Opinion
Case No. 01 C 5540.
June 10, 2003.
ORDER
Plaintiff HotSamba, Inc. ("Hot Samba") has sought leave to file a second amended complaint to correct what it characterizes as essentially a clerical error. (HotSamba's Reply to Def.'s Opp'n to Pl.'s Mot. for Leave to File Second Am. Compl. ("Pl.'s Reply") at 3.) Defendant Caterpillar, Inc. ("Caterpillar") opposes HotSamba's motion on two grounds: (1) granting HotSamba's motion will unduly prejudice Caterpillar, and (2) HotSamba's motion has been made after undue delay in a calculated effort to defeat Caterpillar's pending motion for summary judgment. (Def.'s Opp'n to Pl.'s Mot. for Leave to File Second Am. Compl. at 3.) For the reasons set forth below, HotSamba's motion is granted.
Caterpillar has moved for summary judgment with respect to counts two and three of HotSamba's three-count complaint (misappropriation of trade secrets and breach of contract, respectively).
Background
In 1997-98, HotSamba developed a software program entitled "net-Source." HotSamba customized a version of net-Source for Caterpillar and delivered this software, known as "Build 46," to Caterpillar on September 8, 1998. In addition, HotSamba entered into a license agreement with Caterpillar with respect to Caterpillar's right to use Build 46. On September 25, 2000, Caterpillar entered into an agreement with i2 Technologies, Inc. ("i2") in which Caterpillar agreed to sell certain software to i2. HotSamba contends in the instant lawsuit that Caterpillar's sale of software to i2 was a violation of its license agreement with Caterpillar.
In February 2001, HotSamba filed a copyright registration application in order to file suit against Caterpillar. However, the code submitted to the copyright office by HotSamba was not code for Build 46, but for a later version of net-Source created in April 1999. HotSamba contends that it intended to register the code for Build 46, and that this registration error was totally inadvertent. As a result of this alleged mistake, HotSamba's amended complaint identifies the copyright registration for Build 46 as TX 5-222-217, which is consistent with the February 2001 certificate of registration HotSamba ultimately received. During the course of this litigation, HotSamba discovered that it had registered a copyright in a different version of net-Source (other than Build 46) and subsequently submitted an application to register a copyright for the Build 46 version. HotSamba's new application was registered on February 12, 2003, and a certificate of registration was issued on February 25, 2003; the proper registration number for Build 46 is TXu 1-065-266. Apart from the disparate registration numbers, the two registrations differ in another significant way: the February 2003 registration identifies Build 46 as an "unpublished work," while the earlier registration of Build 46 (or what HotSamba allegedly believed was Build 46) identified the software as "published."
Analysis
Federal Rule of Civil Procedure 15(a) allows amendments to complaints by leave of court and expressly states "leave shall be given freely when justice so requires." Leave to amend a complaint should be freely given in the absence of undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party, or futility of the amendment. Foman v. Davis, 371 U.S. 178, 182 (1962). "Nearly every amendment results in some prejudice. Therefore, the test is whether undue prejudice will result." Ash v. Theros Int'l Gaming, Inc., No. 99 C 5140, 2001 WL 869621, at *3 (N.D. Ill. Aug. 1, 2001). Undue prejudice results when the amendment brings entirely new claims, adds new parties, or "at least entails more than an alternative claim or a change in the allegations of the complaint." Id.
In this case, HotSamba argues that it has moved for leave to file an amended complaint in order to correct the registration number located in paragraph 24 from TX 5-222-217 to TXu 1-065-266 in order to properly identify the licensed software. Arguing that Caterpillar would not be prejudiced by such a change, HotSamba asserts that Caterpillar has known from the beginning of this lawsuit that Build 46 was the only version at issue. HotSamba points out that the license agreement between the parties specifically identifies Build 46 as the software covered by the agreement. In addition, HotSamba argues that Caterpillar has recognized that Build 46 is the subject of this case, both in the course of discovery and in statements to the court.
Caterpillar asserts that it has already conducted "extensive discovery regarding its defenses to HotSamba's copyright claim," and as "HotSamba led Caterpillar to believe that its copyright claim rested on the April 22, 1999 software," it would be grossly prejudicial to Caterpillar if HotSamba was given leave to amend since this would change HotSamba's allegations so drastically that discovery taken by Caterpillar to date would be rendered effectively useless. Furthermore, Caterpillar opposes HotSamba's motion as an intentional and deliberate attempt to retract the "key admission" that HotSamba originally considered Build 46 to be a "published work." Arguing that this admission is a fundamental aspect of Caterpillar's motion for summary judgment with respect to counts two and three of HotSamba's amended complaint, Caterpillar asserts that HotSamba's motivation in seeking to correct the registration number for Build 46 — and identifying it as an "unpublished" work — is in fact a tactical maneuver aimed at defeating Caterpillar's pending summary judgment motion. Caterpillar argues that "after inducing Caterpillar to rely on [HotSamba's admission [that Build 46 was originally regarded as a published work] and its [February 2001 copyright] registration throughout this multi-year case, HotSamba should not be permitted to change its allegations so as to vitiate significant portions of the discovery record."
The court is not persuaded that Caterpillar's discovery to date would be wasted if an amendment were allowed. Discovery to date (by both parties) has been conducted under the assumption that Build 46, and not April 1999, software, was the basis of HotSamba's claim. The record shows that during the course of discovery HotSamba asserted, and Caterpillar acknowledged, that the Build 46 version of net-Source was the focus of HotSamba's claims. In light of the fact that discovery has apparently proceeded based on the notion that Build 46 is the subject of the lawsuit, the court is skeptical of the extent of Caterpillar's reliance on the earlier (February 2001) registration.
See, e.g., Pl.'s Am. Supp. Resp. to Interrog. No. 3 of Def.'s Second Set of Interrogs, (stating in response to an interrogatory calling for HotSamba to identify "everything that [HotSamba] allege[s] was unlawfully copied from the software copyrighted under Certificate of Registration No. TX 5-222-217" that "HotSamba alleges that Caterpillar unlawfully copied portions of the net-Source software license to Caterpillar as Build 46."; See also Mem. in Support of Mot. of Caterpillar Inc. to Compel Resps. to Interrogs, and Prod. of Documents (in which Caterpillar acknowledged that "plaintiff's claims all relate to a product called "Build 46," which is the subject of an April, 1999 "Software License Agreement" between Caterpillar and [HotSamba's predecessor] InterWare, Inc.").
Furthermore, even if Caterpillar somehow genuinely did not know that Build 46 was the focus of this litigation, Caterpillar should have known otherwise. The license agreement between HotSamba and Caterpillar explicitly refers to "Build 46" and defines the licensed software as "Build 46" by referencing Schedule A of the license. (Pl.'s Reply Appendix, Tab 1.) Moreover, HotSamba's original complaint clearly indicates that Build 46 is the subject of this litigation. It is therefore unlikely that, given these facts, Caterpillar realistically could have believed that the April 1999 software would be the focus of the present litigation. In addition, while some prejudice is inevitable when leave to amend is granted, any such prejudice is minimized by the fact that the close of fact discovery in this case is still over five months away — more than enough time to carry out additional discovery.
Caterpillar's claims of bad faith and undue delay on the part of HotSamba also fail to convince the court that an amendment would be improper. At the heart of Caterpillar's claim of bad faith is the contention that HotSamba is attempting to retract a "key admission" that Build 46 was originally considered to be a "published" work when the first (mistaken) copyright registration application was made. According to Caterpillar, HotSamba is seeking to defeat Caterpillar's pending motion for summary judgment by doing away with this prior admission and amending its second amended complaint to indicate that Build 46 is in fact an "unpublished" work. While the court need not decide at this stage the effect that designating a copyright as "published" has on an owner's later causes of action, plaintiff has presented sufficient authority to suggest that such a designation may not be the critical "admission" Caterpillar urges it to be. In the end, Caterpillar has not provided this court with sufficient evidence that HotSamba planned this elaborate chain of events in 1999, anticipating that it would some day face (and then seek to undermine) a motion for summary judgment in 2003.
Caterpillar's assertion that HotSamba is seeking to amend its second amended complaint only after undue delay is also without merit. Caterpillar asserts that HotSamba knew for 13 months that it had mistakenly registered a version of net-Source other than Build 46. HotSamba argues that the delay was a result of the complexities inherent in dealing with a large number of versions of net-Source and the fact that, at the time of the February 2001 copyright registration (and thereafter), HotSamba was no longer operating as a company. Because the company was no longer operating, it no longer had ready access to computers, computer programmers, and files, as they would have been kept in the ordinary course of business. While HotSamba was aware that a mistake had been made as early as February 2002, it was unaware of the extent of its mistake; it believed it had registered a version of net-Source just prior to Build 46, when in reality it had registered a later version of net-Source. HotSamba located the actual source code for Build 46 in September of 2002. Soon after it received its new copyright registration for Build 46 in February 2003, HotSamba moved to amend. Based on these facts, and especially in light of the fact that HotSamba was not an operating company at the time of the registrations at issue, the court does not find undue delay here.
Conclusion
In conclusion, for all the reasons stated above, HotSamba's motion for leave to file a second amended complaint is granted. Caterpillar should notify the court and HotSamba at the parties' next status date what impact, if any, this ruling has on Caterpillar's pending motion for summary judgment.