Intellectual Ventures I LLC et al v. Toshiba Corporation et al

Filing 501

MEMORANDUM ORDER granting 405 MOTION to Amend/Correct Amended Answers, Defenses and Counterclaims filed by Toshiba Corporation, Toshiba America Information Systems Inc., Toshiba America Inc., Toshiba America Electronic Components Inc. Signed by Judge Sue L. Robinson on 9/7/2016. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

INTELLECTUAL VENTURES I LLC,
et al.,
Plaintiffs,

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) Civ. No. 13-453-SLR

v.
TOSHIBA CORPORATION, et al.,
Defendants.

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MEMORANDUM ORDER
At Wilmington this

7th

day of September, 2016, having reviewed defendants'

motion for leave to amend their amended answers, defenses and counterclaims, and
the papers filed in connection therewith;
IT IS ORDERED that said motion (0.1. 405) is granted, for the reasons that
follow:
1. Background. The complaint in this case was filed in March 2013.
Consistent with the original scheduling order approved by the court, all motions to join
other parties and/or to amend pleadings were required to be filed on or before April 24,
2015, a date that was never revised during the course of these proceedings. (D.I. 55)
According to the last revised scheduling order submitted by the parties and approved by
the court, fact discovery was to close on or before March 11, 2016, with expert
discovery to close on or before July 1, 2016. (D.I. 330) On June 15, 2016, defendants
filed the instant motion to amend to include a defense of improper inventorship with

respect to U.S. Patent No. 5,938,742 ("the '742 patent"), based on "conclusive
information recently obtained during the June 1, 2016 deposition of third party Stephen
Perlman." (0.1. 406 at 1)
2. The '7 42 patent stems from work and technology developed at plaintiffs'
predecessor-in-interest General Magic, Inc., which filed patent application no.
08/516,857 ("the '857 application") on August 18, 1995, naming two inventors - Anthony
M. Fadell and Walter F. Broedner. At the same time, General Magic filed four other
related patent applications claiming other aspects of its technology. Two of those
applications identified Mr. Perlman in addition to Mr. Fadel! and Mr. Broedner as
inventors. (See '742 patent, col. 63:25-40) The claims of the '857 application issued as
the '742 patent on August 17, 1999, naming Messrs. Fadell and Broedner as inventors.
Previously, U.S. Patent No. 5,675,811 ("the '811 patent") - a patent not asserted in this
case - issued from one of the applications filed contemporaneously with the '7 42 patent,
listing Mr. Perlman, among others, as an inventor. (0.1. 408, ex. 7) Plaintiffs contend
that all of the named inventors assigned their rights to the disclosed inventions to
General Magic. (Id.; 0.1. 1, ex. H) In 2003, Intellectual Ventures purchased all of
General Magic's assets, including the right, title, and interest to General Magic's patent
portfolio. (0.1. 415, ex. 2)
3. Standard of review. A court-ordered schedule "may be modified only for
good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4). "[T]he good cause
standard under Rule 16(b) hinges on diligence of the movant, and not on prejudice to
the non-moving party." Roquette Freres v. SP/ Pharma, Inc., 2009 WL 1444835, at *4

(0. Del. May 21, 2009). Only after having found the requisite showing of good cause
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will the court consider whether the proposed amended pleading meets the standard
under Fed. R. Civ. P. 15. See E. Minerals & Chems. Co. v. Mahan, 225 F.3d 330, 340
(3d Cir. 2000). Pursuant to Rule 15, courts deny leave to amend for reasons of undue
delay, bad faith on the part of the moving party, undue prejudice to the non-moving
party, or futility of amendment. Farnan v. Davis, 371 U.S. 178, 182 (1962). A party's
delay in seeking an amended pleading is "undue" when it places an unwarranted
burden on the court or when it comes after previous opportunities to amend. See

Bjorgung v. Whitetail Resort, LP, 550 F.3d 263, 266 (3d Cir. 2008). A proposed motion
to amend is prejudicial when "allowing the amended pleading would (1) require the nonmoving party to expend significant additional resources to conduct discovery and
prepare for trial, (2) significantly delay the resolution of the dispute, or (3) prevent [a
party] from bringing a timely action in another jurisdiction." Long v. Wilson, 393 F.3d
390, 400 (3d Cir. 2004). A proposed motion to amend the pleadings is futile if the
complaint as amended is frivolous, advances a claim that is legally insufficient on its
face, or fails to state a claim upon which relief can be granted. Koken v. GPC Int'/, Inc.,
443 F. Supp. 2d 631, 634 (D. Del. 2006). "The decision to grant a motion for leave to
amend is within the sound discretion of the District Court," "taking all pleaded
allegations as true and viewing them in a light most favorable to the plaintiff." Winer

Family Trust v. Queen, 503 F.3d 319, 331 (3d Cir. 2007).
4. "(T]he inventors as named in an issued patent are presumed to be correct."

Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1358 (Fed. Cir. 2004) (internal
quotation omitted). To rebut that presumption, a party alleging improper inventorship

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must demonstrate improper inventorship by "clear and convincing" evidence. Id. "The
clear and convincing burden of proof is applied to joint inventorship disputes because of
a 'strong temptation for persons who consulted with the inventor and provided him with
materials and advice, to reconstruct, so as to further their own position, the extent of
their contribution to the conception of the invention."' Id. at 1366-67 (citation omitted).
An alleged co-inventor's oral testimony alone cannot rise to the level of clear and
convincing evidence. Caterpillar Inc. v. Sturman Indus., Inc., 387 F. 3d 1358, 1377
(Fed. Cir. 2004). Accordingly, oral testimony must be corroborated by other evidence.
Lacks Indus., Inc. v. McKechnie Vehicle Components USA, Inc., 322 F.3d 1335, 1350

(Fed. Cir. 2003). In order to be added as a joint inventor, said individual must prove, by
clear and convincing evidence, that his contribution to the invention in question was "not
insignificant in quality, when that contribution is measured against the dimension of the
full invention." Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997).
5. Even if a party demonstrates misjoinder of an inventor by clear and
convincing evidence, the court can correct the patent under 35 U.S.C. § 256, which
provides in relevant part that
[t]he error of omitting inventors or naming persons who are not inventors
shall not invalidate the patent in which such error occurred if it can be
corrected as provided in this section. The court before which such matter
is called in question may order correction of the patent on notice and hearing
of all parties concerned and the Director shall issue a certificate accordingly.
35 U.S.C. § 256(b). Although§ 256 does not limit the time during which inventorship
can be corrected, the defenses of !aches and estoppel have been applied in§ 256
actions based on the principle that "equity disfavors undue and prejudicial delay by a

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person who may have an interest in the property of another." Stark v. Advanced
Magnetics, Inc., 29 F.3d 1570, 1573 (Fed. Cir. 1994).

6. Analysis. Defendants bring this motion to invalidate the '742 patent, not to
correct inventorship on behalf of Mr. Perlman. (D.I. 407, ex. H at 27) The motion
comes 17 years after the '742 patent issued, and more than one year after the courtordered deadline for amending pleadings. Trial is scheduled to commence January 17,
2017. Despite reference to the '811 patent (in which Mr. Perlman was named as an
inventor) in the '742 patent, defendants contend that Mr. Perlman's purported
inventorship could not have been discovered earlier than his June 2016 deposition,
which testimony is corroborated by "documentary evidence, circumstantial evidence,
and testimony from an independent witness." (D.I. 418 at 3)
7. Because the court is not prepared at this juncture to evaluate the quality or
quantity of evidence defendants cite in their papers, and because the court recognizes
the importance of proper inventorship, the motion to amend shall be granted. However,
the court also recognizes the extraordinary delay between issuance of the '7 42 patent
and the assertion of improper inventorship, as well as the fact that, in most instances,
the remedy for improper inventorship is a certificate of correction, not invalidation.
Therefore, under the extraordinary circumstances of this case, the court will bifurcate
the newly-added defense to allow for additional discovery and a separate motion
practice and trial, which schedule can be discussed at the September 30, 2016 oral

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argument.

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