On January 17, 2017, the United States District Court for the Northern District of California issued revisions to its Local Patent Rules requiring early disclosure of damages-related discovery and contentions. The revised rules are effective immediately in all patent cases pending in the Northern District. Local Patent Rules are rules that apply to all civil actions filed in or transferred to the specific District Court which allege infringement of a utility patent or which seek a declaratory judgment that a utility patent is not infringed, is invalid or is unenforceable. The Local Patent Rules govern the mandatory discovery disclosures that must be given relatively early in a patent case. Many District Courts across the country have various versions of Local Patent Rules to help govern and streamline often vary complex patent cases. The Local Patent Rules for the Northern District of California previously had detailed early disclosure requirements for infringement and invalidity positions, but generally not as to damages related issues.
Beginning under new Patent Local Rule 2-1(b)(5), the parties are now to provide the court at the Initial Case Management Conference – in addition to the prior requirements under Rule 2-1 which are still required and in place – with a “non-binding, good faith estimate of the damages range expected for the case along with an explanation for the estimates.”
Under Local Patent Rule 3-1, which relates to a patentee’s initial infringement contentions, patentees are now required to also disclose “the timing of the point of first infringement, the start of claimed damages, and the end of claimed damages,” with their initial contentions and in addition to the prior requirements. Moreover, under Local Patent Rule 3-2, which governs the document production that must be made concurrent with the initial disclosures under Rule 3-1, the patentee must now also produce:
(1) all licenses and agreements “transferring any interest in any patent-in-suit;”
(2) all license agreements that are “comparable to a license that would result from a hypothetical reasonable royalty negotiation;”
(3) all documents and licenses “comprising or reflecting a F/RAND commitment or agreement with respect to the asserted patent(s);”
(4) documents sufficient to show “sales, revenues, costs and profits” of a patentee’s own products that it asserts practice the assert patent(s) in order “to preserve the right to recover lost profits based on such products;” and
(5) all other agreements that “otherwise may be used to support the party asserting infringement’s damages case.”
The patent’s initial infringement contentions and accompanying document production under Patent Local Rules 3.1 and 3.2 – including the damages related documents and disclosures just mentioned – must all be disclosed, identified, and produced fourteen days after the Initial Case Management Conference.
Local Patent Rule 3-4, governing an accused infringer’s document production accompanying its invalidity contentions, requires an accused infringer, 45 days after receiving the patentee’ initial infringement contentions and production, to now also produce:
- “all agreements that the party opposing infringement contends are comparable to a license that would result from a hypothetical reasonable royalty negotiation;
- documents sufficient to show the sales, revenue, cost, and profits for accused instrumentalities identified pursuant to Patent L.R. 3-1(b) for any period of alleged infringement; and
- all agreements that may be used to support the party denying infringement’s damages case.”
Brand new Local Patent Rule 3-8 requires patentees to then serve “damages contentions” 50 days after the accused infringer’s invalidity contentions and production. The damages contentions must “identify each of the categories 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.” The listed damages categories include: lost profits, price erosion, convoyed or collateral sales, reasonable royalty, and any other form of damages.
Under brand new Local Patent Rule 3-9, the accused infringer then must provide responsive damages contentions 30 days after the patentee’s damages contentions. The accused infringers responsive damages contentions must “identify specifically how and why it disagrees with” patentee’s damages contentions and “include the party’s affirmative position on each issue.”
The Northern District’s new Patent Local Rules represent a significant change that could help quicken and streamline litigation by requiring parties to put a definitive dollar figure on disputes early on in the litigation. The new rules could also streamline damages related discovery because the rules require parties to self-identify and produce damages documents, theories, and amounts early in the litigation, eliminating the need for later lengthy discussions amongst the parties and their attorneys about what needs to be produced and when it has to be produced. However, the new rules will also mean more upfront work and cost for parties and their attorneys. And, it will also require plaintiffs to conduct more damages related investigations before filing suit in ensure they are ready to meet their initial disclosure requirements.