The Perils of Waiting Too Long to Retain a Damages Expert

Corning Optical Communications Wireless Ltd. v. Solid, Inc., et al., Case No. 5:14-cv-03750

United States District Court, N.D. California, San Jose Division: Decided April 14, 2015

“Just a few months from trial, and a few weeks from the close of fact discovery . . . neither side has any firm sense of whether this is a $1 case or a case worth billions.” Those were the words of Magistrate Judge Paul S. Grewel of the United States District Court, Northern District of California in his decision in granting defendants’ motion to compel a calculation of damages and related information from plaintiff.

In this patent infringement case, Magistrate Judge Grewel acknowledged the hard work of the parties having exchanged reams of data, conducted numerous fact depositions, and retained multiple experts, no doubt costing a small fortune in legal and expert fees, but also noted the absurdity that, at such a late stage, plaintiff was unable to produce a calculation of damages as required by Rule 26(a)(1)(A)(iii) of the Federal Rules of Civil Procedure, or substantively respond to defendants’ interrogatories regarding damages, claiming it needed additional time and information. Plaintiff’s response to defendants’ interrogatories regarding damages was, essentially, “wait until we serve our expert report.” Similarly, plaintiff’s Rule 26(a)(1)(A)(iii) disclosure regarding documents that support its calculation of damages was: “No documents related to this calculation exist at this time.”

Citing to the Northern District of California’s decision in Brandywine Commc’ns Techs., LLC v. Cisco Sys., Inc., 2012 WL 5504036 (N.D. Cal. Nov. 13, 2012), Magistrate Judge Grewel concluded that, at such a late stage of discovery, plaintiff’s response to defendants’ interrogatories regarding damages and its Rule 26(a)(1)(A)(iii) disclosure were plainly insufficient. He reasoned that “[e]ven if [defendants] were willing to wait to find out what this case is worth – which [they are] not – the court still needs to know as it resolves the parties’ various discovery-related disputes. Proportionality is part and parcel of just about every discovery dispute. To be sure, new information may come to light as the case proceeds that might drastically alter [plaintiff’s] positions. But Rule 26(e) provides a solution for that: supplementation.”

In rendering the court’s decision, Magistrate Judge Grewel quoted Judge William Alsup in the Northern District of California’s decision in Brandywine, supra, 2012 WL 5504036: “that some material is as yet unknown does not excuse non-disclosure of what is or should be known. Plaintiff is not required to do the impossible but is required to do the best it can. Just because some items cannot yet be disclosed does not mean that nothing should be disclosed.” Id. at 3. Judge Alsup held that preclusion or other sanctions are appropriate if the court determines that a party’s disclosure on damages should have and could have reasonably been more complete. Id.

In his decision, Magistrate Judge Grewel ordered that, within 16 days of the date of the decision, plaintiff shall supplement its damages-related Rule 26 disclosures and respond to defendants’ interrogatories regarding damages with the following details:

•  The amount of damages Plaintiff seeks under each of its asserted damages theories (including lost profits, reasonable royalty, interest and any other asserted theory);

• Plaintiff’s apportionment of damages between Defendants and each asserted patent;

• For each asserted patent, the time period of which Plaintiff seeks damages as a result of the alleged infringement;

• To the extent Plaintiff seeks to recover both lost profits and a reasonable royalty, the theory under which it claims such recovery is appropriate;

• The witnesses on which Plaintiff intends to rely to support its damages claim;

• The documents on which Plaintiff intends to rely to support its damages claim;

• To the extent Plaintiff claims that it lost profits as a result of the alleged infringement, the facts on which Plaintiff bases its claim, including the identity and amount of Plaintiff’s products on which Plaintiff claims to have lost profits; and

• To the extent Plaintiff seeks to recover a reasonable royalty, the facts on which Plaintiff bases its claim, including the date of the hypothetical negotiation, any allegedly comparable licenses, the term of the reasonable royalty sought and any other Georgia-Pacific factors on which Plaintiff intends to rely.

Had plaintiff retained a damages expert at an earlier stage of the litigation, it likely would not have found itself in such a precarious position. In any complex matter, it is imperative to know the value of one’s claims before expending significant fees and expenses in litigation.

At Rosenfarb LLC we produce well-supported, well-reasoned and well-communicated damage calculations that withstand the rigors of litigation. We are a firm of forensic accounting and valuation experts. We understand business – which is an amalgamation of events and transactions with often complex and nuanced underlying economic purposes. We have keen insights and always connect the dots. We understand the litigation process. We frame the issues simply and in alignment with the litigation strategy. We use logic to support our opinions, while creating compelling stories. We are sincere, professional, and credible.  We are accounting experts with legal acumen.

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