Should the Federal Circuit's Model E-Discovery Order Change the Way You Conduct E-Discovery for Patent Litigation?, Contributed by Sapna Walter Palla, Kaye Scholer LLP
Anyone who has been involved in moderately complex patent litigation is aware of the immense time and expense devoted to electronic discovery (“e-discovery”). The laborious process of negotiating with adversaries over search terms, custodians and metadata and then culling, producing and reviewing the many gigabytes of electronic data, particularly electronic communications, often yield little probative information. To reduce and streamline e-discovery costs, Chief Judge Randall R. Rader of the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) introduced the Model Order on E-Discovery in Patent cases (“Model Order”) on September 27, 2011. This article describes the impetus for the Model Order, its key aspects and its implementation by district courts. It further discusses whether and how litigants and potential litigants should modify their strategy in complying with ediscovery including collecting, reviewing and producing documents for litigation, preparing discovery requests, negotiating with opposing counsel, drafting litigation holds and preserving electronically stored information (“ESI”). Finally, this article addresses whether the approach taken under the Model Order is conducive to non-patent complex civil litigations.
Impetus for the Model Order
In the current economic environment, where it has become imperative for law firms and legal departments to better manage costs within the ediscovery process, escalating ediscovery costs are a major source of concern. Greater reliance on electronic communications has radically increased the volume of ESI, as well as sources of ESI that must be mined during the ediscovery process, whether stored in social media, smartphones, or portable devices such as iPads and laptops. Cloud computing, where data is saved over a network of servers, has complicated the process even further. The direct impact has been an increase in the complexity and costs associated with the collection, processing, reviewing, storage, production and management of ESI. Moreover, these costs are exacerbated by attorneys routinely using discovery as a tactical weapon to make overbroad requests for ESI increasing the time and money expended without any real benefits in identifying documents most relevant to the litigation.
Patent cases in particular, tend to suffer from “disproportionally high discovery expenses.”1 Voluminous scientific and technical materials which span a number of years are generally the target for ediscovery in patent cases. On average, the cost of litigating a patent case to trial is between three to ten million dollars with costs increasing in cases with multiple patents.2 More often than not, ediscovery is a significant component of this cost. Indeed, by some accounts, costs of ediscovery in intellectual property cases are “almost 62% higher” than in other types of cases.3
In his remarks introducing the Model Order at the Eastern District of Texas Judicial Conference, Judge Rader acknowledged that cost is the “greatest weakness of the U.S. court system” and that “discovery excesses” are a driving factor.4 Despite the substantial sums spent on document discovery, he noted that only “0.0074% of the documents produced actually made their way onto the trial exhibit list — which is less than one document in ten thousand.”5 Moreover, the value of electronic mail or other forms of electronic correspondence (collectively “email”) as relevant evidence in patent cases is questionable. Since most discovery in patent litigation centers on “what the patent states, how the accused products work, what the prior art discloses, and the proper calculation of damages,” “far reaching ediscovery, such as mass email searches, is often tangential to adjudicating these issues.”6 And as Judge Rader noted, “of the thousands of appeals” he had evaluated, “email appears even more rarely as relevant evidence.”7
In light of these concerns, the Advisory Council of the Federal Circuit created a special ediscovery subcommittee8 to draft a Model Order to address the increasingly burdensome costs of ediscovery and to guide district court judges and magistrates toward limiting ediscovery in patent cases. While not legally binding, the Model Order is intended to be “a helpful starting point for district courts to use in requiring the responsible, targeted use of ediscovery in patent cases.”9 It is also intended to reduce the propensity of litigants to use the ediscovery process as a fishing expedition. As the Advisory Council stated, the goal of the Model Order is to “streamlin[e] ediscovery, particularly email production, and requir[e] litigants to focus on the proper purpose of discovery – the gathering of material information – rather than [on] . . . unlimited fishing expeditions.”10
Key Aspects of the Model Order
The Model Order, which is posted on the Federal Circuit’s website, provides for, among other things, exchange of core documentation at the beginning of a case, stringent restrictions on email discovery, prohibition on production of metadata absent a showing of good cause, cost shifting for disproportionate ESI production requests and limitation of potential waivers of attorney-client and work-product protected ESI.11
— Exchange of Core Documentation
The Model Order requires parties to begin the discovery process by exchanging initial disclosures and “basic documentation about the patents, the prior art, the accused instrumentalities and the relevant finances.”12 It encourages exchanging these materials promptly early in the case to “promote efficient and economical streamlining of the case.”13
— Limitations On Email Discovery
The main focus of the Model Order is on limitations in email discovery. General ESI production requests under Federal Rules of Civil Procedure (“FRCP”) 34 and 45 are presumed not to cover requests for email. Instead, the Model Order requires parties to “propound specific email production requests . . . for specific issues, rather than general discovery of a product or business.”14 Similar to FRCP 30, which limits the number of depositions a party can take during litigation, the Model Order endorses the use of limited search terms and custodians for email requests. It requires that email production requests “identify the custodian, search terms, and time frame” and requires parties to “cooperate” on those items.15 Moreover, the number of search terms and custodians is limited to five unless otherwise agreed upon by the parties or allowed by the Court “upon showing a distinct need based on the size, complexity and issues of this specific case.”16 However, the Court will only consider five additional custodians and search terms per party. The Model Order also requires that the search terms are narrowly tailored to particular issues and discourages the use of “indiscriminate terms” such as the producing company’s name or the product name unless combined with narrowing search criteria.17
— Deferral of Email Discovery
All requests for email are deferred to after the parties have exchanged the core documentation to allow parties to make more informed requests for email.18
— Prohibition on Production of Metadata
Parties are not required to produce metadata, other than basic information such as the date and time the document was sent and received and the sender and recipient information.19 Any additional metadata requests require a showing of good cause.20
— Shifting of Costs for Disproportionate ESI Requests
The Model Order contains a general provision that “[c]osts will be shifted for disproportionate ESI production requests pursuant to Federal Rule of Civil Procedure 26.”21 If a party serves requests for additional custodians or search terms which are beyond what the parties have agreed to or the court has allowed, the requesting party will “bear all reasonable costs caused by such additional discovery.”22 The Model Order also sets forth other bases for cost shifting. The Court may consider a “party’s nonresponsive or dilatory discovery tactics,” “efforts to promote efficiency and reduce costs” and “use of narrowing search criteria” in determining whether to shift costs for disproportionate discovery.23
— Non-Waiver of Attorney-client Communication or Work-Product Protected ESI
In accordance with the non-waiver protections of the 2008 amendments to Federal Rule of Evidence 502, the Model Order provides parties with protection against waiver of the attorney-client and work-product privileges, both in the pending case and in any other federal or state proceeding, when ESI containing protected information is inadvertently produced.24 The Model Order also clarifies that “mere production of ESI” as part of a “mass production” of documents shall not constitute a waiver for any purpose.25
Implementation of the Model Order by Some District Courts
During his remarks, Judge Rader pointed out that for the Model Order to have a “real impact,” district court judges will need to put it into practice as part of the court’s “inherent power to control their docket to further ‘economy of time and effort for itself, for counsel and for litigants.’”26 Some judges have already followed Judge Rader’s directive in patent cases before them.
The Eastern District of Texas has been particularly active in implementing the provisions of the Model Order. Just two days after it was adopted, Magistrate Judge Everingham, an author of the Model Order, limited the scope of email searches in Stambler v. Atmos Energy Corp.27 He ordered the parties to “agree to a list of 5 custodians and 10 search terms” unless they show good cause.28 In addition, he stated that “metadata need not be produced” but “shall be preserved” and that any further expansion of metadata will be evaluated on a “case by case” basis.29 In October 2011, two other Eastern District of Texas judges issued orders with provisions similar to the Model Order. In Effectively Illuminated Pathways v Aston Martin Lagonda, Judge Love ordered that no party is obligated to search for or produce metadata without a showing of good cause and that only after exchanging core documentation, can parties request searches of emails of up to five custodians using “the fewest and most relevant search terms.”30 Judge Love also posted the Model Order on his website as an example of an order typically used by him in patent matters. In Intravisual Inc. v Fujitsu Ltd., Judge Folsam’s discovery order contains provisions on cost shifting, restrictions on production of email and metadata and non-waiver of protected information which are almost verbatim to the Model Order.31
In November 2011, Judge Paul Grewal of the Northern District of California also considered the provisions of the Model Order while ruling on an ediscovery motion in DCG Systems, Inc. v. Checkpoint Tech., LLC.32 The defendant sought an order from the court based on the Model Order but the parties disagreed about its restrictions on the timing and scope of email production. In granting the motion and implementing provisions of the Model Order, Judge Grewal commented that “only through experimentation of at least the modest sort urged by the Chief Judge will courts and parties come to better understand what steps might be taken to address what has to date been a largely unchecked problem.”33
How Should Litigants and Potential Litigants Modify E-Discovery in Light of the Model Order?
Given that in the short time since its introduction the Model Order has already been accepted in patent-heavy jurisdictions, it is very likely that it will become the framework for courts in guiding e-discovery in patent cases. The following are some suggestions for litigants and potential litigants in patent matters to modify their approach to e-discovery in light of the Model Order.
— Insist on Early Exchange of Core Documentation
Since the Model Order encourages the “prompt and early production” of “basic documentation about the patents, the prior art, the accused instrumentalities, and the relevant finances,”34 litigants should insist that these documents be exchanged as early as possible, possibly even before exchange of initial disclosures. An analysis of the initial discovery results is essential to crystallizing the issues in the case and making informed decisions about the most pertinent custodians and search terms.
— Determine the Amount of and Level of Complexity of E-Discovery Required Before Agreeing on Custodian and Search Term Limits
While the five custodian and five search term default limitations should help to reduce the burden and cost of electronic document productions, litigants need to evaluate whether in their particular case, the default limitations are sufficient to obtain the necessary discovery. For example, in cases where antitrust counterclaims are involved, broader email discovery may be justified. If more than the default number of custodians or search terms is determined to be necessary, early and ongoing discussions with the adversary are key to promoting efficiency and avoiding discovery disputes. In addition, early notice to the adversary and requests tethered to information in the core documentation will help justify requests beyond the default limitations. Conversely, if a party expects to be at the receiving end of extensive electronic requests, it can rely on the proposed default limitations to negotiate reasonable limits on custodians and search terms.
— Evaluate if Exclusion of Metadata Will Result in Any Real Cost Savings and Efficiencies
Since most lawyers are not fully familiar with the intricacies of metadata, early consultation with technical experts as well as communications between the parties’ technical experts will help clarify whether eliminating metadata will deter or assist in a speedier and more efficient review of the electronic documents. For example, metadata is often automatically collected in the ediscovery process without additional costs and its exclusion could increase costs for parties whose document review technologies use metadata to organize and analyze productions. Thus, parties should carefully evaluate whether metadata restrictions will result in any real cost savings and efficiencies.
— Build a record to Deflect Cost Shifting Burdens
While the Model Order has several provisions for cost shifting considerations, it does not address whether such costs include attorney review time and preparation of a privilege log, which are typically the most expensive stages of the process. Parties that need discovery beyond the default limits of the Model Order should strive to build a record to show reasonable efforts in promoting efficiency and address who will bear the additional costs associated with attorney review time and preparation of a privilege log. This will place them in a better position to negotiate reductions in cost shifting burdens and avoid protracted motion practice down the road.
— Limit Requests for Production of Non-Email ESI
Though the Model Order focuses on email, there is sufficient basis to limit the production of other forms of ESI. Judge Rader stated in his remarks that “orders requiring the production of all relevant documents leads to waste.”35 The Advisory Council added that “[r]outine requests seeking all categories of . . . [ESI] often result in mass productions of marginally relevant and cumulative documents.”36 The Model Order itself provides that costs “will be shifted for disproportionate ESI production requests.”37 These statements should be used to negotiate limitations in production of non-email ESI.
— Negotiate Limitations in Preservation of ESI
Litigants as well as potential litigants are subject to preservation obligations which can be expensive and overwhelming. The Model Order does not directly address a party’s preservation obligations which implicate when and how broadly litigation holds should be implemented and for how long data should be preserved. Until there is more clarity, potential litigants should continue to implement litigation holds when they anticipate litigation. However, since the Model Order encourages a limit on the number of custodians, the scope of the litigation hold could arguably be narrowed provided that the custodians selected are the key individuals with pertinent information. In addition, once the litigation begins and the parties agree upon the key custodians, the number of custodians to whom the litigation hold applies can be reduced even further. The recent decision in Pippins v. KPMG LLP provides support for this approach. Because of high preservation costs, KPMG moved for a protective order to limit the number of hard drives it was required to preserve while the case was stayed. Though the court denied the motion, it stated that KPMG was only obliged to preserve the data of “key players” and that issues of cost-shifting could not be resolved till discovery proceeded and the parties could determine what materials were on the hard drives and whether those materials contained responsive information.38 Moreover, communications with adversaries to advise them that the litigation hold is being narrowed is essential to avoid motion practice about preservation obligations.
Is the Model Order Conducive to Non-Patent Complex Civil Litigations?
It is not clear whether the Model Order, or something similar, will be adopted in non-patent complex civil litigations. While emails are generally not as important to claims of infringement or validity in patent litigations, in non-patent complex civil litigations where emails often provide key evidence, courts may not be as likely to adopt the stringent restrictions on email production. However, the Model Order’s requirement that core documentation be exchanged before requests for email production would promote efficiency in any type of complex litigation and help reduce unnecessary and overbroad requests. The non-waiver provisions of the Model Order and restrictions on metadata would also help reduce costs associated with collection and review of electronic data.
The need for consistent and predictable treatment of ESI across jurisdictions, particularly as it relates to issues of preservation and sanctions, has been recognized even in non-patent matters. In 2010, the Civil Rules Advisory Committee of the Judicial Conference of the United States convened the Duke Conference to address calls for reform of the e-discovery process. The Committee met most recently in September 2011 to discuss issues of over-preservation, inconsistent sanctions, ineffective Rule 26(f) conferences and the role of technology.39 Thus, it is likely that the federal rules will be modified to address e-discovery and that some of the tenets of the Model Order will be incorporated.40
The Model Order is a timely tool for litigants to navigate the morass of e-discovery in patent cases. While it is too early to determine whether it will promulgate a permanent shift in e-discovery, it has already started to lower litigants’ expectations as to the scope of permissible discovery. Regardless of whether a district court adopts the Model Order in its entirety, use of the Model Order as a starting framework and open communications with adversaries about the ediscovery needs of a case will be important to successfully conducting patent litigations.
Sapna W. Palla counsels and represents clients in a variety of matters, including intellectual property, patent, bankruptcy litigation and complex commercial issues. Ms. Palla has practiced before both state and federal courts, including appeals to the Federal Circuit, and has experience in alternative dispute resolution such as arbitration and mediation. In the intellectual property area, Ms. Palla’s practice encompasses an array of technologies including pharmaceuticals and biotechnology.
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