CBT v. Return Path: Preparation Costs to Make Copies Are Not Recoverable

Category: Damages
By: Abby Lin, Contributor 
TitleCBT Flint Partners, LLC v. Return Path, Inc., No. 2013-1036 (Fed. Cir. Dec. 13, 2013).
[1] Congress changed the language as of October 13, 2008, to encompass electronically stored information as well as information on paper. Section 1920(4) now covers “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” 28 U.S.C. § 1920(4) (emphasis added). The Eleventh Circuit has not addressed section 1920(4) since it was amended [and the district court in this case interprets new Section 1920(4) as expanding the scope of its previous version].
CBT at *5 (text added).
[2] [Due to the change in language of 28 U.S.C. §1920(4) covering fees from “copies of papers” to “the costs of making copies of any materials where the copies are necessarily obtained for use in the case”], what constitutes “making copies” for the purposes of sifting the activities that go into producing electronic documents [In other words, does Section 1920 allow recovery for e-discovery costs?]. Id. at *6 (text added).
[1] [W]e see no significance in the change from “copies” to “making copies”, a change that appears to reflect no more than the linguistic aim of using activity-describing phrases (“exemplification,” “making copies”) on both sides of the conjunction in section 1920(4). Id. at *6.
[2] [C]osts incurred in preparing to copy [such as discussions, planning, meetings] are not recoverable. Id. at *14(text added). [Costs of activities that] are part of the large body of discovery obligations, mostly related to the document-review process [are not included by Congress in section 1920(4)]. Id. at *15 (text added).

Procedural History
1.      District Court: CBT sued Return Path and Cisco for infringement of Patents 6,192,114(‘114) and 6,587,550(‘550) in district court. The court granted summary judgment of indefiniteness of ‘550. Cisco moved to recover e-discovery costs from CBT under 28 U.S.C. §1920. The court granted the motion, deciding that the e-discovery qualified as “21st Century equivalent of making copies”. Section 1920(4) covers “costs of making copies.” CBT Flint Partners, LLC v. Return Path, Inc., 676 F. Supp. 2d 1376 (N.D. Ga. 2009).
2.      Appeal to Federal Circuit: On appeal, the Federal Circuit reversed the summary judgment of indefiniteness and remanded. Fees were irrelevant since the summary judgment was vacated. CBT Flint Partners, LLC v. Return Path, Inc., 654 F.3d 1353, 1355(Fed. Cir. 2011).
3.      Remand on District Court: District Court granted summary judgment of noninfringement and taxed the electronic discovery costs, denying CBT’s motion to review taxation of costs. CBT Flint Partners, LLC v. Return Path, Inc., 870 F. Supp. 2d 1369 (N.D. Ga. 2012), CBT Flint Partners, No. 1:07-cv-1822-TWT (N.D. Ga. Sept. 18, 2012)(ECF No. 329)
4.      This Appeal to Federal Circuit: CBT appealed to the Federal Circuit on the issue of taxation of costs.
Contributor Note: For brevity and clarity, the procedural history and relevant decisions are presented in time line format without using direct quotes from the decision. The Court describes the procedural history on pages 2-4.
Legal Reasoning (Taranto, Dyk, O’Malley)
Cisco's E-Discovery Stages
CBT, at *11-12.
Cisco E-Discovery StagesActivities
Copying/imaging computer hard drives and documents (includes preserving metadata).
Process images to extract documents.
Organize extracted documents into database
Index, decrypt, de-duplicate documents
Filter, analyze, search, review documents to see which contained privileged info and which were responsive to discovery requests, resulting in identification of subset of documents for production.
Copied subset of documents to memory media
Delivered media to requestor (CBT) or, in the case of source code, onto a secured computer
[1] Analyzing Post-2008 Section 1920(4) Language in view of Pre-2008 Case Law and Legislative History
Legal Standard: 1920(4)
Federal Rule of Civil Procedure 54(d)(1) and 28 U.S.C. 1920(4)Federal Rule of Civil Procedure 54(d)(1) authorizes district courts to award costs to the prevailing party. In turn, 28 U.S.C. § 1920 “enumerates expenses that a federal court may tax as a cost under the discretionary authority found in Rule 54(d).” Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437, 441-42(1987). CBT, at *4-5.
Section 1920(4) Pre 2008 WordingBefore Congress enacted the Judicial Administrative and Technical Amendments Act of 2008, Pub. L. No. 110-406, § 6(2), section 1920(4) covered “[f]ees for exemplification and copies of papers necessarily obtained for use in the case.” 28 U.S.C. § 1920 (2007) (emphasis added). Id. at *5-6.
Section 1920(4) Post 2008 WordingCongress changed the language as of October 13, 2008, to encompass electronically stored information as well as information on paper. Section 1920(4) now covers “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case” 28 U.S.C. § 1920(4) (emphasis added). Id. at *5-6.
11th Circuit's Treatment of 1920(4)The Eleventh Circuit’s preamendment precedent, however, expressed the general principle that section 1920(4) “allows recovery only for the reasonable costs of actually duplicating documents, not for the cost of gathering those documents as a prelude to duplication.” Allen v. U.S. Steel Corp., 665 F.2d 689, 697 n.5 (5th Cir. Unit B 1982). Id. at *5-6.
Analysis: Section 1920(4) Case Law and Legislative History Only Show that Some Costs Are Covered by Section 1920(4)
The Judicial Conference Committee’s view that section 1920 has been long understood to “allow the taxing of costs in a very limited way” rests on the Supreme Court’s explanation that the congressional policy behind the enactment of section 1920 was to place “rigid controls on the cost-shifting in federal courts.” The Supreme Court reiterated that understanding in Taniguchi, which, [] reiterated “the narrow scope of taxable costs,” their “modest scope, their limitation “to relatively minor, incidental expenses.”
CBT at *8(internal citations omitted).
Without a clearer prescription of dramatic change than we can find in the 2008 amendment, those background principles call for reading the new language to effect only modest changes in the award of costs under the generally applicable section 1920(4) leaving larger-scale shifting of litigation expenses to be addressed under other statutory provisions that set particular standards for particular types of cases to implement context-specific policies.
Id. at *8.
In accord with the Eleventh Circuit’s pre-amendment principle, the caution favoring modesty in section 1920(4)’s real-world effect, and Ricoh’s explanation that its scope is tied to what is required to fulfill a request, we conclude that recoverable costs under section 1920(4) are those costs necessary to duplicate an electronic document in as faithful and complete a manner as required by rule, by court order, by agreement of the parties, or otherwise. To the extent that a party is obligated to produce (or obligated to accept) electronic documents in a particular format or with particular characteristics intact (such as metadata, color, motion, or manipulability), the costs to make duplicates in such a format or with such characteristics preserved are recoverable as “the costs of making copies . . . necessarily obtained for use in the case.” 28 U.S.C. §1920(4). But only the costs of creating the produced duplicates are included, not a number of preparatory or ancillary costs commonly incurred leading up to, in conjunction with, or after duplication. [Citation for Ricoh: In re Ricoh Co., Ltd. Patent Litig., 661 F.3d 1361 (Fed. Cir. 2011)]
Id.  at *9-10(citation added).
Proper Relief for Discovery Lies in Other Forms of Relief and Not Section 1920(4): A litigant faced with what it views as overboard discovery requests or vexatious discovery tactics-or even unduly fruitless or burdensome negotiations over discovery obligations – must pursue relief by other means, such as seeking court orders to limit the discovery when the problems arise or seeking reimbursement of costs of fees or payment of penalties afterwards under authority other than section 1920(4). Id. at *16.
Application to Case
District Court Should Define Form of Copying in the future
How this analysis[of making copies] applies in full to the specific bills of this case requires an inquiry that the district court should perform int eh first instance. The court should determine what requirements governing the format or other characteristcs of the produced documents were imposed on the defendants. At least in this case, looking back to events some years ago, the court may have to resort to a determination of well-grounded expectations agbout default requirements in teh absence of contrary agrement, rules, or orders. In the future, default standards should become clearer, and pre-copying court orders or parties' agreement should determine more affirmatively and definitely what form of copying is required in a particular case. CBT at *15 (text added).
Contributor Note: The Court constantly states that clear rules or agreements should be made before discovery in order to make it “easier for requests parties to define their requests with the consequences known in advance and for both parties to know what is at stake in any attempt to agree on a difference allocation of costs.” Id. at *18.
Metadata may be included in Costs of Making CopiesWe do not see why it makes a difference that the process of making a single production copy may involve first creating one electronic duplicate of the two-part "document" (visible content, metadata), then creating a production copy of each part. … Notably, both the Third and Fourth Circuits, in their recent decisions addressing issues similar to those we address, have recognized that the statute covers costs for steps, which commonly involve an initial reproduction, that necessarily precede the creation of a final production copy: converting electronic files to non-editable formats, Country Vintner of N. Carolina, LLC v. E. & Gallo Winery, Incv, 718 F.3d 249, 260(4th Cir. 2013), and scanning paper documents, Race Tires, 674 F.3d at 171.
Id. at *13.
"Making Copies" does not include preparation for copying and document review.
Whoever performs them [e-discovery could be performed by parties or electronic-discovery vendors], however, the steps described are all fairly included in section 1920(4) where they are, in fact, necessary to make copies of information required to be produced and not incurred just to make copies for the convenience of the producing party. For example, if metadata can be preserved without first using imaging and extraction techniques, then those steps are outside section 1920(4). And if a vendor does its chargeable work (i.e., work covered by the statute if performed on a single document) on a large volume of documents before culling to produce only a subset, the awarded copying costs must be confined to the subset actually produced, e.g. by using document-specific charges if they are available or by using a reasonable allocation method such as prorating.
CBT at *13-14.
“Whether such information is covered by section 1920(4), such as metadata or extracted text, should depend on whether that information is required to be produced, in which case it is part of the cost of ‘making copies.’” Id. at *18.
On the other side of the line, costs incurred in preparing to copy are not recoverable.
Id. at *14.
A requester may therefore decide to request a production in a from that increases copying costs while saving other litigation costs. But if not, the costs are limited to the duplication needed for the production in the form required. Id. at*14.
The costs of [activities such as project management, keyword searching, “statistical previews”, “auditing and logging of files and enduring compliance with Federal Rules,” and “extraction of proprietary data”] are not the costs of making copies. Rather they are part of the large body of discovery obligations, mostly related to the document review process, that Congress has not included in section 1920(4). Id. at *15.
Similarly, the costs incurred in acquiring, installing, and configuring a new data-hosting serve at the offices of Cisco’s counsel were clearly incurred for the convenience of Cisco and its counsel and are not recoverable. Neither should a party be able to recover the costs of litigation support tasks such as training in the use of the document review software, deposition support, or production and privilege-log creation. Costs of other activities listed on the vendor’s invoices here, such as meetings, conference calls, and other communications, also are not costs of “making copies,” even when they relate to the copying process.
Id. at *15-16.
Brief Summary of Some Recoverable/Taxable Costs
Activity Taxable/Recoverable?
Acquiring, installing, configuring new data-hosting server at offices of Cisco’s counsel for convenienceNo. CBT at *15.
Litigation support tasks: training in use of document review software, deposition support, or production and privilege log creationNo. Id. at *15-16.
Planning, preparation, coordination, and communications associated with copyingNo. Id. at *16, 19.
Document DecryptionNo, decryption is precopying. Id. at *16.
DeduplicationNo. "[Deduplication] is either a pre- or post copying activity (depending on when the culling is done), not itself the making of copies." Id. at *17.
Load Files“Whether such information is covered by section 1920(4), such as metadata or extracted text, should depend on whether that information is required to be produced, in which case it is part of the cost of ‘making copies.’” Id. at *18.
Imaging source drive and extracting metadataYes, but only on the documents actually produced and if required to make a copy in the required format. This Court’s decision differs from the Third Circuit’s Race Tires decision where the Third Circuit designated imaging and extracting metadata as unrecoverable. This Court decided that “there is no good reason, as a default matter to distinguish copying one part of an electronic document (i.e., the part that is visible when printed) from copying other parts (i.e., parts not immediately visible) when both parts are requested. Id. at 20.
Prior Art Searches No. CBT at *20.
Project managementNo. Id. at *15.
Keyword searchingNo. Not “making copies”. Relief lies in other means, not 1920(4). Id. at *16.
“statistical previews” , “auditing and logging of files and enduring compliance with Federal Rules”, “extraction of proprietary data”No. Id. at *15.
Copying responsive documents to production mediaYes. Id. at *18-19.
Delivered media to requestor (CBT) or, in the case of source code, onto a secured computerYes. “Covered costs include the costs incurred in providing a secured computer for the time the requester is entitled to access to it, installing on the secured computer whatever review software the requester requires, and copying the source code files to the secured computer.” Id. at *19.
Because the district court erred in interpreting 28 U.S.C. § 1920, the district court’s fee award is reversed in part and vacated in part, and the case is remanded for the district court fully to apply the approach and conclusions of this opinion to the particular cost requests submitted in this case. CBT at *20-21.
O’Malley, Circuit Judge, concurring in part and dissenting in part. CBT, O’Malley Op., at *1.
Grounds for Dissent: Initial Imaging Costs are not taxable costs
“I, thus, respectfully dissent from the portion of the majority opinion that authorizes, as “costs,” an award of the pre-duplication expenses the majority describes as stage one costs.” CBT, O’Malley Op., at *2.
“I believe that [the costs incurred during the initial imaging of source media and the extraction of the metadata] fall, in the words of the Eleventh Circuit’s own formulations, with the ‘prelude to duplication’ and are not taxable costs.” Id. at *3.
“Accordingly, I respectfully dissent from the majority’s conclusion to expand the narrow confines of costs taxable under Section 1920(4). In this case, only the costs of creating the final single copy produced to the requesting party are covered by §1920(4), including scanning to the extent necessary, converting documents to a uniform production format, copying the converted files to production media, the creation and copying of the load files, and the cost of the production media itself.” Id. at *3.
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