Traditionally, the U.S. courts (both federal and state) have forced private litigants to exchange, through their lawyers, highly confidential paper documents recording the most intimate details of their business affairs. Such “civil discovery” often included disclosure (under a “protective order”) of both technological and financial trade secrets. By the late 1990s, however, the U.S. courts recognized that the most important business records were being created and stored electronically, rather than on paper. To keep U.S. civil litigation current with this rapid change in business recordkeeping, on December 1, 2006, the U.S. Supreme Court adopted a new and controversial set of procedural and evidentiary rules governing the discovery of “electronically stored information” in U.S. civil litigation.1 These new “electronic discovery” rules are now widely used by both U.S. federal and state courts.

Manufacturing businesses in China have privately expressed deep concern about both the cost and fairness of applying the new “electronic discovery” rules to Chinese businesses. U.S. litigation consultants estimate that the average cost of complying with the new electronic discovery rules has climbed to more than $1.5 million per matter. The threat posed to Chinese manufacturers by such high (and non-recoverable) litigation costs may in many cases exceed the value of the case, forcing settlement regarding the merits of the plaintiff's case. Moreover, business record keeping practices in China reflect Chinese business and legal realities and seldom approach the rigor of U.S. record keeping practices. This difference in business practices makes Chinese companies highly vulnerable to tactical charges of destroying evidence (often referred to as “spoliation”), which may lead to a judgment against the Chinese defendant with any consideration of the merits of the case.

[continued] United States, Intellectual Property, Recent U.S. “Electronic Discovery” Sanctions Order In U.S. Patent Case Creates New Threat To Chinese Companies – Finnegan, Henderson, Farabow, Garrett & Dunner, LLP – 08/12/2009, Patent, Litigation, Mediation & Arbitration, Disclosure & Electronic Discovery.