If the other side is giving you spotty details on damages during Rule 26 initial disclosures, we may have a case for you. Judge Williams hasn’t issued opinions from the bench yet, but this Special Master opinion from last year challenges the “we’ll wait for expert reports” excuse with respect to damages contentions.
In TQ Delta, LLC v. DISH Network Corp., C.A. 15-614-RGA (D. Del. Oct. 2021), defendants sought to compel plaintiff to supplement its initial disclosures and contentions on damages, and Judge Williams granted the motion.
Rule 26(a)(1)(A)(iii) Computation of Damages
Rule 26(a)(1)(A)(iii), requires “a computation of each category of damages claimed by the disclosing party . . . .” Plaintiff said that it “‘intend[ed] to seek damages adequate to compensate for the infringement, but in no event less than a reasonable royalty, together with interest and costs as fixed by the Court, along with treble damages and attorneys’ fees’ and further that ‘[i]n no event should the damages to which [plaintiff] is entitled amount to less than a reasonable royalty.” Id. at 10. Was that good enough? No!
Georgia-Pacific Factors
Judge Williams deemed plaintiff's initial damages disclosure to be deficient. Specifically,
[I]n a patent infringement action, Rule 26 disclosures require that a plaintiff disclose, among other things, its claimed royalty rate and royalty base, the Georgia-Pacific factors it will rely upon as well as "all evidence it will rely on for that factor," and any and all license agreements that it contends are comparable.
Id. at 8. Merely naming the factors is not enough. Id. at 12-13.
In this case, plaintiff provided legal explanations for both of its methods to calculate a reasonable royalty, but Judge Williams found that this was insufficient, because plaintiff did not provide any of the factual bases that would support applying these methods. Id. at 11-12.
Example factual bases he wanted to see included: identifying the royalty base, the appropriate royalty rate, identifying any relevant convoyed or collateral sales that are or may be incorporated into the damages analysis, identifying any relevant recurring or subscription revenue that is or may be incorporated into the damages analysis. Id. 11-12.
What About Expert Reports?
But wait. Aren’t a party’s damages dependent upon expert opinion to some extent?
Yes, Judge Williams acknowledged that he expected the initial calculation of damages to be updated, refined, and/or supplemented by an expert report and testimony consistent with the scheduling order deadlines—but this does not remove plaintiffs’ responsibility to provide an initial calculation of damages that is broken down by category and supported with factual bases and evidentiary material. Id. 9-10. A plaintiff may not “punt its obligation under Rule 26 to adequately disclose its computation of damages.” Id. at 10.
Evidentiary Support in Damages Contentions
Judge Williams granted defendants’ motion to compel plaintiff to supplement its initial disclosures and supplement its answer to a damages contention interrogatory, in which the plaintiff objected that such discovery was the subject of expert opinion (a common practice). Id. at 14. In the interrogatory response, plaintiff referred to its “reliance on evidence without specifically identifying any documents.” Id. at 15.
Judge Williams found that the limited number of references that plaintiff included in support of its claims for damages were incomplete and only served as examples of such documents as opposed to a complete listing. Id. 15. He ordered a complete listing of the documents and/or other evidence to support plaintiff’s damages contentions, even before expert reports were exchanged. Id. at 15-16.
In Summary
Lack of expert reports may not be a good enough reason to avoid breaking damages down by category, identifying specific Georgia-Pacific factors, and providing factual evidentiary support for those contentions, even at the Rule 26 initial disclosure stages.
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