United States: Denied If You Do, Denied If You Don't

Last Updated: December 30 2014
Article by   Orrick

Motions for Leave to Amend denied in whole or in part.  Horus Vision, LLC v. Applied Ballistics, LLC, Case No. 5:13-cv-05460-BLF(HRL); Icon-IP Pty Ltd. v. Specialized Bicycle Components, Inc., Case No. 12-cv-03844-JST

The Northern District of California, like several other districts, has adopted patent local rules which require litigants to state their infringement and invalidity positions nearly at the outset of a case, 14 and 45 days after the initial case management conference, respectively.  These rules are intended to provide each party with the basic legal theories the other side intends to pursue, allowing each to build its case during discovery and engage in informed claim construction.  Once disclosed, a litigant can only modify its infringement or invalidity contentions with the court's permission, which requires the amending party to make a timely showing of good cause to prove it diligently developed its case.  Even after meeting this burden, a court may still deny leave to amend when the amendments would prejudice the other party.  A pair of decisions this week in the Northern District highlight how motions for leave to amend can play out—and not always the way you think.

Horus Vision LLC v. Applied Ballistics, LLC– The initial case management conference in Horus Vision was held in March 2014 and the case proceeded through a Markman hearing on October 20th.  Shortly thereafter, Applied Ballistics filed a motion to amend its invalidity contentions on a variety of grounds.  Magistrate Judge Lloyd denied Applied Ballistics' request to add novel §§ 101 and 112 defenses on the basis that these purely legal defenses did not arise from any facts uncovered during discovery and could have been raised at the outset of the case.  Magistrate Lloyd also denied as untimely a request to add a publication that the defendant identified after the invalidity contention deadline.  So far, application of the local rules is simple: if a party cannot point to any plausible reason why a contention could not be raised earlier, leave to amend is unlikely.

Magistrate Lloyd did, however, allow Applied Ballistics to amend its invalidity contentions to include several publications in the plaintiff's possession that were responsive to defendant's document requests that were served in March, but which were not produced until July.  He did so even though the late-produced documents were listed on the face of the patent and Applied Ballistics may have been able to locate them on its own.  Nevertheless, the court in its discretion allowed the amendments "solely because they are matters with which plaintiff is familiar and successfully overcame in patent prosecution."  In other words, there was at least some ground to argue that requests were made diligently and no countervailing suggestion of prejudice.

Icon-IP Pty Ltd. v. Specialized Bicycle Components, Inc. – But what about an instance where a party, through no lack of diligence, only becomes aware of material prior art later in the case—perhaps just prior to the close of fact discovery?  That is the situation presented by Icon-IP  v. Specialized.

In June 2013, Specialized served document requests for all documents related to the enforcement or litigation of the patent it allegedly infringes.  More than a year later, in August 2014, Icon produced documents from an Italian lawsuit.  By September, Specialized identified a list of prior art in these documents, notified opposing counsel the next day that it intended to amend its invalidity contentions in light of one of the references disclosed, and filed its motion for leave to amend two days later.  But the case was already at a late stage: fact discovery was set to close in October, and trial is set for May 2015.  What result?

Judge Tigar found that Specialized had conducted a diligent search for prior art.  And, he agreed that the reference Specialized sought to add was neither well-known nor straightforward to discover.  In short, hadn't Specialized done everything it was supposed to do?  Maybe.  But notwithstanding, Judge Tigar denied leave to amend, concluding that an amendment made after the close of fact discovery would be unduly prejudicial.

Judge Tigar's decision follow a course set by the Northern District to date as no decision in the district has allowed invalidity contention amendments in the closing days of fact discovery.  Nor was Judge Tigar swayed by the argument that Icon-IP delayed producing relevant documents.  Rather, he appears to have been swayed by what amounts to an argument that "if Specialized wanted the documents earlier, they should have moved to compel their production."

There are no guarantees in litigation.  As a defendant, you may rely on the plaintiffs to fairly conduct discovery and still find yourself out of luck at the end of the day.  Perform a thorough search for prior art, hold the other side accountable for discovery, and, perhaps most importantly, remember time is ticking even before deadlines lapse.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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