Looksmart Grp., Inc. v. Microsoft Corp.
386 F. Supp. 3d 1222
N.D. Cal.2019Background
- Looksmart sued Microsoft for patent infringement of U.S. Patent No. 7,356,530, alleging Bing infringed.
- Under Northern District of California Patent L.R. 3-8, Looksmart served damages contentions (estimating a reasonable royalty, suggesting various approaches including a 1.3% rate on Bing ad revenue) but reserved further discovery.
- Looksmart’s expert (Lasinski) later produced a damages report relying on an avoided-cost theory tied to Microsoft’s reduced server needs, calculating ~$39.5 million.
- Microsoft moved to strike portions of the expert report as introducing a damages theory not disclosed in Looksmart’s Rule 3-8 contentions.
- The core legal questions: whether parties must supplement/amend damages contentions under Fed. R. Civ. P. 26(e), whether leave of court is required, and whether Looksmart’s failure was sanctionable.
- The Court found Looksmart materially shifted its damages theory without timely supplementation but declined to strike the report because the obligation to amend was unsettled and Looksmart’s failure was substantially justified.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 26(e) requires supplementation of Patent L.R. 3-8 damages contentions | Looksmart: No ongoing duty to amend damages contentions; Rule 3-8 replaces supplementation until expert reports | Microsoft: Rule 26(e) still requires supplementation when a theory materially changes | Court: Rule 26(e) requires supplementation/amendment when damages theory shifts "in some material respect" |
| Whether leave of court is required to amend damages contentions | Looksmart: No court-ordered leave required by the Patent Local Rules | Microsoft: Amendments should require Rule 16(b)(4) good cause / court leave to prevent prejudice | Court: Leave is not required; amendments governed/enforced by Rules 26(e) and 37(c) (motion to strike/sanctions available) |
| Whether Looksmart materially changed its damages theory | Looksmart: Its contentions referenced cost-savings and related concepts; no new category of damages asserted | Microsoft: Expert advanced an avoided-cost/server-count theory not disclosed or described in contentions | Court: Shift to an avoided-cost/server-based theory was a material change; Looksmart failed to amend timely |
| Appropriate remedy for failure to amend | Looksmart: Any failure harmless or substantially justified given rule uncertainty and discovery disclosures | Microsoft: Strike the expert portions and bar that damages theory | Court: Although Rule 26(e) violation occurred, striking would be unfair given unsettled obligations; Looksmart’s failure was substantially justified, so motion to strike denied |
Key Cases Cited
- O2 Micro Int'l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355 (Fed. Cir. 2006) (explains purpose of patent-local contention rules and need for timely amendments)
- Woods v. DeAngelo Marine Exhaust, Inc., 692 F.3d 1272 (Fed. Cir. 2012) (Rule 26(e) requires supplementation as theories mature to shape discovery and trial prep)
- Goodman v. Staples The Office Superstore, LLC, 644 F.3d 817 (9th Cir. 2011) (discusses fairness where legal obligation was previously unsettled and relevance to sanctions under Rule 37)
- Asia Vital Components Co. v. Asetek Danmark A/S, 377 F. Supp. 3d 990 (N.D. Cal. 2019) (applies supplementation principles to contention-type disclosures and striking expert material for nondisclosure)