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New Path For Accelerated Damages Discovery Requires Immediate Expert Assistance

Originally Published in Financial Complexity Made Clear, March 2014

By: David Nolte
Tel: (213) 787-4100
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The Eastern District of Texas is well known for its intense patent activity and already provides early disclosure of infringement and invalidity contentions to facilitate faster resolution of these cases. The Court has now taken similar action by providing an option for accelerated damage discovery, including requiring a two week turnaround between defendant's production of potentially infringing sales data and plaintiff's good faith estimate of damages. Accomplishing this will require expert assistance immediately in the process. Even for cases that do not settle, this damage estimate will inform the Court's discovery decisions and resource allocations.

On February 25, 2014, Chief U.S. District Judge Leonard Davis issued General Order 14-3, which provides this optional schedule in patent infringement cases called the Track B Initial Patent Case Management Order ("Track B"). Track B generally requires early disclosure of the most critical information in assessing the plaintiff's damages, although the estimates offered during the accelerated period are non-binding and additional discovery is available later in the process.

The Court can preemptively put parties on Track B, or it can be elected by mutual agreement among the parties on or before the last defendant files its answer or motion to dismiss. Any additional parties added after the filing of a Track B election may file an objection. Upon election, the Court will impose a standard protective order and the following schedule applies:

  1. Infringement contentions and licensing disclosures within 14 days. This includes accompanying production for infringement contentions and all licenses or settlement agreements concerning the patents-in-suit and any related patent.
  2. Initial disclosures and summary sales information by defendant(s) within 30 days thereafter. Summary sales information should include the quantity of accused products and all reasonably similar products sold in the United States and the revenues from those sales. Reasonably similar products are defined as other products that a party should reasonably expect to be accused of infringement of the asserted claims after a full opportunity for discovery.
  3. Good faith damages estimate by plaintiff(s) within 14 days thereafter. This must include a summary description of the methodology. The estimate is non-binding and will not limit an ultimate finding of damages.
  4. Defendant(s)' invalidity contentions and related production within 14 days thereafter.
  5. Notice of readiness for management conference within 5 days thereafter. The parties shall proceed with claim construction related disclosures according to the timing set by the local patent rules. Prior to the management conference, discovery is limited to 5 interrogatories, 5 requests for production, and 5 requests for admission per side, absent leave of court or stipulation of the parties.
  6. Parties to confer at least 14 days before the scheduled management conference, with a jointly filed discovery plan at least 7 days before the management conference. The joint discovery plan must address a number of detailed items, including:
    • appropriate discovery limitations considering the case facts and likely value including written discovery limits, deposition limits, the number of expert witnesses, and whether expert depositions should be authorized;
    • the appropriateness of an expedited trial, consolidated claim construction and trial procedure, trial on limited issues, or a stipulation for post-trial mediation before the entry of judgment on the verdict;
    • any existing or likely discovery disputes, including the parties' respective positions. The Court notes that its objective is to set schedule and discovery limitations that are fair, adequate, and recognize the likely value of the case.

If followed in good faith, Track B should provide knowledge of an opposing party's liability and damage positions within a short time after its election. This enables earlier resolution via settlement (especially when lower amounts are at stake), as parties will have an educated basis for potential damages and an opportunity to avoid the considerable expense of a more prolonged fight. However, the accelerated schedule requires that expert involvement occur quickly in order to properly interpret the discovery (including identifying the specific value of the patented technology) and respond with damage calculations within the required timelines. Should this process prove effective, other districts may follow suit.

David Nolte is a principal at Fulcrum Financial Inquiry LLP with over 30 years experience performing forensic accounting, auditing, business appraisals, and related financial consulting. He regularly serves as an expert witness.

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