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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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 SAN JOSE DIVISION 8 United States District Court For the Northern District of California 9 10 11 12 13 14 15 LIFESCAN, INC. and LIFESCAN SCOTLAND, ) LTD., ) ) Plaintiffs, ) ) v. ) ) SHASTA TECHNOLOGIES, LLC, et al., ) ) ) Defendants. ) ) ) 16 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 17 (collectively, “Plaintiffs”) Motion for Leave to File a First Amended Complaint, and Defendants 18 Shasta Technologies, LLC, Instacare Corp., Pharmatech Solutions, Inc., and Conductive 19 Technologies, Inc.’s (collectively, “Defendants”) Motion for Leave to File an Amended Answer. 20 This court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338(a). Plaintiffs oppose 21 Defendants’ motion, and two Defendants—Instacare Corp. and Pharamtech Solutions Inc.—oppose 22 Plaintiffs’ motion. For the reasons set forth below, the court GRANTS Plaintiffs’ Motion for 23 Leave, and DENIES Defendants’ Motion for Leave as moot. 24 25 I. Background This case is a patent infringement action concerning blood glucose test trips. Plaintiff 26 Lifescan Scotland, Ltd. filed this action on September 9, 2011, alleging that Defendants infringe its 27 U.S. Patent Nos. 6,241,862 (“the ’862 patent”) and 5,708,247 (“the ’247 patent”). Nearly a year 28 1 Case No.: 5:11-CV-04494-EJD ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’ MOTION TO AMEND AS MOOT 1 later, Plaintiff amended the complaint to add LifeScan, Inc. as an additional Plaintiff. Dkt. No. 2 134. At the time of filing, Defendants’ product had not received FDA approval and as of this date 3 still has not received approval. Thus, Defendants do not actually have any accused product on the 4 market. This wrinkle has caused a significant amount of uncertainty in this litigation. 5 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 7 have in their possession sufficient information to show that FDA approval for Defendants’ product 8 is imminent, and have raised the spectre of a motion for a preliminary injunction, including at least 9 United States District Court For the Northern District of California 6 one request for a preliminary injunction hearing. See Dkt. Nos. 70, at 8-11; 87; 90; 124. As of this 10 date, more than ten months after Plaintiffs first alluded to this likelihood, FDA approval has not yet 11 been granted and Plaintiffs have not filed for a preliminary injunction. 12 With the possibility of a preliminary injunction motion looming over these proceedings, the 13 court and the parties proceeded with the litigation. After initial arguments over a possible stay of 14 discovery or stay of the case, on February 1, 2012, this court issued a scheduling order. Because of 15 a dispute as to whether Defendants complied with the Patent Local Rules relating to their invalidity 16 contentions, the court extended the deadlines of that initial scheduling order on May 9, 2012. Dkt. 17 No. 94. In the same order, this court ordered that Defendants produce to Plaintiffs, inter alia, 18 supplemental invalidity contentions and documents sufficient to show the operation of the accused 19 product. Id. Several months later, on July 19, 2012, this court denied Defendants’ Motion for 20 Judgment on the Pleadings and Motion for Stay (Dkt. No. 108) and ordered them to produce to 21 Plaintiffs samples of the accused product and its FDA file by August 10, 2012 (Dkt. No. 107). 22 Defendants failed to comply with the May 9, 2012 order, and were sanctioned by Magistrate Judge 23 Grewal on August 24, 2012. Dkt. No. 130. Defendants nominally complied with this court’s July 24 19, 2012 order, producing test strip samples by the August 10th deadline. However the samples 25 appear to have been expired. Therefore, under an agreement among counsel, Defendants produced 26 new samples on September 12, 2012 along with some additional documents. 27 28 2 Case No.: 5:11-CV-04494-EJD ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’ MOTION TO AMEND AS MOOT 1 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 3 August 28, 2012. See Dkt. No. 131. In that order, the court granted both parties a generous stretch 4 of time to prepare and serve adequate amended infringement and invalidity contentions. Pointing 5 to the late production of Defendants’ samples, Plaintiffs served their amended infringement 6 contentions fifteen days past the deadline set in the scheduling order. This court denied ex parte 7 motions from both parties relating to this incident, leaving the scheduling order intact. Dkt. No. 8 151. 9 United States District Court For the Northern District of California 2 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 10 patent,”) and Defendants filed their Motion for Leave to File an Amended Answer, adding an 11 affirmative defense under Section 2 of the Sherman Act, 15 U.S.C. § 2. The court now turns to the 12 subject of these motions. 13 II. 14 Legal Standard Leave to amend is generally granted with liberality. Fed. R. Civ. P. 15(a)(2) (“The court 15 should freely give leave when justice so requires”); Morongo Band of Mission Indians v. 16 Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). Leave need not be granted, however, where the 17 amendment of the complaint would cause the opposing party undue prejudice, is sought in bad 18 faith, constitutes an exercise in futility, or creates undue delay. Foman v. Davis, 371 U.S. 178, 182 19 (1962); Janicki Logging Co. v. Mateer, 42 F.3d 561, 566 (9th Cir. 1994). Not all of the Rule 15 20 considerations are created equal; “it is the consideration of prejudice to the opposing party that 21 carries the greatest weight.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th 22 Cir. 2003). “The party opposing the amendment bears the burden of showing prejudice.” In re 23 Fritz Cos. Sec. Litig., 282 F. Supp. 2d 1105, 1109 (N.D. Cal. Aug. 27. 2003) (citing DCD 24 Programs Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987)). 25 26 III. Discussion Defendants Shasta Technologies, LLC and Conductive Technologies, Inc. have not filed an 27 opposition to Plaintiffs’ motion. Accordingly, “Defendants,” as used in the proceeding sections, 28 3 Case No.: 5:11-CV-04494-EJD ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’ MOTION TO AMEND AS MOOT 1 shall refer only to Instacare Corp. and Pharmatech Solutions, Inc. Because the court grants 2 Plaintiffs’ motion, Defendants’ motion is moot and the court will only address the parties’ 3 arguments relating to Plaintiffs’ motion. 4 A. Undue Prejudice The court begins with an examination of prejudice because it is the critical factor in 6 deciding a motion for leave to amend. Defendants argue that a grant of leave to amend would be 7 unduly prejudicial because the amendment would make it impossible for them to comply with the 8 schedule set by this court. Defendants’ invalidity contentions were due November 22, 2012, before 9 United States District Court For the Northern District of California 5 the hearing on this motion, and the exchange of claim construction terms is set to occur on 10 December 6, 2012, the day after the hearing. Given that one of these deadlines has passed and the 11 other deadline is only one day away, Defendants are correct that they cannot possibly adequately 12 prepare their contentions and claim construction terms while still abiding by the court’s schedule. 13 Were the court powerless to re-examine and adjust its order, Defendants would certainly be 14 prejudiced. 15 court’s authority. The court can and will provide adequate time for Defendants to respond to the 16 newly added claim. Therefore, that Defendants would fail to meet previously set deadlines does 17 not constitute undue prejudice in this case. 18 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 19 complexity to an already impacted litigation schedule. However, much of this predicament is of 20 the parties’ own making. Each side has already caused significant delays in this case. That the 21 resulting schedule is an aggressive one is thus attributable only to the parties’ litigation conduct to 22 date. The court therefore declines to find that this tight timeframe constitutes prejudice. 23 Defendants also argue that a grant of leave to amend would be unfairly prejudicial because 24 it would “unfairly drive up the costs of litigation” by forcing them to defend against “yet another 25 untenable legal claim.” As will be discussed below, the amendment is not, on its face, futile. 26 Considering the high likelihood that Plaintiffs would simply file a separate lawsuit covering the 27 ’105 patent in the event that the court denies this motion for leave, it appears likely that Defendants 28 4 Case No.: 5:11-CV-04494-EJD ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’ MOTION TO AMEND AS MOOT 1 will face the expense of defending against this claim whether or not leave to amend is granted. In 2 fact, the cost of defending an entirely new lawsuit would likely exceed the cost required to defend 3 against this amendment. Therefore, any additional litigation expenses incurred as a result of the 4 amendment do not constitute undue prejudice in this case. 5 B. Undue Delay Defendants contend that Plaintiffs unduly delayed filing for leave to amend their complaint. 7 Pointing to Plaintiffs’ August 22, 2012 and August 24, 2012 statements to the court indicating that 8 Plaintiffs had obtained sufficient information to support a preliminary injunction motion 9 United States District Court For the Northern District of California 6 concerning the ’247 and the ’862 patents, Defendants argue that Plaintiffs must necessarily have 10 also obtained sufficient information regarding the possible infringement of the ’105 patent. 11 Plaintiffs argue that the August samples were out-of-date, and that they did not have satisfactory 12 samples to analyze until mid-September 2012. Plaintiffs filed this motion on October 26, 2012, 13 two months after Defendants contend Plaintiffs had notice of their ’105 patent claims, and six 14 weeks after Plaintiffs concede they had notice. While some delay is certainly present, it is not 15 necessarily an “undue” delay. As discussed in the previous section, any delay is of both parties’ 16 making, and this court declines to find that this factor weighs against granting a leave to amend. 17 C. Futility 18 Defendants argue that Plaintiffs’ proposed amendment is futile, and thus must be denied. 19 To prevail on this theory, Defendants must show that Plaintiffs’ proposed amendment is “legally 20 insufficient.” See Jones v. Cmty. Redevelopment Agency, 733 F.2d 646, 650 (9th Cir. 1984). 21 Plaintiffs’ claim relies exclusively on a theory of indirect infringement. Particularly, Plaintiffs 22 allege that Defendants induce Plaintiffs’ customers to infringe the ’105 patent by selling and 23 offering to sell Shasta Genstrips, which can be used with the LifeScan Ultra® family of meters and 24 have no substantial noninfringing use. To succeed on this claim, Plaintiffs must show at least one 25 instance of direct infringement. See Dynacore Holdings Corp. v. U.S. Phillips Corp., 363 F.3d 26 1263, 1274-75 (Fed. Cir. 2004). Plaintiffs cannot make this showing, Defendants argue, because 27 28 5 Case No.: 5:11-CV-04494-EJD ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’ MOTION TO AMEND AS MOOT 1 customers have an implied license to use the glucose monitors in the manner claimed by Plaintiffs’ 2 patents. 3 4 Plaintiffs respond that their glucose monitors are sold in packaging that contains the following notice: 5 Use of the monitoring device included here is protected under one or more of the following 6 U.S. patents: 7,250,105…. Purchase of this device does not act to grant a use license under 7 these patents. Such a license is granted only when the device is used with OneTouch® 8 Ultra® Test strips. United States District Court For the Northern District of California 9 Defendants here bear the burden of establishing the existence of an implied license. See 10 Carborundum Co. v. Molten Metal Equip. Innovs., 72 F.3d 872, 878 (Fed. Cir. 1995). However, 11 Defendants failed to address the above express limitation to the license found on the packaging for 12 Plaintiffs’ product in their briefing. Defendants have failed to meet their burden because they have 13 not proven that Plaintiffs’ warning does not preclude the finding of an implied license. 14 Accordingly, Plaintiffs’ amendment will not be found futile. 15 D. Bad Faith 16 Finally, Defendants argue that leave to amend should not be granted because the 17 amendment is brought in bad faith to perpetuate an “illegal monopoly.” Dkt. No. 160 at 8. 18 Defendants’ argument focuses primarily on Plaintiffs’ unexplained delay in filing for this 19 amendment. As discussed in previous sections, the court does not find this argument compelling 20 given the circumstances of this case. 21 22 23 IV. Order Based on the foregoing: 1. Plaintiff’s Motion for Leave to File a First Amended Complaint is GRANTED. 24 Plaintiffs shall file the First Amended Complaint as a separate docket entry on 25 PACER/ECF no later than December 10, 2012. 26 27 28 2. By December 14, 2012, the parties shall submit a joint proposal stipulating to dates for the following deadlines: 6 Case No.: 5:11-CV-04494-EJD ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND; DENYING DEFENDANTS’ MOTION TO AMEND AS MOOT

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