ATI INDUSTRIAL AUTOMATION, INC. v. APPLIED ROBOTICS, INC.

Filing 153

MEMORANDUM OPINION AND ORDER signed by MAG/JUDGE L. PATRICK AULD on 4/14/2014; that Plaintiffs' Motion to Amend its Amended Complaint (Docket Entry 118 ) is GRANTED. FURTHER that, on or before April 21, 2014, Plaintiff shall file its proposed Amended Complaint (Docket Entry 118 -1) as a Second Amended Complaint. (Sheets, Jamie)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

ATI INDUSTRIAL
AUTOMATION, INC.,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
APPLIED ROBOTICS, INC.
Defendant.

1:09CV471

MEMORANDUM OPINION AND ORDER
This case comes before the Court on Plaintiff’s Motion to
Amend its Amended Complaint.

(Docket Entry 118.)

For the reasons

that follow, the Court will grant the instant Motion.1
BACKGROUND
Plaintiff’s

Amended

Complaint alleges

that

Defendant has

infringed three of its utility patents for robotic tool changers.
(Docket Entry 20 at 4-5.)

On September 12, 2013, the deadline for

amendments to the pleadings (see Text Order dated May 1, 2013,

1

For reasons stated in Deberry v. Davis, No. 1:08CV582, 2010
WL 1610430, at *7 n.8 (M.D.N.C. Apr. 19, 2010) (unpublished), the
undersigned Magistrate Judge will enter an order, rather than a
recommendation. See also Everett v. Prison Health Servs., 412 F.
App’x 604, 605 & n.2 (4th Cir. 2011) (“[The plaintiff] moved for
leave to amend her complaint . . . to add . . . a defendant
. . . and to add a state-law claim of medical malpractice against
[that new defendant]. After a hearing, the magistrate judge denied
[that] motion. [The plaintiff] timely objected, thereby preserving
the issue for review by the district court. . . . [T]he district
court could not modify or set aside any portion of the magistrate
judge’s order unless the magistrate judge’s decision was ‘clearly
erroneous or contrary to law.’ Fed. R. Civ. P. 72(a); 28 U.S.C.A.
§ 636(b)(1)(A) (2006 & Supp. 2010).”).

adopting in relevant part Docket Entry 92), Defendant moved to
amend its Answer to include a new counterclaim, alleging that
Plaintiff had infringed its design patent (Docket Entry 101).
Plaintiff opposed the amendment, asserting its futility.
Entry 105.)

(Docket

The Court (per Senior United States District Judge N.

Carlton Tilley, Jr.) permitted that amendment on December 4, 2013.
(Docket Entry 111.)
to

Counterclaims

including

its

On December 30, 2013, Plaintiff filed a Reply

which

second

asserted

defense,

several

which

affirmative

asserts

that

defenses,

Defendant’s

alleged design patent is invalid as functional, and its third
defense, which contends that said patent is invalid for failure to
meet various statutory requirements.
Plaintiff’s

instant

Motion

(Docket Entry 113 at 7.)

seeks

to

amend

its

Amended

Complaint “to bring a claim of design patent invalidity and to
further articulate its claim of patent infringement by inducement.”
(Docket Entry 119 at 2.)

Plaintiff sought Defendant’s consent

prior to filing its instant Motion, which Defendant refused. (Id.)
Defendant responded in opposition (Docket Entry 126) and Plaintiff
replied (Docket Entry 141).
DISCUSSION
Given Defendant’s refusal of consent, Plaintiff “may amend its
pleading only with . . . the [C]ourt’s leave.
freely give leave when justice so requires.”
15(a)(2).

The [C]ourt should
Fed. R. Civ. P.

Under this standard, the Court has discretion, “but

2

outright refusal to grant the leave without any justifying reason
appearing for the denial is not an exercise of discretion.”
v. Davis, 371 U.S. 178, 182 (1962).

Foman

The Fourth Circuit has further

explained “that leave to amend a pleading should be denied only
when the amendment would be prejudicial to the opposing party,
there has been bad faith on the part of the moving party, or the
amendment would be futile.” Edwards v. City of Goldsboro, 178 F.3d
231, 242 (4th Cir. 1999).
In addition, because Plaintiff seeks to amend its Complaint
after the Scheduling Order’s deadline for such action, it also must
show “good cause” under Federal Rule of Civil Procedure 16(b)(4).
See Nourisan Rug Corp. v. Parvizan, 535 F.3d 295, 298–99 (4th Cir.
2008).

“[T]he touchstone of ‘good cause’ under [Federal] Rule [of

Civil Procedure] 16(b) is diligence.” Marcum v. Zimmer, 163 F.R.D.
250, 255 (S.D. W. Va. 1995).

Accordingly, “[i]n considering an

untimely amendment to the pleadings, the [C]ourt looks to whether
the ‘evidence supporting the proposed amendment would not have been
discovered in the exercise of reasonable diligence until after the
amendment deadline had passed.’”

Stonecrest Partners, LLC v. Bank

of Hampton Roads, 770 F. Supp. 2d 778, 784 (E.D.N.C. 2011) (quoting
United States v. Godwin, 247 F.R.D. 503, 506 (E.D.N.C. 2007)).
“Appropriately, the burden to ‘justify a departure from the rules
set forth in the [C]ourt’s scheduling order’ is on the moving
party.”

Id. (internal brackets omitted) (quoting Godwin, 247

3

F.R.D. at 506).
Plaintiff’s instant Motion first seeks to add a claim of
design patent invalidity.
Entry

118-1

at

8-9

(Docket Entry 119 at 4; see also Docket

(Plaintiff’s

proposed

Second

Amended

Complaint).)

In that regard, Plaintiff contends that it “acted

diligently

.

.

.

.

[because

it]

had

no

way

to

anticipate

Defendant’s design patent infringement claim . . . . filed at the
close of business on the last day for amending the pleadings under
the scheduling order.” (Docket Entry 119 at 3.) Plaintiff further
notes that it “has been manufacturing and selling the [allegedly
infringing] products at issue for five years, [but] Defendant never
raised a single complaint about those products until Defendant
filed [its] [M]otion to [A]mend.”

(Id.)

However, Defendant

counters that “Plaintiff’s claim of design patent invalidity is a
compulsory counterclaim to [Defendant’s] claim of design patent
infringement . . . . [and thus] should have been asserted in
Plaintiff’s [Reply] to Counterclaims.”

(Docket Entry 126 at 10.)

“Although . . . a counterclaim to a counterclaim is not
expressly recognized by the Federal Rules [of Civil Procedure],
there are several courts which have considered the issue and most
‘have concluded that a counterclaim may be asserted in a reply to
a counterclaim.’”

Baker v. Borg Warner Morse Tec, Inc., Civ. A.

No. 3:110505, 2012 WL 195011, at *1 (S.D. W. Va. Jan. 23, 2012)
(unpublished) (quoting Soil Works, LLC v. Midwest Indus. Supply,

4

Inc., No. CV-06-2141-PHX-DGC, 2007 WL 1521585, at *1 (D. Ariz. May
22, 2007) (unpublished)).

Nonetheless, as Plaintiff has asserted,

some district courts have concluded that Federal Rule of Civil
Procedure 7(a) does not permit asserting a counterclaim in a reply
to a counterclaim (see Docket Entry 141 at 2 (citing Gonzalez v.
Central Elec. Co-op, Inc., Civ. No. 08-6280-HO, 2009 WL 3415235, at
*5 (D. Or. Oct. 15, 2009) (unpublished), and Turner & Boisseau,
Chartered v. Nationwide Mut. Ins. Co., 175 F.R.D. 686, 687 (D. Kan.
1997))) and other district courts have indicated that “‘for reasons
of clarity and practicality, it would be better to treat the
counterclaim in reply as an amendment to the complaint,’” Baker,
2012 WL 195011, at *2 (quoting Southeastern Indus. Tire Co. v.
Duraprene Corp., 70 F.R.D. 585, 588 (E.D. Pa. 1976)); see also
Century Pac., Inc. v. Hilton Hotels Corp., 528 F. Supp. 2d 206, 213
n.3 (S.D.N.Y. 2007) (“[A] reply counterclaim is to be treated as a
motion to amend the complaint under Rule 15(a).”).
In the instant case, Defendant concedes that Plaintiff would
have shown the required diligence had it included a design patent
invalidity claim in its Reply to Counterclaims (see Docket Entry
126 at 6, 10-11), filed two weeks before the instant Motion
(compare Docket Entry 113, with Docket Entry 118).

Given the

above-discussed disagreement amongst various district courts as to
the propriety of asserting a counterclaim in a reply, the Court
finds that Plaintiff’s decision to refrain from asserting the

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counterclaim in its Reply and instead to move to amend its Amended
Complaint does not reflect a lack of diligence.

The Court thus

concludes that Plaintiff has shown good cause under Federal Rule of
Civil Procedure 16(b)(4) to present a claim of design patent
invalidity after the deadline for pleading amendments.
Plaintiff’s instant Motion also “seeks to add more detailed
allegations in support of its claim of patent infringement by
inducement.”

(Docket Entry 119 at 3; see also Docket Entry 118-1

at 6-8.) Although Plaintiff’s Complaint “included allegations that
Defendant induced infringement . . . . Plaintiff [now] seeks to add
additional information regarding that inducement that Plaintiff
first learned in late November 2013.”

(Docket Entry 119 at 4.)

In

opposition, Defendant contends that Plaintiff reasonably should
have discovered the relevant information when Defendant provided a
spreadsheet,

which

detailed

the

foreign

sales

underlying

alleged infringement by inducement, on July 31, 2013.
Entry 126 at 8-10.)

the

(See Docket

In its Reply, Plaintiff states that, although

it did receive Defendant’s spreadsheet on that date, Defendant
misled Plaintiff as to its contents and did not provide Plaintiff
with sufficient information to interpret the spreadsheet.

(Docket

Entry 141 at 3-4.)
Specifically, upon producing the spreadsheet, Defendant’s
accompanying letter informed Plaintiff that
the disclosure of the sales total from this enclosed
document will not provide your client with any reliable
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potential value of this litigation. We would be willing
to discuss, with our client, the disclosure of sales
totals to your client after the identification of actual
disputed products in this case (e.g. after August 26,
2013, or before if you provide us a list now). In the
meantime, we maintain our objection to the disclosure of
this information as premature.
(Docket Entry 127-2 at 2.)

Plaintiff further contends that it

subsequently “served interrogatories on Defendant asking Defendant
to explain and identify its product numbers so that Plaintiff could
try to understand the spreadsheets” and otherwise worked with
Defendant to obtain the relevant information. (Docket Entry 141 at
4-5.) However, Defendant apparently did not provide Plaintiff with
the information necessary to properly interpret the spreadsheet and
to identify the relevant foreign sales until November 21, 2013,
following the deadline for amendments.
at

2.)2

Plaintiff’s

Under

these

ongoing

(See id.; Docket Entry 119

circumstances,

efforts

to

obtain

the
such

Court

finds

that

information

from

Defendant reflect diligence sufficient to support a finding of good

2

Defendant also argues that Plaintiff already had knowledge
of Defendant’s alleged infringement by inducement because
Plaintiff’s Amended Complaint (filed in 2009) “included allegations
of [Defendant’s] foreign sales of the accused products and
allegations of patent infringement by inducement.” (Docket Entry
126 at 8.) This argument lacks persuasive force. If the factual
allegations Plaintiff now seeks to add already appeared in
Plaintiff’s Amended Complaint in 2009, Plaintiff would not seek
leave to add them now.
A comparison of Plaintiff’s Amended
Complaint and Plaintiff’s proposed Second Amended Complaint reveals
that the former contains generalized statements as to foreign sales
and inducement and the latter includes much greater detail,
including allegations that Defendant acted knowingly.
(Compare
Docket Entry 20 at ¶¶ 29, 31, with Docket Entry 118-1 at ¶¶ 39, 41,
49, 51, 52.)
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cause under Federal Rule of Civil Procedure 16(b)(4) to further
amend the Amended Complaint.

See Ground Zero Museum Workshop v.

Wilson, 813 F. Supp. 2d 678, 708 (D. Md. 2011) (granting motion to
amend where “delay [in moving to amend] was in part due to
[opposing party’s] own delay in responding to discovery requests”).
As to the interests-of-justice analysis under Federal Rule of
Civil

Procedure

15(a)(2),

Defendant

does

not

contend

that

Plaintiff’s proposed amendments would cause prejudice. (See Docket
Entry 126 at 11-12.)

Given that 90 days of fact discovery remain

following the claim construction hearing (see Text Order dated May
1, 2013) and the Court has set no date for such hearing (see Docket
Entries

dated

prejudice.

May

1,

2013,

to

present),

the

Court

finds

no

Finally, Defendant has not asserted that Plaintiff

acted in bad faith in connection with the proposed amendments or
that they fail as futile.

Accordingly, the Court concludes that

Plaintiff’s proposed amendments also satisfy Federal Rule of Civil
Procedure 15(a)(2).
CONCLUSION
Plaintiff has made the requisite showing to amend its Amended
Complaint.
IT IS THEREFORE ORDERED that Plaintiffs’ Motion to Amend its
Amended Complaint (Docket Entry 118) is GRANTED.

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IT IS FURTHER ORDERED that, on or before April 21, 2014,
Plaintiff shall file its proposed Amended Complaint (Docket Entry
118-1) as a Second Amended Complaint.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
April 14, 2014

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