In re ChromaCode Litigation

Background

Bio-Rad Laboratories, Inc., a defendant and counter-claimant, alleges that ChromaCode, Inc., a plaintiff and counter-defendant, infringed two patents. Bio-Rad served damages contentions identifying lost profits and reasonable royalties as damages categories. Its reasonable-royalty contentions discussed royalty rates and the royalty base, asserted more than $81 million in sales of accused products, and sought royalty damages for ChromaCode’s internal research-and-development uses of the accused technology.

During discovery, the parties learned that none of the five accused ChromaCode products had been sold commercially or generated revenue. Bio-Rad later conceded that four products did not infringe the asserted patents, leaving the NSCLC assay in dispute. Bio-Rad did not amend its damages contentions, but on the last day of fact discovery it amended answers to interrogatories about its damages and requested remedies. The amended answers stated that Bio-Rad sought at least a reasonable royalty for ChromaCode’s internal uses and that the royalty could take the form of a lump-sum payment.

Bio-Rad then served Raymond Bummer’s damages expert report. The report proposed calculating royalty damages for ChromaCode’s alleged infringing uses of the NSCLC assay through a hypothetical negotiation resulting in a one-time $2 million payment from ChromaCode to Bio-Rad. ChromaCode moved to strike the report under Federal Rule of Civil Procedure 37(c)(1), arguing that Bio-Rad had not timely and sufficiently disclosed the lump-sum theory, amount, or detailed factual bases in its patent damages contentions.

Legal Standard

The current version of Patent Local Rule 3-8 requires a party asserting infringement to identify the categories of damages it seeks and provide a good-faith explanation of its damages theories and factual bases. The rule states that a party may not amend its identification of damages categories without court permission. Unlike the earlier version of the rule, the current rule does not require a damages computation or identification of information needed for a complete response.

Rule 37(c)(1) generally bars a party from using information that it failed to disclose as required by the discovery rules unless the failure was substantially justified or harmless. In evaluating harmlessness, a court may consider prejudice or surprise, the ability to cure the prejudice, possible trial disruption, and bad faith or willfulness.

Court’s Analysis

The court rejected ChromaCode’s premise that Bio-Rad could not rely on an expert report presenting a lump-sum royalty theory unless its Rule 3-8 contentions had already disclosed that theory, its detailed bases, and the lump-sum calculation. The court distinguished between a damages category and a damages theory. Bio-Rad had identified reasonable royalties, including royalties for internal research-and-development use, as a damages category. The court held that the omission of the more specific lump-sum theory from the contentions did not violate the current Rule 3-8 and did not trigger a duty to amend under Rule 26(e). Therefore, Rule 37(c)(1) did not authorize the requested exclusion on that basis.

The court separately considered whether Bio-Rad’s amended interrogatory responses adequately and timely disclosed the lump-sum theory. It found that the responses adequately disclosed both the theory and its factual bases. Although the responses were served on the last day of fact discovery, the court found no support for a finding of bad faith. It also noted that ChromaCode did not challenge the responses or seek additional fact discovery at the time, and that Bio-Rad apparently was willing to agree to additional discovery for this purpose.

The court concluded that the timing of Bio-Rad’s amended interrogatory responses was substantially justified. Alternatively, even if the responses could have been served earlier, the delay was harmless because the court was not persuaded that ChromaCode was meaningfully prejudiced in preparing a rebuttal, including a rebuttal expert report.

Disposition

The court denied ChromaCode’s motion to strike Raymond Bummer’s expert report. The order addressed whether the report should be excluded based on the timing and content of Bio-Rad’s disclosures; it did not decide whether Bio-Rad is ultimately entitled to the claimed royalty damages or whether the expert’s damages analysis will prevail at trial.