A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Appoints Forensic Investigator After Defendant Failed to Issue Litigation Hold

In a March 4, 2014 ruling, Magistrate Judge Michael H. Dolinger ordered that plaintiff Klipsch Group, Inc. could appoint a forensic investigator to examine defendant Big Box Store Ltd.’s “computer systems for the purpose of determining, if possible the likelihood of document destruction . . ., the likely nature and volume of any such destroyed documents, whether some or all of those documents may be recovered, the status of the sales information in the defendants’ system of computers, whether any pertinent sales data has been destroyed or simply not produced, the recoverability of any destroyed sales data, and what any recovered sales data pertaining to infringing goods indicates as to volume, revenue and profits.” Klipsch had accused Big Box Stores of a variety of discovery abuses in its trademark infringement action, including failure to issue a written litigation hold and issuing an oral litigation hold seven months after the start of the litigation, and further argued that that failure permitted documents to be destroyed, especially documents relating to sales of the goods infringing its trademark. Big Box Stores admitted some trademark infringement, but only as to a small number of units.

Judge Dolinger concluded that Big Box Stores had fallen short in its discovery obligations, including making misleading statements about the documents that it had. The Court found, however, that despite the fact that documents had been destroyed, there was no evidence that any documents relating to the amount of sales had been destroyed, nor was there any evidence that the defendant’s infringing sales were any greater than the small number of sales to which Big Box Stores admitted. In these circumstances, Judge Dolinger rejected a number of harsher penalties, such as termination in Klipsch’s favor, preclusion of evidence about the amount of infringing sales, and a mandatory or permissive adverse jury instruction, in favor of the forensic investigation. The Court ordered the plaintiff to bear the cost of the investigation in the first instance with leave for the plaintiff to apply for a shifting of the costs “in light of actual problems in obtaining discovery from defendants.”
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