October 6, 2015
Managing Intellectual Property
By Jeffrey C. Totten; Robert C. MacKichan III
Authored by Robert C. MacKichan III and Jeffrey C. Totten
The amended Federal Rules of Civil Procedure contain multiple changes that may impact district court litigation. Of particular interest to patent litigators, the amended rules redefine the scope of discovery, the requirements for objecting to document requests, and the rules governing the preservation and loss of electronically stored information in the United States. The rules emphasise the concept of proportionality as a throttle on discovery, a change that will likely play a prominent role in discovery disputes, but may not drastically affect the scope of production in patent cases involving sophisticated corporate parties and high stakes. Rules requiring more specific objections to document requests aim to reduce uncertainty regarding the completeness of document productions, but may lead to more disputes about the adequacy of written responses in patent lawsuits. Further, until the courts elucidate the meaning of the newly recited requirement that "reasonable efforts" be taken to preserve electronically stored information, many parties may opt for a conservative approach to the retention of electronic documents. Thus, while parties and practitioners should be aware of changes in the mechanics and timing of discovery requests and responses introduced by the rule amendments, clarity on the impact on patent litigation may take time to materialise.
The amendments to Rule 26 introduce two substantive changes to the scope of discovery that will likely be of interest to parties involved in patent litigation. First, the amendments incorporate the concept of "proportionality" into the definition of permissible discovery. Second, they eliminate the familiar refrain that permissible discovery need not be admissible at the trial, so long as it "appears reasonably calculated to lead to the discovery of admissible evidence". We explore these changes, the Advisory Committee's reasons for making them, as well as their possible impact, in turn.
First, amended Rule 26(b)(1) incorporates a proportionality requirement directly into the definition of the scope of discovery:
Parties 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 . . .
Under this revision, information is discoverable if it is relevant to a party's claim or defence and is proportional to the needs of the case. According to the Advisory Committee, the purpose of this change is to address discovery overuse by making proportionality an express component of the scope of discovery.
In its comments, the Advisory Committee notes that discovery is technically already subject to proportionality limitations, as current Rule 26(b)(1) recites that "[a]ll discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii)", which provide proportionality-based factors warranting the grant of protective orders. Moreover, Rule 26(g) provides that a lawyer's signature on a discovery request or response constitutes certification that it is not unduly burdensome in view of these factors. But by transferring the proportionality factors into the definition of discovery scope, and by expressly reciting the term "proportional," the Committee intended to reinforce the parties' obligation to consider the factors and "to encourage judges to be more aggressive in identifying and discouraging discovery overuse".
Proportionality is defined under the amended Rule by importing the factors governing the grant of protective orders of current Rule 26(b)(2)(C)(iii): (1) the importance of the issues at stake in the action, (2) the amount in controversy, (3) the parties' resources, (4) the importance of the discovery in resolving the issues, and (5) whether the burden or expense of the proposed discovery outweighs its likely benefit. An additional factor is also introduced by the amendment, adding consideration of "the parties' relative access to relevant information". This addition, the Advisory Committee states, reflects the "reality that some cases involve an asymmetric distribution of information" where "one party must bear greater burdens in responding to discovery than the other party bears".
The impact of Rule 26(b)(1)'s revised definition will most likely be felt in the manner in which parties and courts discuss discovery disputes. It can be expected that proportionality will find renewed use in discovery objections. Instead of arguing over whether the discovery is "unduly burdensome" or "reasonably calculated to lead to admissible discovery", future challenges will focus on whether the discovery is "proportional" to the case.
What must remain to be seen is whether the revised rule will impact the amount and type of discovery exchanged. The Advisory Committee suggests that the change should not alter existing discovery obligations:
[Moving] the proportionality calculation to Rule 26(b)(1) does not change the existing responsibilities of the court and the parties to consider proportionality, and the change does not place on the party seeking discovery the burden of addressing all proportionality considerations.
Nor is the change intended to permit the opposing party to refuse discovery simply by making a boilerplate objection that it is not proportional. The parties and the court have a collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.
In patent cases, which often involve high-stakes claims and at least one well-resourced party, the modification of the rule may have less impact than in other areas of the law. Depending on the facts of the case, the parties involved, and the amount in controversy, it may be difficult to argue that the burden of providing information outweighs its importance.
To challenge a discovery request on proportionality grounds, it may be necessary to provide evidence of the burden of the requested discovery. Demonstrating facts showing the discovery is not proportional to the needs of the case will make a challenge more likely to succeed. As such, we can expect increased reliance on the opinions of information technology or e-discovery experts to provide estimates of document searching and production costs.
A second significant change to Rule 26(b)(1) eliminates the commonly recited phrase that "[r]elevant information need to not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence". As the Advisory Committee notes, this "reasonably calculated" language is often relied on as defining the scope of discovery—a practice never intended under the rules. Instead, according to the Advisory Committee, the phrase was simply meant to clarify that inadmissibility is not a basis for opposing discovery of information otherwise within the scope of discovery. Amended Rule 26(b)(1) replaces the deleted phrase with the statement that "[i]nformation within the scope of discovery need not be admissible in evidence to be discoverable".
At the very least, removal of the "reasonably calculated" language will change the standard recited to address the scope of discovery in many cases. A recent search of patent dockets returned over 50 orders since January 2014, either denying motions for protective orders or granting motions to compel, that recite the "reasonably calculated" standard in some fashion. Indeed, as the Advisory Committee describes, comments opposing the proposed change complained that it would eliminate a "bedrock" definition of the scope of discovery. This, the Advisory Committed reasoned, reflects "the very misunderstanding the amendment is designed to correct". What must remain to be seen is whether dropping the phrase will increase focus on relevance and proportionality in view of broad discovery requests.
The proposed amendments to Rule 26(c)(1)(B) expressly acknowledge the court's authority to allocate expenses through protective orders. Including this authority directly in the rules may increase the frequency of discovery disputes being resolved by ordering discovery at the requestor's expense. Where the parties have disproportionate resources or discovery requests lie at the edges of relevancy, for example, courts may shift costs to the party seeking discovery. The Advisory Committee urges, however, the amendment "does not imply that cost-shifting should become a common practice" and the responding party should ordinarily bear the costs of responding. Time will tell how often courts employ this provision.
Amended Rule 34 adds two requirements for objecting to requests for production of documents. According to the Advisory Committee, these two new requirements are "aimed at reducing the potential to impose unreasonable burdens by objections to requests to produce".
First, amended Rule 34(b)(2)(B) mandates that objections to requests for production be stated "with specificity":
For each item or category, the response must either state that inspection or related activities will be permitted as requested or state with specificity the grounds for objecting an objection to the request, including the reasons.
The Advisory Committee explains that while an objection may state that a request is overbroad, the objection must identify any scope of the request that is recognised to be appropriate. An example objection, according to the Advisory Committee, would be "a statement that the responding party will limit the search to documents . . . created within a given period of time prior to the events in suit, or to specified sources." Current Rule 33(b)(4), covering objections to interrogatories, already contains a specificity requirement. The Advisory Committee intended the amendment to Rule 34 to clarify that less-specific objections to document requests are improper.
Second, amended Rule 34(b)(2)(C) requires that "[a]n objection must state whether any responsive materials are being withheld on the basis of that objection". Through this change, the Advisory Committee aimed to address the situation where a party states several objections, but still agrees to produce documents, leaving the requesting party uncertain whether any documents are being withheld based on the objections. The Advisory Committee does not contemplate objections with a detailed description or log of all documents withheld, but responses "to alert other parties to the fact that documents have been withheld and thereby facilitate an informed discussion of the objection". As with the requirement of specificity, the Advisory Committee explains that a response stating the limits applied in searching for documents would qualify as a statement that the materials have been "withheld".
By focusing on the content of written responses to document requests, the Advisory Committee's changes could actually lead to more discovery disputes in patent litigation. Instead of focusing on the documents actually produced, some parties may instead argue about the adequacy of the written responses accompanying document requests. This will, no doubt, provide fertile ground for discovery disputes testing the true extent of the objection requirements. We can also expect disputes regarding document production to occur earlier in the case. Finally—and perhaps as intended by the rule—specific objections may frame disputes more discreetly than general, blanket objections permissible under the current rules.
Although the requirement for specificity in objections is arguably new, it should not be an insurmountable. According to the Committee Notes, adequate specificity and identification of whether materials are being withheld can be achieved by describing any limits applied in searching for responsive documents. Many litigators will likely not be eager to disclose the strategy used to identify relevant materials. Balancing the protection of attorney work product with the rules specificity requirement may prove tricky.
A further amendment to Rule 34(b)(2)(B) requires that document productions "be completed no later than the time for inspection specified in the request or another reasonable time specified in the response". Parties are often reluctant to commit to a date certain for the completion of document production, reserving the right to supplement productions throughout discovery. The requirement of specifying a "reasonable time" is yet another requirement that may lead to disputes, especially in cases involving parties holding large collections of potentially relevant documents.
As amended, Rule 26(d)(2)(A) allows for delivery of document requests before the parties' Rule 26(f) scheduling conference. The requests can be delivered as early as 21 days after the service of the complaint, irrespective of the timing of the scheduling conference. The requests are then considered to be served at the first Rule 26(f) scheduling conference, making responses due 30 days after the conference. The Advisory Committee's stated purpose for this change is to facilitate discussion regarding the scope of discovery during the Rule 26(f) scheduling conference. The Advisory Committee contemplates that such discussions may lead to changes to the requests.
In practice, the impact of this rule will depend on how commonly it is invoked. Since the requests are not considered served until the day of the scheduling conference, providing them earlier will not mean that responses will be received earlier. If it is expected that a particular request will be troublesome, it may be advantageous to serve it before the conference so that the parties may confer. On the other hand, the requestor may not know if a true dispute exists until the time for response has come—30 days after the Rule 26(f) conference.
Attempting to address differences in the way in which courts react to the loss of electronically stored information (ESI), the Advisory Committee rewrote Rule 37(e). The proposed rule eliminates the safe harbour provision of existing rule 37(e), which now states that:
Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.
In place of this good-faith safe harbour, amended Rule 37(e) introduces a framework for applying corrective action where electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take "reasonable steps to preserve it", and it cannot be restored or replaced through additional discovery.
The corrective action permitted under the amended rule hinges on whether loss of the ESI resulted from an intentional act attempting to avoid discovery. In particular, subdivision 37(e)(1) provides that "upon finding prejudice to another party from loss of the information", without regard to intent, the court may order measures "no greater than necessary to cure the prejudice". But where there is "a finding that the party acted with the intent to deprive another party of the information's use in the litigation", subdivision 37(e)(2) authorises an adverse-inference instruction or dismissal of the action—measures the Advisory Committee describes as "very severe".
According to the Advisory Committee's comments, amended Rule 37(e) aims to address "the continued exponential growth in volume" of electronically stored information in litigation. Instead of attempting to define the trigger, scope and duration of a preservation obligation, the amended rule relies on the standard developed in case law—that a duty to preserve information arises when litigation is "reasonably anticipated"—and focuses on standardising the framework for responding to a failure to preserve ESI. As noted by the Advisory Committee, the federal circuit courts of appeal have established significantly different standards for imposing sanctions or curative measures for failure to preserve electronically stored information, some permitting the severe adverse-inference instruction sanction for the negligent loss of ESI. The Advisory Committee felt this rule led to over-preservation of ESI at great costs, and sought to reduce this "primary incentive for over-preservation" by limiting adverse-inference instruction sanctions to cases of intentional loss of ESI.
Although the rule does not define "reasonable steps" to preserve ESI, the Advisory Committee notes that proportionality, including sensitivity to party resources, should be a factor. In addition, while the safe harbour provision of current Rule 37 has been deleted, according to the Advisory Committee, "the routine, good-faith operation of an electronic information system" should still factor into the analysis of whether the party took "reasonable steps" to preserve ESI. The Advisory Committee also emphasises that, under the amended Rule, sanctions are only appropriate where lost information cannot be restored or obtained from other sources. If the information is restored or replaced, no further measures should be taken. Further still, the Advisory Committee warns that the serious measures listed in subdivision (e)(2) "should be applied cautiously and should not be used when the information was relatively unimportant or lesser measures would be sufficient to redress the loss".
The impact of these changes on parties anticipating patent litigation remains unclear. Although amended Rule 37(e) limits application of adverse inferences and default judgments for failure to preserve ESI, other corrective action remains available where parties failed to "reasonable steps" to secure information. Deletion of the express safe harbour for information lost through the routine, good-faith operation of systems and the emphasis on "reasonable steps" may lead parties to better document the steps taken to preserve ESI in anticipation of litigation. Further, some parties may be hesitant to rely on the rules, opting instead to bear the expense of document retention out of an abundance of caution.
A final change worth following is the abrogation of Rule 84, which at present provides that the form complaints appended to the Federal Rules suffice under the rules. Form 18 provides a sample complaint for direct patent infringement, which the Federal Circuit has found sufficient to defeat a motion to dismiss under Rule 12(b)(6). With respect to allegations of infringement, Form 18 merely requires a statement that the defendant has been infringing the patent by "making, selling, and using the device embodying the patent".
The Advisory Committee's stated reasons for eliminating the forms include the observation that the forms "illustrate a simplicity of pleading that has not been used in many years" and that "the increased complexity of most modern cases have resulted in a detailed level of pleading that is far beyond that illustrated in the forms".
Under the Supreme Court's rulings in Twombly and Iqbal, a complaint must contain enough facts to state a claim for relief that is plausible on its face such that, accepting all factual allegations as true, a court may draw the reasonable inference that that the defendant is liable for the misconduct alleged. In view of the deletion of form 18, as well as the Advisory Committee comments, courts may require more detailed factual allegations in direct patent infringement pleadings to pass muster under Rule 12(b)(6).
If, as expected, Congress does not intervene, the amendments to the Federal Rules will take effect on December 1 2015. The new rules will apply to all pending cases, including those filed before December 1; however, if the application of a new rule would not be feasible or would lead to injustice, a party can move the court for relief. While amendments have the potential to bring some noticeable changes to discovery proceedings in patent litigation, the true extent of their impact—and their effectiveness at advancing the goals of increased cooperation, proportionality and early judicial case management—will have to be determined over time as they are applied by practitioners and the courts.
Originally printed in Managing Intellectual Property. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
Lecture
Patent Protection for Software-Related Inventions in Europe and the USA Training Course
June 5, 2024
Hybrid
Articles
Motion to Dismiss: When an Amended Complaint Might Not Moot What You Think
February 29, 2024
Due to international data regulations, we’ve updated our privacy policy. Click here to read our privacy policy in full.
We use cookies on this website to provide you with the best user experience. By accepting cookies, you agree to our use of cookies. Please note that if you opt not to accept or if you disable cookies, the “Your Finnegan” feature on this website will be disabled as well. For more information on how we use cookies, please see our Privacy Policy.
Finnegan is thrilled to announce the launch of our new blog, Ad Law Buzz, devoted solely to breaking news, developments, trends, and analysis in advertising law.