I hope the Third Circuit one day revisits the Pennypack factors, which are what it directs the lower courts to apply to determine whether late disclosures are subject to sanctions such as preclusion.
The factors can be lenient on parties that are very late in disclosing critical facts. Pennypack sets up a system where, oddly, the more critical the late-disclosed fact is, the later the party can be, and the less likely it is to be excluded. Isn't that backwards?
In practice, the factors often seem to turn on whether there is incurable prejudice, and that can be hard to establish. But a rule that "you can just fix your discovery later if it doesn't cause incurable prejudice" rewards parties who delay, and can essentially punish diligent parties who timely disclose things (as their diligence gives up a strategic advantage that they'd have if only they don't try so hard).
But that's the Third Circuit case law we have.
We saw another example of Pennypack's impact this week in Merck KGaA v. Hopewell Pharma Ventures, Inc., C.A. No. 22-1365, D.I. 164 (D. Del. Aug. 28, 2024), where the patentee failed to disclose its real conception date until just over a month before the close of fact discovery:
ORAL ORDER: The Court has reviewed the Apotex Defendants' ("Defendants") Motion to Strike ("Motion") . . . . With their Motion, Defendants move to strike Plaintiff's supplemental responses to Defendants' Interrogatories ("ROGs") Nos. 1 and 2 and Plaintiffs' validity contentions[ ]to the extent that those responses/contentions rely on an earlier (i.e., Nov. 25, 2003) priority date based on conception. [T]he Court agrees with Defendants that Plaintiffs' April 4, 2024 supplementation of their responses to ROG Nos. 1 and 2 to assert this new priority date for the first time (supplementation that came just over a month prior to the close of fact discovery) was untimely. . . . The Court understands that it takes some time for even diligent counsel to investigate whether an earlier priority date is justified in a case like this. But under the circumstances here, the Court concludes that Plaintiffs should have supplemented this response months before they did. And so their April 4, 2024 supplementation was untimely pursuant to Fed. R. Civ. P. 26.
Worse, the supplement came seven months after the initial response, and the accused infringer had been asking for the supplement for months:
The new priority date was disclosed almost seven months after Plaintiffs' initial response to the ROGs (in which they had asserted a later-in-time priority date of Dec. 22, 2004)[ ]after Defendants had, for months, been inquiring about whether the asserted priority date would change (and Plaintiffs had been putting off responding to Defendants' entreaties). . . .
The patentee also knew the issue was important:
It involved an issue that Plaintiffs had to know was very important to the case (because Defendants were asserting that a key reference, Bodor, anticipates the patents, and Bodor predated the previously-asserted Dec. 22, 2004 priority date).
And the patent possessed all of the facts it needed for the new date:
And it involved an issue as to which all of the facts needed to justify the new, earlier priority date were solely in Plaintiffs possession.
Nonetheless, applying the Pennpack factors, the Court had to deny the motion to strike. The patentee emerged completely unscathed. I won't cut-and-paste the analysis entirely, but here is how the Pennypack factors broke down:
- Defendants were "at least somewhat surprised" by the late disclosure.
- Defendants did not establish they were significantly prejudiced.
- There was no impact to the trial date
- There was no showing of bad faith.
- The information is important.
Thus, the Court found that all but one of the factors favored the patentee, and denied the motion. But it offered some guidance on how the accused infringer could potentially have made a better case here:
[W]ith regard to prejudice (factor one), the ability of the moving party to cure any such prejudice (factor two) and the extent to which denying the motion would affect the trial date (factor three), Defendants did not make a strong showing here. Defendants had the opportunity to tell the Court exactly what type of discovery they would have sought had they known of the new priority date earlier in the case (and that, under the circumstances here, they would still need to seek). But their briefing on this issue was vague. . . . Indeed, Plaintiffs note to the contrary that: (a) because the disclosure came well before inventor depositions, Defendants were able to question the inventors about the new asserted priority date; (b) Defendants' final invalidity contentions lay out pages of analysis purporting to challenge the new priority date; and (c) Defendants have multiple
Of course, the reality may be that there is not a whole lot they would have done differently as far as seeking discovery. But knowing the actual conception date earlier would have allowed them to develop the case differently, potentially emphasizing different, less-risky prior art, or doing more prior art searches with the new date. Now it's too late.
The Court found no bad faith on the patentee's part (only a lack of diligence), but suggested the kinds of conduct could have resulted in a finding of bad faith:
With regard to the fourth factor (bad faith or willfulness in failing to comply), the Court does not have a basis to conclude Plaintiffs acted in bad faith. This is not a case where Plaintiffs have repeatedly sandbagged Defendants or have otherwise played fast and loose with the rules. Nor is it one where the Court has other information to suggest bad faith. At most, it seems, Plaintiffs were dilatory here.
What could the accused infringer have done here?
They could have at least forced the plaintiff to answer earlier by taking it to the Court earlier in discovery—that has worked in the past. Of course, that would have required bothering the Court with a discovery dispute, and you can only do that so many times before you start to risk consequences. There may not have been much they could do.
Maybe one day the Third Circuit will revisit this case law in light of modern litigation practices, and tweak it to reward diligence rather than delay. Until then, these kinds of orders are definitely worth taking into account as you consider the risk-reward calculus of whether to move to compel complete deficient discovery responses now, or wait and seek preclusion if the other side tries to fix them later.
If you enjoyed this post, consider subscribing to receive free e-mail updates about new posts.
