Case Law Summaries by ZapprovedVir2us, Inc. v. Invincea, Inc., No. 2:15cv162 (E.D. Va. Jan. 27, 2017).

This case, Vir2us, Inc. v. Invincea, Inc., underscores the risks of failing to meet clear and timely e-discovery requirements set by the court. When the defendant and its lead counsel committed late disclosures and discovery violations, the court imposed severe monetary sanctions against both for “needlessly burden[ing] discovery.”

The plaintiff, Vir2us, Inc., filed a complaint in 2015 alleging that the defendant, Invincea, Inc., infringed on its computer system software security patents. The case settled “the night before trial.” This post-settlement order addressed Vir2us’s motions asking the court to sanction Invincea for the late discovery of relevant materials.

The court observed that it has “broad discretion” to sanction a party for discovery violations. That decision is based on a three-step analysis: “(1) whether a party violated a discovery order” or federal rule, “(2) whether the violation was ‘harmless’ or ‘substantially justified’”; and “(3) which sanction is appropriate.” Based on this analysis, the court agreed that an undisclosed financial penalty was appropriate due to Invincea’s “needlessly burden[ing] discovery” because it failed “to comply with the Federal Rules of Civil Procedure and the court’s discovery orders.”

On April 21, 2016, the day after discovery closed, Invincea’s witness swore under oath that all discoverable board meeting minutes and notes had been produced. However, Invincea eventually produced more than 150 additional responsive documents. Some were provided as late as May 25, 2016, mere days before the trial was set to begin. These minutes “included the roll of the Board members present…crucial information [that] would have shaped [Vir2us’s] deposition strategy.”

In Invincea’s defense to the patent claims, witnesses asserted repeatedly that the company was unaware of Vir2us before the lawsuit. However, the late-disclosed minutes “explicitly naming [Vir2us] as a competitor showed this assertion to be false.” Despite these changed facts, Invincea’s counsel never supplemented their discovery responses or expert reports to correct the misrepresentation. Nor did they withdraw the previously filed motions based entirely on that false claim.

Invincea “compounded its failure to produce company documents by providing shifting justifications for their absence.” First, Invincea claimed that responsive documents “just don’t exist anymore.” Later, it alleged “confusion about where documents were electronically stored.” When the documents were eventually disclosed, Invincea “could not satisfactorily explain why the Board meeting minutes…were not found during searches” it claimed to have completed months before.

The court pointed out that two Invincea employees “never responded” regarding initial requests to search for responsive information. Inexplicably, “[n]o one followed up with these key employees.” Searches after the close of discovery revealed another three emails “explicitly mentioning ‘Vir2us’” that Invincea should have found and turned over earlier. One of those managing employees claimed that he had previously “searched only his computer hard drive, not his email account.” Counsel admitted that “had we followed up specifically early on … we would have found those emails.”

Finding that Invincea had repeatedly violated both the discovery rules and the court’s orders, the court next considered whether those violations harmed Vir2us or were justified.

Noting that Vir2us “suspected throughout discovery that [Invincea] was withholding discoverable materials,” the court nonetheless found surprise, in that both Vir2us “and — somehow — [Invincea] were ‘stunned’ by their contents.” Nor was there any opportunity to cure. “Though [Invincea] eventually produced documents, it did so only a few weeks before trial and after claiming that they were irretrievable and duplicative.” Those late-disclosed documents “would clearly have been crucial to [Vir2us’s] case,” which “weighs in favor of a finding of harm.” Regarding explanations, Invincea itself acknowledged that “timely follow-up … could have headed off the criticism” about its handling of discovery.

The court concluded that “sanctions are necessary in this case not only because discoverable documents were not timely produced … but also because [Vir2us] and the Court will never know what may have been uncovered had [Invincea] properly conducted discovery.” Therefore, the court imposed monetary sanctions in an undisclosed amount. Because “[w]hat occurred is, at bottom, sanctionable conduct for which [Invincea] and its principal counsel are both responsible,” the court ordered that both Invincea and its counsel must pay.

Takeaways to boost e-discovery success

Organizations and their counsel can take three main lessons away from this case:

  • Follow up promptly and diligently with key witnesses to ensure that you have identified and turned over all discoverable information.
  • Don’t count on the parties or their employees to conduct thorough searches. They probably aren’t experts in IT or discovery, so they aren’t likely to know how to search.
  • Finally, if you make a misrepresentation, correct it as soon as possible.

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