Note to Litigants: When Costs Shift, TAR Costs May Shift with Them
In an unusual development coming out of the Southern District of California this past week, the Honorable Anthony J. Battaglia shifted Defendants’ attorney’s fees and the Defendants’ costs related to technology-assisted review to the Plaintiffs.
While it is uncommon in the United States for the prevailing party to be awarded reimbursement of attorney fees, it is even less common for discovery expenses to be included in such reimbursement. Notably in this case, the discovery expenses included costs related to technology-assisted review, in itself a subject of much discussion in the legal/e-discovery ecosystem.
The matter at issue is Gabriel Technologies Corp. v. Qualcomm Inc. On October 24, 2008, Plaintiffs alleged breach of license agreements, fraud/fraudulent inducement, equitable patent infringement, and misappropriation of trade secrets pursuant to California’s Uniform Trade Secrets Act (“CUTSA”) among other claims, seeking over $1 billion in damages. Over the course of the litigation, the court rejected each of Plaintiffs’ claims, with the final claims denied in a recent grant of summary judgment for Defendants. The court noted that “the lack of evidence supporting Plaintiffs’ patent claims was so obvious that it should have been known by Plaintiffs” who were ultimately found to have brought “objectively baseless patent claims in subjective bad faith.” In addition, the Court concluded that Plaintiffs engaged in litigation misconduct, “such that this case is exceptional within the meaning of 35 U.S.C. § 285.”
Under 35 U.S.C. § 285, in exceptional cases a court “may award reasonable attorney fees to the prevailing party” in a patent case. Not surprisingly, Defendants sought award of attorneys’ fees.
The next step, according to the court, was to analyze whether an award of attorneys’ fees was appropriate, and if so, the dollar amount. Further, it had to determine what to include in that calculation. After due consideration, the Court awarded the full amount Defendants requested for attorneys’ fees of its outside counsel from the date of a bond order – then went on to consider and award attorneys’ fees related to Black Letter Discovery’s review of responsive documents for confidentiality, privilege, and relevance issues.
More, the Defendants had also requested fees attributable to technology-assisted document review, providing the following explanation:
“Over the course of this litigation, Defendants collected almost 12,000,000 records — mostly in the form of Electronically Stored Information (ESI). . . . Rather than manually reviewing the huge volume of resultant records, Defendants paid H5 to employ its proprietary technology to sort these records into responsive and non-responsive documents.” (Defs. Mot., Doc. No. 332-1 at 26). After the algorithm determined whether documents were responsive or unresponsive to discovery requests, Black Letter attorneys reviewed the responsive documents for confidentiality, privilege, and relevance issues. (Id. at 26, n.11.) For this reason, the review performed by H5 and Black Letter accomplished different objectives with the H5 electronic process minimizing the overall work for Black Letter.”
In the performance of its technology-assisted review services, H5’s consultants partner with legal counsel on a matter, incorporate counsel’s direction on responsive criteria, and configure H5’s technology-assisted review to identify responsive and non-responsive documents with very high accuracy. The H5 process thereby substantially reduces the volume of manual review required in most matters, enabling counsel to focus on the documents that really count, saving clients time and money. H5’s consultants include professionals with expertise in fields such as linguistics, statistics and computer science as well as attorneys.
Since a proper execution of technology-assisted review is a hybrid of case counsel and professionals trained in its process and execution, the question before Judge Battaglia was how to assess those fees. Under a literal reading and interpretation of 35 U.S.C. § 285, the Court could have exercised its discretion and arguably deemed the fees of performing technology-assisted document review as NOT qualifying as “attorney’s fees.”
Judge Battaglia, however, viewed the expense of technology-assisted review in light of the alternative attorney review fees they displaced, which would have been substantially higher:
“Again, the Court finds Cooley’s [Defendants’ counsel] decision to undertake a more efficient and less time-consuming method of document review to be reasonable under the circumstances. In this case, the nature of Plaintiffs’ claims resulted in significant discovery and document production, and Cooley seemingly reduced the overall fees and attorney hours required by performing electronic document review at the outset.”
Judge Battaglia’s interpretation that including the cost of technology-assisted review was reasonable in this case was both insightful and appropriate. A primary benefit of technology-assisted review for litigants is that, when properly deployed and executed, it reduces the overall cost of discovery. While poorly executed technology-assisted review may provide little cost reduction, when executed with requisite expertise, it can displace a substantial portion of the document review expense that would have been incurred in the alternative.
Like judges in other recent cases, Judge Battaglia did not question Defendants’ use of technology-assisted review for the purpose of identifying responsive and non-responsive documents. To the contrary, he found Cooley’s decision to “undertake a more efficient and less time-consuming method of document review to be reasonable under the circumstances” – yet another sign of judicial acceptance of the process.