Special Master (Soon-to-Be Sitting District Judge) Williams Partially Grants Motion to Strike Damages Theories

September 7, 2022

Publication| Intellectual Property

In TQ Delta, LLC v. Comcast Cable Communications LLC, No. 15-611-RGA (Aug. 11, 2022), and related patent actions, Special Master Gregory B. Williams partially granted the defendants’ motion to strike as untimely certain damages theories.  Earlier, the special master had ordered the plaintiff to supplement its Fed. R. Civ. P. 26 disclosures and damages interrogatory responses to identify the factual basis for its damages theories and to identify the documents on which it would rely.  The defendants asserted that a further supplement served ten weeks after the close of fact discovery, as well as the plaintiff’s damages expert report, disclosed five new reasonable royalty theories and a new royalty structure, based on documents not identified during fact discovery. 

The defendants objected that three damages theories were based on a publicly available, albeit not produced, development agreement between TiVo and DirecTV and related trial transcripts from an earlier litigation between those companies.  The special master found that the possibility of such reliance had been disclosed but that applying the royalty rate derived from those documents to the DirecTV service fees, rather than the defendants’ own service fees, had not been.  Two other theories, however (based on the costs of the defendants’ own boxes and related financial data), were found to be permissible refinements of earlier disclosures, since the use of such costs and data had been disclosed during fact discovery. 

The defendants also challenged all of the above theories as based on a per-subscriber-per-month royalty structure rather than the per-device theory disclosed during fact discovery.  The special master ruled that the plaintiff had timely disclosed a per-subscriber-per-month royalty structure, but by application to the defendants’ own fees, rather than (as in the supplemental responses and expert report) to DirecTV’s monthly fees.  Accordingly, the special master found this royalty structure to be untimely.

The special master then struck under the Third Circuit’s Pennypack factors the damages theories that were found to be untimely.  The special master found that the defendants were prejudicially deprived of the opportunity to take discovery into whether DirecTV services fees were a suitable proxy for purposes of damages; further, the additional time and expense that would be needed for such discovery made the prejudice incurable and would disrupt trial (even though trial had not yet been scheduled).  The delay in asserting the new theories was found to be unjustified in light of the previous disclosure order and the plaintiff’s obligations under Rule 26.  Finally, the special master found that the new theories were not so important as to excuse their untimely disclosure, since the plaintiff had other damages theories available that were not challenged on this motion.  

The decision is available here.

Key Point: The special master recognized that in sophisticated, complex litigations with parties represented by competent counsel—which it found this case to be—courts have been more willing to exclude untimely disclosures under the Pennypack analysis.

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