After considering the parties' responses to the Court's July 2, 2007, Order to
show cause why Defendants should not be sanctioned for failure to comply with
the Local Rules; Magistrate Judge Paul L. Abrams's July 10, 2007, Report and
recommendation that Defendants be sanctioned for discovery violations; and
Defendants' defiance of a district court injunction involving the same product in
the District of Nevada, the Court has determined that Defendants should be
sanctioned by striking their answers and entering their default. As discussed

herein, Defendants have exhibited a pattern of utter disregard for the rules of
procedure and discovery, and the Court believes that this sanction is appropriate.

Local Rule Violations

First, Defendants have repeatedly failed to comply with the pretrial
deadlines set by the Local Rules for the Central District of California. Although
Plaintiff timely filed its Memorandum of Contentions of Law and Fact, its witness
list, and its exhibit list (which it filed instead of a joint exhibit list because of
Defendants' lack of cooperation) on June 15, 2007, the last day these filings were
due, Defendants filed none of these documents on time. Instead, Defendants filed
their witness list six days late, on June 21, 2007, without an explanation for its
tardiness and without seeking leave to file it late, and they filed their exhibit list
even later, on June 29, 2007, again without explanation. Further, Defendants have
not yet filed a Memorandum of Contentions of Law and Fact.

Defendants have not filed and served an expert report, although they list an
expert witness on their witness list. Calling him would be a violation of Local
Rule 16, Rule 26(a)(2) of the Federal Rules of Civil Procedure, and the Court's
Scheduling Order. The Court even continued the deadline for expert reports on
multiple occasions, including in December 2006, January 2007, and April 2007.

Defendants failed to meet with Plaintiff at least forty days before the Final
Pretrial Conference pursuant to Local Rule 16-2. Plaintiff's counsel approached
Defendants' counsel both by letter and in person to attempt to schedule a timely
meeting; however, Defendants were unprepared to conduct the required meeting
on time. At the hearing on July 16, 2007, Anton N. Handal, counsel for
Defendants, acknowledged that Defendants were at fault for failing to meet with
Plaintiff.

Similarly, the Joint Pretrial Conference Order was due on June 21, 2007, but
Defendants failed to cooperate with Plaintiff in assembling this order. While it is
Plaintiffs duty to draft the Order, it cannot do so without the cooperation of

Defendants. This cooperation was not provided. Accordingly, a Joint Pretrial
Conference Order was not timely filed.

Further, Defendants have repeatedly disobeyed Local Rule 7-7. Under
Local Rule 7-7, "declarations shall contain only factual, evidentiary matter...."
Defendants have filed numerous declarations that violate this provision, including
Mr. Handal's declaration in response to the Court's July 2, 2007, Order, which is
filled with argument and hyperbole, alleging for example that Plaintiff has
"participated in a concerted effort to sandbag and stonewall the Defendants and
their counsel." Such statements are unhelpful to the Court because they are
generalized statements and have no evidentiary support. For example, Mr. Handal
alleges that "cooperation is a two way street" and that it was not Defendants' fault
that they were unable to comply with the required pretrial disclosures and
deadlines. However, Mr. Handal alleges no facts in support of his arguments,
instead making generalized allegations that Plaintiff is equally responsible. He
alleges that Plaintiff produced "the most meaningful documents in this case after
the discovery cut off" and that it had been "engag[ing] in several unreasonable
acts which were designed to prevent the Defendants from completing their Rule 16
obligations in good faith," but he provides no specifics,¹ nor does he indicate why
Defendants did not seek relief from the Court to overcome any prejudice resulting
from these "unreasonable acts."

 

Discovery Violations

Next, the Court turns to the report and recommendation issued by

 

¹At the July 16, 2007, hearing, Mr. Handal contended it was inappropriate for Plaintiff to
file an exhibit list approximately 800 pages long. It is customary for parties to file extensive
exhibit lists, but only a handful of exhibits. ever surface at trial. Further, had the parties met in
accordance with Local Rule 16-2, the list could have been much shorter because many of the
exhibits cover potentially stipulated facts. Indeed, after the parties finally met and compiled a
joint exhibit list (following the pretrial conference), the exhibit list was reduced to 172 pages.

Magistrate Judge Abrams on July 10, 2007. Defendants objected to some of the
sanctions recommended by Magistrate Judge Abrams, but they did not object to
any of his findings. The Court hereby adopts Magistrate Judge Abrams' report,
and it finds his Report to be consistent with the Court's own experience with these
Defendants.

The Court believes these discovery violations are egregious and have
unduly burdened Plaintiff and the Court. For instance, Magistrate Judge Abrams
explains that Defendants misrepresented, in their opposition to Plaintiff's ex parte
application for discovery sanctions, that the appeal of a discovery ruling to this
Court would automatically stay the ruling. Not only does Local Rule 72-2.2 make
it absolutely clear that it does not,² but in Defendants' appeal of that discovery
order, they explicitly told this Court that "unless [such] an order is stayed, a party
seeking review of the order is bound by the order unless and until it is reversed or
modified." Thus, Defendants apparently knew about this rule, and the Court can
only conclude that they lied to Magistrate Judge Abrams. At the hearing on July
16, 2007, Mr. Handal told the Court that he subsequently retracted the statement
that the ruling would be stayed; however, that does not change the fact that
Defendants misrepresented the law to Magistrate Judge Abrams in the first place,
even if counsel later retracted it.

Further, Defendants did not provide any of the discovery ordered by
Magistrate Judge Abrams by June 13, 2007, when it was due. Instead, on June 26,
2007, after Plaintiff filed an ex parte application for discovery sanctions, they sent
Plaintiff a CD containing about 1000 pages of discovery. In their opposition to
the Plaintiff's ex parte application for discovery sanctions, Defendants said the CD
contained copies of "all the documents [plaintiff] is seeking i[n] its discovery

 

²Local Rule 72-2.2 is not ambiguous. It says, "[r]egardless of whether a motion for
review has been filed, the Magistrate Judge's ruling remains in effect unless the ruling is stayed
or modified by the Magistrate Judge or the District Judge."

motion." However, when ordered by Magistrate Judge Abrams to make that
statement under oath, Defendants' counsel could not, instead conceding that the
CD represents only "a portion of the document production...."

Most egregious, however, Magistrate Judge Abrams pointed out and
attached to his recommendation examples of documents contained on the CD
which were totally illegible, obstructed by what appears to be a lemon on the
photocopy machine. He concluded that this aberration reflects Defendants'
intention to "deliberately thumb its nose at the Court's Order and thwart the
discovery process," and this Court agrees.

 

Nevada Case

Finally, as the Court stated at the July 16, 2007, hearing, it takes judicial
notice pursuant to Rule 201 of the Federal Rules of Evidence of parallel trademark
litigation in the District of Nevada, Koninklijke Philips Electronics N.V. v. KXD
Technology, et al., Case No. 2:05-cv-01532-RLH-GWF ("Nevada case"). In that
case, on January 5, 2006, District Judge Roger L. Hunt issued a Temporary
Restraining Order to protect the plaintiff's DVD+ReWritable & Design trademark,
which prevented all defendants from inter alia manufacturing, importing, or
distributing any goods that bear that mark. On March 15, 2006, the Court issued a
preliminary injunction, barring the defendants from engaging in the same conduct.
However, the identical defendants who are defendants in this case (KXD
Technology, Inc..; Astar Electronics, Inc.; Shenzhen KXD Multimedia Co., Ltd.;
Shenzhen Kaixinda Electronics Co., Ltd.; KXD Digital Entertainment, Ltd; and
Jingyi Luo) violated the District of Nevada's preliminary injunction by continuing
to sell enjoined products. Accordingly, on February 12, 2007, Judge Hunt
ordered these defendants to pay Plaintiff over $1.6 million in civil contempt
damages and attorneys' fees, to post a $2 million bond, and further ordered that
per diem sanctions would accrue at the rate of $10,000 per day. Defendants have

not yet paid those sanctions, even though payment was due on February 26, 2007,
nor have they posted bond.

The sanction imposed on Defendants in this case is not based upon their
conduct in the Nevada District Court. However, the evidence of their misconduct
there has helped the Court to exercise its discretion to impose this sanction.

 

Appropriate Sanctions

Based on the long list of pretrial violations, the discovery violations noted
by Magistrate Judge Abrams, and the conduct by these defendants in the parallel
trademark litigation in Nevada, the Court finds that Defendants are trying to delay
or avoid having a trial on the merits. Further, based on the record before the
Court, Defendants and their counsel appear to be complicit in these violations.

The Ninth Circuit has "repeatedly upheld the imposition of [even] the
sanction of dismissal for failure to comply with pretrial procedures mandated by
local rules and court orders." Thompson v. Housing Auth. Of City of Los
Angeles, 782 F.2d 829, 831 (9th Cir. 1986); Link v. Wabash R.R. Co., 370 U.S.
626, 633-34 (1962) (dismissal due to attorney's repeated failure to meet court
requirements did not unjustly penalize client). Before imposing such a sanction,
the Court must consider five factors: (1) the public's interest in expeditious
resolution of litigation, (2) the court's need to manage its docket, (3) the risk of
prejudice to the other party, (4) the public policy favoring disposition of cases on
their merits, and (5) the availability of less drastic sanctions. Thompson, 782 F.2d
at 831.

These factors support striking Defendants' answers and proceeding by
default. The public has an interest in the expeditious resolution of litigation, and
Defendants have shown no intention to conduct a trial on the merits. Defendants
have yet to file a Memorandum of Contentions of Law and Fact, and they have not
produced all the discovery Magistrate Judge Abrams ordered them to produce.

Defendants have not filed an expert report and concede that they cannot offer any
expert testimony in this patent infringement case. Further, the proposed jury
instructions Defendants exchanged with Plaintiff were incomplete, a violation of
the Court's Standing Order re: jury instructions. For example, Defendants
proposed the following instruction for obviousness:

"[i]n reaching your conclusion as to whether or not claim [] would have
been obvious at the time the claimed invention was made, you should
consider any difference or differences between the [identify prior art
reference(s)] and the claimed requirements" (all brackets and text in
original).

Defendants failed to identify either the patent claims or the prior art references in
their proposed jury instructions. Finally, in the Amended Final Pretrial
Conference Order, Defendants asserted an inequitable conduct defense under 35
U.S.C. § 130; however, there is no section 130 in the patent statute.

Although monetary and evidentiary sanctions are within the Court's
discretion, the Court believes it would be inappropriate to subject Plaintiff or
the Government to a costly trial where it appears from the record that Defendants
have engaged in a pattern of delay, obfuscation, and obstruction. Further, Defendants
have demonstrated a willingness to defy orders of a district court involving the
same product in the Nevada case, and the Court believes they would be unlikely to
comply with this Court's eventual judgment.
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Accordingly, the Court hereby ORDERS that the Answers of Defendants
KXD Technology, Inc.; Astar Electronics, Inc.; Jingyi Luo; Shenzhen Kaixinda
Electronics Co., Ltd.; Shenzhen KXD Multimedia Co., Ltd.; and KXD Digital
Entertainment Ltd. are hereby STRICKEN from the record and DEFAULT shall
be entered against each of Defendants.

 

IT IS SO ORDERED.

IT IS FURTHER ORDERED that the Clerk of the Court shall serve, by United
States mail or by telefax or by email, copies of this Order on counsel for the parties in this matter.