Inline Connection Corp. v. AOL Time Warner Inc.
Inline Connection Corp. v. AOL Time Warner Inc.
Opinion of the Court
MEMORANDUM OPINION
Currently pending is America Online Inc.’s (“AOL”) and EarthLink, Inc.’s (“EarthLink”) Motion For Leave to File Third Amended and Supplemental Answer and Counterclaims (“Third Amended Answers”).
I. FACTUAL BACKGROUND
This is a patent infringement case. Inline Communication Corporation (“inline”)
The original scheduling order in this case set a deadline for amendment of pleadings on March 28, 2003.
On April 18, 2003, Inline moved for leave to file amended complaints against AOL and Time Warner,
On April 23, 2004, the Court entered the parties’ Joint Stipulation and Order of Dismissal, dismissing Time Warner from the case.
The court conducted a Markman hearing on August, 28 2003,
On February 9, 2006, defendants provided supplemental interrogatory responses to Inline which included most of the factual information concerning the prosecution laches and inequitable conduct allegations that is the subject of their proposed amended pleadings.
On April 19, 2006, defendants filed their motion, pursuant to Federal Rule of Civil Procedure 15 and Delaware Local Rule 15.1, for an order granting them leave to each file their Third Amended Answer.
Inline opposes defendants’ motion on Rule 15 grounds arguing undue delay on the part of defendants in seeking leave to file the Third Amended Answers and prejudice to Inline should defendants’ motion be granted. Inline also opposes defendants’ motion alleging a failure to establish good cause to modify the court’s scheduling order as required by Federal Rule of Civil Procedure 16(b).
This opinion is the court’s ruling on defendants’ motion.
II. DISCUSSION
First, AOL asserts that its proposed Third Anended Answers reflect the fact that Inline has dismissed defendant Time Warner from the suit with prejudice and states that all allegations against Time Warner are therefore moot. Because there does not appear to be a dispute over this issue,
Inline argues that the court should first consider whether defendants have met the “good cause” standard of Rule 16(b) because the court’s original scheduling order set a deadline to amend pleadings by March, 28, 2003 and that deadline was only extended until May 2003 following Inline’s amendment of its complaints to include the ’585 patent.
For the reasons explained below, the court determines that defendants have met the standard under Rule 15(a) to amend and supplement their pleadings with regard to their prosecution laches defenses and counterclaims but have failed to meet that standard with regard to their additional inequitable conduct theories.
With regard Inline’s Rule 15(a) opposition to defendants’ prosecution laches, undue delay and prejudice, Inline argues that defendants’ Second Amended Answers include a “generic” affirmative defense of prosecution laches and “conclusory” counterclaims including allegations of “unreasonable delay in prosecuting” the patents-in-suit.
Inline contends that defendants’ prosecution laches counterclaims add two new factual allegations. First, defendants’ purported prejudice by the lapse of time between Inline’s original patent application and the issuance of the patents-in-suit.
The court is unpersuaded by Inline’s arguments as they relate to supplementation of defendants’ prosecution laches defenses and counterclaims. This court has previously stated that “ ‘the clearest cases for leave to
Defendants each included a defense of prosecution laches in their original pleadings, filed in June and August 2002, and in their Second Amended Answers filed in May 2003. Furthermore, AOL represents that it presented its prosecution laches contentions to Inline on June 17, 2002, prior to filing its original Answer and Counterclaims on June 24, 2002.
Furthermore, defendants’ original pleadings and Second Amended Answers recite, “[b]y reason of Plaintiffs unreasonable delay in prosecuting and/or seeking the issuance of the [patents-in-suit], including Plaintiffs scheme of repeatedly delaying and then abandoning the same patent applications, with the same patent claims, during the course of patent prosecutions, [the patents-in-suit] each should be declared unenforceable.”
In light of the above, Inline cannot be surprised by defendants’ supplementation in this regard and the court disagrees with Inline’s contention that it will be unduly prejudiced “in the form of significant additional time, cost and effort” to defend against defendants’ supplemented prosecution laches defenses and counterclaims. Additionally, the court does not agree that with regard to these defenses and counterclaims that defendants’ delay in seeking leave to amend amounts to undue delay warranting denial of their motion.
The court is also unpersuaded by Inline’s Rule 16 arguments that defendants’ motion should be denied. The court notes that its original October 28, 2002 Scheduling Order tentatively set March 1, 2004 for the beginning of trial in this matter
In light of the history of multiple changes to the scheduling orders in this case; the fact that prosecution laches is not a new legal theory being added to the case-and which Inline was on notice of prior to defendants’ initial answers; and the court’s finding of no undue delay by defendants and no undue prejudice to Inline, the court determines defendants’ supplementation of their pleadings regarding prosecution laches satisfies the “good cause” requirement of Rule 16(b), despite the lapse of time in requesting such supplementation.
With regard to defendants’ proposed amendments of their inequitable conduct allegations, the court reaches a different conclusion. Here, although their Second Amended Answers include allegations of “inequitable conduct,” defendants’ proposed Third Amended Answers add three entirely new factual theories under the “inequitable conduct” umbrella. Defendants’ Second Amended Answers included only allegations concerning inequitable conduct with regard Inline’s purported failure to disclose Robert Domnitz as a co-inventor of the patents-in-suit.
Inline contends that defendants knew of the “bulk” of the evidence cited in support of these three new theories when they filed their Second Amended Answers on May 15 and 16, 2003; “in most cases” by the end of Goodman’s final day of deposition on July 2, 2003; and knew of “every piece of information” cited by the end of 2003
Defendants argue that the amendment of their inequitable conduct allegations is warranted by Federal Rule of Civil Procedure 9(b), which requires that fraud, including inequitable conduct, be pled with particularity. Defendants assert they did not have all the information necessary to plead their inequitable conduct claims with the required particularity when they filed their Second Amended Answers in May 2003. Examples of this later-obtained information are: “numerous excerpts from ... Goodman’s June 30, July 1 and July 2, 2003 depositions”;
The court recognizes that defendants must plead inequitable conduct with particularity
Defendants trumpet the fact that they “submitted supplemental contention interrogatory responses on February 9, 2006 ... [and that] [s]hortly thereafter, on February 15, Defendants ... submitted proposed amended answers and counterclaims containing this same updated information.”
Defendants cite no evidence or information they received from Inline’s December 2003 production until February 24, 2006 pertaining to their Third Amended Answers. Despite the fact that they may have augmented the February 15, 2006 draft of their proposed amended pleadings with later-received information, defendants had no way of knowing when they submitted that draft to Inline and requested consent to file that additional potentially relevant documents would be subsequently produced. The only conclusion that can reasonably be drawn from these facts is that, by the end of 2003, defendants had all the information they believed necessary to plead with particularity their inequitable conduct allegations concerning non-disclosure of this litigation, purportedly relevant prior art, and Goodman’s date of conception.
Defendants acknowledge that their motion should be granted “absent a showing of undue delay or undue prejudice to Inline ____”
In Cureton v. National Collegiate Athletic Ass’n,
The mere passage of time does not require that a motion to amend ... be denied on grounds of delay.... In fact, delay alone is an insufficient ground to deny leave to amend____ However, at some point, the delay will become ‘undue,’ placing an unwarranted burden on the court, or will become ‘prejudicial,’ placing an unfair burden on the opposing party____Thus, while bearing in mind the liberal pleading philosophy of the federal rules, ... the question of undue delay requires that we focus on*368 the movant’s reasons for not amending sooner.57
Initially, the court notes that defendants’ position seems to be that they need offer no explanation for the April 19, 2006 filing date of their motion to amend. They argue that “Inline asserts, without explanation, that Defendants have delayed in bringing their Third Amended Answers. This assertion is flat wrong and ignores the history of the case.”
As discussed above, the court will accept that defendants did not have all the evidence necessary to plead their inequitable conduct allegations with particularity until the end of 2003, and, therefore, the absence of defendants’ three new inequitable conduct theories from the Second Amended Answers is not determinative. However, defendants’ drafting of their Third Amended Answers, and request for Inline’s consent to file those amended pleadings prior to the receipt of the documents produced later in 2006, demonstrates that defendants had all the information they deemed necessary to seek leave to amend by December 2003. The court concludes, therefore, that the documents produced to defendants in 2006 provides no explanation at all, much less a reasonable explanation, why defendants did not file their motion in early 2004.
Next, defendants attempt to explain their delay in filing with the argument that “for the period between the August 2003 Mark-man hearing and the Court’s decision on Defendants’ motion for reconsideration on October 18, 2005, the focus of this litigation was on non-infringement of the patents-in-suit relating to the ‘signal interface’ claim term. All other aspects of this ease, including invalidity and unenforceability ... were essentially held in abeyance.”
First, despite defendants’ characterization that the all non-infringement aspects of this litigation were “essentially held in abeyance” for some period of time, they do not point to any instance where the parties raised supplementation of the pleadings or any suggestion by the court in connection therewith during that period. It is not for a party to unilaterally determine that it may delay moving to amend its pleadings when it has access to the information necessary for such amendment. Moreover, defendants certainly could have taken this period to reexamine their pleadings and the information in their possession and timely-filed any motion to amend they deemed warranted. The issue of amending pleadings could also have been raised at one of the “several conferences with [the parties and] the Court, which ... substantially changed the case schedule”
Second, during the November 9, 2005 conference, the court reminded the parties that “Rule 26 requires supplementation.... Supplementation requires everything to be supplemented. Not just certain interrogatories or certain requests. Everything including your initial disclosures.”
Case law indicates that this finding, alone, could justify denial of defendants’ motion to amend to include their new inequitable conduct allegations. For example, Inline contends that this court’s discussion in Rose Hall, Ltd. v. Chase Manhattan Overseas Banking Corp.
An amendment should be denied, without requiring defendants to demonstrate prejudice, when the amendment is grounded on “bad faith or dilatory motive, truly undue or unexplained delay ____” Heyl & Patterson International, Inc. v. F.D. Rich Housing of the Virgin Islands, Inc., 663 F.2d 419, 425 (3d Cir. 1981), a decision based upon Foman v. Davis, supra. In the instant case it is not necessary for the court to find that plaintiff has acted in bad faith in seeking the amendment. It is clear that plaintiff has provided no satisfactory explanation for its long delay in filing its motion to amend. Undue delay which is not satisfactorily explained is equivalent to bad faith.65
In Lorenz v. CSX Corp.,
Nevertheless, the court will address the parties’ contentions regarding prejudice to Inline were defendants permitted to amend their pleadings to include their new inequitable conduct allegations. Inline contends it would suffer prejudice “in the form of significant additional time, cost and effort to meet claims not previously advanced” if defendants’ motion were granted.
Defendants argue that Inline would suffer no prejudice should their motion be granted because “[a]ll of the information supporting these defenses ... is and had been in Inline’s possession, custody or control.”
The court disagrees with defendants’ assertion, as it pertains to inequitable conduct, that they do not seek to add new defenses and counterclaims but, rather, to supplement those previously pled. Unlike defendants’ proposed amendment concerning prosecution laches, that the court agrees supplements previously pled allegations of which Inline was certainly on notice, the proposed amendments concerning inequitable conduct goes far beyond mere supplementation. Defendants are not requesting leave to supplement their previously pled inequitable conduct allegations concerning inventorship. Defendants seek, through the guise of supplementation, to add three new distinct factual inequitable conduct theories against which plaintiffs would now have to prepare to defend.
The court also disagrees that there is no surprise to Inline as a result of defendants’ new inequitable conduct allegations and that Inline will not be unduly prejudiced were defendants permitted to amend their answers to include them. “A party is unduly prejudiced if amendment would cause surprise, result in additional discovery, or add cost in the preparation to defend against new facts or theories.”
Although there may, or may not, be additional discovery needed in connection with defendants’ new inequitable .conduct allegations (neither party explicitly argued them need for such), the history of this case makes the court wary that such request shall nevertheless arise. Moreover, the trial in this matter is currently scheduled for six days beginning on February 5, 2007, which the court has sharply advised shall proceed at that time. Since this matter has passed its fourth birthday, further delay for possible additional discovery is disfavored.
III. CONCLUSION
For the reasons stated above, defendants’ motion is granted in part and denied in part. The court grants defendants’ motion to amend AOL’s pleadings to reflect the dismissal of Time Warner. The court also grants defendants’ motion to amend their respective pleadings with regard to their prosecution laches defenses and counterclaims. The court denies defendants’ motion to amend their pleadings with regard to their three additional inequitable conduct allegations.
. Inline is a Virginia corporation with its principal place of business in Virginia.
. AOL is a Delaware corporation with its principal place of business in Virginia.
. AOL Time Warner Incorporated is a Delaware corporation with its principal place of business in New York.
. EarthLink is a Delaware corporation with its principal place of business in Georgia.
. D.I. 10.
. D.I. 8 (docket for civil action number 02-447-MPT, subsequently consolidated with lead case number 02-272-MTP).
. D.I. 28 (Sched. Order Oct. 28, 2002).
. D.I. 92 (Mot. & Order Mar. 27, 2003).
. D.I. 102.
. D.I. 103.
. The ’585 patent issued on April 1, 2003.
. D.I. 128 (Rev. Stip. & Order May 1, 2003).
. D.I. 137; D.I. 138.
. D.I. 128 (extending discovery cut-off to June 27, 2003).
. D.I. 266 (Joint Stip. & Order Apr. 23, 2004).
. D.I. 207.
. D.I. 239 (opinion; claim construction); D.I. 284, 285 (opinion & order; claim construction motion for reconsideration); D.I. 296, 297 (opinion & order; cross-motions for summary judgment); D.I. 319, 320 (opinion & order; summary judgment motions for reconsideration).
. D.I. 383 at 5.
. D.I. 368 at 1-2 (Decl. of Kurt M. Rogers, Esq.).
. Id. at 2.
. Id.
. D.I. 367 (America Online Inc.'s and Earth-Link, Inc.'s Motion for Leave to File Third Amended and Supplemental Answer and Counterclaims).
. Defendants state that at the February 22, 2006 meet and confer that Inline consented to the amendment regarding Time Warner, which applies only to AOL's proposed Third Amended Answer and does not apply to EarthLink. D.I. 367 at 2 n2; D.I. 368 at 2.
. Fed.R.Civ.P. 15(a).
. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).
. See D.I. 128 (Apr. 18, 2003 Rev. Stip. and Order for Extension of Time).
. Fed.R.Civ.P. 16(b).
. D.I. 279 at 1.
. Id. at 2.
. Id. at 4-5.
. Id. at 5 (quoting defendants' Third Amended Answers; Counterclaims H 19).
. D.I. 279 at 12.
. Pegasus Dev. Corp. v. DirecTV, Inc., Civ. A. No. 00-1020-GMS, 2002 WL 598457, at *1, 2002 U.S. Dist. LEXIS 6825, at *4 (D.Del. 2002) (quoting U.S. v. Teeven, Civ. A. No. 92-418 LON, 1992 U.S. Dist. LEXIS 22189, 1992 WL 683682, at *7 (D.Del. Oct.27, 1992)).
. D.I. 383 at 6.
. See id., Ex. A.
. See, e.g., D.I. 367, Ex. A; Counterclaims Vil 20-26 (AOL's proposed Third Amended Answer).
. See, e.g., D.I. 10; Counterclaims 1114 (AOL’s original Answer and Counterclaims); D.I. 138; Counterclaims 11 30 (AOL’s Second Amended Answer).
. Cureton v. National Collegiate Athletic Ass’n, 252 F.3d 267, 273 (3d Cir. 2001) (”[D]elay alone is an insufficient ground to deny leave to amend.").
. D.I. 28.
. D.I. 392.
. See D.I. 383 at 4 nl (defendants’ reply brief listing scheduling order modifications).
. See, e.g., D.I. 138; Counterclaims HV 33-38 (AOL's Second Amended Answer).
. See, e.g., D.I. 367, Ex. A; Counterclaims 111160-75 (AOL’s proposed Third Amended Answer).
. See, e.g., id., Ex. A; Counterclaims Wl 76-85.
. See, e.g., id., Ex. A; Counterclaims UK 86-94.
. D.I. 279 at 5.
. D.I. 383 at 8.
. Id.
. Id. at 3, 8.
. D.I. 399 at 2 (June 8, 2006 letter to court from defendants submitted after briefing their motion to amend was completed).
. See McKesson Info. Solutions, LLC v. The Trizetto Group, Inc., Civ. A. No. 04-1258-SLR, 2005 WL 914776, at *3, 2005 U.S. Dist. LEXIS 6733, at *7 (D.Del. Apr. 20, 2005) ("A claim of patent unenforceability is premised upon inequitable conduct before the Patent & Trademark Office ('PTO'), which is a claim sounding in fraud. A plaintiff alleging unenforceability, therefore, must plead with particularity those facts which support the claim the patent holder acted fraudulently before the PTO.”) (citing Ferguson BeauregardjLogic Controls v. Mega Sys., L.L.C., 350 F.3d 1327, 1343-44 (Fed.Cir. 2003)).
. D.I. 383 at 2 (emphasis added). Three pages later in their reply brief, defendants change this assertion to state that their February 9, 2006 supplemental interrogatory responses "included most of the factual information concerning the prosecution laches and inequitable conduct defenses,” id. at 5 (emphasis added), and that additional documents were produced by Inline thereafter. Id. at 5 n2.
. D.I. 368 at 2.
. Id. at 2 & Ex. A.
. D.I. 383 at 7 (emphasis added).
. 252 F.3d 267 (3d Cir. 2001).
. Id. at 273 (internal citations and quotation marks omitted).
. D.I. 383 at 7.
. Id. at 2 (emphasis added); see also id. at 9 (asserting that "aspects of this case other than infringement were essentially held in abeyance from the August [28], 2003 Markman hearing until the November [9], 2005 conference, when the Court ordered the parties to supplement their prior discovery”).
. Id. at 2.
. Id. at 4.
. D.I. 326 at 31.
. See D.I. 383 at 11.
. 93 F.R.D. 858 (D.Del. 1982).
. Id. at 865 (emphasis added).
. 1 F.3d 1406 (3d Cir. 1993).
. Id. at 1414. ("In the absence of substantial or undue prejudice, denial instead must be based on bad faith or dilatory motives, truly undue or unexplained delay, repeated failures to cure the deficiency by amendments previously allowed, or futility of amendment.... Because of [movant’s] unreasonable delay in requesting leave to amend, and because of the futility or her proposed amendment, we hold that the district court did not abuse its discretion in denying her Rule 15(a) motion.”).
. USX Corp. v. Barnhart, 395 F.3d 161 (3d Cir. 2004) (The District Court denied leave to amend based on futility and unreasonable delay-with no finding of prejudice to non-movant. The Third Circuit determined district court was incorrect in its futility analysis but affirmed on unreasonable delay.).
. D.I. 279 at 12.
. Id. at 12. Expert reports were being prepared during the parties’ briefing on this motion. The parties’ expert reports, and rebuttal reports, were to have been completed by June 30, 2006. Expert depositions were to have been completed by July 21, 2006. See D.I. 392 (Amended Sched. Order May 18, 2006).
. D.I. 279 at 12.
. D.I. 383 at 9; see also D.I. 399 at 1.
. D.I. 399 at 1; see also D.I. 408 at 1 (stating that Inline does not argue that it requires "new discovery to respond to Defendants' supplemental allegations regarding inequitable conduct
. D.I. 383 at 9-10.
. Amquip Corp. v. Admiral Ins. Co., 231 F.R.D. 197, 199 (E.D.Pa. 2005) (granting motion to amend in light of court permitting additional discovery which cured prejudice to non-movant and requiring movant to pay for the additional cost and attorneys’ fees incurred as a result of movant's delay); see also McLaughlin v. Diamond State Port Corp., Civ. A. No. 03-617(GMS), 2004 WL 2958664, *4 (D.Del. Dec.21, 2004) ("The purpose of a scheduling order is to provide concrete deadlines on which the parties can rely in planning their respective litigation strategies. If the court were to permit parties to ignore these deadlines, unfair surprise would abound.'').
. In light of the court's denial of defendants’ motion to amend its inequitable conduct defenses and counterclaims under Rule 15(a), it is unnecessary to address Inline's Rule 16(b) arguments as they relate to this issue.
Reference
- Full Case Name
- INLINE CONNECTION CORPORATION v. AOL TIME WARNER INCORPORATED, Defendants Inline Connection Corporation v. EarthLink, Inc.
- Cited By
- 4 cases
- Status
- Published