Opinion
No. CV 99-10522 ABC (CTx)
February 26, 2001
Attorney Present For Plaintiff: Victor deGyarfas.
Attorneys Present For Defendants: Edward Schewe and Douglas Morseburg.
ORDER RE: MOTION FOR LEAVE TO FILE SECOND AMENDED ANSWER AND COUNTERCLAIM BY DEFENDANT GOLDEN SOURCE (FED. R. CIV. PRO. 13, 15)
Plaintiff asserts in this case that each of the Defendants has manufactured and sold goods infringing on one or more of three U.S. patents pertaining to cordless telephone and caller identification technology. Defendant Golden Source's Motion for Leave to File a Second Amended Answer and Counterclaim came on regularly for hearing before this Court on February 26, 2001. After review of all of the papers, the case file, and oral argument, the Court concludes that a further amendment of Defendant's Answer and Counterclaim at this point in the case (shortly before the close of discovery) is not warranted. Accordingly, the Court hereby DENIES Defendant Golden Source's Motion for Leave to File a Second Amended Answer and Counterclaim.
I. PROCEDURAL HISTORY
On October 12, 1999, Plaintiff CYBIOTRONICS, LTD. ("Plaintiff," or "Cybiotronics") commenced this civil action by filing a Complaint naming Defendants GOLDEN SOURCE ELECTRONICS, LTD. ("Golden Source") and SMOOTHLINE, LTD. ("Smoothline"). Each of the parties is a Hong Kong corporation with its principal place of business in Hong Kong. Plaintiff owns the rights to three patents related to telephone and caller identification technology, and has allegedly developed, made and sold products embodying inventions claimed by the patents. The Complaint alleges the manufacture, use, importation, distribution, offer, and sale of products embodying inventions in the patents by the two named Defendants. The Complaint accuses each Defendant of direct infringement, as well as inducement of infringement and contributory infringement, all allegedly on going. See Complaint ¶¶ 6-17.
U.S. Patent Nos. 5,265,145 ("the '145 patent"), 5,742,669 ("the '669 patent"), and 5,883,942 ("the '942 patent") ("patents-in-suit")
Each Defendant was subsequently served in Hong Kong: Smoothline on December 22, 1999, and Golden Source on February 22, 2000. Each filed its own Answer (and Counterclaim). Smoothline filed its Answer and Counterclaim on February 11, 2000. On March 8, 2000, Golden Source filed what purported to be its Answer. This "pleading" was apparently sent from Hong Kong by Golden Source, without benefit of counsel. It was an improper Answer, and was filed in violation of Local Rule 2.9.1 (a corporate entity may not appear pro se).
Defendant Golden Source initially alleges that it was prepared by its Hong Kong counsel. See Motion at 2. However, no indication of representation is evident in the "Answer" as filed on March 8, 2000. Furthermore, Golden Source also later concedes that Golden Source was not represented when it filed this "Answer." See Motion at 2 n. 1.
Defendant Smoothline's Answer and Counterclaim filed February 11, 2000 included, inter alia, an affirmative defense of invalidity of the patents-in-suit and a counterclaim for declaratory relief based on its allegations of invalidity. See Answer and Counterclaim filed February 11, 2000 ("Smoothline Answer") ¶¶ 23, 34. Defendant Golden Source's initial "Answer," filed March 8, 2000, contained only a single general denial of all of the allegations in the Complaint (in violation of the pleading requirements of Federal Rule of Civil Procedure 8(b)). On April 27, 2000, having secured local counsel (and perhaps prompted by Plaintiff's request for entry of default), Golden Source filed an Amended Answer and Counterclaim with, inter alia, affirmative defenses of invalidity and declaratory counterclaims. See Amended Answer and Counterclaim filed April 27, 2000 ("Amended Answer") ¶¶ 11-25.
On May 19, 2000, Plaintiff moved to strike the Amended Answer and Counterclaim, and/or to dismiss the Counterclaim. On June 7, 2000, the Court granted Plaintiff's motion to strike, in that the Amended Answer and Counterclaim had been filed beyond the time for amendment as of right, and without leave from the Court or written consent from the opposing party. See Fed.R.Civ.Pro. 15(a) (20 days to amend). In its June 7, 2000 Minute Order, the Court, on its own motion, gave Defendant Golden Source 10 days within which to correct the technical deficiencies of the March 8, 2000 Answer by filing a further amended answer. However, the Court specified that Defendant Golden Source could only add affirmative defenses and counterclaims (not alleged in its original Answer) if it obtained written consent or leave of court.
In that the Court struck the Amended Answer and Counterclaim in full, it denied the motion to dismiss only the Counterclaim as moot.
Defendant Golden Source never (before today) sought the Court's leave to add back in any affirmative defenses and counterclaims. It now asserts that Plaintiff's counsel refused in the period following the Court's Minute Order to stipulate to permit Golden Source to add affirmative defenses and counterclaims. See Morseburg Decl. ¶ 13. Therefore, on June 21, 2000, Defendant Golden Source filed a First Amended Answer ("First Amended Answer") which raises no affirmative defenses and makes no counterclaims of any sort. Golden Source did not address any claims of invalidity again until the present Motion. On December 15, 2000, Defendant Golden Source filed a motion for summary adjudication of non-infringement as to the '145 patent and the '669 patent. On December 22, 2000, the Court signed a Stipulation and Order submitted by Plaintiff and Golden Source continuing the hearing from January 8, 2001 to January 22, 2001, thereby giving Plaintiff two more weeks to file an opposition (by January 8, 2001). Nonetheless, on December 28, 2000, Plaintiff filed an Ex Parte Application seeking denial of the motion filed by Golden Source to allow Plaintiff more time to conduct discovery (pursuant to Federal Rule of Civil Procedure 56(f)). This Application was denied by the Court on January 4, 2001. Five days later, on January 9, 2001, rather than an opposition to the Golden Source motion, the Court received and signed a Stipulation and Order dismissing Plaintiff's claims against Golden Source regarding infringement of either the '145 patent or the '669 patent. Thus, only the '942 patent was still asserted against Defendant Golden Source.
Defendant offers no explanation for why it did not at that time seek leave of court to assert affirmative defenses and counterclaims.
Plaintiff had previously offered to dismiss these two patents.
In the meantime, on January 5, 2001, Defendant Smoothline filed two motions for summary judgment. Both motions were granted after a hearing on February 12, 2001. During the pendency of these motions, on February 5, 2001, Defendant Golden Source filed two motions for summary judgment of its own, which were virtually identical to those filed by Defendant Smoothline. These motions have been heard and are being granted on the same date, February 26, 2001, as the hearing on the instant Motion for Leave to Amend. Thus, virtually all of the claims against both of the named Defendants have now been dismissed.
On February 1, 2001, Defendant Golden Source filed the instant Motion for Leave to Amend, seeking to add affirmative defenses based on invalidity, licensure, and unenforceability of the '942 patent, and a counterclaim for declaratory relief invalidating the '942 patent or finding it unenforceable based on alleged inequitable conduct by the patentees. Golden Source also lodged a proposed Second Amended Answer and Counterclaim. Plaintiff has opposed Defendant's Motion to Amend.
II. FACTUAL BACKGROUND
The general factual background of this case has been detailed in the Court's prior orders granting summary judgment, and does not have much relevance to the issues to be decided on the present Motion. In general, the Court only repeats here that all three parties seem to be manufacturers of telephones and caller identification products who are located in Hong Kong, all of whom have apparently manufactured goods for BellSouth, either directly or through intermediaries. Plaintiff owns the rights to the three patents-in-suit, all of which relate to various devices (and/or methods) in this field of technology. The '942 patent relates to a phone with a three-button callback feature.
Specifically, the '942 patent apparently covers a telephone with the capability of "callback" (returning a call from memory) to either a seven-digit, ten-digit, or eleven-digit telephone number based on the user pressing one of three buttons on the device. The '942 patent was issued on March 16, 1999, and its rights belong to Plaintiff. The patent lists as its inventors Boon-Chen Lim and Yeung-How Lim, both of Taikoosing, Hong Kong (no connection to Plaintiff has been specified). Plaintiff is listed on the patent as the "assignee" thereof. The '942 patent indicates that the application was filed on January 24, 1997.
The "facts" underscoring the present Motion for Leave to Amend primarily center on a November 8, 2000 deposition that was given by Robert Schweitzer ("Schweitzer"), a third party witness who is or was the primary contact with all three of these Hong Kong manufacturers for an American import company called North American Foreign Trading Corporation ("NAFT"). Schweitzer and NAFT seemed to play the primary role in securing manufacturing contracts and products from these three manufacturers on behalf of BellSouth, also an American company.
Golden Source claims that certain parts of Schweitzer's testimony at his deposition revealed, allegedly for the first time, a particular basis for claiming that the '942 patent is invalid or unenforceable. See Motion at 5-7. Specifically, Golden Source points to testimony from Schweitzer that he/NAFT was "involved" with the invention of the three-button telephone, that the three-button feature was designed at his request, as requested by BellSouth, that Schweitzer allegedly told representatives of Plaintiff that a phone with this feature should be patented for his "benefit," and that Schweitzer therefore believes he owns half of the '942 patent. See id., Morseburg Decl. ¶ 16; Exhibit A to Morseburg Decl. ("Schweitzer Depo.") at 98-99, 121-123, 199.
Golden Source also points to two exhibits that were produced in the Schweitzer deposition. The first is a memorandum dated August 29, 1996, apparently transmitted from NAFT to Cybiotronics, regarding telephone model number 8841 submitted to Wyle Laboratories for review and testing, and an attached portion of the Wyle Laboratories report which describes a "Callback Feature" that Wyle recommends "be modified to operate in accordance with one of the two options specified in BellSouth's letter dated June 10, 1996, regarding Dialing Plan and Caller ID." Exhibit 200 at C 02603 ("Wyle Report"). Golden Source asserts that Schweitzer confirmed in his deposition that BellSouth sent the referenced letter to Cybiotronics on or about June 10, 1996, prior to the January 24, 1997 application date for the '942 patent.
The memorandum on NAFT letterhead is addressed to Cybiotronics, Attn: Wallace Chau and Angel Lam, from Ray Schug, and is also cc'ed to R. Schweitzer. In the deposition excerpts submitted by Defendant, no references to the memorandum (Exhibit 200) appear, though apparently it was introduced at the deposition. See Morseburg Decl. ¶ 17.
It is worth noting that the "Callback Feature" described in the Wyle Report only appears to mention a 7-digit and 11-digit capability, and makes no mention of a three-button design. Nor does it even seem to indicate the "Callback Feature" would be in "button" form. See id.
What Schweitzer really said in his deposition is far less clear than the picture Golden Source has painted. First, in the portions to which Golden Source cites, he never specifically confirms any "letter" being sent, let alone a letter specific to June 10, 1996. Second, his answers as to when and by whom "information" was provided are vague at best: at first he claims that it was "We at NAFT [that] provided the information to Cybiotronics; so NAFT would be the one, the beneficiary of that." Schweitzer Depo. at 199:4-6. He then says that information "was provided to everybody at the same time; so when your client got it, they got it too. I mean, it was May, June '96 — something like that." Id. at 199:10-12. He then confirms that "the three-button dialing idea originate[d] from BellSouth," though he is unable to name a particular individual at BellSouth who allegedly came up with it. See id. at 199:19-25. Thus, on the one hand Schweitzer seems to claim that NAFT should get credit for the idea (as the "beneficiary" of the patent), while on the other he asserts it was an unnamed individual at BellSouth who actually came up with the three-button telephone idea.
The second piece of documentary evidence produced at deposition is a document entitled "BellSouth Products Functional Specifications for Caller Identification (CID) Products," issue date October 1997, Revision A, December 1998. See Exhibit 301 at NF 000561 ("Products Report"). The Products Report is introduced by a statement from a BellSouth Executive Vice President/C.O.O. that "[t]his document, along with the General Requirements Manual for BellSouth Branded Products define and reference the requirements that must be met to qualify product to be sold under the BellSouth name." Products Report at NF 000562. Among other things, the Products Report gives specifications for a "Callback Feature" requiring, inter alia, that it work in one of two ways: (1) three buttons for 7, 10, and 11 digit numbers; or (2) two buttons for 7 and 11 digit numbers. See id. at NF 000571-000572.
The document has a copyright date of 1997, 1998, indicating the particular revision produced at the deposition was created in 1998.
The signature of the Executive Vice President/C.O.O. on this page was identified by Schweitzer at his deposition as being that of a "Jason Herel," proper spelling unknown. See Schweitzer Depo. at 244.
Defendant Golden Source claims that the Schweitzer deposition, along with the Wyle Report and the Products Report referenced therein, call into question the validity and enforceability of the '942 patent. See Motion at 6; Morseburg Decl. ¶ 19. Counsel for Golden Source says he contacted Plaintiff's counsel on November 16, 2000 (several days after the deposition), seeking his consent to an amendment of Golden Source's Answer to assert affirmative defenses, including invalidity and unenforceability, and to adding a declaratory counterclaim.
Plaintiff's counsel allegedly would not agree, "leaving defendant Golden Source no alternative but to file this motion for leave to amend its answer . . ." Morseburg Decl. ¶ 20. Defendant did not immediately seek leave of court to file an amended Answer. Instead, Golden Source waited almost three months to file the instant Motion.
Defendant makes no attempt to explain why Golden Source waited until February 1, 2001 to file the instant Motion, rather than seeking leave to amend its Answer immediately after Plaintiff's counsel stated that Plaintiff would not consent to the requested amendment. Thus, it is not clear why this Motion, filed at this late date, was Defendant Golden Source's only "alternative" from November until February.
On December 15, 2000, Golden Source served Supplemental Responses to Cybiotronics' Interrogatories 2 and 5. See Exhibit B to Morseburg Decl. ("Supplemental Response"). In its Supplemental Response[s] to Interrogatory No. 2, Golden Source claimed that its accused products did not infringe the claims of the '942 patent for several reasons, among them that the '942 patent is invalid because: (1) it would have been obvious to one of ordinary skill in the art, in view of the prior art; and (2) the listed inventors (Boon-Chen Lim and Yeung-How Lim) are not "true inventors" of the purported invention, which was really invented by one or more employees of BellSouth Corporation ("BSC"), ideas were communicated to Cybiotronics by an employee of NAFT, and the Lims (believed to be employees of Cybiotronics) "merely engineered a device which incorporated the purported invention as disclosed to Cybiotronics by NAFT . . ." Supplemental Response at 4-5. Golden Source also claimed invalidity on the basis of inadequate description and nonenablement. See Supplemental Response at 5.
Golden Source therefore claims that it should be entitled to an amendment based on the facts "newly discovered" at this deposition.
III. LEGAL STANDARD ON A MOTION FOR LEAVE TO AMEND
Amended and supplemental pleadings in federal court are governed by Federal Rule of Civil Procedure 15. Under Rule 15(a), except for the initial amendment of right, "a party may amend [its] pleading only by leave of court or by written consent of the adverse party . . ." Fed.R.Civ.Pro. 15(a). The rule further specifies that "leave [to amend] shall be freely given when justice so requires." Id.
Rule 13 actually controls the specific issue of counterclaims. Specifically, Rule 13(e) and (f) governs the procedure for addition of omitted or later-"acquired" counterclaims. Rule 13(f) says the court may grant leave to amend when a party "fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires." Though this is ostensibly a slightly different standard, the factors used to determine what constitutes excusable neglect are similar to or the same as those used in the Rule 15(a) analysis. See e.g., Pioneer Investment Svcs. Co. v. Brunswick Assoc. Ltd. Partnership, 507 U.S. 380, 392 n. 10 (1993); Magnesystems, Inc. v. Nikken, Inc., 933 F. Supp. 944, 947-48 (C.D. Cal. 1996) (applying same factors). Thus, the Court will not discuss addition of the counterclaim separately.
The "freely given" language should generally be interpreted with "extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). However, "leave to amend is not to be granted automatically." Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990); see Foman v. Davis, 371 U.S. 178, 182 (1962) (outlining the factors warranting denial of leave to amend). Leave to amend lies within the sound discretion of the trial court, and will be reversed only for abuse of discretion. See Foman, 371 U.S. at 182. The trial court must state in writing its reasons for denial. See id.
"As a threshold matter, a party seeking leave to amend should state the grounds for the amendment, and that justice so requires." In re Circuit Breaker Litigation, 175 F.R.D. 547, 550 (C.D. Cal. 1997) (citation omitted). The court then determines whether to grant leave.
"A request for leave to amend may be denied where such amendment is sought: (1) under circumstances that would cause undue delay; (2) in bad faith or for a dilatory motive; (3) under circumstances where the moving party has repeatedly failed to cure deficiencies; (4) under circumstances where allowing the amendment would prejudice the non-moving party; or (5) where allowing the amendment would be futile." Kwon v. Kaiser Hospital, 1999 WL 16324, *4 (N.D. Cal. 1999) (citing Foman, 371 U.S. at 182, 186 and DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)). of these factors, prejudice to the opposing party is the "most important." Jackson, 902 F.2d at 1387. However, the Court should weigh each of the factors in deciding.
The Court may also consider the diligence of the party seeking leave to amend and whether the moving party unduly delayed in filing its motion. See Jackson, 902 F.2d at 1388. "[W]hen considerable time has passed between the filing of the original pleading and the motion to amend, the burden remains with the movant to show some valid reason for the delay." In re Circuit Breaker Litigation, 175 F.R.D. at 550. In gauging whether the moving party has unduly delayed, the Court may consider the time between amendments, whether the moving party knew or should have known the facts and theories raised by the amendment when the party filed a previous pleading, and whether the delay in amending the pleading was justified. See Kwon, 1999 WL 16324 at *4 (citations omitted). In addition, "[t]he district court's discretion to deny leave to amend is particularly broad where [the party seeking leave to amend] has previously amended [its pleading]." Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1988). Thus, there are defined limits on the "liberality" with which leave is granted, factors largely within the control of the party seeking amendment.
IV. DISCUSSION
Defendant Golden Source seeks leave to amend its Answer to add affirmative defenses and a counterclaim, in a Second Amended Answer and Counterclaim. This would be Golden Source's third attempt at an amendment, and overall the fourth version of its answering pleading. As its "threshold showing," Golden Source claims that the evidence it discovered at the November 8, 2000 Schweitzer deposition provides it with the basis to assert various affirmative defenses based on the invalidity of the '942 patent, on an implicit license of the patent to Golden Source granted by NAFT, and/or on unenforceability of the '942 patent based on alleged inequitable conduct by the patentee(s). Motion at 9-13; Reply at 2-5 (describing broad outlines of defenses).
The first three were the Answer, the Amended Answer which was struck, and the First Amended Answer which is the document of record.
In response, Plaintiff points out that this is Defendant's third attempt to amend, that it is now one year since Defendant was served with the Complaint, almost that long since its first attempt to file an answering pleading, eight months since Defendant filed the First Amended Answer which is now its operative pleading (and which was its third such responsive pleading), and that the facts alleged to support the Motion were revealed over three months ago, yet Defendant has just now sought the Court's leave to amend its Answer, approximately one month before fact discovery ends in this case. See Opposition at 1-2.
Plaintiff also argues that Golden Source's alleged affirmative defenses and counterclaim are insufficiently supported by the adduced facts and law, and are therefore "futile." Finally, Plaintiff claims that an amendment at this date is prejudicial. See Opposition at 3-6.
Defendant's primary theory, though it is somewhat sparsely laid out in its moving papers, appears to be that somebody at BellSouth (or perhaps Schweitzer himself) is either the "true inventor" of a device claimed by the '942 patent, or is at minimum a co-inventor thereof. Defendant apparently draws this conclusion based on the "evidence" in Schweitzer's deposition that either he or somebody at BellSouth told Cybiotronics' employees that BellSouth wanted a three-button phone. Defendant implicitly argues that whomever it was that came up with the "idea" for a three-button "callback feature" on a caller ID telephone should be at least partially credited with "benefit[s]" of the patent.
In addition, Defendant argues that if NAFT is given "credit," and is therefore at least a part-owner of the '942 patent, its orders to Golden Source constitute a "license" rendering Golden Source immune from suit for infringement of the '942 patent so licensed. Finally, it appears that Defendant is arguing that the patentees' "failure" to disclose the existence of the "true inventor" or a "co-inventor" to the patent examiner may in fact constitute "inequitable conduct."
This is a somewhat complex theory, only (as will be discussed below) minimally supported by the facts and law adduced by Defendant. Nonetheless, the Court concludes that Golden Source has at least made its "prima facie" showing of a basis for amendment, and so the Court considers whether there are grounds to deny that amendment. In what follows, the Court concludes that leave to amend should be denied, for a host of reasons, including that Defendant has unduly delayed filing the instant Motion for Leave to Amend and already amended its Answer on two prior occasions, that Plaintiff would be unduly prejudiced by this amendment so soon to the close of discovery, and that Defendant has not made a compelling showing of the merit of these amendments.
A. Golden Source Has Unduly Delayed Filing the Instant Motion
While undue delay is usually not enough alone to deny leave to amend, "delay in combination with other factors is sufficient . . ." In re Circuit Breaker Litigation, 175 F.R.D. at 550. It appears from the cases that have discussed application of Rule 15(a) that "undue delay" refers both to the possibility that the orderly proceeding of the case might be unduly delayed by the court's grant of leave to amend a pleading, and to the timeliness of the actual motion that is filed seeking leave from the court to file an amendment. In this case, both interpretations weigh against granting leave to amend.
First of all, with only a month to go in fact discovery, Golden Source has proposed a fairly complex theory of defense that involves multiple non-parties to this litigation from whom it appears that it would be necessary to collect discovery in order to prove or disprove that either BellSouth or NAFT conceived of the device claimed by the '942 patent at some point prior to the inventors named in the January 24, 1997 application to the Patent and Trademark Office ("PTO"). It seems quite clear that for Defendant to prove this theory, or indeed for Plaintiff to refute it, would require an expansion of the scope of discovery significantly beyond the present claims. This would cause a substantial delay in the orderly procession of this case to trial.
Secondly, Defendant Golden Source has been inexcusably dilatory in seeking to state its affirmative defenses and counterclaim. Aside from the fact that Defendant has already tried three times to answer Plaintiff's Complaint, and also the fact that the Court has already (on its own motion) granted leave to amend once before, Defendant has offered no good explanation for the almost one-year period that has elapsed from the time of its initial Answer to the present Motion.
The Court is unpersuaded by Defendant's argument that it only "discovered" a basis for asserting invalidity defenses on November 8, 2000, at the Schweitzer deposition. It may be that it was after that date that Defendant first came up with this particular theory for an affirmative defense of invalidity, but Defendant cannot claim that it had no prior belief that Plaintiff's patent might be invalid before hearing that either NAFT or BellSouth may have contributed to it. In fact, Defendant's claim is belied by its own record in this Court, in that the Amended Answer that Defendant filed on April 27, 2000, which was later struck by the Court, asserted as an affirmative defense that all of the patents-in-suit (including the '942 patent) are invalid and unenforceable under, inter alia, 35 U.S.C. § 102, which would be the asserted basis for invalidity on any "co-inventorship" theory. See, Pannu v. Iolab Corporation, 155 F.3d 1344, 1348-51 (Fed. Cir. 1998).
For Defendant Golden Source to now claim that it was unaware a defense of invalidity might be asserted would be to admit that when it filed the ill-fated Amended Answer on April 27, 2000, it had no legal basis for asserting therein invalidity of the patents as a defense.
In addition, as Defendant repeatedly points out in support of its argument that Plaintiff should be considered on "notice" of claims the '942 patent is invalid, the Answer and Counterclaim filed by Defendant Smoothline on February 11, 2000 contains an affirmative defense that generally asserts invalidity under the patent statutes (as a whole), and also counterclaims on that basis. Thus, Defendant Golden Source cannot claim not to have been aware of a possible affirmative defense of invalidity from the early stages of this litigation. At least as early as April 27, 2000, Golden Source claimed this defense, and yet it has taken until February 1, 2001 to seek to add it to its Answer.
Indeed, when on June 7, 2000 the Court struck Golden Source's Amended Answer and Counterclaim, due to its failure to secure either Plaintiff's consent or the Court's leave, the Court granted Golden Source leave to amend the defects in its March 8, 2000 "Answer," and specifically instructed Defendant that if it wished to re-introduce affirmative defenses and counterclaim(s) (such as those that had been included in the Amended Answer and Counterclaim so struck), it should seek consent from Plaintiff or leave from the Court. Thus, not only is Defendant's delay in seeking the present leave to amend inexcusable given the evidence that Golden Source was aware of at least some basis for asserting invalidity of the patents-in-suit from the early stages of this litigation, it also flouts the Court's specific instruction as long ago as June 7, 2000 that Defendant should seek consent or leave to add back its affirmative defenses and counterclaim(s).
In other words, Defendant cannot now claim not to have been aware at least as early as June 7, 2000, that it had the option not only to seek Plaintiff's consent to amend its Answer, but also to return to the Court for such permission. Instead, Defendant chose to file its First Amended Answer on June 22, 2000, with no affirmative defenses or counterclaims, and has made no effort in the over seven months that have now elapsed between that date and the date of filing the instant Motion to request leave from the Court to amend. Nor has Defendant offered any satisfactory explanation for its decision not to follow its request(s) to Plaintiff for consent with a motion to the Court.
Defendant's awareness of its options under the Federal Rules of Civil Procedure would in any case be assumed, but where Defendant was specifically reminded of those options, the delay in exercising one of them seems particularly striking, and all the more inexcusable.
Golden Source claims that it only became aware of the basis for the present amendment(s) at the November 8, 2000 deposition. Yet as has been noted, Golden Source had some basis for asserting invalidity far earlier. Nor can Golden Source claim that it was unaware until this time of the relationship between Plaintiff, NAFT, and BellSouth, given that all three parties have manufactured products for BellSouth, ordered and/or delivered primarily through NAFT. Even Defendant's ostensibly "new" theories of invalidity based on inventorship and/or inequitable conduct, and its attendant theory of retroactive license, ought to have at least occurred to Golden Source before Schweitzer's deposition. Defendant had sufficient facts within its control from the outset of this litigation to at least investigate these theories.
Indeed, it seems implausible for Golden Source to claim that until the November 8, 2000 deposition it was unaware of a possibility or even probability that the design and specifications for products manufactured for BellSouth by Cybiotronics were developed by BellSouth itself, given the factual background revealed by the prior motions for summary judgment filed by Golden Source and co-Defendant Smoothline. Both of these Defendants apparently manufactured goods for BellSouth according to BellSouth specifications transmitted through Schweitzer/NAFT. Thus, it is a bit disingenuous for Defendant to now claim as a "new" discovery that it may have been BellSouth/Schweitzer that came up with at least the basic design principles for Cybiotronics phones.
Even if the Court accepts that Golden Source had absolutely no basis to assert affirmative defenses of invalidity, unenforceability, and licensure prior to the November 8, 2000 deposition, the delay of nearly three months from that "discovery" until the filing of this Motion seeking leave to amend is itself inexcusable. Given all the circumstances of this case, including Defendant's prior amendments, the rapidly-approaching discovery cut-off, and what Defendant claims is the crucial nature of this information, this delay was "undue."
It is clear that Defendant immediately recognized the claimed significance of this information, given that its December 15, 2000 Supplemental Responses asserted the "inventorship" issue. Yet still Golden Source made no effort to promptly file with the Court. Under these circumstances, "justice" does not "require" leave to amend.
B. Plaintiff Would Be Unduly Prejudiced By An Amendment
In that the Court does not find independent evidence of "bad faith" by Defendant Golden Source, the Court will not treat this as a separate category of analysis. However, the Court reiterates that to the extent that "dilatory motive" may be an indicator of "bad faith," Defendant's inexcusable delay in seeking the present amendment weighs against allowing Defendant to add these defenses and its counterclaim.
Amending to add claims requiring proof of different facts and therefore additional discovery may be considered prejudicial to the nonmoving party. See Jackson, 902 F.2d at 1387. This would seem to be especially true where the amendment is proposed in such proximity to the close of discovery that Plaintiff would be prejudiced by being ill-prepared to refute the new defenses and counterclaim. Further, the substantial increase in the scope of discovery only increases the cost that Plaintiff would have to bear, as well as the difficulty of adequately countering Defendant's claims in the remaining period. See Ascon Properties, Inc., 866 F.2d at 1161 (requiring additional costs and discovery was an adequate basis for a finding of prejudice). As the Ascon court found, this prejudice is compounded where the moving party has already had the chance(s) to amend its pleading. See id.
In this case, the prejudice to Plaintiff might be compounded still further by the fact that the instant amendments would be entered only after (or contemporaneous) with the grant of both of Defendants' motions for summary judgment. Thus, Golden Source seeks to open up a new expanse of discovery at the very point at which all or nearly all of Plaintiff's own claims which initiated this suit are dismissed.
Generally, the need for additional discovery is insufficient by itself to deny a proposed amendment. "However, the longer the delay in seeking to amend a counterclaim, the less of a showing of prejudice is needed . . . While . . . prejudice [of additional time and expense incurred responding to newly-asserted counterclaims] might not be so substantial as to warrant denial on its own, given the timing of the amendments, it is certainly a factor that militates against granting Defendant leave to amend." In re Circuit Breaker Litigation, 175 F.R.D. at 551. In this case, the Court similarly concludes that in light of all of the circumstances, Plaintiff would be prejudiced.
C. Weak Factual and Legal Showing of The Proposed Defenses
The final factor to be considered on a motion for leave to amend is whether the amendment is legally supportable, or whether it would simply be "futile" to allow the moving party to amend. The futility of an amendment can alone justify the denial of a motion for leave to amend. See Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995). In general, the question is not whether the moving party would be likely to prevail on the proposed added claim or defense, but only if there is any real possibility that the claim or defense is legitimate.
In this case, the Court concludes that while at this juncture it cannot find that Golden Source's proposed invalidity claim based on inventorship, or its defense based on licensure of the '942 patent to Golden Source by NAFT, are hopelessly futile, it also is not impressed with the showing that Defendant has made as to these defenses.
The precise standard for determining "futility" is not totally clear. It may be that the claim or defense need only be sufficiently supported to survive a motion to dismiss for failure to state a claim (i.e., a question of pleading). See Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). On the other hand, a moving party may need to adduce a sufficient factual1 basis in order for the claim or defense to survive a motion for summary judgment. See Gabrielson v. Montgomery Ward Co., 785 F.2d 762, 766 (9th Cir. 1986). The Court is not yet prepared under either standard to say the proposed amendments would be "futile," but the insubstantiality of the facts and allegations supplied by Defendant in support thereof leave many obstacles to any potential success thereon. Thus, in light of the minimal support for these theories adduced by Defendant, the Court remains convinced that "justice" does not support leave to amend.
What standard to apply is perhaps a function of the point in the litigation at which the party is seeking leave to amend. In other words, amendments early on in the case might require only a good faith basis for amendment based on a supportable pleading, while amendments later in the case, after substantial discovery, might require a higher showing in order to require that the Court grant leave to amend.
Defendant's description of, and legal support for, the proposed affirmative defenses and counterclaim is light on authority. What can be deduced from Defendant's moving papers, as well as its [Proposed] Second Amended Answer lodged therewith, is that Defendant is primarily arguing that the inventors listed on the '942 patent (the Lims) are not or may not be the "true inventors" of the device claimed therein, or at least that they are or may be only "co-inventors" thereof. If this is true, incorrect inventorship on the patent application may be a basis for asserting its invalidity. See Pannu, 155 F.3d at 1350.
Alternatively, it is possible that the intentional omission of the name of the "true inventor" or a "co-inventor" from proceedings before the patent examiner, in that such information is presumably "material" to the issuance of the patent, might form grounds for a defense/counterclaim premised on "inequitable conduct" by a patentee who omitted this information. See Perseptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1321-22 (Fed. Cir. 2000). This could lead to invalidation of a patent "fraudulently" procured.
As a final alternative, Defendant seems to be arguing that even if the patent is ultimately found valid and enforceable, there is a possibility of a "retroactive license" granted to Golden Source by the "true inventor" or "co-inventor" of the '942 patent (whomever that might be). See Ethicon, Inc. v. United States Surgical Corporation, 135 F.3d 1456, 1465-68 (Fed. Cir. 1998) (recognizing the possibility of licensure of the entire patent by a co-inventor, and the effect of such a "license" retroactively). In this case, Golden Source argues that such a license is implied from orders submitted to it by NAFT.
None of these theories is so divorced from possibility that the Court must find them "futile," but the Court does note quickly some of the obstacles that Defendant would face in asserting these theories either as affirmative defenses or in a counterclaim. First of all, in that patents issued by the PTO are presumed to be valid, Defendant would bear the burden of proof by clear and convincing evidence of any basis for invalidity, including "true inventorship" and/or inequitable conduct based on the omission thereof. This same burden of proof by clear and convincing evidence would apply to proving that an inventor was omitted for purposes of a theory of licensure of the '942 patent. As with any challenge to an issued patent, this is a heavy burden.
This burden is compounded by the fact that (as is true for any claim of priority or invalidity based on prior invention) proof by clear and convincing evidence cannot consist merely of testimony by the alleged "true inventor" or "co-inventor," without corroboration. See Ethicon, Inc., 135 F.3d at 1461. In other words, testimony from an alleged "true inventor" or "co-inventor" must be corroborated by contemporaneous evidence of the inventive contribution, preferably documentary or other physical corroboration. See id. (citing Price v. Symsek, 988 F.2d 1187, 1194 (Fed. Cir. 1993) and Hess v. Advanced Cardiovascular Systems, Inc., 106 F.3d 976, 980 (Fed. Cir. 1997)). Under this standard, for instance, Schweitzer's testimony that he (or somebody at BellSouth) came up with the invention claimed by the '942 patent would not likely establish show "true" or "co-inventorship."
Nor does the documentary evidence provided thus far adequately corroborate Schweitzer's claim of co- or sole inventorship. As was previously noted, the only document that was ostensibly created prior to the application date of the '942 patent, the Wyle Report, makes no mention of a three-button design, nor does it clearly indicate that BellSouth or NAFT had suggested such a design to Cybiotronics. The reference to an earlier June 10, 1996 letter therein also does not show that either BellSouth or Schweitzer conceived of the three-button design before or in conjunction with the named inventors. Other than Schweitzer's testimony, there is no evidence of what was cantained in that alleged prior letter, or any linkage thereof to the '942 patent.
Golden Source would have to show by clear and convincing proof that someone other than the inventors listed on the '942 patent made substantial contribution to either conception or design of the device.
Golden Source has also not as yet adduced evidence that would be required to show prior, contemporaneous or co-invention of the device claimed by the '942 patent. "Determining inventorship" is nothing more than determining who conceived the subject matter at issue Sewall v. Walters, 21 F.3d 411, 415 (Fed. Cir. 1994). Where it is alleged that there were multiple inventors (some of whom are omitted), "each joint inventor must generally contribute to the conception of the invention." Deichmann v. Boeing Co., 36 F. Supp.2d 1166, 1171 (E.D. Mo. 1999) (citing Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227-28 (Fed. Cir. 1994)). Thus, Golden Source must show that someone other than the named inventors either (1) contributed in some significant manner to the conception or reduction to practice of the invention, (2) made a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) did more than merely explain to the real inventors well-known concepts and/or the current state of the art. See Pannu, 155 F.3d at 1351.
"Conception" is the "formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice." Ethicon, Inc., 135 F.3d at 1460 (quoting Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986) (internal citation omitted)) "An idea is sufficiently definite and permanent" when "only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation." Id. Furthermore, "[t]he conceived invention must include every feature of the subject matter claimed in the patent," even though "a co-inventor need not make a contribution to every claim of a patent." Id. (citations omitted)
Therefore, Golden Source would have to show (again by the proof standard of clear and convincing evidence) that the as-yet-unnamed individual at BellSouth, or Schweitzer himself, "conceived" of the entirety of the device claimed by the '942 patent, and conveyed that "conception" to Cybiotronics for manufacture in a form that was so "definite and permanent" that it did not require substantial research or experimentation to come up with the actual design. Golden Source has as yet not even alleged who it is that purportedly came up with the "idea" that is encapsulated in the '942 patent. At the most, it has suggested that somebody at BellSouth came up with the "principle" of a three-button phone (and only Schweitzer's testimony even gives this suggestion) prior to Cybiotronics' patent application. Even if the Court were to presume that the "notion" of a three-button phone was first floated by a BellSouth employee, it is a substantial step from this to a conclusion that this person "conceived" the invention.
There is no evidence or allegation that Schweitzer himself was the person responsible for this "idea," in that he admits the alleged request in May or June of 1996 for a three-button phone originated in the BellSouth hierarchy somewhere. Thus, despite Schweitzer's belief that he or NAFT should be the "beneficiary" of the '942 patent, there is nothing to suggest that it is his name that should be added to it.
Assuming that Golden Source could prove "conception" of the '942 patent by someone other than the Lims, or by some additional party, there would still be a substantial obstacle to any claim of invalidity or unenforceability as a defense to infringement. This is because under either theory some showing of "fraud" or "bad faith" by these patentees would be required to invalidate the patent. For invalidity based on non-joinder or misjoinder of inventors, "bad faith" would be required, and "inequitable conduct" requires a fraudulent intent.
This is because even if Defendant successfully proved the '942 patent invalid on the basis of misnomer of inventor(s), presumably Plaintiff would be entitled to "correct" the names on the patent, in lieu of it being invalidated, pursuant to 35 U.S.C. § 256. See Pannu, 155 F.3d at 1350 ("Upon such a finding of incorrect inventorship, a patentee may invoke section 256 to save the patent from invalidity. Accordingly, the patentee must then be given an opportunity to correct inventorship pursuant to that section."). If Section 256 is invoked, the incorrect inventorship may be simply corrected while preserving the validity of the patent, absent a showing of "deceptive intent" on the part of the patentee in omitting the purported inventor. See C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1353 (Fed. Cir. 1998).
This "deceptive intent" is presumably similar to that which is required to prove "inequitable conduct" by a patentee in proceedings before the patent examiner. Thus, for these theories of invalidity and/or unenforceability, Golden Source would be required to show not only that someone other than the Lims was the "true inventor" or at least a "co-inventor," but also that the Lims were aware of the fact that someone else could make a claim to inventorship, and withheld that fact from the patent examiner or the application intentionally. This is a substantial additional obstacle to invalidating the patent.
Defendant's theory of licensure is similarly fraught with legal obstacles to its success. First, Defendant must show that someone contributed enough to the '942 patent to be considered a co-inventor. Then, Defendant must show that whomever that person was (and it was not Schweitzer himself) somehow granted Defendant a "license" to use the '942 patent. Finally, Defendant must show that this "license" should cover all of Defendant's allegedly infringing activities.
Considering all of these substantial obstacles to the defenses and counterclaim that Defendant wishes to add, the Court concludes that while they may not be "futile," their addition is not required.
V. CONCLUSION
For the foregoing reasons, the Court concludes that "justice" does not "require" that leave to amend be granted to Defendant Golden Source on the basis of this record. The Court finds that Defendant has slept on its rights for too long, and unduly delayed in seeking to amend its Answer and/or to conduct the discovery needed to unearth these defenses at an earlier date. The Court finds that the chance that Defendant might prevail on its asserted defenses is exceedingly slim, and that the delay in the proceedings and/or the prejudice to the Plaintiff from the proposed amendment is unwarranted. Thus, the Court hereby DENIES Defendant's Motion for Leave to Amend.
ORDER RE: MOTIONS FOR SUMMARY JUDGMENT FILED BY DEFENDANT GOLDEN SOURCE ELECTRONICS, LTD.
This case involves the manufacture and sale of cordless telephone and caller identification products, and Plaintiff's patents thereon. Presently before the Court are two Motions for Summary Judgment filed by Defendant Golden Source, one filed pursuant to 35 U.S.C. § 287 (a) alleging insufficient notice of Plaintiff's patents, and one pursuant to 35 U.S.C. § 271 claiming lack of infringement in the United States. These Motions, as well as the arguments and evidence presented both in support and opposition, are nearly identical to two summary judgment motions by Defendant Smoothline granted on February 12, 2001. For the same reasons as were articulated in the Court's prior order, the Court hereby GRANTS both of Defendant's Motions for Summary Judgment.
I. PROCEDURAL HISTORY
On October 12, 1999, Plaintiff CYBIOTRONICS, LTD. ("Plaintiff," or "Cybiotronics") commenced this civil action by filing a Complaint naming Defendants GOLDEN SOURCE ELECTRONICS, LTD. ("Golden Source") and SMOOTHLINE, LTD. ("Smoothline"). The Complaint alleges ownership by the Plaintiff of three patents related to telephone and caller identification ("caller ID") technology, and states that Plaintiff has developed, manufactured and sold products embodying inventions claimed by the patents. It further alleges the manufacture, use, importation, distribution, offer, and sale of products embodying inventions in the patents by the named Defendants. The Complaint accuses each Defendant of direct infringement, inducement of infringement, and contributory infringement that is allegedly continuing. See Complaint ¶¶ 6-17.
The Complaint alleges that Plaintiff has "placed the required statutory notice on all of its telephone and caller identification products manufactured and sold by Cybiotronics" under the patents. Id. ¶ 18. Plaintiff's prayer for relief seeks judgment against all Defendants, preliminary injunctive relief during the pendency of the action, permanent injunctive relief thereafter, compensatory damages, trebling thereof, reasonable attorneys' fees, costs, and interest, and an order forcing Defendants to deliver to Plaintiff all infringing products for destruction at Plaintiff's option. See Complaint at 4.
Both of the named Defendants subsequently filed a separate Answer and Counterclaim. A contentious discovery relationship followed.
Defendant Smoothline filed its Answer and Counterclaim February 11, 2000; Defendant Golden Source filed its Answer March 8, 2000, an Amended Answer and Counterclaim April 27, 2000 and (after a Motion to Strike), a First Amended Answer and Counterclaim June 21, 2000.
After many trips back and forth to Magistrate Judge Turchin by both sides of the case to compel discovery from the other, finally on December 15, 2000 Defendant Golden Source filed a motion for summary adjudication of non-infringement as to U.S. Patent No. 5,265,145 ("the '145 patent") and U.S. Patent No. 5,742,669 ("the '669 patent"). On December 22, 2000, the Court signed a Stipulation and Order submitted by Plaintiff and Golden Source continuing the hearing from January 8, 2001 to January 22, 2001, thereby giving Plaintiff two more weeks to file an opposition (by January 8, 2001). Nonetheless, on December 28, 2000, Plaintiff filed an Ex Parte Application seeking denial of the motion filed by Golden Source to allow Plaintiff more time to conduct discovery (pursuant to Federal Rule of Civil Procedure 56(f)). This Application was denied by the Court on January 4, 2001. Five days later, on January 9, 2001, rather than an opposition to the Golden Source motion, the Court received and signed a Stipulation and Order submitted by Plaintiff and Golden Source dismissing Plaintiff's claims against Golden Source regarding the '145 patent and the '669 patent. In the meantime, on January 5, 2001, Defendant Smoothline filed two motions for summary judgment. One (the "prior marking motion") sought a limitation on the period during which Plaintiff could seek damages for alleged infringement, on the ground that Plaintiff failed to mark products Plaintiff produced pursuant to the '145 patent, the '669 patent, and U.S. Patent No. 5,883,942 ("the '942 patent") as required to give constructive notice ( 35 U.S.C. § 287 (a)), and also failed to give actual notice. The second motion for summary judgment (the "prior infringement motion") argued that Plaintiff had not and could not produce any evidence that Defendant Smoothline had performed any allegedly infringing activities within the United States.
After consideration of Plaintiff's oppositions to the two prior motions, along with the supporting evidence produced by both parties, and after issuing a tentative order which was the guideline for oral argument by the parties at the hearing on February 12, 2001, on that date the Court issued an order (the "Smoothline Order") granting both of the motions for summary judgment filed by Defendant Smoothline.
In particular, the Smoothline Order concluded: (1) that Plaintiff had produced no evidence of actual or constructive notice to Defendant Smoothline of its patents prior to the filing date of the Complaint (October 12, 1999), such that Plaintiff could collect no damages for activities prior to that date ( 35 U.S.C. § 287 (a)) — See Smoothline Order at 21; (2) that Plaintiff had produced no proof of Smoothline's actual knowledge of Plaintiff's patents and its infringement prior to being served with the Complaint on December 22, 1999, such that there was no possibility of inducement or contributory infringement prior to that date ( 35 U.S.C. § 271 (b) and (c)) — See Smoothline Order at 27; (3) that Plaintiff had produced no evidence of any "making," "using" or "selling" of infringing products by Defendant Smoothline within the United States, such that these bases for direct infringement were not available ( 35 U.S.C. § 271 (a)) — See Smoothline Order at 28; and (4) that Plaintiff had not produced evidence sufficient to raise a triable issue of material fact as to whether Defendant Smoothline had made any "offers to sell" within, or "imports" into, the United States during this period, such that there was no direct infringement liability by these terms ( 35 U.S.C. § 271 (a)) — See Smoothline Order at 41, 48.
On February 5, 2001, Defendant Golden Source filed two Motions for Summary Judgment, on the same grounds ("Marking Motion II," and "Infringement Motion II"). Plaintiff has opposed these Motions.
II. LEGAL STANDARD ON A MOTION FOR SUMMARY JUDGMENT
The party moving for summary judgment has the initial burden of establishing that there is "no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed.R.Civ.Pro. 56(c); See British Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th Cir. 1978); Fremont Indemnity Co. v. California Nat'l Physicians's Insurance Co., 954 F. Supp. 1399, 1402 (C.D. Cal. 1997). If the moving party has the burden of proof at trial (e.g., a plaintiff on a claim for relief, or a defendant on an affirmative defense), the moving party must make a "showing sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party." Calderone v. United States, 799 F.2d 254, 259 (6th Cir. 1986) (quoting from Schwarzer, Summary Judgment Under the Federal Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 487-88 (1984)). Thus, if the moving party has the burden of proof at trial, that party "must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in [its] favor." Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986) (emphasis in original); see Calderone, 799 F.2d at 259.
If the opponent has the burden of proof at trial, the moving party has no burden to negate the opponent's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party does not have the burden to produce any evidence showing the absence of a genuine issue of material fact. Id. at 325. "Instead, . . . the burden on the moving party may be discharged by showing — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. (citations omitted).
Once the moving party satisfies this initial burden, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings . . . [T]he adverse party's response . . . must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.Pro. 56(e) (emphasis added). A "genuine issue" of material fact exists only when the nonmoving party makes a sufficient showing to establish the essential elements to that party's case, and on which that party would bear the burden of proof at trial. Celotex, 477 U.S. at 322-23. "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which a reasonable jury could reasonably find for plaintiff." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in favor of the nonmovant. Id. at 248. However, the court must view the evidence presented "through the prism of the substantive evidentiary burden." Id. at 252.
If the nonmovant is unable to create triable issues of material fact, Federal Rule of Civil Procedure 56(f) permits summary judgment to be denied or delayed to allow the nonmovant further discovery. The party seeking protection under subdivision (f) must state by affidavit the reasons why he or she is unable to present the necessary opposing material. Further, "Rule 56(f) requires the nonmoving party to show that additional discovery would uncover specific facts which would preclude summary judgment." Maljack Productions, Inc. v. Goodtimes Home Video Corp., 81 F.3d 881, 888 (9th Cir. 1996). The Rule 56(f) "movant" must set forth specific needed facts, and must also specify "how [those facts] would preclude summary judgment." Garrett v. City County of San Francisco, 818 F.2d 1515, 1518 (9th Cir. 1987).
III. FACTUAL BACKGROUND
The Court provided a detailed summary of the factual background in this case in the prior Smoothline Order. These facts are also well known to the parties, and need not be repeated in detail here.Thus, the Court provides only a brief summary, and indicates where there are apparent differences regarding Defendant Golden Source.
Furthermore, the papers filed in support of the instant Motions give far less factual background and detail than was presented by the papers filed in conjunction with the prior Smoothline motions.
All three of the original parties to this matter, Cybiotronics (Plaintiff), Golden Source, and Smoothline, are apparently businesses incorporated under the laws of Hong Kong, with their principal places of business in Hong Kong as well. It appears that all three are also, inter alia, manufacturers who have produced telephone products for BellSouth, either directly or through intermediaries.
Plaintiff is apparently the owner, directly or by assignment, of the rights granted under the patents-in-suit (the '145 patent, the '669 patent, and the '942 patent), all of which relate to telephone and caller identification technology. Following the Stipulation and Order that was signed by the Court on January 9, 2001, only the '942 patent is asserted against Golden Source. Plaintiff has identified several models of telephones produced by Golden Source that allegedly infringe the '942 patent. These include at least Golden Source model numbers 2020x, 2025, 8801, 8802, 8816, 8823, 8843, and CI-30. It appears that these models (the "accused products") were produced by Golden Source during the period from sometime in 1997 to sometime in 2000. For purposes of these Motions, Defendant Smoothline does not directly argue that its products did not infringe the '942 patent.
Plaintiff has also apparently manufactured telephones covered by the claims of the patents-in-suit, presumably during this same period; the parties dispute whether Plaintiff complied with statutory marking requirements for all or any part of this time period. The other primary factual disputes relate to the nature of the relationship, if any, between Golden Source and the American market. As was true in the prior motions, Defendant Golden Source is firmly of the opinion that it is a Hong Kong corporation, that it has done business only in Hong Kong or in China, that it has never sold or offered to sell the accused products within the United States, and that it therefore is not subject to the reach of U.S. patent laws for direct, contributory, or inducement of infringement. Plaintiff again argues that regardless of where Golden Source is located, it has had sufficient contacts with U.S. companies and markets to incur patent infringement liability.
The term "requirements" is used in the sense that notice in one form or another is a necessary precursor to recovery of damages; there is no "requirement", per se, that goods produced pursuant to a patent be marked as such; however, the patentee may not recover damages for infringement until the alleged infringer has received either actual notice of the patent and the alleged infringement, or may be imputed with constructive notice based on product marking(s) (or the Complaint alleging infringement of the particular patent(s) has been filed).
Unlike the voluminous evidence that accompanied the prior motions by Defendant Smoothline, Defendant Golden Source has provided almost no background facts (or evidence thereof), regarding, for instance, the genesis and development of its relationship with North American Foreign Trading Corporation ("NAFT"), Robert Schweitzer ("Schweitzer") or BellSouth, and/or the genesis and development of the design and manufacture of its accused products. Golden Source apparently prefers simply to point out Plaintiff's inability to produce any evidence.
Plaintiff apparently does not dispute that the accused products (telephones) at issue were manufactured at facilities in China. Nor does Plaintiff apparently dispute that these products were primarily if not exclusively manufactured at the behest of NAFT/Schweitzer, on behalf of or as an intermediary to BellSouth. Instead, Plaintiff once again relies on alleged communications between Golden Source and NAFT in New York as evidence of "offers to sell," on the alleged shipment by Golden Source of accused products into the U.S. as samples for NAFT and for testing by Wyle Laboratories as evidence of "imports," and on Golden Source's Bills of Lading and Invoices as evidence that it was the "importer" of accused products. Plaintiff also claims that Golden Source's production of user manuals in English evidences "inducement." See Statement of Genuine Issues (Infringement) ("IGI") ¶¶ G-R.
The Court presumes that the same basic factual framework applies to the instant Motions as was evidenced on the prior motions. For instance, for purposes of these Motions Plaintiff does not dispute that the accused products manufactured by Golden Source were made in "the Orient" for NAFT on behalf of BellSouth, with BellSouth labels, that NAFT purchased these products "in the Orient" and then resold them to BellSouth "FOB" their country of origin (presumably China or Hong Kong) in "the Orient," and that title passed to BellSouth "in the Orient" pursuant to BellSouth's specific request. See Statement of Undisputed Facts (Infringement) ("IUF") ¶¶ 6-8; IGI ¶¶ 6-8. The Court presumes that the relationship so described mirrored that detailed in the Court's Smoothline Order, where goods manufactured in China were transported to Hong Kong, and then twice changed hands. The Court also presumes (and the evidence indicates) that Golden Source was also paid through letters of credit drawn on Swiss bank accounts.
IV. DISCUSSION A. Summary Adjudication on Notice ("Marking Motion II")
There are two Motions for Summary Judgment currently before the Court, each filed by Defendant Golden Source. The first of these, Marking Motion II, is nearly identical to that previously filed by Defendant Smoothline (the prior marking motion) and granted by the Court on February 12, 2001. Perhaps more importantly, the Opposition filed by Plaintiff (and the evidence in support thereof) does not deviate in any significant respect from that filed in response to the prior marking motion. Therefore, for the same reasons that the Court granted the prior marking motion, the Court hereby GRANTS Defendant Golden Source's Motion for Summary Judgment on the Issues of Marking and the Damages period. See Smoothline Order at 13-21. Defendant Golden Source cannot be liable in damages for any alleged infringement prior to the filing date of the Complaint: October 12, 1999.
B. Summary Judgment on Infringement ("Infringement Motion II")
Defendant Golden Source's second Motion, Infringement Motion II, is also nearly identical to the prior infringement motion filed by Defendant Smoothline. Once again, Defendant Golden Source argues that Plaintiff can produce no evidence of infringing activities by Golden within the United States, within the reach of U.S. patent laws. The opposing papers filed by Plaintiff are also substantially similar to the arguments and evidence submitted in opposition to the Smoothline motion. The marginal differences do not alter the ultimate outcome of the Motion, which is once again decided in Defendant's favor. These marginal differences are discussed in the following brief review of the facts and law underpinning the Court's decisions on these issues.
1. Plaintiff's Rule 56(f) "Motion"
In the final section of its Opposition, presumably hastily added after the Court issued the prior Smoothline Order granting the two prior motions for summary judgment on February 12, 2001, Plaintiff belatedly asks that the Court continue its decision on the instant Motion until such time as Plaintiff has had "the opportunity to take the 30(b)(6) deposition of Golden Source and provide supplemental briefing concerning the evidence obtained." Opposition at 21-22. Plaintiff claims that through this deposition testimony, it hopes to uncover further (or initial) evidence of, inter alia, Golden Source's offers to sell and sales to NAFT and/or BellSouth within the United States, its importation and/or distribution of accused products within the United States, its offers to sell and sales to other United States companies, and/or the date on which Golden Source became aware of the '942 patent, allegedly prior to the date that Plaintiff filed/served this lawsuit. See Exhibit 32 to Opposition ("Gyarfas Decl.") ¶ 5.
Plaintiff's (current) Opposition was filed later that same day.
As Plaintiff notes, a "major objective" of Rule 56(f) has been "to ensure" that any "diligent" party has been given a "reasonable" opportunity for discovery prior to entry of summary judgment. See 10B Wright, Miller Kane, Federal Practice and Procedure, Civil 3d § 2741 at 412 (1998). Therefore, a prerequisite to Rule 56(f) relief is a showing that a Rule 56(f) movant has been diligent in discovery but has nonetheless been unable to secure operative evidence. See, e.g., Nidds v. Schindler Elevator Corp., 113 F.3d 912, 921 (9th Cir. 1996) ("the district court does not abuse its discretion by denying further discovery if the movant has failed diligently to pursue discovery.")
In this case, Plaintiff has insufficiently explained why it has failed to take the Golden Source deposition in the over seven months that have elapsed since it was first noticed on July 6, 2000. Other than a vague reference to Golden Sources s "refusal" to make a witness available for deposition, Plaintiff offers no explanation for why it has presented no evidence of active pursuit of the deposition, why it has apparently filed no motion to compel the deposition, or why there is no other evidence of its diligent pursuit of this allegedly crucial discovery. Nor has Plaintiff explained (a) why it waited until July 6, 2000 to seek the deposition in the first place (nine months after the Complaint was filed) or (b) what has happened in the intervening seven month period between July, 2000 and the present.
Indeed, Plaintiff's counsel only specifically alleges that the "refusal" by Golden Source was "to present a witness in connection with the 30(b)(6) deposition notice before Cybiotronic's Opposition . . . was due." Gyarfas Decl. ¶ 3. This could very easily indicate that Plaintiff only recently renewed its request for the deposition, and provides no extensive history of obstinate refusal by Defendant.
This is not the first time that Plaintiff has presented this same argument regarding this deposition to the Court. On December 28, 2000 Plaintiff filed an Ex Parte Application to continue Golden Source's prior summary judgment motion (as to the '669 and '145 patents), also claiming that it had been unable to take this noticed deposition. At that time, evidence was presented suggesting that it was Plaintiff who postponed the initially-scheduled date for this deposition, and the Court concluded that there was no evidence that Plaintiff had made any real effort to pursue the deposition in the period since it was first postponed. The Court therefore denied the Ex Parte Application, on January 4, 2001. Within five days, Plaintiff dismissed these claims.
Even in light of the Court's previous denial, Plaintiff provides no evidence that it has made any effort to pursue taking the noticed deposition in the six weeks that have since elapsed. It is now over sixteen months since the Complaint in this case was filed, over seven months since Plaintiff noticed the deposition, and over six weeks past the Court's denial of Plaintiff's previous Ex Parte Application. Yet Plaintiff has still not taken the noticed deposition, filed a motion to compel the deposition, or provided any evidence that Defendant is evading production of a witness or taking of the deposition. While presenting no evidence of its own "diligence," Plaintiff may not also seek this Court's indulgence, and further delay summary judgment.
Under these circumstances, Plaintiff's lack of diligence is on its own a sufficient basis to deny its Rule 56(f) motion. See, e.g., Hauser v. Farrell, 14 F.3d 1338, 1340-41 (9th Cir. 1994); California Union Ins. Co. v. American Diversified Savings Bank, 914 F.2d 1271, 1278 (9th Cir. 1990) Landmark Development Corporation, 752 F.2d 369, 372 (9th Cir. 1985). Moreover, Plaintiff has not convincingly shown that the information to be gleaned from deposition of a Cybiotronics employee would differ in any significant way from the evidence already presented both in response to the prior motions and in response to the instant Motions for Summary Judgment. Though what the deposition might reveal is obviously an unknown, Plaintiff has been afforded a sufficient "opportunity" to pursue discovery, and has not taken full advantage of that opportunity in the sixteen months that have elapsed since the case was filed. In light of Plaintiff's lack of diligence in pursuing the discovery which it now seeks by motion, the Court hereby DENIES its Rule 56(f) request to continue the present Motion.
2. Inducement and Contributory Infringement
There are only insignificant differences between this Motion and Opposition and the prior moving papers with regard to the issues of inducement and contributory infringement. Therefore, the Court finds, as it did in the Smoothline Order, that Defendant Golden Source may not be liable for inducement of infringement ( 35 U.S.C. § 271 (b)) or contributory infringement ( 35 U.S.C. § 271 (c)) until such date as it can be imputed with actual knowledge of both the '145 patent and its alleged infringement of that patent. See Smoothline Order at 25-27. It is apparently undisputed that Defendant Golden Source was first served with the Complaint in this action on February 22, 2000; this date represents the first date that actual knowledge may be imputed. Accordingly, the Court hereby GRANTS Defendant Golden Source's Motion with regard to inducement and contributory infringement, and concludes that no liability may be based on activity prior to February 22, 2000.
As it did in the Smoothline Order, the Court does not reach the additional issues alluded to but insufficiently argued by the instant Motion, such as whether Golden Source may be liable for inducement or contributory infringement for activities conducted exclusively outside of the U.S., whether there is any linkage between any "inducement" or "contributory" infringement and any direct infringement by "another," and/or whether Golden Source has in fact engaged in any activity that would be captured by the language of 35 U.S.C. § 271 (c).
3. Direct Infringement
The differences on the issue of direct infringement between the instant Motion and Opposition, and the prior moving papers, are again mostly cosmetic and of little consequence to the Court's conclusions. Plaintiff has again failed to raise triable issues as to direct patent infringement activity by Golden Source within the United States.
As was true for the prior motion(s), Plaintiff has presented no evidence of any direct "making," "using" or "selling" by Defendant Golden Source that took place during the operative period within the United States. See Smoothline Order at 28. Indeed, Plaintiff once again focuses almost exclusively on arguing that Golden Source made "offers to sell" of accused products within the United States, and that it "imported" the accused products into the United States. See Opposition at 3-5, 13-18. Its arguments with regard to these two bases for direct infringement liability mirror those previously made.
Plaintiff relies on the same authority and exposition of that authority on which it relied to oppose the prior infringement motion. Therefore, nothing in the current papers gives the Court cause to depart from its previous conclusion that a patentee/plaintiff may not premise direct infringement liability solely on "offers to sell" in the United States, where the contemplated "sales" are not consummated within the United States, or that direct infringement liability for "imports" into the United States extends only to that party which is the actual "importer" of the goods, and not to third parties which play some role in the shipment of goods, but are not the "importer." See Smoothline Order at 29-48. The patent laws are limited to the geographical confines of the United States, and the Court is limited by the clear and obvious terms defining the scope of the statutes.
With regard to the instant Motion, there is even less evidence to support possible direct infringement liability for Golden Source than there was for Smoothline. For instance, as Golden Source points out, none of the documents provided by Plaintiff evidencing communications between NAFT (in New York) and Golden Source (in Hong Kong) come as close to constituting "offers to sell." See Exhibits 7-9.
Therefore, whereas with regard to the Smoothline motion there was at least an arguable basis for finding that an "offer to sell" had been made "within the United States," here Plaintiff has not given the Court even the documents evidencing "negotiations" and/or "price quotes" that were produced in opposition to the prior motion. Instead Plaintiff merely provides purchase orders transmitted from NAFT to Golden Source (Exhibit 7), invoices transmitted from Golden Source to NAFT along with goods that were being shipped (Exhibit 8), and a few scant examples of correspondence back and forth discussing features of the telephones being manufactured (Exhibit 9). None of these would seem to constitute an "offer" in the contractual sense of the term, nor would the letters of credit provided by Plaintiff (Exhibits 14 through 17) seem to indicate that Golden Source made any such "offer."
These letters of credit also do not, as Plaintiff claims, prove that Golden Source was the "importer" of the accused products into the United States. As has often been the case, Plaintiff reads from this "evidence" rather selectively, and focuses on the fact that all of these letters of credit state that the goods covered thereby would be transported "TO ANY U.S.A. PORT/AIRPORT." See, e.g., Exhibit 14 at NF 000400. Plaintiff deduces from this that Golden Source, beneficiary of the letters of credit, was the "importer" of the goods identified. However, Plaintiff again "overlooks" two additional notations on each letter of credit. First, the letters of credit specify that the goods are taken "on board" at "ANY CHINA/HONGKONG PORT/AIRPORT," consistent with all of the evidence suggesting that NAFT and/or BellSouth took the goods "FOB" Hong Kong. See id. Further, the letters of credit indicate that invoices and packing lists accompanying shipments for customs purposes were made out to NAFT. See, e.g., id. at NF 000401.
Finally, Plaintiff again relies on alleged "evidence" that there were accused products sent by Golden Source to Wyle Laboratories for FCC testing as support for its claim that Golden Source "imported" at least some of the accused products into the United States. However, the alleged "evidence" of this does not even show that it was Golden Source that sent/submitted these products to Wyle Laboratories. In fact, each of the "Pre-Acceptance Test Reports" from Wyle Laboratories submitted by Plaintiff (Exhibits 10 through 13) specifically states that it was NAFT which "provided" units tested by Wyle. See, e.g., Exhibit 10 at GS-3480. The products listed as "BellSouth products" on these reports were apparently submitted by NAFT, and there is nothing in what Plaintiff has provided to indicate that these products were shipped to Wyle, or otherwise "imported," by Defendant Golden Source.
An identical claim was made in opposition to the prior motion. There, Smoothline did not dispute that it sent products for testing.
As the Court previously concluded, this would not in any case be an "import" into the United States. See Smoothline Order at 44.
Therefore, the Court concludes that there is even less basis for finding direct infringement liability as to Defendant Golden Source than there was as to Defendant Smoothline, in that there is even less evidence of "offers to sell" within the United States (not to mention the lack of any evidence of contemplated sales therein), and even less evidence of any "importing" activity by Defendant Golden Source. The Court finds that Plaintiff has failed to raise a triable issue of fact as to Defendant Golden Source's direct infringement liability. Thus, the Court hereby GRANTS Defendant's Motion as to this issue.
V. CONCLUSION
For the foregoing reasons, the Court concludes that there are no triable issues of material fact on the following questions: whether Plaintiff may seek damages for allegedly infringing activities prior to October 12, 1999; whether Golden Source is liable for inducement or contributory infringement for any period prior to February 22, 2000; and whether Smoothline is liable for direct infringement at any time. On each of these questions, Plaintiff has failed to raise genuine issues of material fact, and its claims are subject to dismissal.
Accordingly, the Court GRANTS Defendant Smoothline's Motion for Summary Judgment on issues of notice and marking ( 35 U.S.C. § 287 (a)), and STRIKES Plaintiff's prayer for damages to the extent that it is premised on any conduct prior to October 12, 1999. The Court also GRANTS Defendant Smoothline's Motion for Summary Judgment on issues of direct and indirect infringement ( 35 U.S.C. § 271 (a), (b), and (c)), DISMISSES Plaintiff's claims of direct infringement entirely, and its claims for inducement of infringement and contributory infringement to the extent they are premised on conduct prior to February 22, 2000.