District Court Orders Plaintiff to Supplement Damage Information Provided in Federal Rule 26 Initial Disclosures Where Plaintiff Failed to Compute an Actual Damage Number

December 13, 2016

In this discovery dispute in a patent infringement action, Frontgate contended that Balsam Brands, Inc. ("Balsam") failed to adequately respond to an interrogatory seeking information about Balsam's damages. As explained by the district court, Balsam's response stated that it: (1) "intends to seek lost profits on the 1,662 Flip Trees that it did not sell during the 2015 Christmas season"; and (2) "intends to seek a reasonable royalty on all Inversion Trees sold by Defendants for which lost profits are not available." Balsam further responded that "historical data on Balsam's cost, sales, inventory, and pricing" was included in materials produced.

The district court noted that under the Federal Rules, Balsam is required to disclose "a computation of each category of damages claimed." Fed. R. Civ. P. 26(a)(1)(A)(iii). Under this standard, the district court stated that "Balsam has disclosed the information necessary to meet its computation of damages requirement, but fails to disclose an actual amount of damages. Balsam should calculate the amount of actual profits lost based on these figures, and supplement its response with this amount. See Schwarzer, Tashima & Wagstaffe, RUTTER GROUP PRAC. GUIDE: FEDERAL CIV. PRO. BEFORE TRIAL (The Rutter Group 2016), Ch. 11(II)-C."

The district court concluded that "Balsam's experts are entitled to present their theory of damages, which may be different or in addition to what Balsam is currently aware of. This does not excuse Balsam from providing a computation as part of its initial disclosures, let alone in response to interrogatories being answered at the end of the discovery period. See The Rutter Group 2016, Ch. 11(II)-C ('The amount claimed in the initial disclosures is not a limit on damages recoverable at trial, at least where defendant is aware (e.g., through discovery) that a greater amount is sought.')."

Nonetheless, the district court permitted Balsam to allocate profits between the two plaintiffs at a later date. "As for the allocation of profits between the two plaintiffs, Balsam reports that it is currently supplementing its response to reference additional records, but ultimately, Balsam's experts will need to analyze the data to accurately quantify the allocation. Balsam's position is reasonable. Frontgate can wait for expert witness discovery to understand the precise allocation of profits between the plaintiffs."

Balsam Brands Inc. v. Cinmar, LLC
, Case No. 3:15-cv-04829-WHO (N.D. Cal. Nov. 30, 2016)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.