Damages are at the heart of almost every patent case. But damages issues, even in important cases like Apple v. Motorola, are often dealt with very late in the case. As in immediately before trial. There is no doubt that patent cases present many complex issues for both litigants and the bench. Damages are just one of those issues, yet there is an increasing awareness that something is lost by shuffling damages issues off into the late stages of a case. And the patent-litigation savvy Northern District of California seems to be at the forefront in formulating a process for early disclosure of damages theories by patentees. The reasoning behind this approach is laid-out very well in a short, but considered, opinion by Magistrate Judge Elizabeth Laporte that was recently handed down.
In issuing her March 8, 2013, Order, Mag. J. Laporte recognized that “the question of early damages disclosure in patent cases is a recurring and important one…” and took the opportunity to explain her “reasoning and guidance to the parties” in EON Corp. IP Holding LLC v. Sensus USA, Inc., et al. (N.D. CA Civ. Case No. 12-01011) regarding EON’s obligations to provide early damages disclosures to the Defendants. While the action was filed a few years back, the case was only transferred from the Eastern District of Texas in 2012, and the briefing leading to Mag. J. Laporte’s Order was conducted earlier this year. According to the Court, the parties disputed the extent of the patentee’s obligation to provide disclosure of its damages theories and “the basis therefore” at the very onset of discovery in the case. Even before the Plaintiff had received the Defendants’ discovery responses in fact. Also at issue was the extent of the Plaintiff’s ability to later modify its early damages contentions.
After allowing the parties to brief their positions on those two issues, and conducting a hearing, the Court issued “detailed guidance” to the parties “and instructed them to meet and confer in light of that guidance to reach an agreement.” Apparently, the Court’s efforts, and investment of time and attention to addressing this important issue squarely paid off, as the parties ultimately reached an agreement of the scope and flexibility of Eon’s early damages disclosure. Thankfully, the Court recognized the importance of this issue to patent litigants and their counsel, and issued her Order further elucidating what she had previously shared with the parties before her.
There is plenty to learn from the approach adopted in the Order. Ultimately, the Court decided that when it comes to information that the patentee had in hand, early disclosure was appropriate. In Eon, the Defendants had prepared a series of questions that they had wanted answered regarding EON’s damages theories. The Court asked the parties to treat those as “standard discovery requests that could be answered promptly,” and not as “comprehensive contention disclosures.” Using that framework, the Court encouraged EON to act in “good-faith to provide the information,” so that it would not need to show good cause later to make any amendments based on information it would be receiving from the Defendants. There was no need for Eon to provide “specific computation of the royalty rate” at such an early stage.
Together with its well-thought out proposal for handling early damages disclosures, the Order also articulates very succinctly the pros and cons of seeking early damages disclosure from patentees. As such, it is a good starting point for counsel on either side of the issue to consider when preparing briefing on this question. This author has long thought that as a default “rule” that earlier disclosure of damages is better, and the Order summarizes several rationales that collectively support that approach. On the flip side, the Court did not hesitate to push back against any suggestion that early damages disclosures should be set in stone, and refused to limit amendment of those disclosures to those situations where “good cause” is shown. Interestingly, the Court noted that the Northern District of California’s Committee responsible for its oft-imitated Patent Local Rules has considered mandating disclosure of damages contentions, but has not yet actually done so.
Until such time as “damages contentions” find their place in patent cases, we are likely to see more courts follow an approach similar to that adopted by Mag. J. Laporte in EON. As an initial matter, it seems clear that if an alleged infringer wants early disclosure of the patentee’s damages contentions, it needs to ask for them. Citing this Order, and evidencing a willingness to follow the approach laid therein, would conceivably be a good first foot forward in that regard. If accepted by other courts, this procedure would allow defendants to obtain more information regarding the patentees’ damages theories than what is usually provided, while sparing the patentee from having to speculate about information it has not yet received. Further, the patentee would retain liberal rights to amend its damages disclosures based on information obtained in discovery, while being spared from providing actual royalty rate calculations at an early stage.
It remains to be seen whether other courts agree with this approach, even as to the threshold question of whether early damages disclosures are desirable. Considering that patentees have the burden of proof on damages in patent cases, the potential streamlining of cases as a result of early disclosure, and the protections afforded to patentees in terms of amending based on discovery, it is likely that at least some courts will. Mag. J. Laporte’s Order is an important incremental step in that regard, and it will be interesting to see its impact, if any, on patent cases nationwide.