Summary
concluding that there was no diligence where defendants did not seek to amend their answer until five months after the events defendants claim justified the amendment
Summary of this case from Swortwood v. Tenedora De EmpresasOpinion
CASE NO.10cv0541-GPC-WVG
01-08-2014
ZEST IP HOLDINGS, LLC and ZEST ANCHORS, LLC, Plaintiffs, v. IMPLANT DIRECT MFG, LLC et al., Defendants.
ORDER:
1. DENYING DEFENDANTS'
MOTION TO CLARIFY
ANSWER; AND
2. DENYING MOTION FOR
LEAVE TO AMEND ANSWER
[Dkt. No. 282]
Pending before the Court is Defendants Implant Direct Mfg. LLC, Implant Direct LLC, and Implant Direct International's (collectively, "Defendants") Motion to Clarify That it May Assert Patent Exhaustion and Implied License at Trial, or in the alternative Motion for Leave to Amend Answer. (Dkt. No. 282.) The parties have fully briefed the motion. (Dkt. Nos. 288, 303.) Pursuant to Civil Local Rule 7.1(d)(1), the Court finds the matter suitable for adjudication without oral argument. Having reviewed the parties' briefs and relevant legal authority, the Court hereby DENIES Defendants' motion to clarify and DENIES Defendants' motion in the alternative for leave to amend Defendants' Answer.
BACKGROUND
This is an action for patent and trademark infringement of dental attachment products. Plaintiffs Zest IP Holdings, LLC and Zest Anchors, LLC ("Plaintiffs") filed this action against Defendants for alleged infringement of U.S. patents through the manufacture and sale of dental attachment product GoDirect, Plaintiffs' unique LOCATOR system, and trademark infringement of the "Zest" mark. (Dkt. No. 13.)
On March 12, 2010, Plaintiffs filed an initial complaint in the above-captioned matter. (Dkt. No. 1.) On August 27, 2010, Plaintiffs filed a first amended complaint ("FAC"), the current operative complaint. (Dkt. No. 13.) On September 17, 2010, Defendants filed an answer to Plaintiff's FAC. (Dkt. No. 17.) Defendants' Answer claimed the affirmative defenses of: (1) non-infringement; (2) no inducement; (3) invalidity under 35 U.S.C. §§ 102 and/or 103; (4) invalidity under 35 U.S.C. § 112, first paragraph; (5) invalidity under 35 U.S.C. § 112, second paragraph; (6) prosecution history estoppel; and (7) unenforceability. (Id. at 9-11.)
On December 9, 2010, U.S. Magistrate Judge William V. Gallo entered a case management conference order setting a March 14, 2011 deadline for any motions to amend the pleadings. (Dkt. No. 27 at 1.) On May 19, 2011, Defendants filed a motion to amend the Answer to assert a counterclaim against Plaintiffs for declaratory judgment of invalidity as to U.S. Patent No. 6,299,447. (Dkt. No. 32.) On January 20, 2012, U.S. District Judge Larry Alan Burns denied Defendants' motion due to Defendants' failure to show diligence in seeking to amend the Answer. (Dkt. No. 81 at 4) (finding a lack of diligence because Defendants sought to amend the Answer two months after the deadline and took eight months to conduct a prior art search after learning new information).
On October 22, 2012, this case was transferred to the undersigned Judge. (Dkt. No. 142.) On September 11, 2013, Defendants filed the present motion to clarify or amend the Answer. (Dkt. No. 282.)
LEGAL STANDARD
Under Federal Rule of Civil Procedure 15(a), leave to amend a pleading should be granted as a matter of course, at least until the defendant files a responsive pleading. After that point, leave to amend should be granted unless amendment would cause prejudice to the opposing party, is sought in bad faith, is futile, or creates undue delay. Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149,1159 (9th Cir. 1989).
However, once a court has issued a scheduling order and the pleading amendment deadline has passed, amendment of the pleadings is only permitted if there is "good cause" for modification of the scheduling order. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000) (citing Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-09 (9th Cir. 1992)); See also Fed. R. Civ. P. 16(b)(4) ("A schedule may be modified only for good cause and with the judge's consent."). This standard "primarily considers the diligence of the party seeking the amendment." Johnson, 975 F.2d at 609. "Good cause" exists if a party can demonstrate that the schedule "cannot reasonably be met despite the diligence of the party seeking the extension." Id. (citing Fed. R. Civ. P. 16 advisory committee's notes (1983 amendment)). The party seeking to continue or extend the deadline bears the burden of proving good cause. See Zivkovic v. Southern California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002); Johnson, 975 F.2d at 608. Only where a party shows good cause for a belated motion to amend may the Court consider whether the amendment would be proper under Rule 15. Johnson, 975 F.2d at 607-09.
DISCUSSION
1. Motion to Clarify Answer
Defendants move the Court to clarify that Defendants' Answer, (Dkt. No. 17, "Answer"), adequately raises patent exhaustion and implied license as affirmative defenses. (Dkt. No. 283 at 8) (citing Fed. R. Civ. P. 8(e) ("[p]leadings must be construed so as to do justice.")). Defendants so move on two grounds: (1) that Defendants' Answer denies Plaintiffs' infringement allegations, (Dkt. No. 283 at 8) (citing Answer ¶¶ 26, 27); and (2) that the Second Affirmative Defense in Defendants' Answer, labeled "no inducement," includes the defenses of patent exhaustion and implied license. (Dkt. No. 283 at 8) (quoting Answer at 9:21-24).
The Court declines to clarify that Defendants' Answer raises the affirmative defenses of patent exhaustion and implied license. "The key to determining the sufficiency of pleading an affirmative defense is whether it gives plaintiff fair notice of the defense." Wyshak v. City Nat'l Bank, 607 F.2d 824, 827 (9th Cir. 1979); see also Simmons v. Navajo County, Ariz., 609 F.3d 1011, 1023 (9th Cir. 2010). In Wyshak, the United States Court of Appeals for the Ninth Circuit held that an amended answer sufficiently pleaded a statute of limitations defense where the defendant mentioned the statute of limitations defense in an amended answer and detailed the defense in a memorandum of points and authorities attached to the motion to file an amended answer. 607 F.2d at 827.
Here, Defendants' Answer provides no such notice to Plaintiffs of Defendants' intent to assert the affirmative defenses of patent exhaustion and implied license. First, the Court rejects Defendants' argument that one-word denials of Plaintiffs' allegations regarding dentists' infringement of Plaintiff's patents can constitute the raising of an affirmative defense. (Dkt. No. 283 at 8) (citing Answer ¶¶ 26, 27). Particularly where Plaintiffs' dentist infringement allegations contain multiple allegations spanning twenty seven lines of pleading paper, (Dkt. No. 13, "First Amended Complaint" ¶¶ 26, 27), Defendants' flat assertion that these allegations are "denied," (Answer ¶¶ 26, 27), fails to raise the affirmative defense of patent exhaustion or implied license.
The Court also rejects Defendants' argument that pleading a "no inducement" defense in the original Answer raised the affirmative defense of implied license or patent exhaustion. (Dkt. No. 283 at 8) (quoting Answer at 9:21-24). The "no inducement" defense alleged in Defendants' Answer asserts that Defendants "did not have, and does not have, any specific intent to cause third parties to infringe Plaintiffs' patents and has therefore not induced infringement of the Plaintiffs' patents." (Answer at 9:21-24.) The Court finds that the "no inducement" defense alleged in Defendants' Answer focuses on negating the requisite specific intent needed for Plaintiffs to prove induced infringement. See Forest Laboratories, Inc. v. Ivax Pharmaceuticals, Inc., 501 F.3d 1263, 1272 (Fed. Cir. 2007) ("An inquiry into induced infringement focuses on the party accused of inducement as the prime mover in the chain of events leading to infringement.") On the other hand, the affirmative defense of implied license or patent exhaustion focuses on whether the patent holder's rights have been exhausted by the authorized sale of an article that substantially embodies a patent. Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 638 (2008). The Court finds that because the "no inducement" and "patent exhaustion" defenses require different showings and focus on different actors, Defendants' pleading of "no inducement" failed to put Plaintiffs on fair notice of Defendants' intent to raise the affirmative defenses of patent exhaustion or implied license. Accordingly, the Court concludes that Defendants' Answer failed to raise the defenses of patent exhaustion or implied license.
2. Motion to Amend Answer
In the alternative, Defendants seek leave to amend Defendants' Answer to assert the affirmative defenses of patent exhaustion and implied license. (Dkt. No. 283 at 9.) Because the pleading amendment deadline has long passed, Defendants bear the burden of showing "good cause" to amend the Answer under Federal Rules of Civil Procedure 16(b). Zivkovic v. Southern California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002). "Rule 16(b)'s 'good cause' standard primarily considers the diligence of the party seeking the amendment." Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992).
Defendants advance three explanations for seeking to amend the Answer nearly two and a half years after the amendment deadline: (1) Plaintiffs indicated expanded claims against Defendants in reply papers to a recent motion, (Dkt. No. 183 at 10) (citing Dkt. No. 156 at 6:28-7:28; Dkt. No. 261 at 7:8-9); (2) Plaintiffs' recently revised infringement contentions accuse a new product, (id.) (citing Dkt. No. 202; Dkt. No. 107-1 at 1:4-8); and (3) Plaintiffs' recently revised infringement contentions expand and clarify Plaintiffs' claims, (id. at 11) (citing Dkt. 107-2, Ex. 10 at 3:8-10; Dkt. No. 202). In other words, Defendants claim Plaintiffs' August 19, 2013 reply papers, (Dkt. No. 261), and the Court's April 15, 2013 Order granting Plaintiffs leave to file amended infringement contentions, (Dkt. No. 202), justify Defendants' motion to file an amended answer.
The Court finds Defendants have not acted diligently in seeking to amend the Answer nearly five months after the triggering events Defendants claim justify amendment of the Answer. First, Defendants move to amend the Answer because Plaintiffs have asserted in recent reply papers filed August 19, 2013, that Plaintiffs "seek to hold Implant Direct liable for post-[acquisition] events [as successors-in-interest] based on Rule 25(c) of the Federal Rules of Civil Procedure." (Dkt. No. 283 at 10.) However, the Court finds Defendants were on notice of Plaintiffs' intent to do so when Plaintiffs moved to join successors-in-interest Implant Direct Sybron Int'l and Implant Direct Sybron Mfg. LLC on August 21, 2012. (Dkt. No. 116-1 at 9) (arguing that without joinder, Defendants will continue to maintain they are not responsible for post-acquisition acts alleged to be infringing by Plaintiffs). The Court granted the Rule 25(c) motion on April 15, 2013. (Dkt. No. 202.)
Second, Defendants claim the Court's granting of Plaintiffs' motion to amend infringement contentions justifies Defendants' motion to amend the Answer. (Dkt. No. 283 at 10-11.) The Court finds Defendants were on notice of Plaintiffs' amended infringement contentions at the time of the Court's April 15, 2013 Order. (Dkt. No. 202.) The Court therefore finds that nearly five months passed between the events Defendants claim justify amendment of the Answer and Defendants' September 11, 2013 filing of the present motion to amend the Answer.
In reply, Defendants argue that Defendants notified Plaintiffs of intent to amend the Answer to assert patent exhaustion on December 17, 2012, and notified the Court of intent to file a motion to clarify or amend the Answer in a joint status report on May 17, 2013. (Dkt. No. 303) (citing Dkt. No. 304-8; Dkt. No. 217, "Joint Status Report"). Defendants explain that the case was "essentially on hold pending ruling on invalidity contention motions the Magistrate indicated should be decided first." (Dkt. No. 303 at 7) (citing Dkt. No. 228 at 2:20-3:3, 53:8-15, 54:16-56:20, 91:22-92:2).
The Court finds that neither notification satisfies Defendants' burden of demonstrating good cause to amend the scheduling order. As an initial matter, notification to opposing counsel of intent to file a motion does not establish diligence in filing said motion. To the contrary, Defendants' proffered communications with Plaintiffs show that Defendants intended to seek leave to amend the Answer as early as December 17, 2012. (Dkt. No. 304-8.) This date is nearly four months before the events Defendants claim triggered the need to amend the Answer. (Dkt. No. 283 at 10-11.)
Furthermore, a review of the transcript of the parties' May 29, 2013 scheduling conference hearing before United States Magistrate Judge William V. Gallo shows that, contrary to Defendants' assertion, the case was not "essentially on hold" at that time. (Dkt. No. 228.) In fact, Judge Gallo sought to set a "date by which any motions, if they're going to be filed by the Defendant, must be filed," but Defendants failed to mention intent to file a motion to amend the Answer. (Dkt. No. 228 at 54:16-56:20.)
The Court concludes that a delay of nearly five months fails to show diligence in seeking to amend the Answer and therefore DENIES, for lack of good cause, Defendants' belated motion to modify the scheduling order to allow Defendants to amend the Answer.
CONCLUSION
For the aforementioned reasons, the Court hereby DENIES Defendants' motion to clarify the Answer and DENIES Defendants' motion, in the alternative, to file an amended answer.
Accordingly, the hearing on Defendants' motion, currently set for January 17, 2014, is hereby VACATED.
IT IS SO ORDERED.
__________
HON. GONZALO P. CURIEL
United States District Judge