The first two articles in this series discussed the importance of the initial casting of the IP litigation team and the first steps in laying the groundwork to ensure that ongoing litigation expenses are controllable and predictable. This article provides some ideas for early strategic decisions that can significantly reduce litigation costs.
Implement cost-effective e-discovery strategies early
E-discovery is often one of the most significant costs associated with litigating an intellectual property case. These costs often reach well into six figures, with the majority of costs incurred for document review. According to a Rand Corporation study, $0.73 of every dollar spent on e-discovery goes to document review.
Much of this document review occurs to weed out hundreds of thousands, if not millions, of totally irrelevant documents. As Federal Circuit Chief Judge Randall Rader assessed in 2011, “I saw one analysis that concluded that .0074 percent of the documents produced actually made their way onto the trial exhibit list — less than one document in ten thousand.”
However, these costs can be effectively managed by implementing several strategies. First, the parties should consider adopting the e-discovery model order drafted by the Federal Circuit Advisory Council. The model order contains several measures intended to help rein in the costs of discovery, such as excluding e-mail and metadata from FRCP Rule 34 and 45 requests, imposing presumptive limits on custodians and search terms for e-mail requests, and shifting costs for disproportionate e-discovery requests.
Next, parties should consider taking advantage of the latest technological tools that prioritize documents for document production and document review. New technology enables parties to weed out irrelevant documents early in the process, saving significant costs for both the producing party and the reviewing party.
One method especially helpful for the reviewing party, called predictive coding, is accomplished by performing an initial, human review of a sample set of documents. These coding determinations made on the sample set are then processed by the predictive coding machine, which identifies and utilizes the human coding patterns to accurately predict categorizations for the remaining documents.
Using predictive coding technology not only saves document review expenses, but also substantially increases the likelihood of finding the “smoking gun” documents early in the litigation. Indeed, when key documents are identified in the early stages of litigation (e.g., clear evidence of invalidating prior art in a patent infringement case), outside counsel can more accurately determine your company’s risk and formulate the overall case strategy early in litigation, thus advancing the possibility of early settlement.
Finally, the parties should try to be as cooperative as possible in negotiating limits on e-discovery. Lack of cooperation between the parties and expensive discovery disputes can quickly erode any potential savings attributed to smart use of e-discovery orders and technology.
Agree on early depositions
All parties to the litigation may find significant benefit in taking limited fact-finding depositions of the opposing party early in the case. This can be accomplished using an agreement under which the parties consent to be deposed again on the same general topics once the litigation progresses. These early depositions can narrow issues and identify the key areas of dispute prior to any investment in document review or the drafting of written discovery. Later in the litigation, parties that utilize this strategy can significantly reduce the number of documents to produce or review, and the related costs, by narrowly tailoring their requests in light of the information they learned in the early depositions.
Consider requesting bifurcation
The idea of bifurcating liability and damages is gaining popularity with intellectual property litigants. Two types of bifurcation may be especially beneficial: traditional bifurcation and reverse bifurcation.
Traditional bifurcation is the separation of discovery and trial on the issues of liability and damages. By Rule 42(b), courts may order such bifurcation in cases when it is “in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy.”
Although some judges disfavor bifurcation, other judges find that this option saves time and resources. For example, Delaware’s District Court Judge Sue L. Robinson has entered two recent decisions holding that bifurcating damages should occur "in all but exceptional patent cases." Judge Robinson concluded in her decisions that bifurcation eliminates discovery disputes and Daubert motions relating to damages documents and expert opinions until after all the liability issues have been resolved. Of course, the avoidance of these disputes also creates significant cost savings for the litigants as well.
Another strategy is "reverse bifurcation," in which the damages phase occurs first in the litigation. This sequence is particularly helpful in cases where the defendant believes damages are significantly less than the plaintiff apparently presumes, and especially in patent infringement cases where a patent holder (often a “non-practicing entity”) has sued many parties, including parties for which damages are very limited. In these cases, prior to the entry of a scheduling order, defense counsel should consider filing a motion requesting that the court force the patent holder to identify the accused products early on, and allow the parties to engage in limited discovery solely on damages. Early clarification of these issues may greatly simplify discovery and perhaps eliminate the need for an expensive merits determination. Moreover, if the patent holder has a realistic understanding of potential damages (as opposed to blindly pursuing its pipe dream that all of the defendant’s products infringe), the patent holder is more likely to agree to an early and reasonable settlement.