The FRCP provide the overarching framework for pre-trial discovery. These rules authorize broad and extensive pre-trial discovery in civil cases.197 The goal of discovery is to enable the parties to obtain full knowledge of the critical facts and issues bearing on the litigation. By reducing asymmetric information, discovery ideally reduces the range of dispute and facilitates settlement.
The breadth of U.S. civil discovery, in conjunction with the wide range of claims and defenses, high stakes, trade secret sensitivity, and extensive use of electronic record-keeping by technology companies, makes discovery in patent cases especially complex. As a result, discovery can become a strategic battlefield, with better-skilled and -financed parties able to use discovery maneuvers to influence the litigation process. Thus, district judges are often called upon to supervise and balance the discovery process.
Discovery typically commences after the complaint has been filed and the parties have met and conferred. FRCP 26(f) requires the parties to confer as soon as practicable – and, in any event, at least 21 days before a Rule 16 scheduling conference. Due to the fact that many parties and counsel in patent litigation are repeat players, and patent cases are typically filed in a limited set of districts, many aspects of pre-trial patent discovery have been routinized, at least in the early stages of litigation. As noted in Section 10.6.6.1, many district courts and district judges have augmented those rules with PLRs and standing orders that provide detailed disclosure timetables.
FRCP 26(b) provides that, unless otherwise limited by court order:
[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.
The “proportionality” requirement aims to focus courts and litigants on the expected contribution of discovery to the resolution of the case. This requirement provides district judges with a framework for moderating the extent and costs of discovery based on the nature and scope of the case, the amount of any damages sought and how the case compares to other patent cases.
10.6.8.1 Initial disclosures
Although FRCP 26(a)(1) requires early disclosure of “all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses,” and “a computation of each category of damages claimed,” a patentee will rarely have access to this information in advance of discovery. Patent damages are based on profits lost by the patentee or, at a minimum, the reasonable royalty that the infringer would have paid to license the patented technology, both of which depend on the sales and offers made by the accused infringer. Thus, much of the evidence as to the patentee’s damages resides in the hands of the accused infringer. Accordingly, initial disclosures as to damages typically only describe the types of damages sought (rather than providing a rough computation of the amount of damages sought) and necessarily defer disclosure of documents and other evidence to a date after discovery has been completed.
10.6.8.2 Document production
Reflecting the broad scope of activities relevant to patent cases, it is common for litigants to propound 100 or more document requests. Document requests typically reach into nearly every facet of a party’s business, including product research and development, customer service and support, sales, marketing, accounting, and legal affairs. The documents must be collected in hard copy from custodians in nearly every department and in electronic form from both the company’s active computer files and all readily accessible archives.
In addition, patent litigation often requires the production of technical information that is highly sensitive and difficult to reproduce for production. Some technical information, such as semiconductor schematics, can only be reviewed in native format using proprietary software that is itself valuable and sensitive. Such information may need to be reviewed on-site on the producing parties’ computers. Computer source code is also highly sensitive and may need to be reviewed in native format. Often, it is produced on a stand-alone computer, unconnected to the internet and in a secure location, and with limitations imposed on the number of pages that may be printed.
Financial information related to damages is also viewed as highly sensitive and can be difficult to produce. Often, in lieu of the underlying financial documents (such as numerous invoices), companies produce reports from their financial databases. They must agree on which categories of information will be produced from these databases or come to terms with the fact that some categories of information cannot be generated by such systems.
Third-party confidential documents, such as patent licenses, are also usually relevant to the damages case, and third-party technical documents can be relevant to the liability case (e.g., if a third party makes the accused chip). The production of these documents often requires permission from third parties, the negotiation of protective orders, or even compulsory process and motions practice.
Document requests in patent cases usually generate multiple motions to compel, motions for protective orders or both. Courts can facilitate more effective document collection and production processes by:
- reviewing the parties’ electronic discovery plan at the case management conference, as required by FRCP 26;
- requiring the parties to meet and confer to narrow document requests and to document their efforts in any motion to compel;
- requiring the parties to file a letter brief seeking permission to file a motion to compel or requiring a pre-motion telephonic conference with the Court, a magistrate or a special master prior to the filing of a motion to compel; and
- placing a limitation on the number of document requests permitted per side.
FRCP 33(a) has a default limit of 25 interrogatories per party. In their joint case management statement, parties often make a joint request for additional interrogatories. These requests are typically granted because the scope of subject matter in patent litigation is quite broad. Because patent litigation often includes multiple plaintiffs and defendants, however, courts should consider imposing an interrogatory limit per side, rather than per party.
FRCP 30(a)(2)(A) limits to 10 the number of depositions that may be taken by a party without leave of court. As a result of the breadth of discovery in patent cases, and in spite of the more extensive mandatory disclosure requirements imposed by PLRs, litigants often seek to take in excess of 20 depositions to develop their case, and may legitimately need more than the presumptive 10 depositions. The court should strongly encourage parties to reach mutual agreement in their Rule 26(f) proposed discovery plan regarding the number of depositions or cumulative hours that will be allowed without court order. Absent agreement, a limit should be set to promote the parties’ efficient use of the depositions. A limit of 15 to 20 depositions per side, or about 100 hours, typically provides parties with plenty of opportunity to cover the major issues in a case. Many judges set significantly lower presumptive limits (e.g., 40 hours per side), allowing the parties to petition for more time where justified. The most common practice is to apply these limits to fact discovery, since expert depositions tend to be self-regulating and do not involve inconvenience to the parties themselves.
FRCP 30(d)(1) imposes a one-day (7 hour) limitation on the deposition of fact deponents that should presumptively apply in the absence of a showing of a real need for more time (e.g., if an inventor also has a role in the business). The 30(b)(6) depositions of parties’ organizational officers in patent litigation are, however, often critical to the case. Typically, these depositions can encompass highly technical or detailed information spanning the course of years or even decades. It is often effective to allow 30(b)(6) depositions to continue for more than a single day. However, to prevent runaway 30(b)(6) depositions, the court can also require that each day of a 30(b)(6) deposition counts as a separate deposition for the purposes of the per-side deposition limit. Alternatively, a limit on the total number of deposition hours also helps avoid disputes over how many “depositions” a 30(b)(6) deposition constitutes, when it encompasses more than one topic.
10.6.8.5 Electronic records
A significant portion of discovery in patent litigation is electronic discovery. Although electronic discovery in patent litigation presents similar issues as electronic discovery in other complex litigation, certain challenges arise more frequently in patent cases.
Pursuant to FRCP 26(f)(2), the parties must “discuss any issues about preserving discoverable information; and develop a proposed discovery plan.” The discovery plan produced under Rule 26 must address “any issues about disclosure or discovery of electronically stored information, including the form or forms in which it should be produced.”198 Additionally, each party’s initial disclosures under Rule 26(a) must identify any electronically stored information (ESI) that it intends to use to support its case.
The nature of ESI is such that some types of documents are more accessible than others, ranging from active, online data to nearline data, offline storage and archives, backup tapes, and erased, fragmented, or damaged data.199 Inasmuch as the last two categories contain “inaccessible” data, classification of data can be important in cost-shifting analysis. Under the federal rules, ESI is presumptively not discoverable if it comes from a source that is “not reasonably accessible because of undue burden or cost.” To raise the presumption, the responding party to a discovery request must identify the sources that are “not reasonably accessible” that it will not search or produce. In response, the requesting party may challenge the designation by moving to compel, whereupon the burden shifts to the responding party to show that the information is not reasonably accessible. The court may then hold that the information is not reasonably accessible and so is presumptively not discoverable. Even if the requesting party shows “good cause” to obtain production, the court may specify conditions on the production, such as cost-shifting.
Although there is much wisdom in this effort to reduce the costs of e-discovery, there is no one-size-fits-all solution, and greater experience in managing the scope of electronic discovery will likely result in further evolution and explication of the various guidelines. For example, in many cases, the most expensive ESI to collect is not email, which is often stored on relatively accessible central servers, but rather the contents of the computer hard drives of individual users, which must be individually copied or “imaged” to collect and produce the users’ working documents. Parties often look to their FRCP 26(a) initial disclosures to determine whose computers should be imaged.
10.6.8.6 Management of discovery disputes
District judges vary in how they deal with discovery disputes. Some judges refer discovery management to magistrate judges so as to reduce their need to deal with what can be frequent skirmishes. By contrast, some judges find that handling discovery disputes keeps them abreast of developments in the case and enables them to coordinate discovery and scheduling issues. Moreover, there can be an in terrorem effect at work when the district judge hears discovery disputes – litigants may be less likely to raise as many disputes and will likely be more conciliatory if the judge deciding the case has a greater opportunity to assess whether counsel have been unreasonable. Where referral is the common practice, experienced counsel soon learn the tendencies of the magistrate judges on particular issues, resulting in fewer motions. If this does not happen, or if the case otherwise appears likely to generate a disproportionate level of discovery controversy, courts can require the parties to engage a special master under FRCP 53. When the special master possesses substantial experience with patent litigation, the resulting process, although sometimes costly, can be substantially more efficient and effective.