United States Court of Appeals
for the Federal Circuit
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In re: REARDEN LLC, REARDEN MOVA LLC, MO2,
LLC, MOVA, LLC,
Petitioners
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2016-125
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On Petition for Writ of Mandamus to the United
States District Court for the Northern District of Califor-
nia in No. 3:15-cv-00797-JST, Judge Jon S. Tigar.
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ON PETITION
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Before MOORE, HUGHES, and STOLL, Circuit Judges.
STOLL, Circuit Judge.
ORDER
The defendants in the underlying case, Rearden LLC,
Rearden MOVA LLC, MO2, LLC, and MOVA, LLC,
petition for a writ of mandamus to challenge the district
court’s order compelling them to produce allegedly privi-
leged documents. We conclude we have jurisdiction to
decide their petition. We further conclude that petition-
ers’ arguments fail to carry the high burden required on
mandamus to overturn the district court’s discovery
determination. We therefore deny their petition.
2 IN RE: REARDEN LLC
BACKGROUND
A.
The central, underlying dispute in this case is one of
ownership. Both sides claim ownership of visual effects
technology known as “MOVA Contour Reality Capture” or
“MOVA.” MOVA technology can capture an actor’s facial
performance for use in motion picture special effects and
video games. The technology is secured by trademarks,
copyrights, trade secrets, and patents, including U.S.
Patent Nos. 7,548,272 (the ’272 patent), 7,567,293 (the
’293 patent), 7,605,861 (the ’861 patent), and 8,659,668
(the ’668 patent), and the technology is reflected in hard-
ware, source code, and other physical assets, all of which
we will refer to collectively as the “MOVA assets.” Both
sides assert ownership of the MOVA assets. Because the
facts are so fiercely contested, we first set forth the basic
versions of events of the parties.
According to respondent Virtue Global Holding Lim-
ited’s (“VGHL”) version of events, Steve Perlman, the
head of Rearden LLC and the other petitioners, declined
an offer from OL2, Inc. to acquire the MOVA assets and
proposed OL2 sell the assets instead to then-Rearden
employee, Greg LaSalle. Perlman promised to provide
legal resources to get the business off the ground and
introduced LaSalle to Rearden’s corporate attorney who
helped LaSalle establish his own company, MO2, LLC, 1
and negotiate the asset transfer with OL2.
In February 2013, respondent says Perlman demand-
ed that LaSalle turn over the MOVA assets to Rearden.
1 There are two separate entities named “MO2,
LLC” involved in this case: this MO2 entity, which we
will also refer to as original MO2, and the later-formed
“MO2, LLC” that is a named defendant and petitioner.
IN RE: REARDEN LLC 3
LaSalle’s refusal to turn over the assets resulted in his
termination of employment with Rearden. MO2, acting
through LaSalle, then sold the MOVA assets to Shen-
zhenshi Haitiecheng Science and Technology Co., Ltd.
(“SHST”) on May 8, 2013. SHST hired LaSalle, and
through SHST’s subsidiary, Digital Domain 3.0 (“DD3”),
began to sell the technology to movie and videogame
studios. LaSalle then filed paperwork to dissolve MO2.
VGHL subsequently obtained the MOVA assets from
SHST.
Petitioners agree that the MOVA assets were trans-
ferred to MO2 but assert that SHST never obtained
ownership. They contend that Perlman and Rearden, not
LaSalle, formed original MO2 to acquire the MOVA assets
and hired LaSalle to file the corporate paperwork, acquire
the MOVA assets, and manage, all on Rearden’s behalf.
They contend that, pursuant to his employment agree-
ments, LaSalle assigned any rights in the MOVA assets to
Rearden. They say that LaSalle was terminated before
May 8, 2013, and lacked authority to act on MO2’s behalf.
And, in any event, they assert, original MO2 transferred
the MOVA assets to Rearden MOVA LLC before the
purported agreement between LaSalle and SHST.
B.
This case began in February 2015. SHST filed a com-
plaint in the United States District Court for the North-
ern District of California, alleging that petitioners had
made “false or misleading representations of fact concern-
ing the ownership of the MOVA Assets in a campaign to
mislead the public and actual and prospective users and
licensees of those assets,” including forming a second
“MO2 LLC” named entity, falsely recording assignments
of the MOVA patents from original MO2 to Rearden
MOVA LLC, and making statements that they owned the
assets. SHST sought a declaration that it owned the
MOVA assets and that petitioners’ patent assignments
4 IN RE: REARDEN LLC
were invalid. SHST also sought damages for alleged
violations of California’s false advertising and unfair
competition statutes.
Petitioners answered that the claims were waived be-
cause SHST “knew that authority from at least one of the
Defendants was required for the proper transfer of the
MOVA Assets.” Petitioners also counterclaimed, seeking
a declaration that they owned the MOVA assets, and
seeking damages against SHST for, among other things,
infringement of the ’272, ’293, ’861, and ’668 patents.
SHST soon thereafter purportedly sold the assets to
respondent VGHL. With SHST stipulating that it would
remain in the case as a counterclaim defendant, the
district court granted a motion to substitute in March
2016, and VGHL filed an amended complaint raising the
same charges as raised in SHST’s complaint. Petitioners
responded to the amended complaint by filing the same
answers and counterclaims against SHST while adding a
claim under the California Uniform Fraudulent Transfer
Act.
During discovery, respondent moved to compel peti-
tioners to produce documents exchanged between original
MO2 and the corporate attorney that Perlman had intro-
duced to LaSalle. The magistrate judge granted the
request, concluding that petitioners had not shown they
could assert attorney-client privilege on behalf of original
MO2 and that LaSalle waived the privilege when he
shared the documents with DD3. Petitioners objected to
the magistrate judge’s ruling. But the objections, the
district court determined, did not establish that the
magistrate judge’s findings and conclusions were clearly
erroneous or contrary to law. The district court therefore
denied the objections. In doing so, the district court
declined to consider an additional declaration from Perl-
man because it was not before the magistrate judge.
IN RE: REARDEN LLC 5
DISCUSSION
A.
We turn first to respondent’s threshold argument,
namely, that issuing mandamus here would not be “in aid
of” our “jurisdiction[]” but instead that of the United
States Court of Appeals for the Ninth Circuit. 28 U.S.C.
§ 1651(a); see In re BBC Int’l, Ltd., 99 F.3d 811, 812–13
(7th Cir. 1996) (“Mandamus anticipates an appeal. . . .
But this assumes that the court from which mandamus is
sought is the one that will hear the ultimate appeal.”).
Our jurisdiction over cases from federal district courts
is governed by 28 U.S.C. § 1295(a), which states that the
Federal Circuit has appellate jurisdiction “in any civil
action arising under, or in any civil action in which a
party has asserted a compulsory counterclaim arising
under, any Act of Congress relating to patents.”
§ 1295(a)(1). “Because the concept of what constitutes a
‘compulsory counterclaim’ now directly impacts our juris-
diction, it is governed by Federal Circuit law, rather than
by that of the regional circuits.” Vermont v. MPHJ Tech.
Invs., LLC, 803 F.3d 635, 644 n.2 (Fed. Cir. 2015).
Congress amended our jurisdictional statute through
the America Invents Act to broaden our jurisdiction to
include compulsory counterclaims “arising under” patent
law. Leahy–Smith America Invents Act, Pub. L. No. 112–
29, 125 Stat. 284 (2011). Previously, the Supreme Court’s
decision in Holmes Group, Inc. v. Vornado Air Circulation
Systems, Inc., 535 U.S. 826, 834 (2002), had effectively
limited our jurisdiction to patent law claims asserted in a
well-pleaded complaint. It was explained that the
amendment to our jurisdictional statute, would counter-
act the potential for Holmes Group to “lead to an erosion
in the uniformity or coherence in patent law that has been
steadily building since the [Federal] Circuit’s creation in
1982.” H.R. Rep. No. 109-407, at 5 (2006), subsequently
“reaffirm[ed]” by H.R. Rep. No. 112-98, at 81 (2011). The
6 IN RE: REARDEN LLC
amendment was “intended to provide federal courts, and
this court specifically, with a broader range of jurisdic-
tion; that is, with jurisdiction over claims arising under
the patent laws even when asserted in counterclaims,
rather than in an original complaint.” Vermont, 803 F.3d
at 644. But while Congress extended our jurisdiction to
ensure uniformity in patent law, that extension did not
reach permissive counterclaims. Expressing the concern
about the “possib[ility] that a defendant could raise
unrelated and unnecessary patent counterclaims simply
in order to manipulate appellate jurisdiction,” it has been
argued that Congress limited our appellate jurisdiction to
compulsory counterclaims relating to patent law. 157
Cong. Rec. S1379 (daily ed. Mar. 8, 2011) (statement of
Sen. Kyl).
To determine whether a particular counterclaim is
compulsory, we look to Federal Rule of Civil Procedure
13(a). It provides that a compulsory counterclaim “arises
out of the transaction or occurrence that is the subject
matter of the opposing party’s claim.” Fed. R. Civ. P.
13(a)(1)(A). The requirement that a party must raise
“counterclaims arising out of the same transaction or
occurrence . . . was designed to prevent multiplicity of
actions and to achieve resolution in a single lawsuit of all
disputes arising out of common matters.” S. Constr. Co. v.
Pickard, 371 U.S. 57, 60 (1962) (per curiam). Courts
interpreting the scope of Rule 13(a)’s “transaction or
occurrence” test “generally have agreed that these words
should be interpreted liberally in order to further the
general policies of the federal rules and carry out the
philosophy of Rule 13(a).” 6 Wright & Miller, Federal
Practice & Procedure § 1410, at 50–51 (3d ed. 2010).
“[O]ur court has utilized three tests to determine
whether the ‘transaction or occurrence’ test of Rule 13(a)
is met: (1) whether the legal and factual issues raised by
the claim and counterclaim are largely the same; (2)
whether substantially the same evidence supports or
IN RE: REARDEN LLC 7
refutes both the claim and the counterclaim; and (3)
whether there is a logical relationship between the claim
and the counterclaim.” Nasalok Coating Corp. v. Nylok
Corp., 522 F.3d 1320, 1325 (Fed. Cir. 2008); see also In re
EMC Corp., 677 F.3d 1351, 1358 (Fed. Cir. 2012). Here,
the claims and counterclaims involve the same patents,
they share overlapping legal and factual issues, and
substantially the same evidence could refute both the
claims of ownership and the counterclaims of infringe-
ment. The patent infringement counterclaims share a
critical factual dispute with plaintiff’s 2 state law claims:
whether SHST obtained ownership of the MOVA assets
on May 8, 2013. To make a case for patent infringement,
counterclaimants will need to show that they, not re-
spondent, own the MOVA assets. The success of plain-
tiff’s state law claims will similarly depend on how these
factual issues are resolved. Moreover, the infringement
claims rely in part on SHST’s unauthorized use of the
disputed MOVA assets, including physical assets, whose
ownership is in dispute. So the claims and counterclaims
share a close, logical relation: the ownership and rightful
use of the technology claimed and disclosed in the MOVA
patents. See Vermont, 803 F.3d at 644. And plaintiff’s
claims and petitioners’ counterclaims share substantial
2 While the district court subsequently entered de-
fault against SHST for not participating in discovery and
set aside its substitution order, now allowing VGHL to
assert the claims only as intervenor, we still look to the
plaintiff’s operative complaint and the counterclaims at
the time of filing to determine jurisdiction. See Jang v.
Boston Sci. Corp., 767 F.3d 1334, 1338 (Fed. Cir. 2014)
(“[T]he Federal Circuit’s exclusive appellate jurisdiction is
predicated on the cause of action and the basis of the facts
as they existed at the time the complaint or any compul-
sory counterclaim was filed.”).
8 IN RE: REARDEN LLC
evidentiary overlap. See Nasalok, 522 F.3d at 1325.
Petitioners’ counterclaims thus arise from the same
transaction or occurrence as plaintiff’s claims. See Fed. R.
Civ. P. 13(a). Finally, we note that concerns about not
allowing defendants to manipulate jurisdiction through
the addition of permissive counterclaims are not implicat-
ed here. See 157 Cong. Rec. S1379 (daily ed. Mar. 8,
2011) (statement of Sen. Kyl). Rather, the counterclaims
arise out of, and are indeed contingent upon, the very
dispute and the same patent rights asserted in the com-
plaint. We thus find petitioners’ patent infringement
counterclaims to be compulsory. As such, we have juris-
diction over any appeal of these claims and, hence, juris-
diction over this petition.
We note that this case stands in contrast to one where
a plaintiff brings a suit contesting patent ownership and
defendants have an infringement claim that matures
after the filing of the complaint. In that situation, de-
fendants are permitted to bring that claim in a later suit
or, under Rule 13(e), to seek leave to add the claim. See
Fed. R. Civ. P. 13(e). The rule provides that “[t]he court
may permit a party to file a supplemental pleading assert-
ing a counterclaim that matured or was acquired by the
party after serving an earlier pleading.” Id. That deter-
mination is, however, case specific. But here, where
petitioners counterclaimed that plaintiff infringed the
very patents over which both parties seek a declaration of
ownership, and where the alleged infringing activity was
known by petitioners at the time of filing, petitioners’
claims are compulsory counterclaims.
B.
Applying regional circuit law, we review a denial of a
request for an evidentiary hearing and a denial to sup-
plement the record for an abuse of discretion, see United
States v. Howell, 231 F.3d 615, 621 (9th Cir. 2000), and
the district court’s factual findings for clear error, United
IN RE: REARDEN LLC 9
States v. Graf, 610 F.3d 1148, 1157 (9th Cir. 2010).
Moreover, because petitioners seek relief by way of man-
damus, our review is particularly deferential: we will
overturn the district court’s determinations on these
issues only upon a showing of a “clear and indisputable”
right to relief and no adequate alternative legal channels
through which petitioners may obtain the same relief.
Kerr v. U.S. Dist. Court, 426 U.S. 394, 403 (1976). Peti-
tioners have fallen short of meeting that standard.
Petitioners first argue that the district court erred on
review of the magistrate judge’s order in not accepting a
supplemental declaration from Perlman and not holding
an evidentiary hearing on the issue. Petitioners, however,
have not shown any error in these regards that is man-
damus-worthy. While a district court may accept addi-
tional evidence and hold an evidentiary hearing, no case,
including those cited by petitioners, holds that such a
hearing or supplementation is a requirement. See Howell,
231 F.3d at 621 (“[A] district court has discretion, but is
not required, to consider evidence presented for the first
time in a party’s objection to a magistrate judge’s recom-
mendation”); see also id. at 620 (discussing hearings).
Petitioners, moreover, have not shown a clear abuse of
discretion on the part of the district court in refusing their
requests. The magistrate judge granted petitioners’
request to consider Perlman’s first declaration that was
submitted to address the central issue in this discovery
dispute—the ownership of the MOVA assets and control
of original MO2 prior to when LaSalle entered into an
agreement to sell the MOVA assets to SHST. Petitioners
failed to explain to the district court why they could not
have submitted any added information to the magistrate
judge or explain why a hearing in addition to the one held
by the magistrate judge was necessary.
Petitioners also suggest that the magistrate judge and
district court erred in not deferring a ruling on the privi-
10 IN RE: REARDEN LLC
lege issue until after conclusively resolving who controlled
the original MO2, and thus who had the right to assert
the privilege. Yet petitioners cite no case that suggests
that the magistrate judge and district court had no legal
authority to enter their orders and render preliminary
factual determinations on the ownership issue in order to
resolve the privilege issue. Rather, they cite one case,
United States v. Mett, 178 F.3d 1058, 1065 (9th Cir. 1999),
which is not on point and states only the basic proposition
that “hard cases should be resolved in favor of the privi-
lege, not in favor of disclosure.”
Petitioners’ remaining arguments largely challenge
the district court’s conclusion that they could not assert
the privilege on behalf of original MO2. Those argu-
ments, at bottom, are attacks on the district court’s pre-
liminary factual findings regarding whether Rearden
MOVA acquired the MOVA assets from original MO2
before LaSalle entered an agreement with SHST and
whether Perlman and Rearden LLC (as opposed to
LaSalle only) controlled and managed original MO2 such
that they could assert the privilege. We decline to enter-
tain mandamus relief on these arguments because peti-
tioners rely heavily on Perlman’s extra-record declaration
and petitioners have alternative avenues to obtain mean-
ingful review of these arguments after trial. See Mohawk
Indus., Inc. v. Carpenter, 558 U.S. 100, 109 (2009).
Accordingly,
IT IS ORDERED THAT:
The petition is denied.
FOR THE COURT
November 17, 2016 /s/ Peter R. Marksteiner
Date Peter R. Marksteiner
Clerk of Court