In this patent infringement matter, the court ordered a party to describe its damages in detail, explaining that the information is necessary not only to parties but also to the court in deciding discovery disputes.
Here, the defendant, Solid, Inc., served an interrogatory on the plaintiff, Corning Optical Communications Wireless Ltd., seeking information about its damages claims. Corning responded that Solid should wait for its expert report. Its earlier initial disclosure regarding its damages calculations was “similarly tight-lipped: ‘No documents related to this calculation exist at this time.’”
U.S. Magistrate Judge Paul S. Grewal termed the problem a “classic chicken-and-egg” scenario: “To provide meaningful calculations, patentees need lots of information from accused infringers. But the expense of producing lots of information can only be justified by a meaningful calculation suggesting that substantial dollars are actually at stake.”
Here, despite spending “a small fortune” on discovery and having “exchanged reams of data,” and despite being just a “few weeks from the close of fact discovery,” the parties in this case still lacked “any firm sense of whether this is a $1 case or a case worth billions.” What Judge Grewal found “[e]ven more remarkable” is that these circumstances “are not unusual” in patent cases, where parties prefer to “bludgeon first and value second.”
Judge Grewal indicted the Federal Rules of Civil Procedure and local rules, finding that they discourage the sharing of information about damages. In fact, he suggested the Advisory Committee Notes to Federal Rule 26 excuse the failure to disclose in patent matters, because “a party would not be expected to provide a calculation of damages which, as in many patent infringement actions, depends on information in the possession of another party or person.”
Even so, the judge found that “[t]he answer is not simply to give up and hope for the best. Even if early, mandatory, and robust damages contentions are not always wise, there are at least more modest disclosures that are almost always worth adopting in cases like this.” Therefore, Corning’s response was “plainly insufficient.” Not only is this information that Solid needs, but the court also needs to understand the value of the case to be able to judge discovery-related disputes on the basis of proportionality. Moreover, parties can always provide supplements to their initial disclosures under Federal Rule of Civil Procedure 26(e).
Accordingly, the court granted Solid’s motion to compel and required Corning to supplement its damage-related disclosures by providing the following details:
- the amount of damages it intends to seek under each asserted damage theory,
- the apportionment of damages between the defendants and each patent,
- the time period of damages for each patent;
- the theory supporting the recovery of lost profits and a royalty,
- the witnesses it plans to use in support of its damages claim,
- the documents it plans to provide in support of its damages claim,
- the facts supporting its claim for lost profits, and
- the facts supporting its recovery of a reasonable royalty.
Without information on the value of the case, it becomes nearly impossible to decide discovery disputes, which largely rest on an evaluation of the costs of the requested discovery and the value of the case.
Given the high cost of litigation, and particularly discovery, most parties should have a general idea of what a case is worth to them at the outset. Engaging in gamesmanship by refusing to share even the remotest inkling of damages information with the opposing party is a type of overzealous representation that should no longer be condoned.