NORA BARRY FISCHER, District Judge.
Now pending before the Court is Defendant ZOLL LifeCor's ("ZOLL") Motion for Show Cause Order Regarding Post-Daubert Damages and supporting attachments, filed on September 5, 2017. (Docket No. 724). Plaintiff Koninklijke Philips ("Philips") filed a response and supporting attachments on September 20, 2017. (Docket No. 738). On September 27, 2017, ZOLL filed a reply brief and supporting attachments. (Docket No. 742). Philips filed a sur-reply on September 29, 2017, to which ZOLL filed a sur-reply on October 2, 2017. (Docket Nos. 745, 748). Upon Philips's request, the Court held oral argument on October 13, 2017. (Docket Nos. 750, 751). Because the parties will conclude their current settlement negotiations by November 3, 2017, the Court issued its Order immediately after oral argument on October 13, 2017, noting that a written opinion would follow. (Docket No. 752). Specifically, the Court granted ZOLL's motion, ordering Philips to identify the amount and evidentiary basis of record, and/or whether the record requires supplementation, for any damages claim that Philips believes may have survived this Court's Memorandum Order and Opinion regarding the parties' Daubert Motions, on or before October 20, 2017, at 5:00 p.m. (Id.). In support of its Order, the Court's analysis follows.
Philips brings this civil action against ZOLL for patent infringement under 35 U.S.C. § 271. The patents in suit are U.S. Patent Nos. 5,593,427; 5,607,454; 5,735,879; 5,749,904; 5,749,905; 5,803,927; 5,836,978, and 6,047,212 (the "Patents-in-Suit"). These patents are directed at electrotherapy methods for defibrillators, allegedly including ZOLL's LifeVest wearable defibrillator. ZOLL denies that it infringes any claim of the Patents-in-Suit. ZOLL has also asserted affirmative defenses for non-infringement and invalidity. (Docket No. 24).
Presently pending before the Court is ZOLL's Motion for Show Cause Order Regarding Post-Daubert Damages. In its motion, ZOLL requests that Philips be required to identify the amount and evidentiary basis for any damages claim that may have survived the Court's Daubert Order dated July 25, 2017. (Docket No. 718). In its Daubert Order, the Court granted, in part, and denied, in part, ZOLL's motion to exclude the testimony of Mr. John Jarosz, Philips's damages expert. (Id. at 12-13). Specifically, the Court excluded the following: (1) Mr. Jarosz's discussion of an alleged reduction in the cost of the accused products; (2) the 50% apportionment rate as expressed in footnote 359 of Mr. Jarosz's report; and (3) the discussion of the importance of the patents-at-issue, Mr. Jarosz's conversation with Dr. Patrick Wolf, and the patented features being a "significant driver" of the "majority of" the value of the WCD 3000. (Id.). The Report and Recommendation of Special Master Gale R. Peterson, (Docket No. 688), was otherwise adopted as the Court's opinion.
Although this matter is a patent case, it is governed by the law applicable in the United States Court of Appeals for the Third Circuit. To this end, Federal Rules of Civil Procedure 16 and 26 are applicable. Rule 16 provides, in relevant part, that a case management order may "modify the timing of disclosures under Rules 26(a) and 26(e)(1)." FED. R. CIV. P. 16(b)(3)(B)(i). In pertinent part, Rule 26 provides:
FED. R. CIV. P. 26(a)(1)(A)(iii). In applying Rule 26, courts have understood "computation" to require "a specific computation of a plaintiff's damages," which includes "a disclosure of evidentiary material upon which the category of damages is based." Stemrich v. Zabiyaka, No. 1:12-CV-1409, 2013 U.S. Dist. LEXIS 113674, at *3 (M.D. Pa. Aug. 13, 2013) (internal quotations omitted). The computation "requires at least some analysis," and "simply reciting a dollar figure clearly is not enough." Id. at *3-4. However, the rule "does not place a great burden on the plaintiff" because "the plaintiff needs only to disclose what those damages are and how they were calculated." Id. at *4-5. "The plaintiff must merely disclose the best information available concerning the claim, however limited and potentially changing it may be." Id. at *5 (internal quotations omitted).
With respect to the supplementation of disclosures and responses, Rule 26 provides that
FED. R. CIV. P. 26(e)(1)(A)-(B). As to expert witnesses, Rule 26 provides that "[f]or an expert whose report must be disclosed under Rule 26(a)(2)(B), the party's duty to supplement extends both to information included in the report and to information given during the expert's deposition." FED. R. CIV. P. 26(e)(2). To satisfy Rule 26(e)(2), a plaintiff "must disclose a computation of each category of damages using the `best information available' at the present time, and supplement that information as it becomes available." Stemrich, 2013 U.S. Dist. LEXIS 113674, at *10.
Pursuant to 35 U.S.C. § 284:
35 U.S.C. § 284; see also 4 Annotated Patent Digest § 30:12 ("The Patent Act specifically provides that a district court may receive expert testimony on the issue of damages for patent infringement. . . . . The use of expert testimony is permissive. Thus, if a patentee's damage expert is excluded, that fact does not automatically deny a patentee a right to recover damages."). The United States Court of Appeals for the Federal Circuit has explained that 35 U.S.C. § 284 "is unequivocal that the district court must award damages in an amount no less than a reasonable royalty." Dow Chem. Co. v. Mee Indus., 341 F.3d 1370, 1381 (Fed. Cir. 2003). However, "the district court's obligation to award some amount of damages `does not mean that a patentee who puts on little or no satisfactory evidence of a reasonable royalty can successfully appeal on the ground that the amount awarded by the court is not'reasonable and therefore contravenes section 284.'" Id. at 1382 (quoting Lindemann Maschinenfabrik GmbH v. Am. Hoist & Derrick Co., 895 F.2d 1403, 1407 (Fed. Cir. 1990)). In the event that an infringement of claims is proven, then "the district court should consider the so-called Georgia-Pacific factors (Ga.-Pac., Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970)) in detail, and award such reasonable royalties as the record evidence will support." Id.
Having carefully considered the parties' respective briefing, along with the arguments presented at the hearing on October 13, 2017, the Court finds that Philips is required to identify the amount and evidentiary basis for any damages claim that it believes may have survived the Court's Order regarding the parties' Daubert motions.
The Court held a Case Management Conference in this matter over four years ago, on October 1, 2013. (Docket No. 96). Following the conference, the Court entered a Case Management Order, which provided that "[e]ach party shall make its initial expert witness disclosures required by Federal Rule of Civil Procedure 26 on issues for which it bears the burden of proof by
Philips provided ZOLL with its Rule 26 disclosures on February 28, 2013, before the Court held the Case Management Conference. (See Docket No. 724-2). In a section entitled "Computation of Damages," Philips stated:
(Id. at 7 (emphasis added)). In its first set of interrogatories, ZOLL requested the following in Interrogatory No. 5:
(Docket No. 724-3 at 7). In its response, which was provided on April 2, 2014, Philips stated:
(Id. (emphasis added)). Similarly, on June 9, 2014, Philips refused to produce a witness in response to ZOLL's Rule 30(b)(6) deposition topics that were directed to Philips's ultimate damages theories. (Docket No. 724-4 at 13-15). Indeed, Philips stated, "In addition to the General Objections, Plaintiffs object to this topic as calling for legal conclusions and expert testimony. Plaintiffs will not provide a witness on this topic as written," in response to each of the following topics:
(Id.). After this Court issued its Daubert Order on July 25, 2017, ZOLL's counsel sent an e-mail to Philips's counsel on August 8, 2017, requesting that Philips provide "an explanation for the basis and amount of any damages claim you believe may have survived the Daubert ruling." (Docket No. 724-1 at 2). In response, Philips did not identify any new damages amount and argued only that "the jury will ultimately determine what damages are owed in light of the evidence presented." (Id.).
Despite Philips's representations that it would supplement information related to the computation of damages, it is apparent that Philips has not done so. In this Court's estimation, not only should Philips have supplemented its disclosures throughout the course of this litigation, which has been ongoing for over five years, but Philips should have immediately provided ZOLL with the basis and amount of its damages claim after the Court issued its Daubert Order. Instead, Philips did nothing. Indeed, Philips did not amend its Rule 26 disclosures until September 20, 2017, over two weeks after ZOLL filed the instant motion and nearly two months after the Court issued its Daubert Order. (See Docket No. 738-3). As to the computation of damages, Philips stated:
(Id. at 9). Philips supplementation is woefully inadequate. Philips does not identify any damages number and instead points only to several witnesses without any explanation as to how they may contribute to any calculation of damages. (Id.).
(Docket No. 718 at 8 n.8 (emphasis added)). This, the Court finds that Philips failed to sufficiently supplement information related to the computation of its alleged damages.
The Court's conclusion is supported by well-settled law. As noted above, a "computation" that complies with Rule 26 requires "a specific computation of a plaintiff's damages," which includes "a disclosure of evidentiary material upon which the category of damages is based." Stemrich, 2013 U.S. Dist. LEXIS 113674, at *3. The computation "requires at least some analysis," and "simply reciting a dollar figure clearly is not enough." Id. at *3-4. "Put summarily, the plaintiff needs to provide the defendants with an initial estimate as to their claimed damages and at least `some analysis' of how the relevant facts lead to that dollar figure." In re Oakwood Homes Corp., 340 B.R. 510, 541 (Bankr. D. Del. 2006). Although "this is not such an onerous task," Philips's "vague disclosures fall far short of the `computation' requirement." Id. at 539, 541 (noting that Rule 26(a) "does not place a great burden on the plaintiff" because "all the claimant needs to do is sit down and calculate the damages that are claimed") (internal quotations and alterations omitted).
Within this District, courts have required plaintiffs to disclose "any evidentiary material upon which the computation of damages is based." N. Am. Communs., Inc. v. Sessa, No. 14-CV-227, 2015 U.S. Dist. LEXIS 131549, at *30-31 (W.D. Pa. Sept. 29, 2015) (granting motion to compel initial disclosures where the plaintiff "failed to provide a dollar figure or any analysis regarding its computation of damages" and supplied "no proffered reason why [it] cannot provide Defendant with the computation of its damages"); see also Stemrich, 2013 U.S. Dist. LEXIS 113674, at *9-10 (holding that "Plaintiffs must disclose a computation of each category of damages using the `best information available' at the present time, and supplement that information as it becomes available," because "the court will not accept that Plaintiffs have absolutely no clearer computation").
As discussed above, this matter is governed by the law applicable in the Third Circuit. That said, cases within the patent arena have similarly required disclosures of the computation of damages. For example, in granting a motion in limine to exclude the defendant from making reference to its damages, the District Court found that the defendant "ha[d] not supplemented its Rule 26(a) disclosures or identified any damage computations or supporting documents following the submission of its initial disclosures." Brandt Indus. v. Pitonyak Mach. Corp., No. 10-CV-857, 2012 U.S. Dist. LEXIS 131096, at *5 (S.D. Ind. Sept. 12, 2012); see also Veritas Operating Corp. v. Microsoft Corp., No. 06-CV-703, 2008 U.S. Dist. LEXIS 35627, at *24, 77 (W.D. Wash. Jan. 17, 2008) (explaining that "[a] year is ample time to identify a damages category, conduct a damages analysis and compute damages" and holding that "[w]ith respect to the evidence that Microsoft now urges in its brief, and any other evidence that Microsoft may offer in support of damages claim . . . mere recitation and bare analysis of those facts does not, at this stage, cure Microsoft's failure to disclose any computation of damages or any other damages analysis as required by the rules").
Courts outside this jurisdiction and the patent arena have likewise required parties to disclose the computation of damages. For example, in Design Strategy, Inc. v. Davis, 469 F.3d 284, 294 (2d 2006), after the plaintiff asserted that the calculation of damages would be "simple arithmetic," the District Court held that the plaintiff had not complied with Rule 26 because it did not provide any justification for its failure to provide a damages calculation. On appeal, the Court of Appeals for the Second Circuit explained that: (1) the record "[did] not reflect any supplemental disclosures as required by Rule 26(e);" (2) "Rule 26(a) requires more than providing — without any explanation — undifferentiated financial statements; it requires a `computation,' supported by documents;" (3) "Rule 26(a) requires a party to provide a computation of any category of damages voluntarily, i.e., `without awaiting a discovery request;'" and (4) "Rule 26(a) requires a party — in addition to providing a calculation of damages — to make `available for inspection and copying as under Rule 34 the documents or other evidentiary material . . . on which such computation is based.'" Id. at 295. Because the plaintiff failed to disclose both a calculation of damages and the documents supporting that calculation," the Second Circuit affirmed the District Court. Id. at 296 (emphasis in original). See also Silicon Knights, Inc. v. Epic Games, Inc., No. 07-CV-275, 2012 U.S. Dist. LEXIS 63707, at *11-12 ("Disclosing damages-related documents alone, without disclosing a computation based on such documents, does not satisfy a party's Rule 26(a)(1)(A)(iii) obligation.") (citing Gillum v. ICF Emergency Mgmt. Servs., L.L.C., No. 08-CV-314, 2009 U.S. Dist. LEXIS 43344, at *8 (M.D. La. May 21, 2009) (holding that "vague assertions of damages" contained in interrogatory answers do not fulfill a party's Rule 26(a)(1)(A)(iii) obligation)); Clayman v. Starwood Hotels & Resorts Worldwide, 343 F.Supp.2d 1037, 1047 (D. Kan. 2004) (concluding that under Rule 26 "defendant [was] entitled to a specific computation of plaintiff's damages and [was] entitled to . . . the documents and other evidentiary material on which such computation is based" and holding that "[i]f plaintiff fails to comply, it will not be permitted to present any damages calculations regarding future medical expenses at trial");
As a final matter, the Court notes that practice guides support the Court's decision. To this end, the Wagstaffe Group Practice Guide: Federal Civil Procedure Before Trial provides that "[t]he parties are required to disclose `a computation of each category of damages' claimed— including counterclaims and cross-claims—and to make available for copying any nonprivileged documents or evidentiary materials on which the damage calculation is based." James M. Wagstaffe, Rutter Group Practice Guide: Federal Civil Procedure Before Trial § 11:280 (Nat'l ed. 2017) (quoting FED. R. CIV. P. 26(a)(1)(A)(iii)) (emphasis in original). The Wagstaffe Guide further comments that "[t]o make the disclosure obligation meaningful, a more detailed specification of damages is required." Id. at § 11:281. As to the specificity of the computation, the Wagstaffe Guide states that "Plaintiff should provide its assessment of damages in light of the information currently available to it in sufficient detail to enable each defendant to understand its potential exposure and make informed decisions as to settlement and discovery." Id. at 11:281.10 (emphasis in original). "[T]he party claiming damages must make available for inspection and copying by the other `the documents or evidentiary material . . . on which each computation is based' just as if there had been a formal request for production under Rule 34." Id. at § 11:282 (quoting FED. R. CIV. P. 26(a)(1)(A)(iii)) (emphasis in original).
As discussed above, Philips stated at argument that it will make available Dawn Jorgenson and Greg Ayers for depositions. Philips also stated that another witness, Jack Richbourg, will testify at trial. Mr. Richbourg was deposed on June 12, 2014, in the Massachusetts action. See supra n.1. ZOLL contends that, through its statements, Philips has requested that discovery be reopened, while Philips denies same. In any event, the Court finds that the issue of Philips's undisclosed witnesses is premature, given the lack of detail as to damages calculations and support, which must be supplied first and at this time.
For these reasons, Philips shall comply with the Court's Order entered on October 13, 2017, (Docket No. 752), requiring Philips to identify the amount and evidentiary basis of record, and/or whether the record requires supplementation, for any damages claim that Philips believe may have survived this Court's Memorandum Order and Opinion regarding the parties' Daubert Motions, on or before