United States: Brandywine v. Cisco: Motion To Dismiss Damage Claim Based On Inadequate Disclosures Denied But Plaintiff Ordered To Supplement With Information In Its Possession Or Risk Preclusion

Last Updated: December 7 2012
Article by Stanley M. Gibson

Brandywine Communications Technologies, LLC ("Brandywine") filed a patent infringement action against Cisco Systems, Inc. ("Cisco"). During the initial case management conference, the parties were given additional time to supplement their initial disclosures and were told to do so "on pain of preclusion." Cisco contended that the damage disclosures remained inadequate and the district court was called on to address the issue of to what extent Fed.R.Civ.P. 26(a) requires a plaintiff in a patent cases to disclose and specify damages at the outset of the litigation even though some of the necessary information is only in the hands of the accused infringer.

Rule 26(a)(1)(A)(iii) provides: "A party must, without awaiting a discovery request, provide to the other parties a computation of each category of damages claimed by the disclosing party -- who must also make available for inspection and copying as under Rule 34 the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered."

The district court, after stating that it could not find any decision construing the requirement in the patent-infringement context, found that Brandywine could provide more specific information for lost profits, including identifying its own products that compete with the accused products and how sales of its own products have been impacted by the infringing products. "The systems sold by Cisco were available on the market and could have been studied, if not reverse-engineered before suit. If Brandywine is now seeking damages in the form of lost profits, it should now be in a position to state the extent of loss of its own sales of its own products in an approximate dollar amount and state how that amount was calculated. To be more specific, it should be able to identify each of its own products that compete (or have competed) with the accused products and explain how sales of its own specified products have been affected by the alleged infringement. This can and should be done even though discovery will produce more precise sales records for the accused products that will allow later for more accurate updates of estimates of lost profits. As the rule calls out, Brandywine should also now be in a position to make available for inspection and copying the unprivileged documents and other evidentiary materials on which it will rely for damages, save and except for those not yet known to it despite the type of diligent pre-suit investigation required by Rule 11. The foregoing relates to lost profits."

With respect to a reasonable royalty calculation, the district court found that Brandywine should be in a position to state the claimed royalty rate, state the claimed royalty base and then multiply the two. "As for a reasonable royalty, as to each accused product, Brandywine should already be in a position to state the claimed royalty rate and state the claimed royalty base, and then multiply the two for a total, specifying the information by year. This can and should be done now even though subsequent discovery may eventually warrant a modification of the calculation. As above stated, the rule further requires that the patent plaintiff make available for inspection and copying all unprivileged documents and other evidentiary material on which the reasonable royalty computation is based, providing a log for those withheld on claim of privilege. This must be done without waiting for a formal request. Although the rule does not say so expressly, it is a reasonable view of the rule -- and this order so holds -- that the computation must call out the particular materials relied on and identify them in some plausible way so as to clarify the basis for the disclosed computations."

The district court further expanded upon this by requiring Brandywine to list each of the Georgia Pacific factors on which it currently intended to rely and to provide the supporting evidence in its possession for each of the factors. This would include identifying any license agreements in its possession and not waiting for "better" comparables that may be found during discovery. The district court also stated that "[i]f fairness dictates, the jury will be told of the original comparables even while the patent plaintiff may be permitted to argue for the more lucrative comparable. The patent plaintiff should not be allowed to evade the duty to lay out its damages contentions at the outset of the case merely because it hopes it can frame more handsome contentions after discovery."

The district court also required the defendant to identify any license agreement that it may use to support its own view of a reasonable royalty as part of the initial disclosures.

Finally, the district court denied Cisco's request to preclude Brandywine's claims for damages at this early stage of the litigation based on the initial disclosures but did require Brandywine to provide supplemental disclosures with regard to damages within 21 days and after those disclosures the district court would consider whether preclusion was appropriate.

Brandywine Communications Technologies, LLC v. Cisco Systems, Inc., Case No. C 12-01669 WHA (N.D. Cal. Nov. 13, 2012)

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