On Track Innovations Ltd. v. T-Mobile USA, Inc.
MEMORANDUM AND ORDER granting 95 Motion for Leave to File Document: For the foregoing reasons, On Track Innovations' motion for leave to file an amended complaint (Docket no. 95) is granted. (Signed by Magistrate Judge James C. Francis on 1/31/2014) Copies Mailed By Chambers. (tn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
ON TRACK INNOVATIONS LTD.,
- against :
T-MOBILE USA, INC.,
- - - - - - - - - - - - - - - - - -:
T-MOBILE USA, INC.,
- against :
ON TRACK INNOVATIONS LTD.,
Counter Defendant. :
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
12 Civ. 2224 (AJN) (JCF)
Pursuant to Rule 15(a)(2) of the Federal Rules of Civil
Procedure, the plaintiff in this patent infringement action, OnTrack Innovations (“OTI”), seeks leave to amend its complaint to
include claims of active inducement of patent infringement under 35
U.S.C. § 271(b).
(On Track Innovations Ltd.’s Memorandum in
Support of its Motion for Leave to File Amended Complaint (“Pl.
The defendant, T-Mobile USA, Inc. (“T-Mobile”), opposes
the motion, arguing that it is untimely, prejudicial, made in bad
faith, and ultimately futile.
(T-Mobile’s Opposition to OTI’s
Motion for Leave to File Amended Complaint (“Def. Memo.”)).
the following reasons, the motion is granted.
contactless modes of communication, such as so-called ‘hybrid’
(Memorandum and Order dated June 20, 2013 at 3).
Certain cell phones are equipped with a feature -- Near Field
Communications (“NFC”) -- enabling them to establish peer-to-peer
radio communications with nearby devices.
NFC-capable phones can
without needing physical contact; for instance, the user of an NFCcapable cell phone can turn on his nearby stereo through his cell
OTI is the owner of U.S. Patent No. 6,045,043 (“the ‘043
Patent”), which “deals with connecting a microprocessor with both
separate, dedicated lines of connection,” obviating the need for a
switching device between the two.
(Order at 3).
The plaintiff filed its original complaint on March 26, 2012,
claiming that T-Mobile’s NFC-capable devices directly infringe its
In October 2012, T-Mobile did a pilot launch of the ISIS
Mobile Wallet, a method of contactless payment using NFC-capable
phones in conjunction with enhanced SIM cards, in two major U.S.
(Def. Memo. at 4; Declaration of Ellisen S. Turner dated
Dec. 23, 2013, Exh. C).
The national launch of T-Mobile’s NFC
program occurred in November 2013.
(Pl. Memo. at 1-3; ISIS Mobile
Wallet FAQ, attached as Exh. B to Amended Complaint, at 29).
Mobile subscribers were informed, through T-Mobile’s website, that
they could visit T-Mobile stores to receive Advanced SIM cards for
use in their NFC-capable cellular phones.
Mobile Wallet FAQ at 29).
(Pl. Memo. at 1-3; ISIS
OTI now seeks to amend its complaint to
allege that, by inviting its customers to obtain an Advanced SIM
card for insertion into an NFC-capable cell phone, T-Mobile was
“actively inducing infringement of the patent.” (Pl. Memo. at 1).
Rule 15 of the Federal Rules of Civil Procedure provides that
leave to amend a pleading should be freely granted “when justice so
Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 371
U.S. 178, 182 (1962); Aetna Casualty & Surety Co. v. Aniero
Concrete Co., 404 F.3d 566, 603–04 (2d Cir. 2005); Carrion v.
Singh, No. 12 CV 0360, 2013 WL 639040, at *11 (E.D.N.Y. Feb. 21,
Under this liberal standard, motions to amend should be
denied only for reasons of undue delay, bad faith or dilatory
motive, undue prejudice to the non-moving party, or futility.
Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 126 (2d Cir.
2008) (citing Foman, 371 U.S. at 182); McCarthy v. Dun & Bradstreet
Corp., 482 F.3d 184, 200 (2d Cir. 2007); In re Alcon Shareholder
Litigation, 719 F. Supp. 2d 280, 281-82 (S.D.N.Y. 2010).
standard applies when the party seeks to supplement the complaint
with events that happened after the date of the original pleading.
See Fed. R. Civ. P. 15(d); In re American International Group, Inc.
Securities Litigation, No. 04 Civ. 8141, 2008 WL 2795141, at *3
(S.D.N.Y. July 18, 2008) (noting that pleading is technically
The court has broad discretion over such motions.
McCarthy, 482 F.3d at 200; Biosafe-One, Inc. v. Hawks, 639 F. Supp.
2d 358, 370 (S.D.N.Y. 2009).
district court applies the law of the circuit in which it sits to
nonpatent issues and the law of the Federal Circuit to issues of
substantive patent law.” Paone v. Microsoft Corp., 881 F. Supp. 2d
386, 393–94 (E.D.N.Y. 2012) (internal quotation marks omitted); see
also In re Bill of Lading Transmission and Processing System Patent
Litigation, 681 F.3d 1323, 1331 (Fed. Cir. 2012) (applicable law of
regional circuit is applied to motions to dismiss for failure to
state a claim in patent cases).
In the Second Circuit, a court may deny a motion to amend
amendment would prejudice other parties.” Grace v. Rosenstock, 228
F.3d 40, 53-54 (2d Cir. 2000) (internal quotation marks omitted);
accord State Farm Mutual Automobile Insurance Co. v. Grafman, No.
04 CV 2609, 2007 WL 7704666, at *3 (E.D.N.Y. May 22, 2007).
However, “[m]ere delay,
. . . absent a showing of bad faith or
undue prejudice, does not provide a basis for a district court to
deny the right to amend.”
Block v. First Blood Associates, 988
F.2d 344, 350 (2d Cir. 1993) (internal quotation marks omitted);
see also Rotter v. Leahy, 93 F. Supp. 2d 487, 497 (S.D.N.Y. 2000)
(“Typically, the moving party’s delay, standing alone, is not
sufficient reason to foreclose amendment.”).
The plaintiff seeks to add a new claim twenty months after the
filing of its original complaint.
However, this new allegation
centers on T-Mobile’s November 2013 national launch of its NFC
program, rather than on activities taking place at the time the
action was commenced.
T-Mobile argues that OTI was aware of
similar activities -- namely, its October 2012 pilot launch of the
NFC program -- at least one year earlier, and that this constitutes
(Def. Memo. at 3-5).
However, as far as OTI knew at
the time of the pilot launch, the only suggestions that customers
insert Advanced SIM cards into NFC-capable phones came from an
independent blogger and an ISIS press release, not from T-Mobile,
and thus OTI did not then possess facts that could have supported
an induced infringement claim against T-Mobile.
According to OTI,
the national launch was the first time that T-Mobile itself invited
subscribers to obtain new Advanced SIM cards for their NFC cellular
(On Track Innovations LTD.’s Reply in Support of its
Motion for Leave to File Amended Complaint (“Pl. Reply”) at 3).
Under these circumstances, there is no undue delay.
See TNS Media
Research, LLC v. TRA Global, Inc., No. 11 Civ. 4039, 2012 WL
2052679, at *1 (S.D.N.Y. June 4, 2012) (allowing party to add
counterclaim defendants where earlier suspicions were subsequently
Genetics, Inc., 777 F. Supp. 2d 390, 400 (N.D.N.Y. 2011) (allowing
amendment where “the new allegations, including those giving rise
Plaintiff did not become aware until some point during discovery”).
Indeed, even if OTI had not offered a satisfactory explanation for
the one-year delay after the October 2012 pilot launch, courts have
allowed amendment after much longer periods of delay.
Commander Oil Corp. v. Barlo Equipment Corp., 215 F.3d 321, 333 (2d
Cir. 2000) (no abuse of discretion in grant of leave to amend after
seven year delay, in absence of prejudice); Rachman Bag Co. v.
Liberty Mutual Insurance Co., 46 F.3d 230, 235 (2d Cir. 1995)
(leave to amend properly granted after four-year delay); Block, 988
F.2d at 350-51 (amendment allowed four years after complaint
“[P]rejudice alone is insufficient to justify a denial of
leave to amend; rather the necessary showing is ‘undue prejudice to
the opposing party.’” A.V. by Versace, Inc. v. Gianni Versace
S.p.A., 87 F. Supp. 2d 281, 299 (S.D.N.Y. 2000) (emphasis in
original) (quoting Foman, 371 U.S. at 182).
In deciding whether
undue prejudice exists, courts should consider whether the new
claim would “‘(i) require the opponent to expend significant
additional resources to conduct discovery and prepare for trial;
(ii) significantly delay the resolution of the dispute; or (iii)
prevent the plaintiff from bringing a timely action in another
Corrections, 214 F.3d 275, 284 (2d Cir. 2000) (quoting Block, 988
F.2d at 350); Zoll v. Jordache Enterprises Inc., No. 01 Civ. 1339,
2002 WL 485733, at *1 (S.D.N.Y. March 29, 2002).
involves a balancing process,” weighing any potential prejudice to
the opposing party against the prejudice that the moving party
would experience if the amendment were denied.
Nation of New York v. County of Oneida, 199 F.R.D. 61, 77 (N.D.N.Y.
infringement after fact discovery has closed prevents them from
obtaining relevant evidence for their defense.
that without previous notice of induced infringement claims, it had
no reason to seek an opinion of counsel letter, which the Federal
Circuit recognizes as probative of lack of intent.
Industries, Inc. v. Bunzl USA, Inc., 661 F.3d 629, 649 (Fed. Cir.
“admissible, at least with respect to [defendant]’s state of mind
discovery has not yet closed, there is no reason that this evidence
cannot now be obtained.
T-Mobile’s prejudice argument goes one step further, and
argues that any opinion it obtains now will, at trial, be argued to
(Def. Memo. at 8).
However, while OTI is free to
allegedly infringing acts is immaterial to T-Mobile’s intent at the
time, it is statutorily barred from arguing that any failure to
obtain the advice of counsel with respect to the ‘043 Patent is
probative of T-Mobile’s intent to induce infringement.
§ 298 (“The failure of an infringer to obtain the advice of counsel
with respect to any allegedly infringed patent, or the failure of
the infringer to present such advice to the court or jury, may not
be used to prove that the accused infringer willfully infringed the
patent or that the infringer intended to induce infringement of the
T-Mobile has not identified any way in which the amendment
would require significant additional discovery.
To be sure, a
knowledge and specific intent that are not required in a direct
infringement claim, and T-Mobile complains that it has not had the
opportunity to elicit any evidence of intent.1
defendant “should have accessible to it the evidence bearing on its
own state of mind.”
Perfect Pearl Co., Inc. v. Majestic Pearl &
Stone, Inc., 889 F. Supp. 2d 453, 461 (S.D.N.Y. 2012).
proposed amendment is not likely to “require [T-Mobile] to expend
significant additional resources to conduct discovery and prepare
for trial” or “significantly delay the resolution of the dispute,”
there is no undue prejudice.
See Block, 988 F.2d at 350.
Similarly, there is no undue prejudice in the revised list of
accused products in OTI’s proposed amended complaint.
Mobile states that three new accused devices are included for the
first time (Def. Memo. at 14), OTI explains that this is due to the
T-Mobile’s contention that it needs fact discovery from the
suppliers that designed the accused products “to confirm that they
were not aware of the patent [and] did not intend their products to
(Def. Memo. at 14).
At issue are Tinfringe” is baseless.
Mobile’s intent and actions, not the suppliers’.
underlying technical basis for claiming infringement remains the
(Pl. Reply at 8).
Leave to amend may also be denied when the pleading would not
survive a motion to dismiss.
See AEP Energy Services Gas Holding
Co. v. Bank of America, N.A., 626 F.3d 699, 726 (2d Cir. 2010);
Penn Group, LLC v. Slater, No. 07 Civ. 729, 2007 WL 2020099, at *4
(S.D.N.Y. June 13, 2007) (collecting cases).
A court may deny a
motion to amend for futility only where no colorable grounds exist
to support a claim or defense.
See Slay v. Target Corp., No. 11
(“Futility generally turns on whether the proposed amended pleading
states a viable claim.”); Estate of Ratcliffe v. Pradera Realty
Co., No. 05 Civ. 10272, 2007 WL 3084977, at *4 (S.D.N.Y. Oct. 19,
As when deciding a motion to dismiss, all reasonable
inferences must be drawn in favor of the plaintiff. See, e.g.,
Henneberry v. Sumitomo Corp. of America, 415 F. Supp. 2d 423, 433
(S.D.N.Y. 2006) (“[T]he Court will review the amended complaint
through the prism of a Rule 12(b)(6) analysis and, consequently,
accept as true all of the proposed complaint’s factual allegations,
and draw all reasonable inferences in favor of plaintiff.”).
opposing party bears the burden of establishing that an amendment
would be futile.
See Amaya v. Roadhouse Brick Oven Pizza, Inc.,
285 F.R.D. 251, 253 (E.D.N.Y. 2012).
To state a claim for induced infringement under § 271(b), “the
infringement, and second that the alleged infringer knowingly
induced infringement and possessed specific intent to encourage
Manufacturer Co., 501 F.3d 1307, 1312 (Fed. Cir. 2007) (internal
Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1378 (Fed. Cir.
2005); Pecorino v. Vutec Corp., 934 F. Supp. 2d 422, 447 (E.D.N.Y.
2012). Induced infringement thus requires both “knowledge that the
Appliances, Inc. v. SEB S.A., __ U.S. __, __, 131 S. Ct. 2060, 2068
(2011), as well as active steps “directed to encouraging another’s
infringement,” DSU Medical Corp. v. JMS Co., 471 F.3d 1293, 1306
(Fed. Cir. 2006).
In short, “the inducer must have an affirmative
requirement may be satisfied by showing actual knowledge or willful
Global-Tech Appliances, __ U.S. at __, 131 S. Ct. at
instructions, can sufficiently allege specific intent to induce
infringement.” Smartwater, Ltd. v. Applied DNA Sciences, Inc., No.
12 CV 5731, 2013 WL 5440599, at *9 (E.D.N.Y. Sept. 27, 2013); see
also Golden Blount, Inc. v. Robert H. Peterson Co., 438 F.3d 1354,
1364 n.4 (Fed. Cir. 2006) (upholding finding of inducement where
defendant “provided [an] instruction sheet to customers directing
them to perform specific acts leading to the assembly of infringing
devices, from which the district court could draw an inference of
Here, OTI asserts that T-Mobile had knowledge of the ‘043
Patent, knew that combining an Advanced SIM card with an NFCcapable cell phone constituted direct infringement of that patent,
and subsequently instructed its subscribers to visit T-Mobile
stores to receive an Advanced SIM card to insert into their NFCcapable
(Pl. Memo. at 2-3; Pl. Reply at 11-12).
supports these factual allegations by attaching information from TMobile’s website instructing subscribers to visit a T-Mobile store
for an Advanced SIM card to use in NFC-capable cell phones.
Mobile Wallet FAQ).
Drawing all inferences in OTI’s favor, this
supports a plausible claim of active inducement.
emphasized by the Federal Circuit, a plaintiff is not required to
prove its case at the pleading stage.
681 F.3d at 1339.
See In re Bill of Lading,
At this stage, it is plausibility and not
probability that governs pleadings.
See id. at 1331 (citing
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
To the extent that T-Mobile raises a bad faith objection to
OTI’s motion, that assertion also fails.
T-Mobile claims that, in
what it deems an improper “quid pro quo,” OTI refused to consent to
T-Mobile’s request to amend its answer unless T-Mobile allowed OTI
to amend its complaint.
(Def. Memo. at 5-6).
This is now moot, as
OTI has agreed to allow T-Mobile to amend its answer. (Pl. Reply at
Moreover, while there is little law in the Second Circuit on
what constitutes bad faith in the context of a motion for leave to
amend a pleading, see Oneida Indian Nation, 199 F.R.D. at 80, the
precedent that exists indicates that the amendment itself must
embody unfair strategic maneuvering, see, e.g., State Trading Corp.
of India v. Assuranceforeningen Skuld, 921 F.2d 409, 417–18 (2d
strategic advantage by reserving certain claims until after court’s
choice of law determination).
For the foregoing reasons, On Track Innovations’ motion for
leave to file an amended complaint (Docket no. 95) is granted.
C. FRANCIS IV
STATES MAGISTRATE JUDGE
Dated: New York, New York
January 31, 2014
Copies mailed this date:
Clyde A. Schuman, Esq.
Guy Yonay, Esq.
Jessica W. Lin, Esq.
Pearl Cohen Zedek Latzer LLP
1500 Broadway, 12th Floor
New York, NY 10036
Eric J. Lobenfeld, Esq.
Ira J. Schaefer, Esq.
Robert R. L. Kohse, Esq.
Hogan Lovells US LLP
875 Third Ave.
New York, NY 10022
John C. Hueston, Esq.
Douglas J. Dixon, Esq.
Irell & Manella, LLP
840 Newport Center Drive, Suite 400
Newport Beach, CA 92660
Ellisen S. Turner, Esq.
Benjamin M. Haber, Esq.
Irell & Manella, LLP
18900 Avenue of the Stars
Los Angeles, CA 90067
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