Applying U.S. Court of Appeals for the Eleventh Circuit law and addressing whether e-discovery costs are recoverable under  28 U.S.C. § 1920(4), the U.S. Court of Appeals for the Federal Circuit reversed in part, vacated in part and remanded a district court’s decision to award defendants e-discovery costs as “the cost of making copies,” finding that, in the 11th Circuit, recovery under the statute is limited to taxation of costs directly related to documents that are actually produced and requiring that the district court perform a close fact inquiry on remand.  CBT Flint Partners, LLC v. Return Path, Inc., Case No. 13-1036 (Fed. Cir., Dec. 13, 2013) (Taranto, J.) (O’Malley, J. concurring-in-part and dissenting-in-part).

CBT sued Return Path and Cisco IronPort Systems for patent infringement.  After claim construction, CBT stipulated to non-infringement of the asserted claims of one asserted patent, and the district court granted summary judgment of indefiniteness on the asserted claim of the second.  Defendant Cisco was awarded costs pursuant to § 1920, including $243,453.02 in fees paid to its e-discovery vendor.  CBT appealed the indefiniteness ruling to the Federal Circuit, which reversed the ruling and remanded for further proceedings.  The district court subsequently granted summary judgment of non-infringement.  The district court awarded defendants’ renewed motions to recover costs.  CBT appealed.

The Federal Circuit analyzed the scope of § 1920(4) under the law of the regional circuit, which in this case was the 11th Circuit.  The 11th Circuit had not addressed § 1920(4) since the statute was amended by the Judicial Administrative and Technical Amendments Act of 2008, but earlier precedent expressed the general principle that § 1920(4) allows recovery only for costs of duplicating documents for production, not costs related to gathering documents prior to duplication.  The Court found that, while the 2008 amendments contemplate electronic document production, the scope of § 1920(4) did not expand beyond costs of duplication.  Accordingly, only the costs for creating the produced duplicates are recoverable, not costs for other common e-discovery activities.

The Federal Circuit used a three-stage analysis to determine whether specific e-discovery activities fall in the category of duplication:

At stage one, documents are collected and prepared for analysis.  Typically, vendors copy hard drives and other media, and process them to extract individual documents, retaining the documents’ original file properties.  The Court stated that such costs may be recoverable if the activities are reasonably necessary for responding to the request, e.g., if a production agreement requires specific metadata. 

At stage two, documents are organized and filtered for production.  This stage includes indexing, decrypting and de-duplicating files, as well as filtering, searching and reviewing for responsiveness or privilege.  The result is a subset of documents for production.  The Court found these activities do not constitute duplication. Rather, they are obligations outside of § 1920(4).  Similarly, the Court concluded that costs for hosting documents, training or planning meetings are not recoverable.

At stage three, selected documents are copied onto media, such as hard drives or DVDs, or, in the case of source code, loaded onto secure computers for review.  There was no dispute that these costs, which are directly related to copying and production, fall under the scope of § 1920(4). 

The Federal Circuit remanded the case for determination of costs using the Court’s outlined approach and urged that the district court employ “common-sense judgments guided by a comparison with the paper-document analogue.”

In an opinion concurring in part and dissenting in part, Judge O’Malley dissented from the portion of the majority opinion that authorized, as “costs,” an award of the pre-duplication expenses the majority described as stage one costs.  Judge O’Malley stated that she did not believe that the majority was being sufficiently mindful of the limits imposed on courts by § 1920(4).  Judge O’Malley noted that the majority may have improperly expanded the statute in order to further the policy goals of shifting costs.