Design Data Corporation v. Unigate Enterprise, Inc. et al

Filing 129

ORDER DENYING 112 MOTION FOR LEAVE TO AMEND. Signed by Judge William H. Orrick on 09/11/2014. There are no remaining claims in this case. Judgment will be entered in accordance with the granting of defendants' motion for summary judgment. (jmdS, COURT STAFF) (Filed on 9/11/2014)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 DESIGN DATA CORPORATION, Case No. 12-cv-04131-WHO Plaintiff, 8 v. ORDER DENYING MOTION FOR LEAVE TO AMEND 9 10 UNIGATE ENTERPRISE, INC., et al., Re: Dkt. No. 112 Defendants. United States District Court Northern District of California 11 12 Having failed to uncover evidence that defendants (“Unigate”) actually used its 13 copyrighted software (SDS/2) in violation of the Copyright Act and realizing that its copyright 14 claims were foundering, plaintiff Design Data Corporation (“DDC”) sought leave to amend to 15 alleged additional causes of action. Granting leave to amend, however, would require the 16 reopening of fact discovery, a reopening and extension of the deadline to file motions, and a 17 continuance in the pretrial and trial dates to allow resolution of defense motions challenging the 18 proposed new claims. This prejudice – to the case schedule and Unigate’s ability to efficiently 19 litigate this case – when combined with the lack of diligence DDC showed in seeking to add these 20 claims, leads me to DENY the motion for leave. BACKGROUND 21 22 This case was filed on August 6, 2012. An Amended Complaint, alleging causes of action 23 for copyright infringement under the Copyright Act and for breach of contract was filed on 24 October 23, 2012. 25 the Copyright Act claim. Docket No. 27. On January 24, 2014, defendant Unigate filed its 26 motion for summary judgment. The Court repeatedly extended the briefing deadlines and hearing 27 date to allow DDC to complete additional forensic testing of Unigate’s computers, depose 28 Unigate’s principals, and submit supplemental briefing. Docket Nos. 73, 81, 93, 99, 110. The The breach claim was dismissed in January 2013, and the case proceeded on 1 Court heard the motion for summary judgment on July 18, 2014, and issued the order granting the 2 motion on August 6, 2014. 3 Three days before the hearing on the motion for summary judgment, DDC filed a motion 4 for leave to file a Second Amended Complaint. By that motion, DDC seeks to add causes of 5 action for: (i) Circumvention of Copyright Protection Systems in Violation of the Digital 6 Millennium Copyright Act - 17 U.S.C. § 1201 et seq.; (ii) False Designation of Origin under the 7 Trademark Act - 15 U.S.C. § 1125(a)(1); (iii) Common Law Trademark Infringement and Unfair 8 Competition (SDS/2 Mark); and (iv) Statutory False Advertising and Unfair Competition - Cal. 9 B&P Code § 17200 et seq. LEGAL STANDARD 11 United States District Court Northern District of California 10 Under Federal Rule of Civil Procedure 15(a), “leave to amend should be granted as a 12 matter of course, at least until the defendant files a responsive pleading. After that point, leave to 13 amend should be granted unless amendment would cause prejudice to the opposing party, is 14 sought in bad faith, is futile, or creates undue delay.” Johnson v. Mammoth Recreations, 975 F.2d 15 604, 607 (9th Cir. 1992). 16 However, once a district court has issued a pretrial scheduling order, establishing the time 17 to join parties and amend pleadings, to file and hear motions, and to complete discovery, and if 18 any of those dates would be affected by granting leave to amend, the party seeking to amend must 19 show “good cause” under Rule 16(b). The “good cause” standard “primarily considers the 20 diligence of the party seeking the amendment. The district court may modify the pretrial schedule 21 ‘if it cannot reasonably be met despite the diligence of the party seeking the extension.’” Id. at 609 22 (quoting Fed. R. Civ. P. 16 advisory committee's notes (1983 amendment)). 23 24 25 26 If good cause is shown under Rule 16(b), the party must also demonstrate that amendment is proper under Rule 15(a). Johnson, 975 F.2d at 608. DISCUSSION Under the Court’s March 24, 2014 scheduling order, the fact discovery cut off was June 27 24, 2014; the last day for hearing motions was September 17, 2014; the pretrial conference is 28 November 17, 2014; and trial is set for December 15, 2014. Docket No. 81. Pursuant to the 2 1 parties’ July 25, 2014 stipulation, the Court agreed to extend the deadline for taking depositions of 2 all percipient witnesses (including the parties, “Deposition Discovery Cut-off”) to (a) 30 days after 3 the Court issued its order on Unigate’s motion for summary judgment or (b) the Order resolving 4 the motion for leave, whichever is later. The Court also extended the deadline for disclosure of 5 expert reports to the Deposition Discovery Cut-off date. Docket No. 117. 6 It is apparent that if DDC’s motion to amend is granted, then the Court’s scheduling order 7 will have to be amended. The nature of the new claims are markedly different than the Copyright 8 Act claim. Fact discovery, including interrogatories and requests for production, will have to be 9 reopened. Unigate will have to re-take Rule 30(b)(6) depositions to probe DDC’s use of its trademark, its advertising, and its damages. Moreover, it is likely that after that discovery Unigate 11 United States District Court Northern District of California 10 will want to move for summary judgment, requiring the extension of the deadline for hearings on 12 motions. This cannot be accomplished prior to the November 17, 2014 pretrial conference date, or 13 the December 15, 2014 trial date, even if the parties were extraordinarily diligent in completing 14 the additional discovery that would need to be undertaken. Given that the timing of DDC’s motion to amend would upend the trial schedule, the Court 15 16 will consider DDC’s motion under Rule 16(b)’s good cause standard. See Johnson, 975 F.2d at 17 608. DDC argues that because there was no deadline for amending pleadings set in the Case 18 Management Order, the liberal standard for amending under Rule 15 should apply. I disagree-- 19 DDC’s argument elevates form over substance given the status of the case when the motion was 20 filed. In this instance, however, it does not matter because I would deny the motion to amend 21 under either standard. I find that DDC knew (or should have known) the factual bases underlying the claims it 22 23 now seeks to add as of August 2012 and late 2013. DDC has not been diligent in seeking leave to 24 amend. 25 The “new” evidence plaintiff claims supports it motion for leave to amend is described in 26 the Supplemental Declaration of Kymberleigh Korpus [Docket No. 111-1] and is summarized in 27 bullet points below. After each bullet point, a sentence that starts with “However” notes the 28 relevant evidence regarding what and when DDC knew or should have known about it: 3 1  Since 2009, Unigate has advertised on its website and has told customers it uses SDS/2. 2 Supp. Korpus Declaration ¶¶ 2.a.; 2.b. 3 However, DDC’s own investigator knew about DDC advertising use of SDS/2 on its 4 website as of January 2011, and discovered that DDC told potential customers that it used SDS/2 5 in January 2011. Declaration of Thomas Duden ¶¶ 6-7. 6  Since 2009 Unigate has made various false and misleading statements on its website 7 regarding its “detailing” work and use of SDS/2, despite the fact that DDC did not do the 8 detailing, but sent it to contractors in China. Supp. Korpus Decl. ¶¶ 2.c., 2.d. 9 However, DDC’s investigator reviewed Unigate’s website in 2009. Moreover, the falsity of the statements relied on by DDC (that Unigate did not do the detailing itself, despite statements 11 United States District Court Northern District of California 10 to the contrary, and sent the work to China) was known to DDC in August 2012, when Mr. Duden 12 confronted defendants. Duden Decl. ¶¶ 12-14. 13  DDC argues that it secured new evidence from defendants’ July 2014 depositions 14 regarding their relationship with Tony (defendants’ contractor in China). Supp. Korpus 15 Decl. ¶¶ h., i. 16 However, all of Unigate’s communications with Tony were produced to DDC at the end of 17 2013, and the Court repeatedly extended the case management deadlines in February 2014, to 18 allow DDC more time to sort through the large amount of documents produced. DDC does not 19 explain why it took them until the July depositions to understand the context of defendants’ 20 relationship with Tony. 21  Other allegedly new facts include the operation of Unigate; namely that Zhang and Liu are 22 the only two employees, but they portrayed themselves on their website and to customers 23 as being a bigger company with more employees. Supp. Korpus Decl. ¶¶ j. – o. 24 However, defendants disclosed that they were the sole operators to Mr. Duden in August 25 2012, DDC’s website was investigated in January 2011, and customer communications were 26 turned over to DDC at the end of 2013. Duden Decl. ¶ 13. 27 28  The remaining “new” facts relied upon by DDC to support its motion for leave to amend regard the relationship between defendants Unigate Enterprises, Inc. (which offers steel 4 1 detailing) and Unigate Graphic, Inc. (which offers architectural drawings), and the fact that 2 “virtually” no corporate formalities exist for UE and UG. Supp. Korpus Decl. ¶¶ p. – v. 3 However, DDC does not explain why these facts are either newly discovered – the parties 4 will recall that there was significant motion practice regarding defendants’ various corporate forms 5 back in August and September 2013 – or why these facts are crucial to the new claims DDC wants 6 to assert. 7 In sum, DDC had knowledge of the majority of the facts it claims supports it motion for 8 leave by August 2012 or the end of 2013 at the latest. Waiting until July 2014 to move to amend – 9 when it became clear that DDC did not have evidence to support its Copyright Act claim and that claim was likely to fail – is not diligent. DDC has failed to show good cause to modify the case 11 United States District Court Northern District of California 10 management dates. 12 Considering the motion under Rule 15, I still deny it. As the Ninth Circuit has recognized, 13 “late amendments to assert new theories are not reviewed favorably when the facts and the theory 14 have been known to the party seeking amendment since the inception of the cause of action.” Acri 15 v. International Asso. of Machinists & Aerospace Workers,781 F.2d 1393, 1398 (9th Cir. 1986). 16 Here, DDC did not seek to amend until July 2014, when it was clear that it was not going to be 17 able to uncover evidence of copyright infringement. It seeks to amend based on facts that it knew 18 (or reasonably should have known) in January 2011, August 2012, and (for a discrete subset) the 19 end of 2013. Reopening of fact discovery and motion practice would prejudice defendants and 20 unduly delay resolution of this case. Acri, 781 F.2d at 1398-1399 (no abuse of discretion for 21 denial of motion to amend under Rule 15(a), where it “was brought to avoid the possibility of an 22 adverse summary judgment ruling, and that allowing amendment would prejudice the Union 23 because of the necessity for further discovery.”). 24 Therefore, under both Rule 16 and Rule 15, leave to amend is DENIED. 25 26 27 28 5 CONCLUSION 1 2 DDC’s motion for leave to amend is DENIED. There are no remaining claims in this case. 3 Judgment will be entered in accordance with the granting of defendants’ motion for summary 4 judgment. 5 6 7 8 9 IT IS SO ORDERED. Dated: September 11, 2014 ______________________________________ WILLIAM H. ORRICK United States District Judge 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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