Dan Venglarik, IP Partner, Munck Wilson Mandala Client Alert
Still the pioneer in local patent rules, the Northern District of California recently adopted revised local patent rules adding a damages disclosure requirement. If enforced as stringently as the infringement and invalidity contention disclosure requirements, the damages disclosures may further facilitate early settlement of patent cases in that district.
In 2001, the Northern District of California became the first district to adopt local rules specific to patent cases, imposing additional disclosure requirements beyond the discovery available under the Federal Rules of Civil Procedure. Thirty-two of the 94 Federal judicial districts—most of which have heavy patent litigation dockets—now have patent local rules. While the specifics vary, those rules generally require prompt disclosure of asserted claims and infringement contentions and responsive invalidity contentions and their prior art reference bases. Docket control orders in the respective districts typically impose limitations on the number asserted claims and prior art references, with deadlines for narrowing the selections to reduce costs and facilitate orderly preparation for trial.
The revised local patent rules just adopted in the Northern District of California add damages disclosures. At the time of the FRCP 26(f) initial case management conference, the parties are now required to discuss the scope and timing of damages discovery and:
The parties shall provide the court with a non-binding, good-faith estimate of the damages range expected for the case along with an explanation for the estimates. If either party is unable to provide such information, that party shall explain why it cannot and what specific information is needed before it can do so. Such party shall also state the time by which it should be in a position to provide that estimate and explanation.
The new damages contentions requirement specifies that the patent owner shall:
Not later than 50 days after service of the Invalidity Contentions, each party asserting infringement shall:
(a) Identify each of the category(-ies) of damages it is seeking for the asserted infringement, as well as its theories of recovery, factual support for those theories, and computations of damages within each category, including:
- lost profits;
- price erosion;
- convoyed or collateral sales;
- reasonable royalty; and
- any other form of damages.
(b) To the extent a party contends it is unable to provide a fulsome response to the disclosures required by this rule, it shall identify the information it requires.
In response to the damages contentions, the accused infringer must:
Not later than 30 days after service of the Damages Contentions served pursuant to Patent L.R. 3-8, each party denying infringement shall identify specifically how and why it disagrees with those contentions. This should include the party’s affirmative position on each issue. To the extent a party contends it is unable to provide a fulsome response to the disclosures required by this rule, it shall identify the information it requires.
These damages contentions and responsive contentions follow the asserted claims and infringement contentions and invalidity contentions.
The purpose of the new damages contentions requirement is to encourage early settlement of patent litigation by forcing patent owners to identify their best-case recovery scenario while also requiring accused infringers to a understand realistic potential risks. This may also assist Courts in identifying greenmail situations in which a non-practicing entity asserting patent infringement seeks to leverage a recovery based more on the litigation expenses that the accused infringer can expect to incur rather than on the value of the patent being enforced. As occurred with the adoption of patent local rules in general, other districts can be expected to watch for the impact of these damages disclosure requirements on the district court dockets to determine whether to similarly modify their own patent local rules.