spoliation Reply no. 115 at 1.
Adams Spoliation Memorandum no. 102, at 1, 6-7.
Exhibits E and F to Adams' Spoliation Memorandum no. 102.
Exhibit E to Adams' Spoliation Memorandum no. 102.
Gateway Personnel, Exhibit A-1 (Gateway Personnel Exhibit A-1 in no. 150), November 2003
Gateway Privileged Documents for In Camera Review, docket no. 150, filed under seal November 25, 2003.
Chen's e-mail address, shown on the e-mail, is at [redacted]. Exhibit E to Adams' Spoliation
Memorandum no. 102.
Exhibit F to Adams' Spoliation Memorandum no. 102.
See Sealed Report and Recommendation Regarding Gateway's Possession of Adams' Detector and
Designation of Consulting Experts at 7-10 (R & R Re: Detector and Consultants), entered concurrently with this
report and recommendation.
Gateway's Response to Plaintiffs' Response to Gateway's Accounting at 5, docket no. 312, filed
under seal January 4, 2005.
Plaintiffs' Response to Gateway's Accounting in Compliance with Magistrate Judge David
Nuffer's August 9, 2004 Order (Dkt. No. 246) [sic] at 2, docket no. 273, filed under seal September 17, 2004.
Adams' Spoliation Memorandum no. 102, at 7.
Exhibit G to Adams' Spoliation Memorandum no. 102.
Id at 3.
Adams' Spoliation Memorandum no. 102, at 8.
See summary in Adams' Spoliation Memorandum no. 102, at 5.
See Exhibits to Report and Recommendation Regarding Gateway's Possession of Adams' Detector
and Designation of Consulting Experts, filed concurrently with this Report and Recommendation.
See R & R Re: Detector and Consultants at 7.
Gateway's Spoliation Memorandum no. 107, at 10-12.
This case is set for bench trial; not jury trial. If there were a jury trial, the indented material could
be modified to be an inference instruction.
Fed. R. Civ. P. 1.
Gateway's Spoliation Motion no. 186 at 4.
Id. at 2-3.
Id. at 3.
Id and n.2.
Id. at 3.
Adams' Spoliation Opposition no 198 at 1.
Id.; Gateway's Spoliation Motion at 3 n.2.
Adams' Spoliation Opposition 198 at 7 and Exhibit 5 in Exhibits to Plaintiffs' Opposition to
Gateway's Motion Requesting Inference of Patent Invalidity and Unenforceability Pursuant to the Spoliation
Doctrine (Plaintiff's Opposition Exhibits no. 199), docket no. 199, filed under seal April 16, 2004.
Gateway's Spoliation Reply no. 203 at 8.
Exhibit 5 at 1 in Plaintiff's Opposition Exhibits no. 199.
David W . O'Brien, Note, Discovery of Draft Patent Applications: Considerations in Establishing
a Draft Retention Policy, 2 Tex. Intell. Prop. L.J. 237 (1994); Jeffrey S. Boone, A Document Retention Policy for
Patent Attorneys, 26 IDEA 49 (1985).
Gateway's Spoliation Motion no. 186, at 8-10.
Adams' Spoliation Opposition no. 198, at 3-6.
Gateway's Spoliation Reply no. 203, at 5.
In Re Rambus, docket no. 9302, 2003 WL 1017815 (F.T.C. Feb. 26, 2003).
Rambus, Inc. v. Infineon Technologies, AG, 220 F.R.D. 264, 284 (E.D. Va. 2004) . The opinion
has a colorful description of the inauguration of the "document retention program on September 3, 1998 with `Shred
Day' an event at which each employee at Rambus' corporate headquarters in Mountain View, California was
provided with a burlap bag with the instructions to bag all documents slated for the shredder." The day ended at
"5:00 PM [with] beer, pizza, and champagne." Id
In Re Rambus, 2003 WL 1017815.
Molins PLC v. Textron, Inc., 48 F. 3d 1172, 1178 (Fed. Cir. 1995); Northern Telecom, Inc. v.
Datapoint Corp., 908 F.2d 931, 935-36 (Fed. Cir. 1990).
Plaintiffs ' Motion for Judgment Based upon Gateway's Spoliation of Evidence, docket no. 101,
filed under seal September 26, 2003.
Defendant's Motion Requesting Inference of Patent Invalidity and Unenforceability Pursuant to the
Spoliation Doctrine, docket no. 186, filed under seal April 1, 2004.