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MINEBEA CO., LTD. v. PAPST

June 6, 2005.

MINEBEA CO., LTD., et al., Plaintiffs,
v.
GEORG PAPST, et al., Defendants.



The opinion of the court was delivered by: PAUL FRIEDMAN, District Judge

OPINION AND ORDER

This matter is before the Court on defendants' objections to the Special Master's Report and Recommendation No. 11 ("R&R 11"), Report and Recommendation No. 13 ("R&R 13"), Report and Recommendation No. 19 ("R&R 19"), the supplement to Report and Recommendation No. 19 ("R&R 19S") and Report and Recommendation No. 23 ("R&R 23"). Although testimony has now been taken from all the witnesses in question under the Hague Convention, Minebea continues to assert that the issues regarding the "control" of these witness by Papst needs to be established so that either (1) Papst can be ordered to produce the witnesses in person for trial, or (2) adverse inferences can been drawn from its failure to do so. It is not clear whether, if the witnesses are not produced in person, Minebea seeks preclusion of the Hague witness summaries as well as adverse inferences. Minebea's initial reaction in open court was that it would prefer both.

Upon consideration of all of the reports and recommendations, Papst's objections thereto, Minebea's oppositions and Papst's replies, the Court concludes that Papst should have produced the inventors: Bernard Schuh, Heinrich Cap, Dieter Elsaesser, Ulrich Koletzki, Johann von der Heide and Rolf Mueller for deposition testimony in the United States. Papst is directed to produce these witnesses for live testimony at trial. If Papst fails to do so, the jury will be instructed as to what adverse inferences may be drawn from Papst's failure to produce them. The Court concludes, however, that Papst should not be ordered to produce Dr. Gerhard Schaetzle, Dr. Hans-Joachim Koenig, and Messers. Michael Herrmann and Klaus Lenz.

  I. SPECIAL MASTER'S REPORTS AND RECOMMENDATIONS

  At the time the Special Master issued R&R 11, the witnesses in question were (a) seven alleged inventors of Papst patents, (b) Dr. Schaetzle, the past president of Papst Motoren, (c) Dr. Koenig, a German attorney once retained by Papst Motoren, and (d) Messrs. Herrmann and Lenz, former employees of Papst Motoren.*fn1 R&R 11 explains that each of the seven inventors had executed an assignment to Papst Motoren which expressly provided that the inventor would testify with regard to the assigned invention when requested by Papst Motoren, its successors and assigns. See R&R 11 at 2. None of the other witnesses have executed any written commitments. See id.

  Papst, in cooperation with Minebea and the Special Master, delivered letters to all of the witnesses requesting their voluntary appearance for deposition. All of the witnesses declined. See Defendants' Objections to Report and Recommendation No. 11. Minebea then asked the Special Master to compel Papst to produce these witnesses for deposition or, in the alternative, to require Papst to sue them in Germany to compel their appearance. See R&R 11 at 3. Minebea also requested that if Papst failed to do so (1) adverse inference be drawn, and (2) Papst be precluded from making any arguments based on testimony from any such witness. See id. The Special Master declined to order Papst to pursue its contractual rights through lawsuits in Germany. See id. The Special Master did, however, recommend that Papst be ordered to "take all appropriate steps to compel each of the eleven German witnesses identified in Minebea's motion to appear for deposition in this action," and required Papst to report to the Special Master the steps taken and progress made. Id. at 4. The request for sanctions was deferred. Papst objected to the Special Master's ruling.

  The Special Master then issued Report and Recommendation No. 13. The Special Master noted that Papst continued to maintain that under the Federal Rules of Civil Procedure it had no obligation to produce the witnesses in question, that the assignments in the record did not create a benefit by which Minebea could compel depositions, and that Minebea must proceed by way of the Hague Convention. See R&R 13 at 2-3. The Special Master stated that unless Papst filed suit in a German court to enforce the inventors' assignment agreements, Papst could not be said to have taken all appropriate steps to comply with Report and Recommendation No. 11. See id. at 6. The Special Master also noted that it was unclear what obligation Dr. Schaetzle had to Papst Licensing, but the Special Master suggested that Papst be ordered to take all steps available to produce him for deposition and that Papst produce any documents referring to Dr. Schaetzle's duties and responsibilities at Papst Motoren and the terms of his employment. See id. at 8.

  The Special Master also suggested in Report and Recommendation No. 13 that Dr. Koenig's refusal to appear for deposition was based upon Papst's refusal to release him from his duty of secrecy. See R&R 13 at 10. The Special Master recommended that Papst be ordered to provide Dr. Koenig with such a release as well as produce any documents referring to Dr. Koenig's duties and responsibilities at Papst Motoren and/or Papst Licensing and any terms of his engagement by either. See id. Finally, the Special Master explained that the record gave him no basis for determining whether Messrs. Herrman and Lenz have any obligation to testify at Papst Licensing's request, but the Special Master did order that Papst be directed to produce any documents referring to their duties and responsibilities at Papst Motoren and/or Papst Licensing and any terms of employment by either. See id. at 11. The Special Master ordered Papst to submit monthly reports as to the status of its endeavors to produce the witnesses in question. Papst objected to the Special Master's ruling.

  In accordance with R&R 13, Papst began submitting status reports to the Special Master and the Court in connection with its efforts to produce these witnesses for deposition. The first status report indicated that Papst was investigating the available courses of action for bringing suit against the inventors in Germany to obtain their testimony. See Papst's Status Report Concerning German Witnesses at 2. Papst also indicated that it was reviewing Dr. Schaetzle's contractual obligations to Papst Motoren and the duty of secrecy asserted by Dr. Koenig. See id. at 3. Papst's second status report, submitted June 1, 2004, indicated that Dr. Schaetzle owed a duty of secrecy to Papst Motoren and that ebm-papst St. Georgen was the successor to Papst Motoren. See Second Status Report Concerning German Witnesses at 1. The Report also indicated that Dr. Koenig has a duty of secrecy to ebm-papst St. Georgen. See id. Papst's third status report argued that the inventors were compelled by statute to execute the assignment agreements in question and that they therefore did not "volunteer" to testify by signing the assignment agreements. See Third Status Report Concerning German Witnesses at 1. The fourth and fifth status reports indicated only that Papst awaited the Court's decision on R&R 11 and R&R 13. See Fourth Status Report Concerning German Witnesses; Fifth Status Report Concerning German Witnesses.

  The Special Master then submitted Report and Recommendation No. 18 in preparation for the September 2, 2004 status conference before the Court and in response to Minebea's request that certain facts be treated as established as a sanction for Papst's failure to produce these witnesses for deposition. See R&R 18 at 1. The Special Master noted that Papst representatives and counsel had had numerous oral and written communications with the German witnesses and that these communications were revealed for the first time in Papst's July 28, 2004 report to the Special Master, even though the communications had been on-going since October 2003. See id. at 4. The Special Master noted that while Papst's conduct might warrant imposing on Papst the entire cost to all parties of going forward with proceedings in Germany, he had reservations about the sanctions Minebea had proposed. See id. at 5. The Special Master recommended that the Court instruct the Special Master whether he should consider and report further as to (1) the propriety of the inferences sought by Minebea, and (2) the propriety of compelling Papst to bear all parties' costs of the proceedings in Germany pursuant to the Letters of Request. See id. at 6.

  The Special Master then submitted Report and Recommendation No. 19, which explained that it came to the Special Master's attention in an emergency telephone conference on September 5, 2004 that counsel for Papst had been arranging for meetings between Mr. Schnayer and each of the witnesses in Germany. See R&R 19 at 2. The purpose of the meetings was to prepare the witnesses to give testimony pursuant to the Hague Convention. See id. Mr. Schnayer anticipated that the witnesses would retain Mr. Schayer as their counsel and that Papst would pay the fees incurred. See id. The Special Master noted that Papst had failed to bring this information to the Court's attention. See id. The Special Master also suggested that Papst's counsel had set up a "real possibility for a conflict of interest." See id. The Special Master concluded that Papst's behavior "has gone a long way toward providing additional persuasive evidence" that the Papst defendants have control over the witnesses in question. The Special Master was prepared to recommend sanctions should Papst fail to produce the witnesses. See id. at 3.

  The Special Master then filed a supplement to Report and Recommendation No. 19. The Special Master explained that Mr. Schnayer had met with all of the potential German witnesses and was representing at least six of them — five of the inventors and Mr. Lenz — and that Papst was to pay the fees for the representation of those witnesses. See R&R 19S at 2.*fn2 Dr. Koening, Dr. Schaetzle and Mr. Elsaesser were to be represented by counsel selected by Papst Motoren, and Papst Motoren was to pay the fees. The arrangements with respect to Mr. Hermann had yet to be made. See id. Mr. Schnayer was reported to have urged each witness to appear voluntarily in the United States. See id. The Special Master opined that because Papst's lawyers were serving as counsel for six of the witnesses, Papst clearly was in a position to produce those six witnesses. See id. at 6. The Special Master further recommended that Papst could, through Papst Motoren, produce Dr. Koenig, Dr. Schaetzle and Mr. Elsaesser. See id. The Special Master recommended that if Papst failed to produce the witnesses for deposition in the United States, that Papst bear all the costs of the Hague proceedings in Germany. See id. at 10.

  Papst's sixth status report indicated that counsel for Papst had met with each of the German witnesses and urged them to appear in the United States. See Sixth Status Report Concerning German Witnesses at 2. Papst also indicated that Messers. Schuh, von der Heide, Koletzki, Muller, Cap and Lenz had retained Papst's counsel to represent them. Id. Papst's seventh status report indicated that it would take no further action absent the Court's ruling on its various objections. See Seventh Status Report Concerning German Witnesses at 1.

  Finally, the Special Master issued Report and Recommendation No. 23 which concluded that "Papst's counsel's conduct as evidenced in the recent correspondence . . . reinforces my opinion that Papst's repeated exercise of its unilateral control over each of the German witnesses . . . demonstrates that Papst is in a position to produce each of the German witnesses in this District for a deposition in this action." R&R 23 at 6. The Special Master concluded that the Hague proceedings should go forward and recommended that resolution of who should bear the costs of the Hague Convention proceedings ...


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