Court Allows Discovery of License and Settlement Agreements, Damages Expert Reports, and Damages Expert Testimony from Different Litigation Concerning Related Technology

Authored by D. Brian Kacedon; John C. Paul; and Andrew J. Ra, Jr.

In the United States legal system, discovery is a wide-ranging tool that allows litigants to obtain information "regarding any nonprivileged matter that is relevant to any party's claim or defense." During the discovery phase of trial, relevance is broadly construed. When the discovery sought does not appear relevant on its face, the party seeking discovery has the burden to show that the information and documents sought are relevant to a claim or defense. In patent disputes, parties often seek the discovery of license agreements, settlement agreements, and/or expert testimony on damages related to the patents-in-suit or similar technology. Given the potentially confidential nature of such items, however, parties often seek to avoid the production of such items.

The U.S. District Court for the District of Kansas recently addressed this issue in High Point SARL v. Sprint Nextel Corp., No. 09-2269-CM-DJW (D. Kan. April 30, 2012).¹In this case, the plaintiff moved to compel the defendant to produce all license and settlement agreements, damages expert reports, deposition transcripts of damages expert testimony, and settlement communications between the defendant and its opponents from a different case involving related technology. The court ordered the defendant, over the defendant's objection, to produce all license and settlement agreements, damages expert reports, and deposition transcripts of damages expert testimony but declined to compel production of settlement communications between the defendant and its counterparties.

The High Point SARL Decision

High Point sued Sprint, claiming Sprint infringed four of High Point's patents. The patents cover technology that devises a way to replace certain circuitswitched portions of traditional telecommunications systems with more efficient and economical packet-switched network equipment for cellular telephone communications.

During discovery, High Point moved to compel Sprint to produce: 1) all license and settlement agreements; 2) damages expert reports; 3) deposition transcripts of damages expert testimony; and 4) settlement communications between Sprint and its opponents from a different litigation, Sprint Communications Co., LP, v. Vonage Holdings Corp. and four related cases, involving voice-over-internet-protocol ("VOIP") technology. In response, Sprint argued that the documents related to the VOIP patent were not relevant because the VOIP patent and the patents in this case involve very different technologies. Due to a prior ruling regarding the VOIP-related documents, High Point had the burden of showing that the discovery requested was relevant to a claim or defense.

For the VOIP-related license and settlement agreements, High Point argued that the requested documents were relevant to the calculation of a reasonable royalty for the alleged infringement of the Patents-in-Suit. According to High Point, because Sprint's VOIP technology was comparable to the technology of the High Point patents, they would be relevant to the consideration of the hypothetical negotiation of a reasonable royalty for a license to the High Point patents under several of the Georgia-Pacific factors used to determine a reasonable royalty rate. High Point argued that its patents and Sprint's VOIP patents address packetization of voice traffic and interfacing packet networks with traditional telephone networks. And because each parties' patents were essential to the operation of their respective telecommunications network systems, the valuation of Sprint's VOIP patents, and the factors considered in assessing that value, was highly relevant to the assessment of a reasonable royalty for a license to the High Point patents. In response, Sprint argued that High Point's patents connect to a traditional phone network using a different technology, CMDA, whereas its VOIP patents connect to a traditional phone network using the internet.

The court found that High Point had met its burden of showing the relevance of Sprint's VOIP-patent license and settlement agreements because it had shown that Sprint's VOIP technology was sufficiently comparable to the technology of High Point's patents to be relevant to several Georgia-Pacific factors for determining a reasonable royalty rate. It found that both sets of patents involved the packetization of voice data and transmission over a network and such similarity was sufficient to establish the relevance of the license and settlement agreements relating to the VOIP technology.

For the VOIP damages expert reports and deposition testimony, High Point argued that such testimony would be highly relevant in determining damages and for specifically determining how Sprint calculated damages for a comparable technology. According to High Point, publicly available trial transcripts were insufficient because they provided only a snapshot of Sprint's damage analyses and a summary of the expert report. High Point further argued that deposition testimony would likely contain very different content than just the trial testimony. Sprint, on the other hand, responded that the publicly available trial transcripts were sufficient to capture the expert's reasonable royalty determination and the methodology used to reach it. But the court disagreed. Instead, it concluded that the publicly available transcripts did not provide the same type or amount of information as the deposition transcript or damages expert report.

Finally, for the VOIP settlement communications, High Point argued such communications were relevant in view of the court's previous ruling ordering High Point to produce its ongoing and unconsummated patent licensing communications with third parties in the absence of a consummated agreement. Sprint countered by arguing that a bright-line rule existed holding that settlement negotiations were never discoverable where an agreement had been consummated. The court concluded that High Point had failed to meet its burden of showing the relevance of such communications to a claim or defense. It noted that High Point failed to show why the communications were relevant and also distinguished its earlier ruling by finding that the communications High Point sought were for a comparable technology, as opposed to the actual patents in the case.

In view of its findings, the court ordered Sprint to produce all license and settlement agreements, damages expert reports, and transcripts of damages expert deposition testimony relating to Sprint's VOIP-technology patent-infringement litigation.

Strategy and Conclusion

The High Point decision shows that courts may construe relevance broadly during the discovery and that litigants may have to produce license agreements, settlement agreements, expert reports, and expert testimony from different litigations so long as the technology is comparable to the that of the patents being litigated. As discussed above, however, this broad relevance determination applies specifically to discovery—just because these documents are discoverable does not necessarily mean they will be considered relevant or admissible during trial.

Endnotes 

¹The High Point decision: http://docs.justia.com/cases/federal/district-courts/kansas/ksdce/2:2009cv02269/71085/789/.

Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. 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.