Nalco Company v. Turner Design, Inc

Filing 94

ORDER by Judge Nathanael M. Cousins granting in part and denying in part 82 Motion to Amend Infringement Contentions (nclc1S, COURT STAFF) (Filed on 8/11/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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NALCO CO.,
Plaintiff,

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Case No. 13-cv-02727 NC
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
AMEND INFRINGEMENT
CONTENTIONS

v.
TURNER DESIGNS, INC.,
Defendant.

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Re: Dkt. No. 82

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On the eve of the close of fact discovery, Nalco moved to amend its infringement

19 contentions in this method patent infringement action. The Court grants Nalco leave to
20 amend its infringement contentions to identify direct infringers and to add the non-threaded
21 version of the Little Dipper, because Nalco has demonstrated that it was diligent in seeking
22 third-party discovery that necessitated the amendment. But the Court denies leave to amend
23 to add a direct infringement theory against Turner, as Nalco could have brought this theory
24 earlier in the litigation and the recent Limelight decision did not change the law on direct
25 infringement.
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I. BACKGROUND
Nalco served its original infringement contentions on October 14, 2013. Dkt. No. 83-

28 1. The infringement contentions alleged indirect infringement by Turner of Claims 1 and 2
Case No. 13-cv-02727 NC
ORDER GRANTING IN PART
MOTION TO AMEND CONTENTIONS

1 of Nalco‟s U.S. Patent No. 6,255,118 (‟118 patent) based on the use of Turner‟s Little
2 Dipper fluorometer to perform the method covered by the ‟118 patent. Id.
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Since Nalco served the infringement contentions, the parties have exchanged

4 substantial written discovery. Nalco also pursued third-party discovery from several of
5 Turner‟s Little Dipper customers. See Dkt. No. 54; Nalco Co. v. Chem-Aqua, Inc., No. 146 mc-80183 RS (NC), 2014 WL 3420463 (N.D. Cal. July 10, 2014). Nalco took third-party
7 depositions in the months of May and June. Dkt. No. 83 at ¶ 2. Fact discovery closed on
8 July 4, 2014, and the parties exchanged expert reports in late July and early August. Dkt.
9 No. 64.
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Nalco served Turner with its proposed amended infringement contentions on June 19,

11 2014. Dkt. No. 83-2 at 2. The proposed amended infringement contentions identify the
12 direct infringers as part of Nalco‟s indirect infringement theory, identify the non-threaded
13 version of the Little Dipper as being used to infringe the ‟118 patent, and add a direct
14 infringement theory against Turner. Dkt. No. 83-6. Nalco filed its motion to amend
15 infringement contentions on July 2, 2014. Dkt. No. 82. The Court heard oral argument on
16 August 6, 2014. Dkt. No. 92.
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II. LEGAL STANDARD
A party may amend its infringement contentions “only by order of the Court upon a

19 timely showing of good cause.” Patent L.R. 3-6. Patent Local Rule 3-6 “serves to balance
20 the parties‟ rights to develop new information in discovery along with the need for certainty
21 in legal theories at the start of the case.” Apple, Inc. v. Samsung Elecs. Co., Ltd., No. 12-cv22 00630 LHK, 2012 WL 5632618, at *2 (N.D. Cal. Nov. 15, 2012) (citing O2 Micro Int’l,
23 Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1366 (Fed. Cir. 2006)).
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Good cause for granting a motion to amend infringement contentions exists when the

25 moving party shows (1) that it was diligent in amending its contentions; and (2) that the
26 non-moving party will not suffer undue prejudice if the motion is granted. O2 Micro, 467
27 F.3d at 1366. “In considering the party‟s diligence, the critical question is whether the party
28 „could have discovered [the new information] earlier had it acted with the requisite
Case No. 13-cv-02727 NC
ORDER GRANTING IN PART
MOTION TO AMEND CONTENTIONS

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1 diligence.‟” Apple, 2012 WL 5632618, at *6 (citing Google, Inc. v. Netlist, No. 08-cv2 04144 SBA, 2010 WL 1838693, at *2 (N.D. Cal. May 5, 2010)). If the moving party fails
3 to establish diligence, there is “no need to consider the question of prejudice.” O2 Micro,
4 467 F.3d at 1368.
III. DISCUSSION

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Nalco moves to amend to add (1) the identities of direct infringers of the ‟118 patent

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7 under its indirect infringement theory; (2) the non-threaded model of the Little Dipper as a
8 product used to infringe the ‟118 patent; and (3) a theory that Turner directly infringes the
9 ‟118 patent. Nalco argues that the first two additions are justified based on recent
10 discovery, and the direct infringement theory is justified based on the recent Supreme Court
11 decision in Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014).
12 The Court finds that good cause exists to add the identities of direct infringers and to add
13 the non-threaded version of the Little Dipper in light of recent discovery. But the Court
14 denies the motion to add the direct infringement theory based on Limelight, as that case did
15 not materially change the law on direct infringement.
16 A.

Identifying Direct Infringers

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Nalco has always alleged an indirect infringement theory, originally contending that

18 Turner “and/or its customers (purchasing either directly or indirectly from Turner) provide a
19 solid state fluorometer” which is used to infringe the ‟118 patent. Dkt. No. 83-1 at 8. In the
20 amended infringement contentions, Nalco specifies that Turner induces infringement by
21 “directing and instructing entities including water treatment companies and end-users to
22 practice a method of monitoring concentration of chemicals in industrial water systems” by
23 using the Little Dipper. Dkt. No. 83-2 at 3. Nalco thus specifies water treatment companies
24 and end users as the third parties that directly infringe the ‟118 patent as instructed by
25 Turner.
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Nalco argues that this change is based on evidence discovered in the last two months

27 that demonstrated, contrary to its earlier understanding, that Turner directly communicated
28 and sold Little Dippers to some end users. Dkt. No. 91 at ¶¶ 5-7. The Court finds that
Case No. 13-cv-02727 NC
ORDER GRANTING IN PART
MOTION TO AMEND CONTENTIONS

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1 Nalco has shown it diligently pursued third-party discovery and moved to amend shortly
2 after learning about Turner‟s interactions with end users. See Brandywine Commc’ns
3 Technologies, LLC v. AT & T Corp., No. 12-cv-02494 CW, 2014 WL 1569544, at *16
4 (N.D. Cal. Apr. 18, 2014) (finding amendment based on third-party discovery appropriate
5 where plaintiff “served its third-party subpoenas at a relatively early stage of discovery but
6 was ultimately delayed in taking depositions of the relevant third parties.”). The
7 amendment is thus appropriate, especially given that Nalco has always alleged indirect
8 infringement and identification of end users as the direct infringers effectively narrows the
9 theory rather than expands it. See id. (finding limited scope of proposed amended
10 contentions weighed in favor of granting leave to amend).
The Court finds that the prejudice of these limited amendments to Turner is low,

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12 given that Turner has not identified any additional discovery it would require in light of the
13 amendments, and counsel indicated at oral argument that the parties‟ experts considered the
14 amended contentions in their expert reports. Leave to amend is therefore granted to identify
15 direct infringers of the ‟118 patent.
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Identifying the Non-Threaded Little Dipper

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For similar reasons, the Court finds Nalco has shown good cause to add the non-

18 threaded version of the Little Dipper to its infringement contentions. Although Nalco was
19 aware of the non-threaded version of the Little Dipper prior to its initial infringement
20 contentions, Dkt. No. 87-1 at ¶¶ 25, 26, Nalco has shown that it did not know that the non21 threaded version was used in an infringing manner until recent discovery demonstrated that
22 customers use the non-threaded version with a tee. Dkt. No. 91 at ¶¶ 2-4. That nuance is
23 important, given that the ‟118 patent is a method patent, and thus Nalco‟s ability to examine
24 the non-threaded Little Dipper was unhelpful without understanding how the product might
25 be used to infringe the method. The Court finds this sufficient to justify amendment, and
26 finds that Nalco was diligent in pursuing the third-party discovery that led to the change.
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As with the identity of infringers, the Court finds the prejudice to Turner is low, given

28 that additional discovery does not appear necessary. See Network Appliance Inc. v. Sun
Case No. 13-cv-02727 NC
ORDER GRANTING IN PART
MOTION TO AMEND CONTENTIONS

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1 Microsystems Inc., No. 07-cv-06053 EDL, 2009 WL 2761924, at *3 (N.D. Cal. Aug. 31,
2 2009) (finding no undue prejudice where parties would not require additional discovery due
3 to amended infringement contentions).
4 C.

Adding a Direct Infringement Theory

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The Court denies leave to amend to bring a direct infringement theory against Turner

6 because Nalco could have brought such a theory in its original infringement contentions.
7 Nalco argues that the addition of the new theory is justified based on the recent Supreme
8 Court decision in Limelight Networks, Inc. v. Akamai Technologies, Inc. That case,
9 however, did not deal with direct infringement. The Court limited its analysis to indirect
10 infringement and “[w]hether the Federal Circuit erred in holding that a defendant may be
11 held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one
12 has committed direct infringement under § 271(a).” 134 S. Ct. 2111, 2120 (2014).
13 Respondents asked the Court to review the Federal Circuit‟s holding in Muniauction, Inc. v.
14 Thomson Corp. that “a method patent is not directly infringed—and the patentee‟s interest
15 is thus not violated—unless a single actor can be held responsible for the performance of all
16 steps of the patent.” Id. at 2119-20. But the Supreme Court expressly declined to review
17 this issue. Id. Thus, nothing about Limelight made a direct infringement theory suddenly
18 viable for Nalco.
Nalco argues that it is moving to amend “to preserve the ability to assert direct

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20 infringement if the Federal Circuit further articulates a theory of divided (but nonetheless
21 direct) infringement.” Dkt. No. 89 at 5. But divided direct infringement was not the law
22 before Limelight and is not the law now. The Supreme Court in Limelight highlighted that
23 the Federal Circuit is free to revisit its precedent on direct infringement “if it so chooses.”
24 134 S. Ct. at 2120. This dicta does not justify the late addition of a new theory in this case
25 based on Nalco‟s speculation that the law of direct infringement may change. The law is
26 always evolving, but the parties must play with the legal cards they have, rather than the
27 ones they hope to be dealt.
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Case No. 13-cv-02727 NC
ORDER GRANTING IN PART
MOTION TO AMEND CONTENTIONS

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Because the Court finds Nalco was not diligent in bringing a direct infringement

2 theory against Turner, the Court need not assess the potential prejudice to Turner. See O2
3 Micro, 467 F.3d at 1368.
IV. CONCLUSION

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The Court grants Nalco leave to amend to identify direct infringers of the ‟118 patent

6 and to add the non-threaded version of the Little Dipper. The Court denies leave to amend
7 to bring a direct infringement theory. Nalco must serve Turner with its amended
8 infringement contentions within two days of this order.
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Because the Court has considered but does not rely on the Feinberg Declaration at

10 docket entry 87-1 in reaching its conclusion, the Court declines to rule on Nalco‟s
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IT IS SO ORDERED.

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Date: August 11, 2014

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_________________________
Nathanael M. Cousins
United States Magistrate Judge

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Case No. 13-cv-02727 NC
ORDER GRANTING IN PART
MOTION TO AMEND CONTENTIONS

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