On February 12, 2015, the United States District Court for the Southern District of Ohio issued an opinion in an IP dispute, deciding on issues raised in anticipation of a discovery dispute conference. Among other issues, the Court clarified that the obligation to preserve evidences arises for a foreign company in the moment in which the company may have reasonably anticipated litigation in the U.S.
One of the parties alleged – among other claims – that PFCP, an Australian company, failed to preserve, or satisfactorily search for and produce, evidence relating to the claim.
PFCP is an Australian company with offices and facilities only in Australia. Australian Law governs the license in dispute and Australia was the anticipated jurisdiction for license-related disputes. In addition, no significant sales of licensed products were made into the U.S., and PFCP had no U.S. presence.
The parties dispute when PFCP’s obligation to preserve evidence began.
The counterparty claims that the Australian’s company duty to preserve arose from the moment in which “the parties were in constant dispute over the existence of, and PFCP’s compliance with, the License”.
PFCP argues that its duty to preserve under U.S. law arose after it answered the complaint and consented to U.S. jurisdiction, or – at the earliest – when it was served with the complaint.
According to the Court, “a duty to preserve may arise when a party should have known that the evidence may be relevant to future litigation”. The Court explains that “PFCP is not excused from an obligation to preserve evidence simply because it is a foreign company… However, the only place litigation might at some point have been anticipated was in New South Wales, Australia—not Ohio or anywhere else in U.S”. Accordingly, and in the absence of contrary evidence, the Court found that the Australian company should have placed a litigation hold starting from the moment in which it was served with the complaint.
Lunkenheimer Co. v. Tyco Flow Control Pac. Party Ltd., 2015 U.S. Dist. LEXIS 17962 is available (with subscription) at https://signin.lexisnexis.com