Uniloc USA, Inc. et al v. Apple Inc.

Filing 112

ORDER GRANTING 98 Motion to Substitute Party. Signed by Judge Edward J. Davila on 5/26/2020. (ejdlc1S, COURT STAFF) (Filed on 5/26/2020)

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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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UNILOC USA, INC., et al.,

Case No. 5:19-cv-01692-EJD

Plaintiffs,
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ORDER GRANTING MOTION TO
SUBSTITUTE PARTY

v.
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Re: Dkt. No. 98

APPLE INC,

United States District Court
Northern District of California

Defendant.
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Before the Court is the motion of Plaintiffs Uniloc USA, Inc. (“Uniloc USA”) and Uniloc

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Luxembourg S.A. (“Uniloc Luxembourg” and together with Uniloc USA, “Plaintiffs”) to

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substitute Uniloc 2017 LLC (“Uniloc 2017”), the new owner of the patent-in-suit, as the plaintiff

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pursuant to Rule 25(c) of the Federal Rules of Civil Procedure. Dkt. No. 98 (the “Motion”). The

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Court took the matter under submission for decision without oral argument pursuant to Civil Local

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Rule 7-1(b). Having considered the arguments of the parties and all papers and evidence

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submitted, the Court GRANTS Plaintiffs’ Motion.

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I.

Background
Plaintiffs filed this lawsuit in the Western District of Texas on February 22, 2018, alleging

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patent infringement. See Complaint, Dkt. No. 1. When the Complaint was filed, Uniloc

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Luxembourg was the owner of the patents-in-suit. Id. at ¶ 7. Plaintiff asserts that in an

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assignment that became effective as of May 2018, Uniloc Luxembourg assigned all its rights,

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interest, and title in the patent-in-suit, including the right to all causes of action, to Uniloc 2017.

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See Declaration of James J. Foster, Dkt. No. 98-1 ¶ 2. On April 2, 2019, the case was transferred

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to this Court. Dkt. No. 54.

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Case No.: 5:19-cv-01692-EJD
ORDER GRANTING MOTION TO SUBSTITUTE PARTY
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On January 6, 2020, Plaintiffs informed this Court of their intent to file a motion to add

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Uniloc 2017 as a party to this action. Joint Case Management Statement and Discovery Plan, Dkt.

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No. 78. Approximately three months later, on April 1, 2020, Plaintiffs filed the present motion to

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substitute Uniloc 2017 as plaintiff.
Defendant opposes the motion. Dkt. No. 101 (“Opposition”). Before the Motion was

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filed, Defendant propounded discovery on Plaintiffs, Plaintiffs responded to those requests, and

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Defendant submitted discovery disputes to the Court relating to those responses. Id. Defendant

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argues that permitting Plaintiffs to substitute Uniloc 2017 at this stage in the proceedings will

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cause delay and prejudice to Defendant by forcing it to re-serve discovery on Uniloc 2017. Id.
II.

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Federal Rule of Civil Procedure 25(c) governs the joinder of a party in an action where

United States District Court
Northern District of California

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Legal Standard

there is a transfer of interest:1

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(c) Transfer of Interest. If an interest is transferred, the action may be

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continued by or against the original party unless the court, on motion,

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orders the transferee to be substituted in the action or joined with the

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original party.
The purpose of the rule is to maintain existing relationships in the litigation after a transfer

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of interest. “Rule 25(c) is not designed to create new relationships among parties to a suit but is

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designed to allow the action to continue unabated when an interest in the lawsuit changes

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hands.” In re Bernal, 207 F.3d 595, 598 (9th Cir. 2000) (quoting In re Covington Grain Co., Inc.,

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Defendant argues that plaintiff must meet the “good cause” standard of Rule 16 of the

Federal Rules of Civil Procedure, as the time to amend the pleadings under the Patent Scheduling
Order has expired. Given the transfer of interest of the patent-in-suit, the Court finds that the
Motion was properly brought under Rule 25(c). The Court further finds that it has discretion to
substitute or join parties under Rule 25(c), regardless of whether a party has met the Rule 15 or
Rule 16 requirements for amendment. In re Bernal, 207 F.3d 595, 598 (9th Cir. 2000).
Case No.: 5:19-cv-01692-EJD
ORDER GRANTING MOTION TO SUBSTITUTE PARTY
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638 F.2d 1362, 1364 (5th Cir. 1981)).
“When presented with a Rule 25(c) motion, district courts may, in their discretion: (1)

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permit the predecessor to continue alone; (2) substitute the successor-in-interest for the

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predecessor; or (3) join the successor-in-interest with the predecessor.” Zest IP Holdings, LLC v.

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Implant Direct Mfg. LLC, No. 10-cv-541-GPC(WVG), 2014 WL 11878454, at *3 (S.D. Cal. July

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30, 2014) (citing Hilbrands v. Far East Trading Co., Inc., 509 F.2d 1321, 1323 (9th Cir.

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1975)); see also Sun-Maid Raisin Grow. of Cal. v. California Pack. Corp., 273 F.2d 282, 284 (9th

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Cir. 1959) (“Substitution or joinder is not mandatory where a transfer of interest has occurred.”).

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As the Ninth Circuit has noted:
The most significant feature of Rule 25(c) is that it does not require that

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United States District Court
Northern District of California

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anything be done after an interest has been transferred. The action may be

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continued by or against the original party, and the judgment will be binding

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on his successor in interest even though he is not named. An order of

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joinder is merely a discretionary determination by the trial court that the

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transferee’s presence would facilitate the conduct of the litigation.

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In re Bernal, 207 F.3d at 598 (quoting 7C Charles Alan Wright, Arthur R. Miller & Mary Kay

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Kane, Federal Practice and Procedure § 1958 (2d Ed. 1986)).

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“Under Rule 25(c), ‘[t]he transferee is not joined because its substantive rights are in

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question; rather, the transferee is brought into court solely because it has come to own the property

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in issue.’” Uniloc USA Inc. v. LG Elecs. U.S.A. Inc., No. 18-CV-06737-JST, 2019 WL 690290, at

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*1 (N.D. Cal. Feb. 19, 2019) (citing Minn. Min. & Mfg. Co. v. Eco Chem, Inc., 757 F.2d 1256,

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1263 (Fed. Cir. 1985)). Accordingly, “[t]he merits of the case, and the disposition of the property,

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are still determined vis-a-vis the originally named parties.” Id. Thus, Rule 25(c) rule “leaves the

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substitution decision to [the trial] court's sound discretion.” In re Bernal, 207 F.3d at 598.

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III.

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Discussion
Plaintiffs argue that substitution pursuant to Rule 25(c) is appropriate here because Uniloc

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USA and Uniloc Luxembourg no longer have an interest in the patent-in-suit or in this litigation.

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Case No.: 5:19-cv-01692-EJD
ORDER GRANTING MOTION TO SUBSTITUTE PARTY
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See Dkt. No. 102, Reply, p. 1. Defendant points out that Plaintiffs waited nearly two years after

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they transferred their interests in the patent to Uniloc 2017 to file the Motion and argues that this

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unreasonable delay prejudices Defendant. Opposition, p. 1. Defendant argues that because it has

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already served discovery on Plaintiffs, it would face delays and additional fees if it were required

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to re-serve the discovery on Uniloc 2017.

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In support of this argument, Defendant points to multiple other cases in this district

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brought by Uniloc entities against Defendant in which the substitution or joinder of Uniloc 2017

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has allegedly resulted in prejudice to Defendant. For example, in Uniloc 2017, LLC v. Apple Inc.,

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Case No. 3:19-cv-01697-VC, currently pending in this district before Judge Chhabria, after
Defendant stipulated to the joinder of Uniloc 2017, Uniloc 2017 refused to adopt the discovery

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United States District Court
Northern District of California

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objections and responses of Uniloc USA and Uniloc Luxembourg. Defendant was therefore

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required to re-serve identical discovery requests on Uniloc 2017 as it had on the other Uniloc

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entities, and it received identical objections from Uniloc 2017 thirty days later. See Corbett Decl.

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Exs. 6-9, Dkt. Nos. 101-7 to 101-10.

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In yet another case currently pending before Judge Alsup, the Plaintiffs filed a materially

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identical motion for substitution. See Uniloc USA, Inc. v. Apple Inc., Case No. 18-cv-00360-

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WHA, Dkt. No. 119. In that case, Judge Alsup exercised his discretion to join Uniloc 2017 but

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keep Uniloc Luxembourg and Uniloc USA as part of the litigation, citing concerns about

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discovery and Plaintiffs’ potential strategic behavior:

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“The Court suspects that Uniloc’s manipulations in allocating rights to the

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patents-in-suit to various Uniloc (possibly) shell entities is perhaps designed

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to insulate Uniloc Luxembourg from any award of sanctions in the event

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Uniloc loses this litigation (or some substantial part thereof). Therefore,

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Uniloc Luxembourg shall remain in the above-captioned actions for the

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purpose for any sanction award if and when such a sanction award would be

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warranted and for purposes of facilitating any reasonable discovery against

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Uniloc Luxembourg.”

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Case No.: 5:19-cv-01692-EJD
ORDER GRANTING MOTION TO SUBSTITUTE PARTY
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Id. at 164-2.
Given the delay in filing this motion and Plaintiffs’ discovery-related behavior in other

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actions in this district, the Court shares Defendant’s concerns about possible delays. However, the

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Court finds that the possible prejudice to Defendant resulting from any such delays is minimal,

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and that allowing Uniloc 2017 to participate in the proceedings will ultimately facilitate the

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litigation. In re Bernal, 207 F.3d at 598.
Consistent with other courts in this district and in order to minimize any prejudice to

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Defendant, the Court exercises its discretion to join Uniloc 2017, rather than substitute it for the

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existing Plaintiffs. Uniloc USA Inc. v. LG Elecs. U.S.A. Inc., No. 18-CV-06737-JST, 2019 WL

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690290, at *2 (N.D. Cal. Feb. 19, 2019) (“In similar circumstances, other courts have exercised

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United States District Court
Northern District of California

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their discretion to join the transferee, rather than substituting that entity, until the ownership of the

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patent could be resolved.”); Hilbrands v. Far East Trading Co., Inc., 509 F.2d 1321, 1323 (9th

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Cir. 1975).

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IV.

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Conclusion
The Court GRANTS Plaintiffs’ Motion and orders Uniloc 2017 JOINED as a plaintiff in

this action. Uniloc USA and Uniloc Luxembourg shall remain in the case.
IT IS SO ORDERED.
Dated: May 26, 2020
______________________________________
EDWARD J. DAVILA
United States District Judge

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Case No.: 5:19-cv-01692-EJD
ORDER GRANTING MOTION TO SUBSTITUTE PARTY
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