January 10, 2025 • 17 mins
What happens when the clock runs out on critical evidence in a high-stakes patent infringement case? Join me, Kelly Twigger, as we unravel the intricate layers of electronic discovery through the compelling Beacon Navigation v. BMW case. Discover how Beacon's late acquisition of essential source code from BMW's third-party supplier, Harman, put their litigation strategy on thin ice. Despite strategic maneuvers to extend fact discovery, the court slammed the door shut, raising the stakes for both sides. You’ll gain insights into the court's analysis through a five-factor test under Rule 37C and how Beacon narrowly avoided the exclusion of pivotal evidence, highlighting the unforgiving nature of discovery timelines.
Peeling back the legal tactics, we focus on the critical role of third-party discovery and timely disclosures under the Federal Rules of Civil Procedure. Through our discussion, learn about the increasing trend of courts barring undisclosed evidence and how early third-party engagement is more crucial than ever. This episode serves as a wake-up call for legal professionals, emphasizing the importance of strategic planning in cases involving electronically stored information. The lessons from Beacon’s ordeal underscore the necessity for meticulous management of discovery obligations, reminding us that the courtroom is no place for procrastination.
Tune in for practical insights and actionable strategies to stay ahead in the complex landscape of eDiscovery.
Beacon Navigation GmbH v. Bayerische Motoren Werke AG
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Kelly Twigger (00:13):
Welcome to the Case of the Week podcast, where
each week, we break down arecent decision in electronic
discovery case law and talkabout the practical impact for
you and your clients and keepyou up to date on your
obligations with electronicallystored information as evidence.
If you're a litigator, legalprofessional or you love the
power of ESI as much as I do,this is the place to be.
(00:34):
I'm Kelly Twigger, the CEO andfounder of eDiscovery Assistant
and the principal at ESIAttorneys, with more than 25
years of experience navigatingthe evolving landscape of
litigation and eDiscovery.
I'm a practicing attorney,author, speaker, entrepreneur
and now podcaster who works as adiscovery strategist and expert
for clients at ESI Attorneysand to provide that knowledge to
(00:55):
all legal professionals throughour e-discovery assistant
platform.
In each episode, we'll tackle anew decision in e-discovery
case law and how it shapes bothyour litigation strategy and
planning for risk mitigation.
If you're ready for blunt,actionable insights that keep
you ahead of the curve, andmaybe a few laughs along the way
, this is your go-to podcast.
Subscribe or follow now tostart embracing's episode of our
(01:19):
Case of the Week series broughtto you by eDiscovery Assistant.
Let's dive into this week's case.
This week's decision comes tous from Beacon Navigation v BMW.
(01:41):
It's a decision from December28th of 2023, written by United
States District Judge MarkGoldsmith.
Judge Goldsmith has 31decisions in our eDiscovery
Assistant Database and, asalways, we tag each of the
decisions in our database withour proprietary issue tagging
structure.
This week's issue tags includeinitial disclosures, failure to
(02:02):
produce, exclusion of evidence,sanctions and source code.
A little bit of background onthis case before we dive in.
This is a patent infringementcase in which Beacon contends
that BMW infringed on a Beaconpatent for its vehicle
navigation technology.
Of interest is that this casesat for 11 years during a
(02:24):
succession of proceedings in theUnited States Patent and
Trademark Office and comes backto this court following the
close of fact, and expertdiscovery is asking the court to
preclude Beacon from relying onthe computer source code as
(02:45):
evidence of infringement forfailure to produce the source
code prior to the close ofdiscovery Few facts.
The court entered thescheduling order in October of
2022, and that scheduling orderprovided for fact discovery to
run through July 27, 2023, withexpert discovery to close in
November of 2023.
(03:06):
Beacon served a subpoena onHarmon, who was the third-party
provider for BMW thatmanufactured their vehicle
navigation technology, more than30 days before the close of
fact discovery, but ultimatelyobtained and produced the source
code after the close of factdiscovery and then relied on the
(03:26):
source code to allegeinfringement for the first time
in its opening expert report oninfringement.
Bmw's motion to strike is toexclude that source code that
Beacon relied on in its expertreport.
Now, this motion came about ayear later, in October 23, after
the close of fact discovery,and alleged that Beacon
(03:48):
admittedly delayed third-partydiscovery of the source code
that described how the infringednavigation systems worked.
Now, the source code at issuethat was used in the BMW
vehicles was not owned by BMW.
It was owned and operated, orowned and created by BMW's
third-party supplier, a companycalled Harman, that Beacon
subpoenaed, as I mentioned,about 30 days before the close
(04:10):
of fact discovery.
In its motion papers, beaconnoted to the court that the
court had ordered the parties towork with the special master
towards settlement and thatduring the eight months of
discovery it had settled withall of the other defendants and
that it held off in seeking thethird party discovery from
Hartman until it knew thatsettlement could not be reached
with BMW.
Beacon served a subpoena onHartman on June 23, 2023, which
(04:34):
was just a month and four daysbefore fact discovery closed.
You know from our discussionspreviously on the case of the
week that that's not going to besufficient time for that third
party to respond withappropriate information prior to
the close of fact discovery.
Now, at the same time, beaconand BMW met and conferred on an
extension of fact discovery viathe scheduling order and on July
(04:55):
26, 2023, beacon submitted astipulated amendment to extend
fact discovery for source codeproduction, including a
provision to delay depositionsof the parties until after the
source code production.
That was one day before thediscovery cut off in the
original scheduling order.
Hartman and Beacon then met andconferred on the scope of the
(05:16):
subpoena on August 2nd andagreed to a narrowed scope for
response in which Harmon agreedto make the source code
available for inspection andprovide a declaration that the
source code was authentic andrepresentative.
Beacon then agreed to withdrawits other document requests and
not seek a deposition of Harmon.
On August 9th, the specialmaster advised Beacon that the
(05:38):
court was not going to enter theJuly 26, 2023 stipulation to
extend fact discovery On August15, so just six days later,
beacon submitted a stipulatedamendment to extend expert
discovery by 11 days toaccommodate its technical
experts vacation.
The court then entered thestipulation on August 17,
extending the deadline foropening expert reports from
(06:00):
August 28 to September 8, 2023.
Now Harmon made the source codeavailable for inspection on
September 5th by giving theparties access to a source code
computer.
The parties then took turnswith their experts in reviewing
the source code and selectingexcerpts from the source code
produced by Harman andrequesting printouts of their
(06:21):
sealed excerpts from Harman.
Boy.
Today is a little bit ofalphabet soup curry.
Now, after reviewing the sourcecode on September 5th and 6th,
beacon served its opening expertreport on infringement on
September 8th and later producedthe source code from its review
on September 14th.
Bmw reviewed the source code onSeptember 20th and 21st, served
(06:42):
its rebuttal report oninfringement on October 9th and
later produced the source codefrom its review on October 12th.
Now the source code must haveratcheted up the game for BMW in
terms of its liability, as itsubsequently filed its motion to
strike, arguing that Beacon hadviolated Federal Rule of Civil
Procedure 26A or E and movingfor discovery sanctions under
(07:04):
Federal Rule of Civil Procedure37C1.
Specifically, bmw asked thecourt to strike portions of
Beacon's infringement reportthat rely on the source code to
preclude Beacon from relying onthe source code and to award BMW
reasonable costs and attorney'sfees related to Beacon's
disclosure of the source code.
So those are our facts.
How does the court engage here?
(07:25):
Well, the court begins with ananalysis of the applicable rule
sections and its obligationsunder them.
Federal Rule of Civil Procedure37C1 states that a district
court may exclude evidence thata party seeks to offer but
failed to disclose pursuant tothe party's discovery
obligations under Federal Ruleof Civil Procedure 26A and E.
(07:46):
26a1 requires a party todisclose the information and
identify the witnesses that theparty may use to support its
claims or defenses, and 26E1essentially requires those
parties to supplement anincomplete or incorrect initial
disclosure in a timely manner.
Now, under Rule 37C1, a partywho fails to disclose
(08:08):
information or identify awitness as required by Rule 26A
or E quote is not allowed to usethat information or witness to
supply evidence on a motion at ahearing or at trial, unless the
failure was substantiallyjustified or is harmless.
Close quote Now, althoughexclusion of late or undisclosed
(08:28):
evidence is the usual remedyfor noncompliance with Rule 26A
or E, rule 27C also requiresthat the district court has an
option to order alternativesanctions instead of exclusion
of the late or undisclosedevidence on a motion or after
giving an opportunity to beheard.
So it's not an absolutesanction that must be entered
(08:49):
for failure to disclose under 26A or E.
Now turning to the facts of thecase, the court notes right away
that both parties knew that thesource code from Harmon was
quote necessary infringementevidence and that the court even
noted in its scheduling orderthat discovery would be required
from defendants' third-partyvendors who provided the accused
GPS systems.
(09:10):
Beacon did not dispute thatreview and production of the
source code was fact discoveryand not expert discovery.
In terms of the timing, recallthat they extended expert
discovery and that the sourcecode was produced during the
time for expert discovery butafter fact discovery was closed.
So that's why that's relevant.
Now the situation here ispretty clear.
(09:30):
Both parties knew that thesource code was relevant and
would be discovered.
The only real issue is thetiming of when it was done and
whether it was sanctionableunder Rule 37.1 for failure to
comply with Rule 26A and 26E.
Now BMW argued that Beacon'sdisclosure of the source code
was untimely because it did notseek the source code and
(09:53):
supplement its infringementcontentions and did not obtain
the source code during factdiscovery.
Beacon didn't disagree, butrather asked the court to take
into account the entirety of thematter and the fact that the
parties agreed to extend factdiscovery.
As well as that, bmw knewBeacon would be relying on the
source code, the court foundthat Beacon did violate Rule 26E
(10:14):
by failing to timely disclosethe source code in its
infringement contentions andpointed to the discovery
responses from Beacon withlanguage that specifically
informed BMW that it would relyon source code from suppliers,
but never produced any sourcecode or relied on any source
code to allege infringement.
The court also noted that inresponse to BMW's
(10:36):
interrogatories, beacon statedthat it would supplement its
infringement conditions quotewhen additional discovery is
obtained from defendants andtheir suppliers.
Close quote.
The court found that withoutreferences to the actual source
code, beacon's infringementcontentions were incomplete and
that Rule 26E1 required Beaconto supplement them.
The court also noted thelanguage of the scheduling order
(10:59):
that required Beacon to quotetimely conduct discovery so that
these contentions can beupdated as soon as possible.
Close quote.
So we've got specific languagethat the court is pointing to
here.
That really shows thatviolation of its discovery
obligations under Rule 26A and Efrom Beacon.
The court also found thatBeacon was required to obtain
(11:19):
the source code during factdiscovery and instead that it
was produced seven weeks afterthe close of fact discovery.
The court noted as well thatthe stipulation to extend fact
discovery was withdrawn whenBeacon submitted a stipulation
to extend expert discovery.
Now that's sort of weirdbecause in the facts of the case
that I mentioned to you earlyit states that the special
(11:40):
master went to Beacon and saidthat that stipulation would not
be entered, but the timing ofwhen the stipulation to extend
expert discovery was submitted.
It doesn't say that Beaconwithdrew the other one.
Rather it says the specialmaster said that it would not be
granted.
So there's a little bit ofconfusion here among the case,
but this is what the court rules.
(12:00):
Now, having found that Beaconviolated its Rule 26E
obligations to update itscontentions regarding the
infringement, the courtaddressed sanctions under Rule
37C and identified thefive-factor test applied by the
Sixth Circuit for determiningwhether a party's nondisclosure
of evidence is substantiallyjustified or harmless.
One, the surprise to the partyagainst whom the evidence would
(12:23):
be offered.
Two, the ability of that partyto cure the surprise.
Three, the extent to whichallowing the evidence would
disrupt the trial.
Four, the importance of theevidence.
And five, the non-disclosingparty's explanation for its
failure to disclose the evidence.
On the first factor, the courtagreed with Beacon and weighed
against exclusion.
Both sides knew the source codefrom Harmon was the key
(12:44):
evidence of infringement.
The court weighed the secondand third factors together as
related and found that BMW couldquote cure any remaining
surprise, close quote withoutdisrupting a trial, as a trial
date had not been set and itgranted BMW leave to depose
Harmon relating to the sourcecode.
The court also gave BMW theability to supplement its
(13:05):
defenses before trial.
As such, the court found thatthe second and third factors
weighed against exclusion of thesource code as evidence.
On the fourth factor theimportance of the evidence the
court agreed with Beacon thatexclusion was not warranted
where discovery was complete andthe case was ready to move
forward on the merits.
Now that's a pretty big rulingin favor of Beacon because
(13:27):
clearly this source code, as itwas the actual code for the
navigation of the vehicles whichare allegedly infringing on
Beacon's patent, the weight ofthat evidence was tremendous.
I mean it was the entire casefor Beacon.
So exclusion here would havebeen essentially dispositive of
the case.
The fifth factor here weighed infavor of exclusion.
(13:49):
The court found that Beacon'sexplanation for its failure to
disclose the source code wasunreasonable and noted quote
delaying third-party discoveryof source code was Beacon's own
litigation strategy.
Close quote Beacon knew aboutHarmon and plans to rely on the
source code, yet it did not seekthat discovery until almost
(14:09):
just a month before the close offact discovery.
The court also rejectedBeacon's argument that it was
working towards settlement andstated that quote compliance
with the scheduling ordernecessarily entails parallel,
not successive, settlementdiscussions and fact discovery.
Close quote.
Summing up the court found thatfour of the five factors
weighed against exclusion,leading the court to conclude
(14:31):
that the untimely disclosure washarmless and to deny BMW's
motion to strike and forsanctions.
So what are our takeaways here?
Well, we've talked about itseveral times on Case of the
Week, but it's worth reiteratingIdentifying third parties from
whom discovery is needed andstarting that process very early
in discovery is critical.
Your cases are not as likely tohave the facts here that
(14:54):
allowed Beacon to escape.
Exclusion of the key evidenceto its case.
Here Beacon disclosed the needfor the source code and both
parties knew which third partyhad it.
Even with those facts, it'sfair to say that Beacon escaped
here by the skin of its teeth.
The timing here, in which Harmonproduced the source code a mere
three months after the subpoenafrom Beacon, is fast for a
(15:15):
third-party production.
In my experience, they take alot longer and you need to start
earlier.
That means that waiting forthird-party discovery, waiting
to start third-party discovery,is very, very risky and you risk
not being able to rely on anyevidence from a third party.
If you wait and don't receiveit during fact discovery, you
also lose the ability to followup on that third-party evidence.
(15:37):
Do you want to take adeposition of the person most
knowledgeable about theinformation that was provided?
Do you need to supplement therequest from that third party
because all the evidence thatyou got is not what you needed?
Do you need to engage in asampling process with the third
party?
Because the volume ofinformation that you want from
that third party is tremendousand the third party is reluctant
(15:58):
to engage in the costassociated with providing that
information.
On a third party subpoena, youmay need to negotiate into a
sampling procedure which takestime.
You've got to have them providethat information, review it, go
back to them constantnegotiation.
So you've got to keep that inmind in terms of fact discovery
(16:19):
and advise the court of what ishappening on that procedure so
that something can be doneoutside of the scheduling order
if necessary.
Now we have seen a remarkableuptick in decisions barring
evidence that are not disclosedon the initial disclosures or
where a party failed tosupplement.
We've seen exclusion ofwitnesses, exclusion of evidence
, exclusion of expert reports.
(16:39):
Today's decision addsthird-party discovery to that
mix.
Okay, that's our case of theweek.
For this week, thanks so muchfor joining me.
We'll be back again next weekwith another decision from our
eDiscovery Assistant Database.
As always, if you havesuggestions for a case to be
covered on our case of the Week,please drop me a line.
If you'd like to receive theCase of the Week delivered to
your inbox via our weeklynewsletter, you can sign up at
(17:01):
ediscoveryassistantcom backslashblog and if you're interested
in doing a free trial of ourcase law and resource database,
please jump toediscoveryassistantcom and sign
up to get started.
Thanks so much.
Have a great week.
Have a great week, discover theshow and be kept in the know on
all things.
Electronic discovery.
I'm Kelly Twigger.
See you next time.
Welcome to the Case of the Week podcast, where
each week, we break down arecent decision in electronic
discovery case law and talkabout the practical impact for
you and your clients and keepyou up to date on your
obligations with electronicallystored information as evidence.
If you're a litigator, legalprofessional or you love the
power of ESI as much as I do,this is the place to be.
(00:34):
I'm Kelly Twigger, the CEO andfounder of eDiscovery Assistant
and the principal at ESIAttorneys, with more than 25
years of experience navigatingthe evolving landscape of
litigation and eDiscovery.
I'm a practicing attorney,author, speaker, entrepreneur
and now podcaster who works as adiscovery strategist and expert
for clients at ESI Attorneysand to provide that knowledge to
(00:55):
all legal professionals throughour e-discovery assistant
platform.
In each episode, we'll tackle anew decision in e-discovery
case law and how it shapes bothyour litigation strategy and
planning for risk mitigation.
If you're ready for blunt,actionable insights that keep
you ahead of the curve, andmaybe a few laughs along the way
, this is your go-to podcast.
Subscribe or follow now tostart embracing's episode of our
(01:19):
Case of the Week series broughtto you by eDiscovery Assistant.
Let's dive into this week's case.
This week's decision comes tous from Beacon Navigation v BMW.
(01:41):
It's a decision from December28th of 2023, written by United
States District Judge MarkGoldsmith.
Judge Goldsmith has 31decisions in our eDiscovery
Assistant Database and, asalways, we tag each of the
decisions in our database withour proprietary issue tagging
structure.
This week's issue tags includeinitial disclosures, failure to
(02:02):
produce, exclusion of evidence,sanctions and source code.
A little bit of background onthis case before we dive in.
This is a patent infringementcase in which Beacon contends
that BMW infringed on a Beaconpatent for its vehicle
navigation technology.
Of interest is that this casesat for 11 years during a
(02:24):
succession of proceedings in theUnited States Patent and
Trademark Office and comes backto this court following the
close of fact, and expertdiscovery is asking the court to
preclude Beacon from relying onthe computer source code as
(02:45):
evidence of infringement forfailure to produce the source
code prior to the close ofdiscovery Few facts.
The court entered thescheduling order in October of
2022, and that scheduling orderprovided for fact discovery to
run through July 27, 2023, withexpert discovery to close in
November of 2023.
(03:06):
Beacon served a subpoena onHarmon, who was the third-party
provider for BMW thatmanufactured their vehicle
navigation technology, more than30 days before the close of
fact discovery, but ultimatelyobtained and produced the source
code after the close of factdiscovery and then relied on the
(03:26):
source code to allegeinfringement for the first time
in its opening expert report oninfringement.
Bmw's motion to strike is toexclude that source code that
Beacon relied on in its expertreport.
Now, this motion came about ayear later, in October 23, after
the close of fact discovery,and alleged that Beacon
(03:48):
admittedly delayed third-partydiscovery of the source code
that described how the infringednavigation systems worked.
Now, the source code at issuethat was used in the BMW
vehicles was not owned by BMW.
It was owned and operated, orowned and created by BMW's
third-party supplier, a companycalled Harman, that Beacon
subpoenaed, as I mentioned,about 30 days before the close
(04:10):
of fact discovery.
In its motion papers, beaconnoted to the court that the
court had ordered the parties towork with the special master
towards settlement and thatduring the eight months of
discovery it had settled withall of the other defendants and
that it held off in seeking thethird party discovery from
Hartman until it knew thatsettlement could not be reached
with BMW.
Beacon served a subpoena onHartman on June 23, 2023, which
(04:34):
was just a month and four daysbefore fact discovery closed.
You know from our discussionspreviously on the case of the
week that that's not going to besufficient time for that third
party to respond withappropriate information prior to
the close of fact discovery.
Now, at the same time, beaconand BMW met and conferred on an
extension of fact discovery viathe scheduling order and on July
(04:55):
26, 2023, beacon submitted astipulated amendment to extend
fact discovery for source codeproduction, including a
provision to delay depositionsof the parties until after the
source code production.
That was one day before thediscovery cut off in the
original scheduling order.
Hartman and Beacon then met andconferred on the scope of the
(05:16):
subpoena on August 2nd andagreed to a narrowed scope for
response in which Harmon agreedto make the source code
available for inspection andprovide a declaration that the
source code was authentic andrepresentative.
Beacon then agreed to withdrawits other document requests and
not seek a deposition of Harmon.
On August 9th, the specialmaster advised Beacon that the
(05:38):
court was not going to enter theJuly 26, 2023 stipulation to
extend fact discovery On August15, so just six days later,
beacon submitted a stipulatedamendment to extend expert
discovery by 11 days toaccommodate its technical
experts vacation.
The court then entered thestipulation on August 17,
extending the deadline foropening expert reports from
(06:00):
August 28 to September 8, 2023.
Now Harmon made the source codeavailable for inspection on
September 5th by giving theparties access to a source code
computer.
The parties then took turnswith their experts in reviewing
the source code and selectingexcerpts from the source code
produced by Harman andrequesting printouts of their
(06:21):
sealed excerpts from Harman.
Boy.
Today is a little bit ofalphabet soup curry.
Now, after reviewing the sourcecode on September 5th and 6th,
beacon served its opening expertreport on infringement on
September 8th and later producedthe source code from its review
on September 14th.
Bmw reviewed the source code onSeptember 20th and 21st, served
(06:42):
its rebuttal report oninfringement on October 9th and
later produced the source codefrom its review on October 12th.
Now the source code must haveratcheted up the game for BMW in
terms of its liability, as itsubsequently filed its motion to
strike, arguing that Beacon hadviolated Federal Rule of Civil
Procedure 26A or E and movingfor discovery sanctions under
(07:04):
Federal Rule of Civil Procedure37C1.
Specifically, bmw asked thecourt to strike portions of
Beacon's infringement reportthat rely on the source code to
preclude Beacon from relying onthe source code and to award BMW
reasonable costs and attorney'sfees related to Beacon's
disclosure of the source code.
So those are our facts.
How does the court engage here?
(07:25):
Well, the court begins with ananalysis of the applicable rule
sections and its obligationsunder them.
Federal Rule of Civil Procedure37C1 states that a district
court may exclude evidence thata party seeks to offer but
failed to disclose pursuant tothe party's discovery
obligations under Federal Ruleof Civil Procedure 26A and E.
(07:46):
26a1 requires a party todisclose the information and
identify the witnesses that theparty may use to support its
claims or defenses, and 26E1essentially requires those
parties to supplement anincomplete or incorrect initial
disclosure in a timely manner.
Now, under Rule 37C1, a partywho fails to disclose
(08:08):
information or identify awitness as required by Rule 26A
or E quote is not allowed to usethat information or witness to
supply evidence on a motion at ahearing or at trial, unless the
failure was substantiallyjustified or is harmless.
Close quote Now, althoughexclusion of late or undisclosed
(08:28):
evidence is the usual remedyfor noncompliance with Rule 26A
or E, rule 27C also requiresthat the district court has an
option to order alternativesanctions instead of exclusion
of the late or undisclosedevidence on a motion or after
giving an opportunity to beheard.
So it's not an absolutesanction that must be entered
(08:49):
for failure to disclose under 26A or E.
Now turning to the facts of thecase, the court notes right away
that both parties knew that thesource code from Harmon was
quote necessary infringementevidence and that the court even
noted in its scheduling orderthat discovery would be required
from defendants' third-partyvendors who provided the accused
GPS systems.
(09:10):
Beacon did not dispute thatreview and production of the
source code was fact discoveryand not expert discovery.
In terms of the timing, recallthat they extended expert
discovery and that the sourcecode was produced during the
time for expert discovery butafter fact discovery was closed.
So that's why that's relevant.
Now the situation here ispretty clear.
(09:30):
Both parties knew that thesource code was relevant and
would be discovered.
The only real issue is thetiming of when it was done and
whether it was sanctionableunder Rule 37.1 for failure to
comply with Rule 26A and 26E.
Now BMW argued that Beacon'sdisclosure of the source code
was untimely because it did notseek the source code and
(09:53):
supplement its infringementcontentions and did not obtain
the source code during factdiscovery.
Beacon didn't disagree, butrather asked the court to take
into account the entirety of thematter and the fact that the
parties agreed to extend factdiscovery.
As well as that, bmw knewBeacon would be relying on the
source code, the court foundthat Beacon did violate Rule 26E
(10:14):
by failing to timely disclosethe source code in its
infringement contentions andpointed to the discovery
responses from Beacon withlanguage that specifically
informed BMW that it would relyon source code from suppliers,
but never produced any sourcecode or relied on any source
code to allege infringement.
The court also noted that inresponse to BMW's
(10:36):
interrogatories, beacon statedthat it would supplement its
infringement conditions quotewhen additional discovery is
obtained from defendants andtheir suppliers.
Close quote.
The court found that withoutreferences to the actual source
code, beacon's infringementcontentions were incomplete and
that Rule 26E1 required Beaconto supplement them.
The court also noted thelanguage of the scheduling order
(10:59):
that required Beacon to quotetimely conduct discovery so that
these contentions can beupdated as soon as possible.
Close quote.
So we've got specific languagethat the court is pointing to
here.
That really shows thatviolation of its discovery
obligations under Rule 26A and Efrom Beacon.
The court also found thatBeacon was required to obtain
(11:19):
the source code during factdiscovery and instead that it
was produced seven weeks afterthe close of fact discovery.
The court noted as well thatthe stipulation to extend fact
discovery was withdrawn whenBeacon submitted a stipulation
to extend expert discovery.
Now that's sort of weirdbecause in the facts of the case
that I mentioned to you earlyit states that the special
(11:40):
master went to Beacon and saidthat that stipulation would not
be entered, but the timing ofwhen the stipulation to extend
expert discovery was submitted.
It doesn't say that Beaconwithdrew the other one.
Rather it says the specialmaster said that it would not be
granted.
So there's a little bit ofconfusion here among the case,
but this is what the court rules.
(12:00):
Now, having found that Beaconviolated its Rule 26E
obligations to update itscontentions regarding the
infringement, the courtaddressed sanctions under Rule
37C and identified thefive-factor test applied by the
Sixth Circuit for determiningwhether a party's nondisclosure
of evidence is substantiallyjustified or harmless.
One, the surprise to the partyagainst whom the evidence would
(12:23):
be offered.
Two, the ability of that partyto cure the surprise.
Three, the extent to whichallowing the evidence would
disrupt the trial.
Four, the importance of theevidence.
And five, the non-disclosingparty's explanation for its
failure to disclose the evidence.
On the first factor, the courtagreed with Beacon and weighed
against exclusion.
Both sides knew the source codefrom Harmon was the key
(12:44):
evidence of infringement.
The court weighed the secondand third factors together as
related and found that BMW couldquote cure any remaining
surprise, close quote withoutdisrupting a trial, as a trial
date had not been set and itgranted BMW leave to depose
Harmon relating to the sourcecode.
The court also gave BMW theability to supplement its
(13:05):
defenses before trial.
As such, the court found thatthe second and third factors
weighed against exclusion of thesource code as evidence.
On the fourth factor theimportance of the evidence the
court agreed with Beacon thatexclusion was not warranted
where discovery was complete andthe case was ready to move
forward on the merits.
Now that's a pretty big rulingin favor of Beacon because
(13:27):
clearly this source code, as itwas the actual code for the
navigation of the vehicles whichare allegedly infringing on
Beacon's patent, the weight ofthat evidence was tremendous.
I mean it was the entire casefor Beacon.
So exclusion here would havebeen essentially dispositive of
the case.
The fifth factor here weighed infavor of exclusion.
(13:49):
The court found that Beacon'sexplanation for its failure to
disclose the source code wasunreasonable and noted quote
delaying third-party discoveryof source code was Beacon's own
litigation strategy.
Close quote Beacon knew aboutHarmon and plans to rely on the
source code, yet it did not seekthat discovery until almost
(14:09):
just a month before the close offact discovery.
The court also rejectedBeacon's argument that it was
working towards settlement andstated that quote compliance
with the scheduling ordernecessarily entails parallel,
not successive, settlementdiscussions and fact discovery.
Close quote.
Summing up the court found thatfour of the five factors
weighed against exclusion,leading the court to conclude
(14:31):
that the untimely disclosure washarmless and to deny BMW's
motion to strike and forsanctions.
So what are our takeaways here?
Well, we've talked about itseveral times on Case of the
Week, but it's worth reiteratingIdentifying third parties from
whom discovery is needed andstarting that process very early
in discovery is critical.
Your cases are not as likely tohave the facts here that
(14:54):
allowed Beacon to escape.
Exclusion of the key evidenceto its case.
Here Beacon disclosed the needfor the source code and both
parties knew which third partyhad it.
Even with those facts, it'sfair to say that Beacon escaped
here by the skin of its teeth.
The timing here, in which Harmonproduced the source code a mere
three months after the subpoenafrom Beacon, is fast for a
(15:15):
third-party production.
In my experience, they take alot longer and you need to start
earlier.
That means that waiting forthird-party discovery, waiting
to start third-party discovery,is very, very risky and you risk
not being able to rely on anyevidence from a third party.
If you wait and don't receiveit during fact discovery, you
also lose the ability to followup on that third-party evidence.
(15:37):
Do you want to take adeposition of the person most
knowledgeable about theinformation that was provided?
Do you need to supplement therequest from that third party
because all the evidence thatyou got is not what you needed?
Do you need to engage in asampling process with the third
party?
Because the volume ofinformation that you want from
that third party is tremendousand the third party is reluctant
(15:58):
to engage in the costassociated with providing that
information.
On a third party subpoena, youmay need to negotiate into a
sampling procedure which takestime.
You've got to have them providethat information, review it, go
back to them constantnegotiation.
So you've got to keep that inmind in terms of fact discovery
(16:19):
and advise the court of what ishappening on that procedure so
that something can be doneoutside of the scheduling order
if necessary.
Now we have seen a remarkableuptick in decisions barring
evidence that are not disclosedon the initial disclosures or
where a party failed tosupplement.
We've seen exclusion ofwitnesses, exclusion of evidence
, exclusion of expert reports.
(16:39):
Today's decision addsthird-party discovery to that
mix.
Okay, that's our case of theweek.
For this week, thanks so muchfor joining me.
We'll be back again next weekwith another decision from our
eDiscovery Assistant Database.
As always, if you havesuggestions for a case to be
covered on our case of the Week,please drop me a line.
If you'd like to receive theCase of the Week delivered to
your inbox via our weeklynewsletter, you can sign up at
(17:01):
ediscoveryassistantcom backslashblog and if you're interested
in doing a free trial of ourcase law and resource database,
please jump toediscoveryassistantcom and sign
up to get started.
Thanks so much.
Have a great week.
Have a great week, discover theshow and be kept in the know on
all things.
Electronic discovery.
I'm Kelly Twigger.
See you next time.
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