LifeScan Scotland, Ltd. v. Shasta Technologies, LLC et al

Filing 169

ORDER granting 152 Motion for Leave to File; denying 154 Motion for Leave to File. Signed by Judge Edward J. Davila on December 5, 2012. (ejdlc4, COURT STAFF) (Filed on 12/5/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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United States District Court
For the Northern District of California

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LIFESCAN, INC. and LIFESCAN SCOTLAND, )
LTD.,
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Plaintiffs,
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v.
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SHASTA TECHNOLOGIES, LLC, et al.,
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Defendants.
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)
)

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’
MOTION FOR LEAVE TO AMEND;
DENYING DEFENDANTS’ MOTION
FOR LEAVE TO AMEND AS MOOT

[Re: Docket Nos. 152, 154]

Presently before the court are Plaintiffs LifeScan, Inc. and LifeScan Scotland, Ltd.’s

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(collectively, “Plaintiffs”) Motion for Leave to File a First Amended Complaint, and Defendants

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Shasta Technologies, LLC, Instacare Corp., Pharmatech Solutions, Inc., and Conductive

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Technologies, Inc.’s (collectively, “Defendants”) Motion for Leave to File an Amended Answer.

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This court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338(a). Plaintiffs oppose

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Defendants’ motion, and two Defendants—Instacare Corp. and Pharamtech Solutions Inc.—oppose

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Plaintiffs’ motion. For the reasons set forth below, the court GRANTS Plaintiffs’ Motion for

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Leave, and DENIES Defendants’ Motion for Leave as moot.

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I.

Background
This case is a patent infringement action concerning blood glucose test trips. Plaintiff

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Lifescan Scotland, Ltd. filed this action on September 9, 2011, alleging that Defendants infringe its

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U.S. Patent Nos. 6,241,862 (“the ’862 patent”) and 5,708,247 (“the ’247 patent”). Nearly a year

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’
MOTION TO AMEND AS MOOT

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later, Plaintiff amended the complaint to add LifeScan, Inc. as an additional Plaintiff. Dkt. No.

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134. At the time of filing, Defendants’ product had not received FDA approval and as of this date

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still has not received approval. Thus, Defendants do not actually have any accused product on the

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market. This wrinkle has caused a significant amount of uncertainty in this litigation.

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Prior to the present motions, the parties sought changes to the court-ordered schedule on
numerous occasions. Plaintiffs have several times indicated to Defendants and this court that they

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have in their possession sufficient information to show that FDA approval for Defendants’ product

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is imminent, and have raised the spectre of a motion for a preliminary injunction, including at least

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United States District Court
For the Northern District of California

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one request for a preliminary injunction hearing. See Dkt. Nos. 70, at 8-11; 87; 90; 124. As of this

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date, more than ten months after Plaintiffs first alluded to this likelihood, FDA approval has not yet

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been granted and Plaintiffs have not filed for a preliminary injunction.

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With the possibility of a preliminary injunction motion looming over these proceedings, the

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court and the parties proceeded with the litigation. After initial arguments over a possible stay of

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discovery or stay of the case, on February 1, 2012, this court issued a scheduling order. Because of

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a dispute as to whether Defendants complied with the Patent Local Rules relating to their invalidity

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contentions, the court extended the deadlines of that initial scheduling order on May 9, 2012. Dkt.

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No. 94. In the same order, this court ordered that Defendants produce to Plaintiffs, inter alia,

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supplemental invalidity contentions and documents sufficient to show the operation of the accused

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product. Id. Several months later, on July 19, 2012, this court denied Defendants’ Motion for

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Judgment on the Pleadings and Motion for Stay (Dkt. No. 108) and ordered them to produce to

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Plaintiffs samples of the accused product and its FDA file by August 10, 2012 (Dkt. No. 107).

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Defendants failed to comply with the May 9, 2012 order, and were sanctioned by Magistrate Judge

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Grewal on August 24, 2012. Dkt. No. 130. Defendants nominally complied with this court’s July

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19, 2012 order, producing test strip samples by the August 10th deadline. However the samples

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appear to have been expired. Therefore, under an agreement among counsel, Defendants produced

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new samples on September 12, 2012 along with some additional documents.

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’
MOTION TO AMEND AS MOOT

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Meanwhile, because of renewed disputes about the sufficiency of the parties’ infringement
and invalidity contentions and document productions, this court again re-set the case schedule on

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August 28, 2012. See Dkt. No. 131. In that order, the court granted both parties a generous stretch

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of time to prepare and serve adequate amended infringement and invalidity contentions. Pointing

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to the late production of Defendants’ samples, Plaintiffs served their amended infringement

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contentions fifteen days past the deadline set in the scheduling order. This court denied ex parte

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motions from both parties relating to this incident, leaving the scheduling order intact. Dkt. No.

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151.

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United States District Court
For the Northern District of California

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Complaint, seeking to add a claim of indirect infringement of U.S. Patent No. 7,250,105 (“the ’105

Four days later, Plaintiffs filed the instant Motion for Leave to File a First Amended

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patent,”) and Defendants filed their Motion for Leave to File an Amended Answer, adding an

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affirmative defense under Section 2 of the Sherman Act, 15 U.S.C. § 2. The court now turns to the

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subject of these motions.

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II.

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Legal Standard
Leave to amend is generally granted with liberality. Fed. R. Civ. P. 15(a)(2) (“The court

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should freely give leave when justice so requires”); Morongo Band of Mission Indians v.

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Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). Leave need not be granted, however, where the

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amendment of the complaint would cause the opposing party undue prejudice, is sought in bad

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faith, constitutes an exercise in futility, or creates undue delay. Foman v. Davis, 371 U.S. 178, 182

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(1962); Janicki Logging Co. v. Mateer, 42 F.3d 561, 566 (9th Cir. 1994). Not all of the Rule 15

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considerations are created equal; “it is the consideration of prejudice to the opposing party that

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carries the greatest weight.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th

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Cir. 2003). “The party opposing the amendment bears the burden of showing prejudice.” In re

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Fritz Cos. Sec. Litig., 282 F. Supp. 2d 1105, 1109 (N.D. Cal. Aug. 27. 2003) (citing DCD

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Programs Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987)).

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III.

Discussion
Defendants Shasta Technologies, LLC and Conductive Technologies, Inc. have not filed an

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opposition to Plaintiffs’ motion. Accordingly, “Defendants,” as used in the proceeding sections,

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’
MOTION TO AMEND AS MOOT

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shall refer only to Instacare Corp. and Pharmatech Solutions, Inc. Because the court grants

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Plaintiffs’ motion, Defendants’ motion is moot and the court will only address the parties’

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arguments relating to Plaintiffs’ motion.

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A. Undue Prejudice
The court begins with an examination of prejudice because it is the critical factor in

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deciding a motion for leave to amend. Defendants argue that a grant of leave to amend would be

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unduly prejudicial because the amendment would make it impossible for them to comply with the

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schedule set by this court. Defendants’ invalidity contentions were due November 22, 2012, before

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United States District Court
For the Northern District of California

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the hearing on this motion, and the exchange of claim construction terms is set to occur on

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December 6, 2012, the day after the hearing. Given that one of these deadlines has passed and the

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other deadline is only one day away, Defendants are correct that they cannot possibly adequately

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prepare their contentions and claim construction terms while still abiding by the court’s schedule.

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Were the court powerless to re-examine and adjust its order, Defendants would certainly be

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prejudiced.

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court’s authority. The court can and will provide adequate time for Defendants to respond to the

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newly added claim. Therefore, that Defendants would fail to meet previously set deadlines does

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not constitute undue prejudice in this case.

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However, amending the schedule to prevent prejudice to a party is well within the

The court notes that Defendants do face some prejudice by an amendment because it adds

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complexity to an already impacted litigation schedule. However, much of this predicament is of

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the parties’ own making. Each side has already caused significant delays in this case. That the

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resulting schedule is an aggressive one is thus attributable only to the parties’ litigation conduct to

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date. The court therefore declines to find that this tight timeframe constitutes prejudice.

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Defendants also argue that a grant of leave to amend would be unfairly prejudicial because

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it would “unfairly drive up the costs of litigation” by forcing them to defend against “yet another

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untenable legal claim.” As will be discussed below, the amendment is not, on its face, futile.

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Considering the high likelihood that Plaintiffs would simply file a separate lawsuit covering the

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’105 patent in the event that the court denies this motion for leave, it appears likely that Defendants

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’
MOTION TO AMEND AS MOOT

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will face the expense of defending against this claim whether or not leave to amend is granted. In

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fact, the cost of defending an entirely new lawsuit would likely exceed the cost required to defend

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against this amendment. Therefore, any additional litigation expenses incurred as a result of the

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amendment do not constitute undue prejudice in this case.

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B. Undue Delay
Defendants contend that Plaintiffs unduly delayed filing for leave to amend their complaint.

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Pointing to Plaintiffs’ August 22, 2012 and August 24, 2012 statements to the court indicating that

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Plaintiffs had obtained sufficient information to support a preliminary injunction motion

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United States District Court
For the Northern District of California

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concerning the ’247 and the ’862 patents, Defendants argue that Plaintiffs must necessarily have

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also obtained sufficient information regarding the possible infringement of the ’105 patent.

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Plaintiffs argue that the August samples were out-of-date, and that they did not have satisfactory

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samples to analyze until mid-September 2012. Plaintiffs filed this motion on October 26, 2012,

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two months after Defendants contend Plaintiffs had notice of their ’105 patent claims, and six

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weeks after Plaintiffs concede they had notice. While some delay is certainly present, it is not

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necessarily an “undue” delay. As discussed in the previous section, any delay is of both parties’

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making, and this court declines to find that this factor weighs against granting a leave to amend.

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C. Futility

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Defendants argue that Plaintiffs’ proposed amendment is futile, and thus must be denied.

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To prevail on this theory, Defendants must show that Plaintiffs’ proposed amendment is “legally

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insufficient.” See Jones v. Cmty. Redevelopment Agency, 733 F.2d 646, 650 (9th Cir. 1984).

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Plaintiffs’ claim relies exclusively on a theory of indirect infringement. Particularly, Plaintiffs

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allege that Defendants induce Plaintiffs’ customers to infringe the ’105 patent by selling and

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offering to sell Shasta Genstrips, which can be used with the LifeScan Ultra® family of meters and

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have no substantial noninfringing use. To succeed on this claim, Plaintiffs must show at least one

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instance of direct infringement. See Dynacore Holdings Corp. v. U.S. Phillips Corp., 363 F.3d

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1263, 1274-75 (Fed. Cir. 2004). Plaintiffs cannot make this showing, Defendants argue, because

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’
MOTION TO AMEND AS MOOT

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customers have an implied license to use the glucose monitors in the manner claimed by Plaintiffs’

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patents.

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Plaintiffs respond that their glucose monitors are sold in packaging that contains the
following notice:

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Use of the monitoring device included here is protected under one or more of the following

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U.S. patents: 7,250,105…. Purchase of this device does not act to grant a use license under

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these patents. Such a license is granted only when the device is used with OneTouch®

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Ultra® Test strips.

United States District Court
For the Northern District of California

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Defendants here bear the burden of establishing the existence of an implied license. See

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Carborundum Co. v. Molten Metal Equip. Innovs., 72 F.3d 872, 878 (Fed. Cir. 1995). However,

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Defendants failed to address the above express limitation to the license found on the packaging for

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Plaintiffs’ product in their briefing. Defendants have failed to meet their burden because they have

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not proven that Plaintiffs’ warning does not preclude the finding of an implied license.

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Accordingly, Plaintiffs’ amendment will not be found futile.

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D. Bad Faith

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Finally, Defendants argue that leave to amend should not be granted because the

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amendment is brought in bad faith to perpetuate an “illegal monopoly.” Dkt. No. 160 at 8.

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Defendants’ argument focuses primarily on Plaintiffs’ unexplained delay in filing for this

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amendment. As discussed in previous sections, the court does not find this argument compelling

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given the circumstances of this case.

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IV.

Order

Based on the foregoing:
1. Plaintiff’s Motion for Leave to File a First Amended Complaint is GRANTED.

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Plaintiffs shall file the First Amended Complaint as a separate docket entry on

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PACER/ECF no later than December 10, 2012.

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2. By December 14, 2012, the parties shall submit a joint proposal stipulating to dates for
the following deadlines:
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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’
MOTION TO AMEND AS MOOT