The review and production of electronically stored information during discovery can be a prohibitive pretrial expense in patent litigation. Recent rulemaking developments and fresh data warrant a renewed look at how litigants can effectively manage the search, review and exchange of ESI — particularly the collection and disclosure of email — to arrive at an appropriate solution tailored to the realistic needs of a given case. Recognizing the ever-increasing burdens of e-discovery, the December 2015 amendments to the Federal Rules of Civil Procedure included revision to Rule 26, in part to restore longstanding proportionality considerations that had been “softened” over time. More recently, the Federal Trade Commission released its 2016 study on patent assertion entity litigation, in which the agency recognized a need for ESI reform in light of overly burdensome and asymmetrical e-discovery.
In light of these developments, we discuss the persisting problem of unduly burdensome e discovery, and consider a number of options available to litigants to more effectively manage the search for and disclosure of ESI in patent lawsuits.
ESI Discovery Costs and Asymmetries
It is no secret that discovery costs comprise a significant portion of total litigation spend in patent cases. As reported by the American Intellectual Property Law Association, relatively recent survey results suggest that median costs incurred in patent infringement lawsuits through discovery amount to 47 percent to 67 percent of total litigation costs.
Compounding this expense problem is the frequent asymmetry in discovery burdens between plaintiffs and defendants, particularly in cases brought by patent-holding entities. These plaintiff entities often have far fewer documents to review and produce because they were often not the entity that created the intellectual property, and they may have no commercial products or significant business activities. Yet these entities may expect defendants — often operating companies with large research and development units and separate marketing and sales divisions — to produce the lion’s share of the ESI, including countless documents and correspondence ranging every aspect of their business from product development, to technical know-how, to marketing and sales. In such cases (as has been reported by the Federal Justice Center and the FTC), this asymmetry can provide a litigation advantage to a plaintiff patent assertion entity, including an undeserved ability to secure a favorable nuisance settlement.
Past and Current Attempts to Reduce ESI Discovery Costs
Between mid-2011 and early-2012, judicial policymakers nationwide began to recognize the undue burden that unbridled e-discovery was inflicting on patent litigants. In response, as one example, the Advisory Council of the Federal Circuit convened an E-Discovery Committee to draft a model order for e-discovery governance, given that “[e]xcessive e-discovery, including disproportionate, overbroad email production requests, carry staggering time and production costs that have a debilitating effect on litigation.” Thus, the Advisory Council adopted a proposed order that “presumptively limit[ed] the number of custodians and search terms for all email production requests.”
Since then, a number of district courts — including some districts having a historically high volume of patent litigation — have adopted model orders governing the discovery of ESI. For example,
The Eastern District of Texas adopted a model order having a default maximum of eight e-mail custodians per producing party.
The District of Delaware enacted a model order providing for a default set of 10 email custodians per party.
The Northern District of California adopted a model stipulation and proposed order suggesting a default set of five custodians per producing party.
Despite efforts to limit the burden of e-discovery through default limitations and model orders, ESI discovery — and email discovery in particular — still remains overly burdensome, particularly as weighed against practical needs in patent litigations. That observation has also been confirmed by practitioners and courts, resulting in amendments to the Federal Rules of Civil Procedure.
Those revisions, effective Dec. 1, 2015, included amendment of Rule 26 to “restor[e] proportionality as an express component of the scope of discovery” :
Parties may obtain discovery … that is … proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the importance of discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.
The Advisory Committee reaffirmed in its commentary that “[t]he parties and the court have a collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes,” and acknowledged that “[t]he parties may begin discovery without a full appreciation of the factors that bear on proportionality.” One such consideration cited by the Advisory Committee was “information asymmetry,” which in our experience is quite significant in patent cases in which only one of the parties engages in research and development or otherwise manufactures and sells products, and thus often possesses the vast majority of potentially relevant ESI.
Additionally, with respect to email discovery in particular, the collection and disclosure of email records typically results in minimal benefit overall in patent litigations. As the Advisory Council of the Federal Circuit observed:
Most discovery in patent litigation centers on what the patent states, how the accused products work, what the prior art discloses, and the proper calculation of damages. These topics are normally the most consequential in patent cases. Thus, far reaching e-discovery, such as mass email searches, is often tangential to adjudicating these issues.
Indeed, with default limits imposed by some judges capping the number of exhibits that may be presented at trial, in our experience it has not been uncommon for a party to introduce few emails into evidence at trial, despite demanding and receiving hundreds of thousands, if not millions, of email records in discovery.
Practical Suggestions Going Forward
Though model ESI discovery orders certainly provide baseline mechanisms to manage e discovery in patent litigations, it can be beneficial to address any needed correction for discovery asymmetry early in a case, such as at (or even before) the Rule 26(f) conference. Several approaches may be helpful in addressing the proportionality considerations of Rule 26.
First, consider engaging in a process for identifying custodians and search terms. Such a procedure may first involve a mutual exchange of informal e-discovery inquiries, such as requesting information about:
Names of custodians likely to possess relevant information;
Names and nicknames of key individuals;
Server names and other data storage repositories;
Code words used to identify competitors, products and relevant projects;
Proprietary software applications and associated data formats; and
Source code development and storage.
From there, consider engaging in an iterative custodian and search term evaluation process. By negotiating custodians and search terms after running searches and determining the number of responsive hits — as well as by sampling responsive hits to determine whether the proposed search terms are yielding any prevalent nonresponsive “mis hits” — litigants can minimize unnecessary waste before document collection and review efforts begin in earnest. For instance, consider correcting for prevalent “mis-hits” by negotiating search query limitations, such as by refining for responsiveness through the use of Boolean and proximity operators.
Alternatively, consider whether production by random sampling up through an agreed maximum number of records may be a viable approach. For some custodians, such as individuals from a company’s accounting or finance team, it may make sense to forego e-mail discovery altogether, in favor of producing alternative disclosures such as financial summaries or data compilations. Similarly, if an engineer’s email is likely to include nothing more probative than what would be included within final product documentation or design specifications, consider whether the need for e-mail discovery of that individual truly outweighs the burden before including such information within the agreed-upon search parameters.
In the event opposing counsel resists sensible and reasonably narrow discovery, consider proposing a cost-sharing approach as part of a negotiated solution to address data retrieval and storage expenditures, employee downtime costs, and attorney review fees. The value of such discovery may become less important if the requesting party has to bear the cost.
Of course, where requests exceed proportionality, never forget the court is a resource. If necessary, when confronted with an unreasonable adversary, consider moving for a protective order. But be prepared to substantiate the motion with concrete cost figures and time estimates for responding to opposing counsel’s requests.
At bottom, engaging in good-faith negotiation and sensible compromise on ESI discovery issues — while remaining prepared to adapt to unforeseen contingencies as discovery progresses — will often yield a mutually agreed outcome that likewise meets the client’s best interests. If not, use the prevailing acknowledgement that discovery asymmetries can exist in patent litigation to your advantage in seeking court intervention.
—By Joseph A. Loy and David N. Draper, Kirkland & Ellis LLP
Joseph Loy and David Draper are partners in Kirkland & Ellis’ New York office.