The Software IP Report

Patent Defendant Allowed Discovery of Non-Accused Products

By Charles Bieneman

Categories: Patent Civil Procedure, The Software IP Report

What is the permissible scope of discovery related to a defendants’ non-accused products in a patent case? In Positive Techs., Inc. v. Sony Elecs., Inc., No.: 11-cv-2226 SI (KAW) (N.D. Cal. Feb 26, 2013), the defendants were denied a protective order after the plaintiff sought discovery related to non-accused products; the plaintiff contended that the information sought was relevant to its damages analysis.

The defendants’ E-Readers, the Kindle and the Nook, were accused of infringing patent claims related to a “controller drive scheme” for device displays. The plaintiff sought sales and revenue data for E-Reader content, services, and accessories, as well as information concerning the relationship between the E-Readers and these non-accused items.

The defendants argued that the plaintiff would only be entitled to this discovery if it could establish that the entire market value rule applied, i.e., “that the patent-related feature of the E-Reader was the basis for customer demand.” However, the district judge had previously rejected this argument, and the present magistrate judge agreed. Information relating to non-accused products could be relevant to establishing a reasonable royalty rate and/or royalty base.

Nonetheless, the court did think that the plaintiff’s pursuit of information relating to non-accused products was overly broad. Supplemental briefing had been ordered in which the plaintiff was to clarify the link between non-accused products and its damages analysis. While the plaintiff did not respond with a more detailed damages position, the plaintiff did identify certain Georgia-Pacific factors to which it claimed the requested information was relevant. Further, the plaintiff stated that it sought only to calculate a reasonable royalty rate, and not a royalty base.

Accordingly, under the broad discovery regime of the Federal Rules, the court thought that the plaintiff was entitled to discovery under the Georgia-Pacific factors it had identified. These factors, which “lay out different considerations that might be relevant to the hypothetical negotiation,” could be informed by the discovery the plaintiff sought.

Further, the court stated that LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012), could limit admissibility of evidence relating to non-accused products, but did not necessarily limit discovery. In LaserDynamics, the Federal Circuit held that “in cases where the [entire market value rule] did not apply, it would be error to admit into evidence sales and revenue information pertaining to the value of an entire multi-component product, rather than sales and revenue information for the smallest patent-practicing unit in the product.” However, “relevance for discovery is broadly construed.” It would have been improper to limit the plaintiff’s discovery “at this stage of the proceedings.”