Deque Systems v. BrowserStack — Fourth Circuit Affirms Summary Judgment After Copyright Plaintiff’s Repeated Failure to Disclose Damages

Background

Deque Systems Inc. is a web accessibility software company that develops DevTools, a browser extension that tests webpage accessibility, and proprietary Rules Help Pages that explain potential solutions to accessibility issues. Deque registered multiple versions of both products with the U.S. Copyright Office.

BrowserStack, a competitor, sought to enter the accessibility testing market around 2021. After a failed acquisition attempt, more than 100 BrowserStack employees created accounts to access DevTools, agreeing to Deque’s Software License Terms that prohibited reverse engineering. In 2022, BrowserStack launched its own Accessibility Toolkit, which Deque alleged was developed by reverse engineering DevTools’ source code and copying its Rules Help Pages.

In February 2024, Deque sued BrowserStack in the Eastern District of Virginia, asserting copyright infringement, false advertising, breach of contract, and unjust enrichment. However, Deque repeatedly failed to comply with its discovery obligations. It did not provide a damages computation in its initial disclosures, gave evasive responses to interrogatories, missed the expert disclosure deadline, and only first revealed its $30 million damages claim in a “rebuttal” expert report served three days before discovery closed.

The district court excluded all of Deque’s damages evidence under Federal Rule of Civil Procedure 37(c)(1) as a sanction for its repeated nondisclosure. With damages evidence excluded and no viable claim for injunctive or declaratory relief remaining, the court granted summary judgment for BrowserStack on all counts. Deque appealed both decisions.

The Court’s Holding

The Fourth Circuit affirmed in full, addressing two main issues.

Exclusion of damages evidence was proper. The court held that the district court did not abuse its discretion in excluding Deque’s damages evidence under Rule 37(c)(1). Applying the Southern States factors, the court found: (1) BrowserStack was genuinely surprised because Deque’s damages claim only became clear three days before discovery closed; (2) curing the surprise would have required reopening discovery and postponing trial, causing significant disruption; (3) the importance of the damages evidence cut against Deque because the more important the evidence, the greater the obligation to disclose it timely; and (4) Deque offered no justification for its noncompliance. The court also rejected Deque’s argument that the more stringent Wilson factors for terminating sanctions should apply, finding the argument was waived because it was first raised in a Rule 59(e) motion, and in any event, the evidence exclusion did not carry the “force of dismissal” since the summary judgment rested on independent grounds.

Summary judgment was independently warranted. Even setting aside the damages exclusion, the court held that Deque could not survive summary judgment on its copyright infringement or false advertising claims. Deque never pleaded declaratory relief and waived any argument for nominal damages. On injunctive relief, Deque failed to present any competent evidence of ongoing or threatened future infringement. BrowserStack submitted an unrebutted declaration that the allegedly infringing content had been removed from its current product and its false advertising had been taken down. Deque never inspected BrowserStack’s source code despite having the opportunity to do so during discovery, and its own counsel effectively conceded the case was “primarily a damages issue.”

Key Takeaways

• Timely damages disclosure is critical. Under Rule 26(a)(1)(A)(iii), parties must provide a computation of damages in their initial disclosures. Repeatedly deferring that obligation—even while retaining new counsel and switching litigation strategies—does not excuse noncompliance and can result in complete exclusion of damages evidence under Rule 37(c)(1).
• Rebuttal reports cannot substitute for initial disclosures. A party cannot circumvent its affirmative disclosure obligations by embedding its damages theory for the first time in a rebuttal expert report filed at the last minute.
• The Wilson terminating-sanction factors do not apply to Rule 37(c)(1) exclusions. The Fourth Circuit declined to extend the heightened Wilson v. Volkswagen framework—which requires consideration of bad faith and less drastic alternatives—to evidence exclusion under Rule 37(c)(1), particularly where the resulting summary judgment rested on independent grounds beyond the excluded evidence.
• Copyright plaintiffs must preserve all forms of relief. A copyright holder that abandons or fails to develop its claims for injunctive and declaratory relief cannot fall back on those remedies after its damages evidence is excluded. The court will evaluate each form of relief on its own merits at summary judgment.
• Failure to inspect offered evidence is fatal. Deque declined to inspect BrowserStack’s source code during discovery, then could not rebut BrowserStack’s declaration that the current product contained no infringing material. Litigants who forgo available discovery opportunities do so at their peril.

Why It Matters

This decision reinforces the Fourth Circuit’s firm stance on discovery compliance in complex IP litigation. For software copyright holders, the case is a cautionary tale about the consequences of treating damages disclosure as an afterthought. Even where the underlying infringement allegations may have merit—BrowserStack’s employees did create over 100 accounts to access Deque’s tools, and internal documents discussed “building on top of” Deque’s products—procedural failures can be fatal. The opinion also clarifies the boundary between Rule 37(c)(1) evidence exclusion and Rule 37(b)(2) terminating sanctions, establishing that the more demanding Wilson factors need not apply when the exclusion of evidence does not, standing alone, dictate the outcome of the case. Practitioners in the Fourth Circuit should take note: damages calculations must be disclosed early, supplemented promptly, and supported by timely expert reports, or they risk losing the ability to prove damages entirely.