El Encanto, Inc. v. Hatch Chile Company, Inc. , 825 F.3d 1161 ( 2016 )

FILED
United States Court of Appeals
Tenth Circuit
June 17, 2016
PUBLISH
Elisabeth A. Shumaker
UNITED STATES COURT OF APPEALS Clerk of Court
TENTH CIRCUIT
EL ENCANTO, INC.; HATCH CHILE
ASSOCIATION,
Petitioners - Appellants,
v. No. 15-2012
HATCH CHILE COMPANY, INC.;
MIZKAN AMERICAS, INC., the
successor in interest to Border Foods,
Inc.,
Respondents - Appellees.
Appeal from the United States District Court
for the District of New Mexico
(D.C. No. 1:14-MC-00045-MV)
Martha L. Fitzgerald, Brownstein Hyatt Farber Schreck, LLP, Denver, Colorado
(Eric R. Burris and Nury H. Yoo, Brownstein Hyatt Farber Schreck, LLP,
Albuquerque, New Mexico, with her on the briefs), for Petitioners-Appellants.
Nickay B. Manning, Law Office of Nickay B. Manning, LLC, Corrales, New
Mexico (Ross B. Perkal and Kevin Lynn Wildenstein, Southwest Intellectual
Property Services, LLC, Albuquerque, New Mexico, and Rita M. Haeusler,
Hughes Hubbard & Reed, Los Angeles, California, on the briefs, for Respondents-
Appellees.
Before GORSUCH, EBEL, and BACHARACH, Circuit Judges.
GORSUCH, Circuit Judge.
The Hatch Valley may be to chiles what the Napa Valley is to grapes.
Whether it’s the soil, the desert’s dry heat, or the waters of the Rio Grande, the
little town of Hatch, New Mexico, and its surroundings produce some of the
world’s finest chile peppers. Just ask any of the 30,000 people who descend on
the place every year for the chile festival.
One thing we know about life and the law is that where value lurks
litigation will soon follow — and the Hatch Valley chile pepper supplies no
exception. After the Hatch Chile Company sought to trademark the term “Hatch”
for its exclusive use, a chile producing rival, El Encanto, objected. Before the
Trademark Trial and Appeal Board (TTAB), a division of the Patent and
Trademark Office (PTO), El Encanto argued that “Hatch” can’t be trademarked
both because it refers to a place and because Hatch Chile has used the term in a
misleading manner. To prove its case of deception, El Encanto sought to show
that Hatch Chile’s products regularly include chiles that aren’t even from the
Hatch Valley.
As so many do these days, this seemingly mild dispute turned hot during
discovery. When El Encanto asked Hatch Chile to disclose the provenance of its
chiles, the company responded (maybe a little curiously) that it didn’t know the
answer and that El Encanto would have to ask its “co-packers and suppliers.” So
that’s just what El Encanto did, issuing a Fed. R. Civ. P. 45 subpoena to Mizkan
2
Americas, Inc., for documents revealing the geographic source of Hatch Chile’s
peppers. But instead of yielding documents that request yielded motions practice.
After seeming to encourage El Encanto to ask its suppliers for just this
information, Hatch Chile filed a motion seeking a protective order. And Mizkan
added its own motion to quash.
So apparently determined to keep the source of the chiles a secret, Hatch
Chile and Mizkan offered this rather paradoxical argument in their attempt to
defeat the subpoena. They began by acknowledging that parties to TTAB
proceedings may use Rule 45 subpoenas to compel nonparties to produce
documents at a deposition. But, they argued, requesting a deposition is a
necessary precondition to any document demand. Of course, El Encanto replied
that it didn’t want to waste everyone’s time with a deposition: documents would
suffice to answer its pretty simple question. But this response didn’t satisfy
Hatch Chile or Mizkan, for they told the district court that, needless and wasteful
though it might be, a deposition had to be convened — and because El Encanto’s
Rule 45 subpoena failed to seek one it had to be quashed. El Encanto’s discovery
request faltered, then, not because it demanded too much discovery — the usual
complaint. It faltered only because El Encanto demanded too little discovery. A
topsy turvy sort of argument, to be sure, but one aimed all the same at keeping the
source of Hatch Chile’s peppers a mystery. And one that met with considerable
initial success, for the district court agreed and granted Mizkan’s motion to quash.
3
So it is this curious case now comes to us. We, of course, review district
court discovery rulings for an abuse of discretion. But a district court always
abuses its discretion when it errs on a legal question, and we decide the presence
or absence of legal error de novo. So really in cases like this, where everything
turns on the interpretation of rules, regulations, and statutes, it’s a bit anomalous
to ask whether the district court abused its discretion. The real question is simply
whether we think the district court read the law correctly. See Frontier Ref. Inc.
v. Gorman-Rupp Co., 136 F.3d 695, 702 (10th Cir. 1998). And answering that
question here, we think it did not. For we see nothing in the federal rules, the
relevant statute, or the applicable regulations that commands the pointless process
Hatch Chile and Mizkan insist upon.
Start with Rule 45. That rule, like the rest in the Federal Rules of Civil
Procedure, is supposed to be administered by courts and parties to ensure the
speedy and inexpensive resolution of all cases. Indeed, the rules committee only
last year amended Rule 1 to make this point unmistakable. See Fed. R. Civ. P. 1.
So how can it be that we must insist on an application of Rule 45 that would, by
everyone’s estimation, ensure only needless delay and expense? Months of
motions practice followed by a new subpoena and a deposition that no one really
wants just to secure documents the relevance of which no one seriously disputes?
Of course it’s true that, years ago, Rule 45 was often read as requiring a party to
notice a deposition if it wanted to compel nonparties to produce documents. But
4
it’s also true that the rulemakers addressed this anomaly a quarter-century ago,
adding language to make plain that parties may compel a nonparty to produce
documents while “spar[ing]” everyone “the necessity” of a needless deposition.
See Fed. R. Civ. P. 45(a)(1) advisory committee’s note to 1991 amendment. So it
is that nothing in the federal rules today requires the pointless process Hatch
Chile and Mizkan demand.
That, though, isn’t the end of the story but closer to its beginning. For the
federal statute that authorizes parties to TTAB proceedings to invoke federal
discovery processes, 35 U.S.C. § 24, was written long before the 1991
amendments to Rule 45. And it is the particular and maybe peculiar interaction
between this statute and the federal rules, Hatch Chile and Mizkan suggest, that
requires parties in TTAB proceedings to request a deposition in order to obtain
documents from nonparties.
For our part, though, we just don’t see it. Section 24 says this:
The clerk of any United States court for the district wherein
testimony is to be taken for use in any contested case in the Patent
and Trademark Office, shall, upon the application of any party
thereto, issue a subpoena for any witness residing or being within
such district, commanding him to appear and testify before an officer
in such district authorized to take depositions and affidavits, at the
time and place stated in the subpoena. The provisions of the Federal
Rules of Civil Procedure relating to the attendance of witnesses and
to the production of documents and things shall apply to contested
cases in the Patent and Trademark Office.
5
Everyone before us agrees that this case qualifies as a “contested” one. See
Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1319-20 (Fed. Cir. 2013)
(suggesting a possible definition of “contested” cases). And everyone agrees that
the TTAB is a division of the PTO. See 15 U.S.C. § 1067. So it is everyone
agrees that the first sentence of the statute allows parties like El Encanto to
compel nonparties like Mizkan to appear and testify at a deposition. But of
course that is not all the statute permits, for the second sentence goes on to say
that “[t]he provisions of the Federal Rules of Civil Procedure relating to the
attendance of witnesses and to the production of documents . . . shall apply.” 35
U.S.C. § 24 (emphasis added). And, as we’ve seen, Rule 45 today affords parties
the power to compel nonparties to produce documents without also convening a
deposition. In this way, and following this chain of logic, it seems to us that the
statute’s terms are ample enough to permit the very sort of efficient discovery El
Encanto seeks.
To be sure, there’s room to disagree over exactly how much work the
second sentence of § 24 does. Some (including this court) have suggested that it
affords parties to contested PTO proceedings access to all of the Federal Rules of
Civil Procedure “relating to the attendance of witnesses and to the production of
documents and things,” including not only Rule 45’s provisions relating to
nonparty discovery but also Rule 34’s provisions relating to the production of
documents from the parties themselves. See, e.g., Natta v. Hogan, 392 F.2d 686,
6
690 (10th Cir. 1968) (holding that the statute “does not limit discovery to that
permissible under Rule 45”); Natta v. Zletz, 379 F.2d 615, 618 (7th Cir. 1967);
Babcock & Wilcox Co. v. Combustion Eng’g, Inc., 430 F.2d 1177, 1178 (2d Cir.
1968) (per curiam). Others have suggested the second sentence does less work
than that. Though the statutory language appears to afford parties to contested
PTO proceedings the right to invoke all of the Federal Rules of Civil Procedure
relating to the attendance of witnesses and the production of documents, some
have argued that Congress really intended to afford parties to PTO proceedings
only the power to compel testimony and documents from nonparty witnesses
pursuant to the provisions of Rule 45. See, e.g., Frilette v. Kimberlin, 508 F.2d
205, 209, 212 (3d Cir. 1974) (en banc) (holding that the statute refers only “to the
matters encompassed by Fed. R. Civ. P. 45 . . .”).
But, while which account of the statute you prefer might very well matter
for other purposes, it doesn’t much matter to the resolution of this appeal. On the
first account, the second sentence makes the full panoply of procedures relevant
to document production available to parties in contested PTO proceedings. On
the second account, the statute still affords parties the right to compel nonparties
to provide documents under Rule 45. Either way, parties to TTAB proceedings
may invoke Rule 45 and (again) that Rule today expressly allows a party to
compel nonparties to produce documents without also convening a deposition.
7
To be sure, you might at this point wonder which version of Rule 45 the
statute’s language means to reference. After all, § 24 was last amended in 1975,
long before Rule 45’s revision in 1991. So, you might ask, could it be that § 24
allows the parties to TTAB proceedings only those powers Rule 45 specified back
in 1975 rather than those it specifies today? We think not. Indeed, even Hatch
Chile and Mizkan don’t purvey this argument. The fact is that the plain language
of § 24 doesn’t suggest that a reader must look to the Federal Rules of Civil
Procedure as they were back when the statute was enacted. To the contrary, as
written the language suggests that a reader may look to the rules as they are found
on any given day, today included. And surely our job when interpreting statutes
is to read them as an ordinary citizen might, not to lay spring traps for the unwary
and force lay persons to become experts in the vestigial esoterica of every statute
and federal rule. See Dir., Office of Workers’ Comp. Programs v. Peabody Coal
Co., 554 F.2d 310, 322 (7th Cir. 1977); Norman J. Singer & J.D. Shambie Singer,
2B Sutherland Statutory Construction § 51:8 (7th ed. 2015) (“A statute which
refers to a subject generally . . . adopts the law on the subject at the time the law
is invoked, which includes all amendments and modifications subsequent to the
reference statute’s enactment.” (footnotes omitted)).
Having exhausted two possible readings of the statute we must admit still a
third can be found in currency today. Some have suggested that for a party to
avail itself of any rights under § 24, it must first have the PTO’s approval to do
8
so. For support, they point to the immediately preceding statute, 35 U.S.C. § 23,
a provision that affords the PTO the power to “establish rules for taking affidavits
and depositions required in cases in the” PTO. See, e.g., Rosenruist-Gestao E
Servicos LDA v. Virgin Enters. Ltd., 511 F.3d 437, 447-48 (4th Cir. 2007); Brown
v. Braddick, 595 F.2d 961, 966-67 (5th Cir. 1979); Sheehan v. Doyle, 529 F.2d
38, 39 (1st Cir. 1976) (per curiam). Of course, you might question whether the
power to establish rules for proceedings “in cases in the” PTO also conveys the
power to prescribe what rules the parties may follow once § 24 permits them
entry to federal court and access to the Federal Rules of Civil Procedure. But
even assuming (without deciding) it does and accepting this, the last possible
interpretation of the statute anyone’s suggested to us, we still don’t see how
Hatch Chile and Mizkan might prevail.
We don’t because the PTO has issued rules allowing parties in contested
proceedings like this one to make use of Rule 45’s existing procedures. In patent
proceedings the PTO has expressly said that parties may seek and obtain
subpoenas for nonparty documents without a deposition. In fact, it has done so
twice. 37 C.F.R. § 41.156(a); id. § 42.52. To be sure, its regulations anticipate
that the parties will file a “motion” first with the PTO. But no parallel motion is
required in TTAB proceedings. Indeed, the PTO’s promulgated rules for TTAB
proceedings are even more generous than its rules for patent proceedings,
indicating that, “[e]xcept as otherwise provided,” all of the Federal Rules of Civil
9
Procedure govern in “inter partes proceedings” (as everyone agrees this
proceeding is). Id. § 2.116. Neither do the TTAB rules ever “otherwise provide”
when it comes to Rule 45. See id. § 2.120. 1
At this juncture, Hatch Chile and Mizkan reply by directing us to a sub-
regulatory manual. And whether by virtue of the operation of § 23 or thanks only
to judge-made doctrines of deference like Chevron or Auer, they suggest we owe
this sub-regulatory manual our obeisance. And, they say, this manual does forbid
TTAB parties from issuing document subpoenas to nonparties unless they are
accompanied by a demand for a needless deposition. It seems the district court
found this argument most persuasive for it is the one on which its opinion appears
to rest.
1
We admit we can imagine at least one further interpretation still of the
relevant statutes. Section 23 speaks of allowing the Commissioner of Patents to
“establish rules for taking affidavits and depositions.” It does not expressly
authorize the PTO to establish rules regarding other forms of discovery. So if the
PTO’s authorization is really required for any discovery, even that permitted in
federal court under § 24, you might well wonder if discovery must be limited to
affidavits and depositions alone. No one in this case, however, has suggested an
interpretation remotely so aggressive. To the contrary, Hatch Chile and Mizkan
(again) take as given that parties to TTAB proceedings can seek document
discovery in federal court under some circumstances, and they do not challenge
any of the PTO’s various rules allowing document discovery as resting on an
impermissible interpretation of the relevant statutes. Maybe someone will on
some other distant day choose to pursue an argument along these lines, but the
parties before us have waived anything like it.
10
But here too we just don’t see it. The relevant portion of the manual, called
the Trademark Trial and Appeal Board Manual of Procedure (TBMP), says this:
Requests for production may not be served on a non-party. [Note 4[:
See Fed. R. Civ. P. 34(a).]] However, if a discovery deposition
deponent is a nonparty witness residing in the United States,
production of designated documents by the witness at the deposition
may be obtained by means of a subpoena duces tecum. [Note 5[: 35
U.S.C. § 24; Fed. R. Civ. P. 45. But see Dan Foam ApS v. Sleep
Innovations Inc., 106 USPQ2d 1939, 1942-43 (TTAB 2013)
(discussing notice requirement to adverse party under Fed. R. Civ. P.
45(b)(1) for a subpoena duces tecum (without deposition) issued to
nonparty and noting that respondent could have sought its own
subpoena of the nonparty to obtain additional documents and/or a
discovery deposition).]]
TBMP § 406.01 (June 2014).
What exactly does this language mean? Hatch Chile and Mizkan suggest
that the first sentence generally prohibits a party from seeking documents from
nonparties and that the second sentence provides a limited exception for situations
when the nonparty is being deposed. Maybe. But El Encanto offers another
plausible reading that yields a very different conclusion. On this reading, the first
sentence alerts parties to the truism that requests for production of documents
under Rule 34 may be directed only to parties, not nonparties. And the second
sentence proceeds to explain how to get documents from nonparties. Allowing,
on El Encanto’s view, parties to seek documents from nonparties either at a
deposition or, as the footnote seems to explain, however permitted by Rule 45.
After all, El Encanto notes, the footnote expressly acknowledges that a party used
11
a Rule 45 subpoena without an attendant deposition in the Dan Foam litigation
before the TTAB.
Who is right about the optimal reading of this most opaque of sub-
regulatory guidance? In the end, we think this is just another debate that doesn’t
matter. It doesn’t matter because the TBMP itself disavows any suggestion that it
seeks to offer authoritative interpretive guidance about § 23 or § 24 that might
possibly command our deference. The manual states quite plainly that it doesn’t
purport to “bind[]” the TTAB or the PTO or anyone else and doesn’t purport to
“have the force and effect of law.” TBMP Introduction (June 2014). Instead the
TBMP says it aspires only to serve as a sort of rough-and-ready handbook,
supplying some “basic information” that may prove “generally useful” to TTAB
practitioners. Id. And we are aware of nothing that might require a federal court
to afford deference to such a self-effacing agency document, one that not only
doesn’t demand deference but actually disclaims it. Maybe especially when
another circuit has already found this manual not “particularly persuasive.”
Rosenruist-Gestao, 511 F.3d at 448. And maybe especially when, if we were to
read the TBMP as Hatch Chile and Mizkan suggest, it would only wind up
creating a conflict between this sub-regulatory handbook and the PTO’s
promulgated Administrative Procedure Act notice-and-comment regulations that
clearly permit the use of document-only subpoenas. For surely if the agency is
indeed so confused that it has spoken out of both sides of its regulatory mouth, it
12
has to be the side speaking unambiguously through formal rulemaking, rather than
the side speaking in garbled terms so quickly disavowed, that speaks the more
loudly.
At this stage we might note only that one thing further conspires to
persuade us of the conclusion we reach in this case. History teaches that, when
Congress first established the PTO, a problem arose because the legislature
neglected to afford the office the power to force nonparty witnesses to participate
in its proceedings. See generally id. at 444. As long ago as 1857, the
Commissioner of Patents complained to Congress that this oversight seriously
impeded his work because “refractory or mercenary men, availing themselves of
this omission in the law . . . refused to appear or give their depositions, except
upon the payment of the most exorbitant sums by the parties.” U.S. Patent Office,
Report of the Commissioner of Patents for the Year 1857, at 7 (1858). And by all
accounts that’s at least one reason why Congress eventually adopted what is now
§ 24 — to help the PTO secure needed evidence from recalcitrant nonparties by
giving parties to its proceedings the power to seek and obtain subpoenas
enforceable in federal court. Rosenruist-Gestao, 511 F.3d at 444; Abbott Labs.,
710 F.3d at 1323-24. A rationale that seems to extend not just to nonparty
testimony but equally and independently to their documents. So it is we can see
nothing (and no one has pointed us to anything) in the statute’s history suggesting
13
that the production of nonparty documents should necessarily depend on the
fortuity of a deposition.
This seemingly small case about chile pepper sourcing and document
discovery has carried a surprisingly large punch, requiring us to try to fit together
in a sensible way an aged statute, many and diverse judicial glosses given to that
law, various agency rules — and musings — about the statute, and their
interaction with amendments to the Federal Rules of Civil Procedure. We have
done the best we can to fit these disparate pieces together. In having attempted
that much, though, we take care to point out what we haven’t attempted. We
haven’t sought to offer any views on the optimal interpretation of § 24 or its
interaction (if any) with § 23. The long lingering circuit split that lingers there
lingers there still. Neither do we purport to address Mizkan’s many more prosaic
objections to the subpoena under Rule 45 itself (objections about the scope of the
document requests, etc.). The district court chose not to rely on these grounds in
its order quashing the subpoena, and they are the sort of issues it is better
equipped to address in the first instance. Today we’ve sought to show no more
than that, consistent with any of the various statutory interpretations and
regulations cited to us, a party to a TTAB proceeding can obtain nonparty
documents without wasting everyone’s time and money with a deposition no one
really wants. We trust that this litigation might now turn away from a chase up
and down the federal court system over collateral disputes related to the
14
production of documents whose relevance no one before us seriously disputes and
advance toward a more informed discussion of the merits consistent with the
aspirations of Rule 1.
Reversed.
15