Case 1:17-cv-00868-CFC-SRF Document 217 Filed 06/25/20 Page 1 of 5 PageID #: 8012
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`VIA E-FILING
`The Honorable Sherry R. Fallon
`J. Caleb Boggs Federal Building
`844 N. King Street
`Wilmington, DE 19801-3568
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`June 18, 2020
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`RE: University of Massachusetts, et al. v. L'Oreal U.S.A., Inc.
`(C.A. No. 17-cv-868-CFC-SRF)
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`Dear Magistrate Judge Fallon,
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`Despite Your Honor’s repeated urging at the May 18, 2020 conference that the parties work
`together to resolve outstanding discovery disputes, little has changed in L’Oréal’s approach to
`discovery in this case, forcing Plaintiffs to move yet again for a request to order L’Oréal to fulfill
`its discovery obligations. After fulfilling the bare minimum of Your Honor’s order to produce hit
`counts related to the search terms “adenosine” and “75156”, L’Oréal has refused to meaningfully
`work towards a resolution of this issue, and instead has simply refused to produce almost anything
`at all. And after two of L’Oréal’s 30(b)(6) witnesses revealed that L’Oréal has failed to produce
`financial information it should have produced months ago as part of its obligations under
`Paragraph 6(d) of the Scheduling Order and in response to Plaintiffs’ discovery requests, L’Oréal
`has failed to confirm whether it will fulfill its discovery obligations.
`Because L’Oréal has made clear that it will produce little without an order from the court
`compelling it to do so, Plaintiffs respectfully request that the Court order the relief requested
`below.
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`Documents Responsive to the Term “Adenosine” and “75156” as Ordered by the Court at
`the May 18, 2020 Conference and Requested by RFPs 27, 32, 40, 41, 42, 53, 59, and 66.
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`At the last conference, the Court ordered L’Oréal to run “adenosine” and “75156” as
`standalone terms in the MILOR database and for the parties to “[h]ave a further meet and confer
`and see, depending on what the number of hits are, if there’s a way to further refine it and to put
`the dispute to rest with regard to further production of documents . . . .” May 18, 2020 Hearing Tr.
`at 50:13-16. Despite this directive, L’Oréal has refused to meaningfully entertain production of
`documents hitting on “adenosine” or “75156” (the internal product code for adenosine).
`In response to that Order, L’Oreal provided the ordered hit counts and produced a total of
`two documents hitting on the “75156” term. Even while producing, it denied they had “any
`relevance to the claims or defenses in this case.” Exhibit A. This is plainly wrong. One document
`compares adenosine to other anti-wrinkle ingredients. The other is a 2005 testing document
`evaluating the anti-wrinkle effect of adenosine. Both documents are plainly relevant to the issues
`in dispute, and their late production raises serious questions about what else is missing.
`L’Oréal provided the hit counts ordered by the Court on May 21, 2020: 50,293 hits for
`“adenosine” and 858 hits for “75156”. L’Oréal later confirmed that none of those documents had
`been reviewed for responsiveness by L’Oréal. Exhibit A. Plaintiffs explained that—given
`adenosine’s central role in this case—it was surprising that L’Oréal had not reviewed any of these
`documents for responsiveness and Plaintiffs called for the documents to be produced.
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`Case 1:17-cv-00868-CFC-SRF Document 217 Filed 06/25/20 Page 2 of 5 PageID #: 8013
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`Nevertheless, in keeping with the Court’s desire to reach an agreement that would put the
`dispute to rest, Plaintiffs suggested a compromise position whereby L’Oréal would produce a
`random sampling of 1,000 documents from the “adenosine” set (every 50th document) so that the
`parties could work together to determine a set of mutually agreeable limitations on the term
`“adenosine” that would hone in on the most relevant documents. Exhibit A. L’Oréal refused.
`Plaintiffs also proposed that L’Oréal identify the scope and categories that L’Oréal was
`withholding—an especially easy task for the 856 of 858 documents that hit on the “75156” term.
`Once again, L’Oréal refused. Exhibit A.
` Finally, Plaintiffs proposed limiters on the term “adenosine” for L’Oréal to consider,
`despite the fact that Plaintiffs believe the vast majority of the documents in the “adenosine” set—
`if not all—would be responsive to their requests. Exhibit B. Again, L’Oréal refused—not only on
`the specific modifiers but on any attempt at all to run modifiers. In short, L’Oréal has refused to
`produce documents hitting on “adenosine,” refused to provide a random sampling of documents
`hitting on “adenosine” so the parties could work towards a set of agreed modifiers, refused to
`propose modifiers itself, refused to explain its view of responsiveness on the “75156” documents,
`and otherwise refused to do anything to work towards producing responsive documents.
`L’Oréal has three excuses—all unavailing. First, L’Oréal argues that it is too late. This
`position ignores that Plaintiffs have been seeking this information literally since the first day of
`discovery. This Court has held multiple hearings on this very issue, trying to encourage
`compromise, and indeed ordered the parties to confer for further production. Second, L’Oréal
`argues burden. But even assuming all documents are produced, the volume of documents is still
`less than many patent cases—especially one with the number of accused products. And a proper
`search should have been run long ago. Third, with respect to the modifiers to the “adenosine”
`search terms specifically, L’Oréal maintains that there are too many modifiers. But Plaintiffs are
`trying to capture the accused products plus modifiers on adenosine likely to lead to highly relevant
`information since L’Oréal will not produce the full set under its own view of relevancy.
`Finally, L’Oréal has made it abundantly clear that it will not produce any more documents
`absent express court order. Plaintiffs have sought compromise after compromise. Documents
`hitting on either “adenosine” or its product code “75156” should have been produced long ago.
`Because Plaintiffs believe that documents hitting on these terms are likely to be relevant—and
`because L’Oréal has done nothing to create a more focused set of documents or to explain its view
`of responsiveness—Plaintiffs request that the Court order L’Oréal to produce all non-privileged
`documents hitting on these two terms. In the alternative, Plaintiffs request that L’Oréal produce
`documents pursuant to the limiters Plaintiffs proposed, documents hitting on “75156”, as well as
`documents hitting on “adenosine” before 2012 (which will capture early development documents
`and includes the timeframe Plaintiffs sold a competing product). Exhibit B.
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`Outstanding Information Regarding Domestic Sales of Accused Products Requested by
`RFPs 38, 39, and 48 and required by Paragraph 6 of the Scheduling Order.
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`Pursuant to Paragraph 6(d) of the Scheduling Order in this action, L’Oréal was required to
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`produce with its Invalidity Contentions “[d]ocuments sufficient to show the sales, revenue, cost,
`and profits for [the] Accused Instrumentalities”. Dkt. # 46. Likewise, in response to the above-
`cited RFPs L’Oréal agreed to produce documents reflecting the sales, revenue, cost, and profit
`information for the Accused Products. Exhibit C (excerpts of Defendants’ R&Os). Despite
`L’Oréal’s obligations to produce this information months ago, Plaintiffs learned last week at the
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`Case 1:17-cv-00868-CFC-SRF Document 217 Filed 06/25/20 Page 3 of 5 PageID #: 8014
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`deposition of Diego Balo—L’Oréal’s designated 30(b)(6) witness on financial issues—that
`L’Oréal has not produced all of the relevant domestic sales, revenue, cost, and profit information
`it maintains in the ordinary course of business.1
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`L’Oréal has produced spreadsheets showing various financial information. For example,
`the Luxury Products USA division accounts for many of the best-selling Accused Products at issue
`in this action, L’Oréal has produced only figures for “consolidated net sales”, “cost of sales”,
`“gross margin”, “advertising & promotion expenses”, “marketing margin”, and “operating profit”
`by year and by product. Exhibit F. But as explained in the declaration of Julie Davis attached to
`this motion, see Decl. of J. Davis ¶3 (Exhibit H), L’Oréal’s method for calculating consolidated
`net sales includes deductions that are generally not included in standard net sales calculations.
`This matters, because it means that the “consolidated net sales” figures reflected in L’Oréal’s
`spreadsheets do not conform with what is generally accepted as net sales and likely undercounts
`revenue.
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`Fortunately, there is an easy solution. A standard net sales figure can be calculated by
`subtracting from gross sales the returns, allowances, and discounts that are generally used to
`calculate a net sales figure. Mr. Balo made clear at his deposition that L’Oréal keeps, in the
`ordinary course, detailed records showing L’Oréal’s gross sales figures by product, along with the
`deductions that L’Oréal makes from its gross sales figures to calculate its consolidated net sales
`figures. Exhibit D (D. Balo Dep. Tr. 38:7-46:24). With this information, Plaintiffs could calculate
`a standard net sales figure that is more in-line with common practice. See Decl. of J. Davis ¶5.
`And another L’Oréal witness has confirmed that this information can be had at the push of a button.
`Exhibit G (E. Arnera Dep. Tr. 47:10-25).
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`Similarly, Mr. Balo testified that the “Cost of Sales” entries in L’Oréal’s spreadsheets are
`calculated by summing up other specific cost items that are not reflected in the spreadsheets
`L’Oréal has produced. Exhibit D (D. Balo Dep. Tr. 50:1-5). And Mr. Balo also testified that
`L’Oréal maintains Profit and Loss information including detail on gross sales, deductions, and net
`sales by product. Exhibit D (D. Balo Dep. Tr. 54:16-55:12). As Ms. Davis explains in her
`declaration, this data would assist her in evaluating the profitability of the Accused Products. See
`Decl. of J. Davis ¶6.
`This data could, and should, have been produced pursuant to L’Oréal’s Paragraph 6(d)
`obligations, or in response to the many discovery requests it corresponds with. In any event,
`Plaintiffs request that the Court order L’Oréal to produce data showing each of the deductions,
`allowances, returns, and discounts it uses to calculate domestic consolidated net sales figures for
`each of the Accused Products, in the form this information is kept in the ordinary course of
`business. Plaintiffs note that, after the parties filed their joint motion, L’Oréal agreed to produce
`domestic gross sales information and noted that it was considering the remainder of Plaintiffs’
`request on this issue, though L’Oréal has not committed to producing the additional information.
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`1 This issue should not have risen to Court intervention. This information is plainly relevant. Given
`its importance now to the damages report, Plaintiffs raise it as one of the three issues to which it
`was limited. On issue after issue, however, L’Oréal has refused to comply with many discovery
`obligations. It refuses to put answers about litigation holds in its interrogatory responses, refuses
`to provide any more information about its non-adenosine searches, and refuses to answer properly-
`issued interrogatories on the ground that it is too close to the end of discovery. Plaintiffs are also
`continuing to meet and confer on other open issues.
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`Case 1:17-cv-00868-CFC-SRF Document 217 Filed 06/25/20 Page 4 of 5 PageID #: 8015
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`Documents Regarding Foreign Sales of Products Containing Adenosine that Are Developed,
`Tested, and/or Manufactured in the United States Requested by RFPs 38, 39, and 48 and
`required by Paragraph 6 of the Scheduling Order.
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`At the June 12, 2020 deposition of Angelike Galdi—L’Oréal’s 30(b)(6) witness on topics
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`regarding the testing of the Accused Products and products containing adenosine—L’Oréal
`revealed, for the first time, that it manufactures, tests, and develops products containing adenosine
`in the United States for final sale outside of the United States. Exhibit E. (A. Galdi Dep. Tr.
`301:12-304:15). Moreover, Mr. Balo testified that the financial spreadsheets produced relate only
`to third-party “non-group” sales, not “group” sales to other L’Oréal entities. Financial information
`regarding such products is directly relevant to Plaintiffs’ damages in this case, and thus should
`have been produced pursuant to L’Oréal’s production required by Paragraph 6(d) of the Scheduling
`Order, and in response to the above-cited Requests for Production. See J. Davis Decl. ¶9.
`Accordingly, Plaintiffs request that the Court order L’Oréal to produce the same domestic
`financial information it has been or will be ordered to produce for any products containing
`adenosine that L’Oréal developed, tested, or manufactured in the United States for sale abroad.
`Plaintiffs request that this information apply to products that have the same formula number, even
`if they are manufactured, tested, developed, or sold within the United States under one product
`name but later sold abroad under a different product name. Plaintiffs also request that L’Oréal
`produce documents sufficient to show the details of any sale between L’Oréal USA and any other
`L’Oréal entity a transaction referred to by Mr. Balo at his deposition as a “group” sale. Exhibit D
`(D. Balo Dep. Tr. 63:4-6). This request includes profit or revenue information from other L’Oréal
`entities on any resale of the product to non-affiliated buyers. This information is needed to
`calculate an appropriate base for Ms. Davis’s damages calculation for products developed, tested,
`manufactured, or sold within the United States for sale abroad. See J. Davis Decl. at ¶9.2
`Moreover, Dr. Galdi testified that as many as 50% of L’Oréal products contain adenosine.
`Exhibit E. This testimony confirms Plaintiffs fears that L’Oréal has not revealed other products
`containing adenosine despite Plaintiffs’ diligent efforts to obtain such information from the
`beginning of discovery. Whether intentional or not, L’Oréal’s crimped view of relevance has
`prevented Plaintiffs from exploring the scope of L’Oréal’s infringement. L’Oréal should update
`Interrogatory 3 to include all products containing adenosine and produce sufficient information in
`response to the Plaintiffs’ requests for production regarding its use of adenosine in any product.3
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`2 Although L’Oréal claims that the parties have not met and conferred on this issue, Plaintiffs
`raised this issue in advance of the parties’ June 12 meet and confer, where L’Oréal stated that it
`would investigate further but agreed that the parties had met and conferred on the issue. After the
`parties filed their joint motion, Plaintiffs again offered to further meet and confer on this issue if
`L’Oréal desired, but L’Oréal never replied.
`3 Immediately upon finding out about this manufacture and testing in the United States and one
`week before the close of depositions, Plaintiffs issued a 30(b)(6) notice regarding L’Oréal’s
`manufacturing, testing, and sales of products meant for ultimate international sale. L’Oréal has
`refused to provide a witness.
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`Case 1:17-cv-00868-CFC-SRF Document 217 Filed 06/25/20 Page 5 of 5 PageID #: 8016
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`cc: Counsel of Record (Via E-Mail)
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`Respectfully submitted,
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`/s/ Brian E. Farnan
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`Brian E. Farnan
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