eDiscovery Daily Blog

Federal Circuit Reduces Award for Defendants Based on Costs of Digital Copies – eDiscovery Case Law

In Phillip M. Adams & Associates, L.L.C. v. Sony Electronics Inc., No. 1:05-CV-64 TS, 2013 U.S. Dist. LEXIS 160728 (D. Utah Nov. 7, 2013), a Federal Circuit court limited awards for the defendant with regard to the costs of digital copies, in a decision that followed the reasoning of the Third Circuit and Fourth Circuit in prior cases.

The initial case and jury trial was brought by plaintiff Phillip M. Adams & Associates, with allegations of patent infringement and trade secret misappropriation against Sony Electronics. In this Federal Circuit case brought on appeal, the court reversed an adverse interference sanction against the defendant imposed by the district court during the jury trial. However, the Federal Circuit upheld the grant of summary judgment in favor of the plaintiff.

After the decision to reverse the sanction, the Federal Circuit turned to the defendants’ request to seek their court costs in the case. The Clerk of Courts taxed costs in favor of the defendants in the amount of $168,812.39, a decision that resulted in motions filed by both the plaintiffs and defendants—the plaintiffs seeking to deny the request, and the defendants looking for allowance of additional costs.

The plaintiffs contested the award for several reasons, one being that the defendants had destroyed evidence, as found by the district court and upheld by the Federal Circuit. However, the court did not grant the plaintiffs’ request for dismissal due to the finding that the district court’s adverse interference sanction had been improper, and further that the plaintiffs “failed to present substantial evidence of infringement within the United States after May 3, 2001.” Additionally, the court stated that with the improper sanction, “it seems to follow that sanctions in the form of reduced or eliminated costs would also not be proper.”

However, the reward was reduced by 25%, due in part to the admittance of the defendant that some costs did not relate to a particular claim for which the two parties had previously agreed to bear their own costs.

The Federal Circuit then addressed the additional costs requested by the defendants totaling more than $60,000 for exemplification and for making copies. The breakdown of costs cited by the defendant included “producing TIFF images, OCR, bates labeling, and copying on CDs and DVDs.” Ultimately, the court granted in part and denied in part the request, basing the decision on prior case outcomes for the Third Circuit in Race Tires America, Inc. v. Hoosier Racing Tire Corp. and the Fourth Circuit in The Country Vintner of North Carolina, LLC v. E & J. Gallo Winery, Inc.

Despite the defendants’ argument that “all activities related to the production of ESI [electronically stored information ] should be taxable,” the court rejected approximately half of the costs sought, reasoning that “the process employed in the pre-digital era to produce documents in complex litigation” excluded those steps from taxation that the defendant sought to recover. Therefore, the defendant was allowed only the costs of nearly $30,000 for TIFF imaging and approximately $2,400 for copying to CDs and DVDs. The remaining requests were rejected.

So, what do you think? Should the costs related to digital copying be taxable by courts? Are awards in the production of ESI too generous? Please share any comments you might have or if you’d like to know more about a particular topic.

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