Toy giant rapped over disclosure miss in patent dispute
Doll maker and its law firm criticised for major e-disclosure failure | 40% of documents missed in harvesting process | Defendant claims indexing error.
The High Court of England and Wales has criticised toy giant MGA Entertainment and the law firm, Fieldfisher, over a major e-disclosure failure ahead of a patent dispute with smaller rival Cabo Concepts.
Cabo, makers of the Worldeez range of toys, initially sued MGA in 2020, accusing the LOL Surprise! doll manufacturer of abusing its market dominance to convince retailers not to stock Cabo’s products and issuing “unjustified threats of patent infringement”.
This conduct, alleged Cabo, led to its ultimate market decline and the company is now seeking £170 million in damages as a result.
Cabo also held that MGA misled the court by claiming to have a patent on the LOL Surprise! concept.
Missed documents
The four-week trial was due to begin on June 27, but three weeks before this, MGA informed the court that they had missed approximately 84,000 documents during the data collection process underlying their disclosure. This led to the adjournment of the trial to October 2024—a delay of four years since the case began.
During a hearing o n July 20 Justice Joanna Smith ordered MGA to pay Cabo ‘thrown-away’ costs on an indemnity basis, and approximately £700,000 to cover expenses incurred due to the delay of the case caused by the missing documents.
In that hearing, Justice Smith wanted more time to consider whether MGA should be subject to an order relating to its disclosure obligations.
Cabo requested that if MGA failed to comply with the terms of the July order covering disclosure, then its defence should be struck out, leading to Cabo’s entitlement to enter judgment.
In this latest judgment, handed down on July 29 in the same court, Justice Smith rejected this application, but criticised both MGA and its legal representatives, Fieldfisher, for not following e-disclosure best practice.
She said: “...it seems to me to be of importance that the failures on the part of MGA were not deliberate and that, in light of the terms of the July Order, there is no reason to believe that they will occur again. Cabo has not suggested otherwise.”
She added that MGA has sought to provide evidence to the court to explain the deficiencies in its disclosure and “has shown itself to be anxious to remedy the deficiencies (albeit to date in a somewhat misguided fashion)”.
Justice Smith noted: “I do not consider any of MGA's conduct to be consistent with an intention to flout the July Order and thus I do not consider it necessary to impose an unless order in order to ensure compliance with the July Order.”
Indexing error
During the disclosure process, it was found that approximately 40% of documents were missed by MGA (just over 1 million documents were harvested with more than 80,000 documents missed). Almost half of all potentially relevant documents were never reviewed and a number of warning signs were inadvertently overlooked.
MGA contends that a major cause of the deficiencies was an indexing error in Microsoft Outlook when harvesting former employees' emails, meaning that larger data sets, in particular, failed to filter correctly.
According to the toy manufacturer, it also identified issues with the harvesting of current employee's emails, but that the lack of any audit trail means that it has not been able to explain why the data was incomplete.
‘Serious’ deficiencies
“There is no suggestion that the deficiencies in disclosure were deliberate, but there is no question that they were serious,” said Justice Smith. “By way of example, the original document harvest…produced 204,950 documents whereas a recently conducted re-harvest has produced 657,996, an increase of over 200%.
“The deficiencies led, at the eleventh hour, to the collapse of the trial and to Cabo finding itself in the unenviable position of having another two years to wait for determination of its claim.”
The harvesting of evidence using keyword searches will now be repeated by an independent e-disclosure provider engaged by MGA, a process which Justice Smith said will “no doubt” result in “very substantial further costs” for both parties.
Richard Spector, partner at Spector Constant Williams (SCW) representing Cabo, said: “We welcome the court's decision, as does our client Cabo Concepts. However, no client should ever have to see their case come to a shuddering halt when it could have easily been avoided.
“This was a major oversight by MGA Entertainment and their legal advisers, made worse by the fact our clients had requested that the disclosure harvest be carried out independently.
“This case highlights the seriousness of what is a highly unusual and significant disclosure failure. This was not an instance of one or two missing documents in a disclosure before a case.
“Approximately, 800,000 documents were not harvested for disclosure despite the fact that MGA’s lawyers, Fieldfisher had represented to the court in July 2021 that MGA had the requisite experience to carry out the task in-house and that there would be supervision including from Fieldfisher.
“MGA didn’t have the experience and there was no adequate supervision at all.”
Fieldfisher declined to comment.
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