Peter H. Kang, Esq., Partner, Sidley Austin LLP (Silicon Valley Office)
Civil litigation filings in all courts nationwide conservatively number over a million new cases per year. According to the Federal Judicial Center, there were 292,076 civil lawsuits filed in the United States District Courts nationwide in the most recent year surveyed (March 2016 to March 2017). In California alone, there were 201,930 unlimited civil cases filed in the Superior Courts in FY 2015-2016. In the area of intellectual property, there were 4,551 patent lawsuits filed in U.S. District Courts in 2017. And one facet in these lawsuits faced by litigants is discovery, particularly electronic discovery (or e-discovery).
In the modern era of the Fourth Industrial Revolution, companies are faced with increasing challenges in their IT (Information Technology) infrastructure, uses of data, proliferation of electronically stored information, and the embedding of technology into newer and more devices. Given the requirements of parties to litigation to search for and produce documents in discovery (subject to the rules and practices of the particular court at issue), these proliferations of IT issues have turned even traditional enterprises into technology companies at some level. Thus, those working with and for companies involved in litigation may prudently seek reasonable and effective tools and strategies for handling the burdens of e-discovery.
Overview of E-Discovery
Discovery is a pretrial procedure common to the courts in the United States (whether state or federal) in which the parties exchange documents and information before trial. This exchange mitigates “trial by ambush” in which one side does not know the other side’s evidence until trial itself, which impedes that side’s ability to prepare rebuttal evidence. Also, the pretrial exchange of documentary evidence allows decision-makers and their counsel on both sides to evaluate the relative strengths and weaknesses of their respective positions, which can facilitate settlement discussions, whether informal direct discussions or through some form of structured mediation or settlement conference. Statistically, most cases settle before trial, and it is likely that the exchange of information and documents through discovery has at least some impact on these rates of settlements.
In the federal courts, the production of documents is called for by Federal Rule of Civil Procedure 34 (from parties), Rule 45 (from third parties via subpoena), and Rule 26 (by way of Initial Disclosures and Pretrial Disclosures). The 1946 Advisory Committee Notes to Rule 34 quotes the U.S. Supreme Court as follows: “We see no reason why all such books, papers and correspondence which related to the subject of the inquiry, and were described with reasonable detail, should not be called for and the company directed to produce them. Otherwise, the State would be compelled to designate each particular paper which it desired, which presupposes an accurate knowledge of such papers, which the tribunal desiring the papers would probably rarely, if ever, have.”
Under Rule 26(b), the scope of discovery is defined as follows: “Parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”
The 2015 Advisory Committee Notes for this rule expressly address e-discovery: “The information explosion of recent decades has greatly increased both the potential cost of wide-ranging discovery and the potential for discovery to be used as an instrument for delay or oppression. What seemed an explosion in 1993 has been exacerbated by the advent of e-discovery. The burden or expense of proposed discovery should be determined in a realistic way. This includes the burden or expense of producing electronically stored information. Computer-based methods of searching such information continue to develop, particularly for cases involving large volumes of electronically stored information. Courts and parties should be willing to consider the opportunities for reducing the burden or expense of discovery as reliable means of searching electronically stored information become available.”
Technology’s Impact on E-Discovery
In the Information Age, e-discovery requires understanding your company’s and client’s email systems and electronic document repository. These two domains alone may account for a large volume of electronically stored information (ESI) which may be subject to discovery, requiring tools and a plan for searching and collecting that data. Furthermore, many companies may have separate financial accounting systems, as well as potential data backup and recovery systems. As noted above, in the modern era, there has been a proliferation of mobile devices, social media accounts, cloud-based storage, wearables or IOT devices, and other portable storage devices, any of which may be the target of e-discovery in an appropriate case. The sheer potential volume of electronically stored data for even a medium-sized company requires thoughtful planning and preparation for handling and processing these types of e-discovery issues.
This article is, of course, an overview of e-discovery issues. There are myriad issues and complexities involved in “big data” and other procedural issues, such as document hold notices, policies for employees who are separating from the company and document retention policies, which are beyond the scope of this overview. For example, it may be advisable (and in some cases mandatory) to negotiate and develop an ESI or e-discovery protocol with opposing counsel and/or the court’s guidance at the outset of a case. However, it is hoped that this introductory discussion can help provide some insights into the issues raised by e-discovery in intellectual property cases as a starting point for prudently approaching the issue in a particular case.