HYUNDAI MOTOR COMPANY, et al., Plaintiffs, v. HYUNDAI TECHNOLOGY GROUP, et al., Defendants Case No.: 8:23-cv-01709-CBM (DFM) United States District Court, C.D. California Signed April 22, 2024 Counsel David R. Eberhart, Amy K. Liang, Andrew Miles Levad, Nathaniel I. Legum, Luann Loraine Simmons, O'Melveny and Myers LLP, Timothy D. Byron, Byron Raphael LLP, San Francisco, CA, Jeffrey J. Fowler, O'Melveny and Myers LLP, Los Angeles, CA, Kaitlyn Amanda Noelani Gosewehr, O'Melveny and Myers LLP, Menlo Park, CA, Kristin Alvarado, Pro Hac Vice, O'Melveny and Myers LLP, Dallas, TX, for Plaintiffs. Ronald P. Oines, Alejandro S. Angulo, Marcel Budiono, Meredith L. Williams, Sarah Van Buiten, Talya Goldfinger, Rutan and Tucker LLP, Irvine, CA, for Defendants. Marshall, Consuelo B., United States District Judge ORDER RE: DEFENDANTS' MOTION FOR REVIEW OF MAGISTRATE JUDGE'S ORDER *1 The matter before the Court is Defendants Hyundai Technology Group, Inc., General Procurement, Inc, and Hyundai Technology, Inc. (collectively, “Defendants”) Motion for Review of Magistrate Judge's January 30, 2024 Order Re Discovery Disputes. (Dkt. No. 72 (the “Motion”).) The Motion is fully briefed. (Dkt. Nos. 74, 77.) I. BACKGROUND On March 24, 2023, Hyundai Motor Company and Hyundai Motor America, Inc., (collectively, “Plaintiffs”) filed a complaint against Defendants asserting six causes of action: (1) Federal Trademark Dilution, 15 U.S.C. § 1125(C)(2)(C); (2) False Designation of Origin, 15 U.S.C § 1125(a); (3) Common Law Unfair Competition; (4) California Unfair Competition, California Business and Professional Code § 17200; (5) Cancellation of Federal Trademark Registration, 15 U.S.C. § 1110 (against Hyundai Technology, Inc.); and (6) Declaratory Judgment for invalidation of the Trademark Assignment Agreement,[1] 28 U.S.C § 2201(a) (against Hyundai Technology, Inc.). (Compl. ¶¶ 15, 16, 19, 21, 22, 23.) Defendants asserted thirteen affirmative defenses, including a laches defense. (Dkt. No. 26.) On December 7 and 20, 2023, the parties participated in discovery conferences with Magistrate Judge McCormick regarding a discovery dispute. (Dkt. Nos. 61, 62.) The dispute revolves around the scope of Plaintiffs' production of documents responsive to three Requests for Production (“RFPs”). (Dkt. No. 70 at 1.) The disputed RFPs are: No. 23 “All DOCUMENTS, including COMMUNICATIONS, mentioning or concerning DEFENDANTS.” No. 31: “All DOCUMENTS, including COMMUNNICATIONS, concerning YOUR knowledge of DEFENDANTS, including DOCUMENTS sufficient to show when and how YOU first became aware of each of DEFENDANTS.” No. 34: “All DOCUMENTS, including COMMUNICATIONS, concerning the right to use PLAINTIFFS' MARKS in connection with computer products.” (Id. at 1–2.) Plaintiffs agreed to produce documents responsive to these requests but objected to producing documents regarding activity and rights outside the United States. (Id. at 2.) Therefore, pending before the Magistrate Judge was Defendants' motion to compel documents that relate to the RFPs outside the United States. Plaintiffs argued that trademark rights are territorial, and therefore the requested documents were irrelevant and burdensome because Plaintiffs and Defendants are engaged in trademark litigation world-wide. (Dkt. No. 70 at 2.) Defendants argued that foreign discovery could lead to discovery of admissible evidence relevant to their laches defense and producing such documents would not create a substantial burden for Plaintiffs. (Dkt. No. 67 at 2–3.) On January 24, 2024, the Magistrate Judge held a hearing regarding the parties' discovery dispute. (Dkt. No. 69.) On January 30, 2024, he denied Defendants' request for documents regarding foreign activity and limited the production of documents to those regarding Plaintiffs' activity and rights in the United States. (Dkt. No. 70.) The Magistrate Judge reasoned that Defendants cited the wrong standard for discovery under Federal Rule of Civil Procedure 26, and failed to address the proposition that foreign activity cannot create an equitable remedy defense under United States trademark law, and therefore was not relevant to a laches defense. (Id. at 2–3.) He also concluded that producing the requested documents would be a “substantial” burden on Plaintiffs which outweighed the potential benefit of obtaining such discovery. (Id. at 3.) On February 13, 2024, Defendants filed the instant motion arguing that the Magistrate Judge's Order was “contrary to law” because it misapplied trademark and discovery principles, and “was also clearly erroneous.” (Dkt. No. 72.) Defendants request that this Court set aside the Magistrate Judge's ruling and “order that Plaintiffs produce all documents responsive to the three at-issue requests without any limits, geographic or otherwise.” (Id. at 2, 9, 10.) On April 2, 2024, the Court held a hearing on Defendants' Motion. (Dkt. No. 84.) II. STATEMENT OF THE LAW *2 Defendants bring the instant Motion pursuant to Federal Rule of Civil Procedure 72(a). Federal Rule of Civil Procedure 72(a) provides: When a pretrial matter not dispositive of a party's claim or defense is referred to a magistrate judge to hear and decide, the magistrate judge must promptly conduct the required proceedings and, when appropriate, issue a written order stating the decision. A party may serve and file objections to the order within 14 days after being served with a copy. A party may not assign as error a defect in the order not timely objected to. The district judge in the case must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law. (Emphasis added.) “The clearly erroneous standard applies to the magistrate judge's factual findings while the contrary to law standard applies to the magistrate judge's legal conclusions, which are reviewed de novo.” Columbia Pictures, Inc. v. Bunnell, 245 F.R.D. 443, 446 (C.D. Cal. 2007) (gathering cases). “The clearly erroneous standard is ‘significantly deferential, requiring a definite and firm conviction that a mistake has been made.’ ” Warsavsky v. Jaguar Land Rover N. Am., LLC, 2021 WL 5994533, at *3 (C.D. Cal. Sept. 17, 2021) (quoting Concrete Pipe & Prods. v. Constr. Laborers Pension Tr., 508 U.S. 602, 623 (1993)). “A decision is ‘contrary to law’ if it applies an incorrect legal standard or fails to consider an element of the applicable standard.” Id. (citing Hunt v. Nat'l Broadcast. Co., 872 F.2d 289, 292 (9th Cir. 1980)). “However, the reviewing court may not simply substitute its judgment for that of the deciding court.” Id. (citing Grimes v. City and Cnty. of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991)). Furthermore, “[w]hen a discovery order centers on a magistrate's determination of relevance, the standard of review in most instances is not the explicit statutory language, but the clearly implicit standard of abuse of discretion.” Defrees v. Kirkland, 2016 WL 11756652, at *2 (C.D. Cal. June 9, 2016) (internal quotation marks and citation omitted). “The court should not disturb the magistrate's relevance determination except where it is based on an erroneous conclusion of law or where the record contains no evidence on which [the magistrate] rationally could have based that decision.” Id. (internal quotation marks and citation omitted). III. DISCUSSION Defendants argue that the Magistrate Judge erred in four ways: (1) application of the territoriality principle of trademark law to Defendants' laches defense prohibiting discovery regarding foreign activity was a “mistake of law”; (2) application of the territoriality principle to “any other claim or defense in this action,” was “clearly erroneous”; (3) application of the standard under Federal Rule of Civil Procedure 26 was “contrary to law”; and (4) failure to properly consider and balance the relevant factors under Rule 26(b)(1) was clearly erroneous because he gave “credence to Plaintiffs' burden argument and the objectionable, self-serving declaration” of Plaintiffs. (Id. at 25–26.) 1. It Was not Clearly Erroneous or a Mistake of Law for the Magistrate Judge to Apply the Territoriality principle to a Laches Defense *3 In trademark law, the “territoriality principle, as stated in a treatise, says that [p]riority of trademark rights in the United States depends solely upon priority of use in the United States, not on priority of use anywhere in the world.” Grupo Gigante SA De CV, v. Dallo & Co., Inc., 391 F.3d 1088, 1093 (9th Cir. 2004) (internal quotation marks and citation omitted.) “The limitations period for laches starts when the plaintiff knew or should have known about its potential cause of action.” Internet Specialties W., Inc. v. Milon-DiGiorgio Enterprises, Inc., 559 F.3d 985, 990 (9th Cir. 2009) (internal quotation marks and citation omitted). The Magistrate Judge concluded that trademark rights were territorial, and that “[c]ourts have extended that principle to find that evidence of foreign activity is not relevant to a defense of laches.” (Dkt. No. 70 at 3.) “A decision is ‘contrary to law’ if it applies an incorrect legal standard or fails to consider an element of the applicable standard.” Warsavsky, 2021 WL 5994533, at *3 (citing Hunt v. Nat'l Broadcast. Co., 872 F.2d 289, 292 (9th Cir. 1982)). The application of the territoriality principle was a determination of law; thus the Court reviews the Magistrate Judge's application of the territoriality principle de novo. See Columbia Pictures, Inc., 245 F.R.D. at 446 (gathering cases). Here, the Magistrate Judge did not apply the incorrect legal standard. This Circuit has not addressed whether the territoriality principle applies to equitable defenses.[2] (Dkt. No. 84.) Thus, the Magistrate Judge's reliance on Jarabes Veracruzanos, Inc. v. Productora de Alimentos Mexicanos, 2016 WL 7486368, at *3 (W.D. Tx. Apr. 8, 2016), which held that “[f]oreign use does not create enforceable trademark rights in the United States nor can it establish an equitable defense against United States trademark rights” was not contrary to law. (Dkt. No. 70, citing Fuji Photo Film Co. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 599 (5th Cir. 1985).) The Ninth Circuit cited Fuji with approval in Grupo-Gigante SA De CV v. Dallo & Co., Inc., 391 F.3d 1088, 1093 (9th Cir. 2004). Accordingly, the Magistrate Judge's conclusion that evidence of foreign activity cannot create equitable defenses under United States trademark law and is irrelevant to a laches defense was not contrary to law. Warsavsky, 2021 WL 5994533, at *3; Defrees, 2016 WL 11756652, at *2. 2. The Magistrate Judge Did Not Err in His Relevancy Determinations The Magistrate Judge found that the requested foreign documents were not relevant to Plaintiff's sixth cause of action to invalidate the 2018 Trademark Assignment Agreement on the basis that Plaintiffs agreed to produce documents regarding Plaintiffs' knowledge of Defendants' activities in the U.S. and documents regarding any party's rights to use the mark HYUNDAI in connection with computer products in the U.S. “The court should not disturb the magistrate's relevance determination except where it is based on an erroneous conclusion of law or where the record contains no evidence on which [the magistrate] rationally could have based that decision.” Id. (internal quotation marks and citation omitted). Here, the Magistrate Judge analyzed what is considered relevant pursuant to Fed. R. Civ. P. 26(b)(1) and concluded that the requested foreign documents were not relevant to ascertaining the validity of the 2018 Trademark Assignment Agreement, given the scope of documents Plaintiffs agreed to produce. Additionally, there is no evidence that the Magistrate Judge committed a mistake of law by applying the territoriality principle to determine that the requested evidence was not relevant based on Rule 26 which provides that “[d]iscovery may be limited, if the court determines that the burden or expense of the proposed discovery outweighs the likely benefit.” Accordingly, the Magistrate Judge's relevancy determination was not clear error. See Defrees, 2016 WL 11756652, at *2. 3. The Magistrate Judge Did Not Apply the Wrong Discovery Standard *4 The Magistrate Judge further concluded that documents of foreign activity were not relevant to Defendants claims or defenses due to the territoriality principle of trademark law. (Dkt. No. 70 at 3.) Defendants contend that the Magistrate Judge erred by applying an “admissible evidence standard” based on his citation to Jarabes Veracruzanos, Inc. v. Productora de Alimentos Mexicanos, No. 14-466, 2016 WL 7486368, at *3 (W.D. Tx. Apr. 8, 2016), which involved a discovery dispute at the summary judgment stage. However, in Jarabes Veracruzanos, Inc, the district judge's decision to exclude evidence of foreign activity was based on relevance. 2016 WL 7486368, at *3 (Addressing Defendant's argument that “evidence of trademark use in Mexico is nonetheless relevant to support its laches and acquiescence defenses.”) (emphasis added). Accordingly, the Magistrate Judge did not apply an “admissibility” discovery standard and thus it was not contrary to law to rely on Jarabes. Warsavsky, 2021 WL 5994533, at *3; Defrees, 2016 WL 11756652, at *2. 4. The Magistrate Judge Did Not Err in Determining that the Requested Material was not proportional to the Needs of the Case Pursuant to Rule 26(b)(1), discovery must be related to a parties' claims or defenses, and it must be “proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1). Pursuant thereto, courts should consider “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). The Court reviews the Magistrate Judge's discovery determinations for clear error. Pacific Coast Surgical Center v. Scottsdale Ins. Co., 2019 WL 1873228, at *2 (C.D. Cal. Apr. 24, 2019); see Defrees, 2016 WL 11756652, at *3. While no single factor is dispositive, the factors are “balanced against other factors” in “reaching a case-specific determination of the appropriate scope of discovery.” Fed. R. Civ. P. 26(b)(1), Advisory Committee's Notes to 2015 Amendment. The Magistrate Judge considered the parties access to relevant information and noted Plaintiffs' willingness to produce documents related to Plaintiffs' United States trademark rights, and those that “mention non-U.S. activity or entities, as well as documents showing Plaintiffs' knowledge of Defendants' U.S. activities.” (Dkt. No. 70 at 3.) He also found the burden on Plaintiffs to produce the requested documents to be “compelling,” and thus outweighed the benefit of more extensive discovery. (Id.) Accordingly, it was not clear error for the Magistrate Judge to limit the scope of discovery based on Fed. R. Civ. P. 26(b)(1). Poquito Mas Licensing Corp. v. Taco Bell Corp., 2014 WL 12772086, at *2 (C.D. Cal. Dec. 4, 2014); Defrees, 2016 WL 11756652, at *3. IV. CONCLUSION Accordingly, the Court DENIES Defendants Motion for Review. Judge McCormick's Order remains in full force and effect. IT IS SO ORDERED. Footnotes [1] Hyundai Bioscience and HTI entered a Trademark Assignment Agreement to assign rights relating to the ‘HYUNDAI’ brands to HTI, including Registration No. 5431013 (“013 Registration”). Plaintiffs' Sixth Cause of Action seeks to invalidate the 2018 Trademark Assignment Agreement. [2] Both parties conceded this at the hearing on Defendants' Motion.