Effective January 17, 2017, the Northern District of California’s Patent Local Rules now require earlier disclosure of damages theories and contentions in patent cases.
The most significant change is reflected in the additions of Patent L.R. 3-8 and 3-9 requiring “Damages Contentions.” Newly added Patent L.R. 3-8 requires patent owners to serve, within 50 days after service of Invalidity Contentions, Damages Contentions to “identify each category(-ies) 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, including lost profits, price erosion, convoyed or collateral sales, reasonable royalty, and any other form of damages.” Patent L.R. 3-9 then requires the accused infringer to respond to the patent owner’s Patent L.R. 3-8 contentions within 30 days, identifying “specifically how and why it disagrees with those contentions.” Patent L.R. 3-8 and 3-9 both require a party to “identify the information it requires” if it is unable to provide complete disclosures pursuant to these rules.
In addition, damages issues now take a more central role from the very beginning of a patent case. Starting with the Initial Case Management Conference, the parties are now required to discuss the scope and timing of damages discovery, as well as provide the court with a “non-binding, good-faith estimate of the damages range expected for the case along with an explanation for the estimates.” Patent L.R. 2-1(b)(5). If a party is unable to provide such an estimate, it must explain why and indicate what specific information is needed before it can do so, and when it can do so.
Lastly, within 14 days of the Initial Case Management Conference, Patent L.R. 3-1 now requires disclosure of “the timing of the point of first infringement, the start of claimed damages, and the end of claimed damages,” as well as any supporting documents required under Patent L.R. 3-2. For example, Patent L.R. 3-2 now specifically requires disclosure of all license agreements that: (1) transfer an interest in any patent-in-suit, (2) the patent owner contends are comparable to a license that would result from a hypothetical reasonable royalty negotiation, and (3) may be used to support the patent owner’s damages case. Documents related to any FRAND commitments with respect to the patents-in-suit must also be disclosed. Similarly, the opposing party must also disclose documents supporting its damages theories under Patent L.R. 3-4, along with its Invalidity Contentions.
These changes to the Patent Local Rules mean that parties can now no longer postpone consideration of damages issues and discovery until later in a case. While this shift may lead to greater litigation expense at the outset of the case, the rule changes are clearly geared to earlier valuation for purposes of potential resolution, and for implementing proportional discovery.