Tech Pharmacy Services, LLC v. Alixa Rx LLC et al

Filing 285

MEMORANDUM OPINION AND ORDER re 244 SEALED MOTION Defendants' Motion for Leave to Supplement their Invalidity Contentions with Additional Information Concerning the Original Disclosed Envoy Prior Art filed by Golden Gate National Sen ior Care, Fillmore Strategic Investors, LLC, Fillmore Strategic Management, LLC, Fillmore Capital Partners, LLC, Alixa Rx LLC. Defendants Motion for Leave to Supplement Their Invalidity Contentions with Additional Information Concerning the Originally Disclosed Envoy Prior Art (Dkt. #244) is DENIED. Signed by Judge Amos L. Mazzant, III on 8/2/17. (cm, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

TECH PHARMACY SERVICES, LLC
v.
ALIXA RX LLC, GOLDEN GATE
NATIONAL SENIOR CARE LLC d/b/a
GOLDEN LIVINGCENTERS, FILLMORE
CAPITAL PARTNERS, LLC, FILLMORE
STRATEGIC INVESTORS, LLC, and
FILLMORE STRATEGIC
MANAGEMENT, LLC

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Civil action No. 4:15-CV-766
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Motion for Leave to Supplement Their
Invalidity Contentions with Additional Information Concerning the Originally Disclosed Envoy
Prior Art (Dkt. #244). After reviewing the relevant pleadings, the Court denies Defendants’
motion.
BACKGROUND
On October 14, 2016, Defendants moved for leave to supplement their P.R. 3-3 invalidity
contentions with two prior art references as well as evidence surrounding the design operation of
a prior art automated dispensing cart (hereinafter “Envoy”) and related software (Dkt. #109).
Defendants contended their supplement would include additional details regarding the Envoy
machine, which was disclosed in their initial invalidity contentions served on May 27, 2016. On
January 19, 2017, the magistrate judge, on referral, issued an order denying Defendants’ motion
for leave (Dkt. #146). The magistrate judge stated:
Defendants characterize much of their proposal as mere supplementation of detail
that would not functionally impact their case or require Plaintiff to make
alterations to its case. The Court encourages the parties to discuss the Proposed
Amended Invalidity Contentions in this light. The Court, while denying leave

regarding the Proposed Amended Invalidity Contentions, could, nonetheless,
consider an agreed proposal from the parties to add additional detail to invalidity
contentions.
(Dkt. #146 at p. 13).

On February 2, 2017, Defendants filed a motion to reconsider the

magistrate’s order (Dkt. #158). The Court denied Defendants’ motion to reconsider because
“Defendants neither establish[ed] the magistrate judge committed any manifest errors of law in
its prior decision nor demonstrate[ed] good cause to amend. Instead, Defendants request the
Court to reconsider its decision without directly challenging the Court’s analysis.” (Dkt. #236 at
p. 5). The Court acknowledged “if Defendants’ still believe a limited set of amendments adding
detail would not functionally impact the case or require Plaintiff to alter its cause, then they
should, by motion, present those proposed amendments to the Court and put forth good cause for
leave to amend” (Dkt. #236 at pp. 5–6).
On April 20, 2017, Defendants filed the present motion for leave to supplement their
invalidity contentions (Dkt. #244). On May 4, 2017, Tech Pharmacy filed a response (Dkt.
#254).

On May 11, 2017, Defendants filed reply (Dkt. #259).

On May 18, 2017, Tech

Pharmacy filed a sur-reply (Dkt. #260).
LEGAL STANDARD
Under the Local Rules for the Eastern District of Texas, Appendix B Patent Rules, leave
to amend invalidity contentions “may be made only by order of the court, which shall be entered
only upon a showing of good cause.” P.R. 3-6(b). “Good cause,” according to the Federal
Circuit, “requires a showing of diligence.” O2 Micro Int’l Ltd. v. Monolithic Power Sys., Inc.,
467 F.3d 1355, 1366 (Fed. Cir. 2006). “The burden is on the movant to establish diligence rather
than on the opposing party to establish a lack of diligence.” Id.

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The Court weighs multiple factors in determining whether good cause exists, including,
but not limited to:
1. The length of the delay and its potential impact on judicial proceedings;
2. The reason for the delay, including whether it was within the reasonable
control of the movant;
3. Whether the offending party was diligent in seeking an extension of time, or
in supplementing discovery, after an alleged need to disclose the new matter
became apparent;
4. The importance of the particular matter, and if vital to the case, whether a
lesser sanction would adequately address the other factors to be considered
and also deter future violations of the Court’s scheduling orders, local rules,
and the federal rules of civil procedure; and
5. The danger of unfair prejudice to the non-movant.
Allure Energy, Inc. v. Nest Labs, Inc., 84 F. Supp. 3d 538, 540–41 (E.D. Tex. 2015) (quoting
Comput. Acceleration Corp. v. Microsoft Corp., 481 F. Supp. 2d 620, 625 (E.D. Tex. 2007)).
ANALYSIS
Defendants seek leave to supplement their invalidity contentions to add additional
information concerning the Envoy system. Defendants state the Envoy system was known to
Tech Pharmacy and timely disclosed in their initial invalidity contentions served on May 27,
2016.
Tech Pharmacy challenges Defendants’ request for leave to amend, arguing Defendants
again seek to amend their invalidity contentions to include the same Envoy amendments that the
magistrate judge rejected.

Tech Pharmacy further argue that Defendants repeatedly

mischaracterize their request as adding supporting details when in fact they seek to chart the
previously-uncharted Envoy system after the close of discovery.
Defendants assert they have set forth good cause for leave under the factors the Court
considers to determine good cause. While non-exclusive, the Court will examine each of the
factors listed in Computer Acceleration and Allure.

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Length of the Delay and Its Potential Impact on Judicial Proceedings
Defendants’ current motion for leave is almost eleven months after the deadline to serve
invalidity contentions, six months after the Court’s Markman hearing and claim construction
order, and four months before trial. The length of this delay weighs against a finding of good
cause to amend. Even though Defendants’ earlier filed October 14, 2016 motion for leave
involved the same Envoy supplement that is before the Court, that motion also involved two
prior art references that are no longer under consideration. Thus, the Court measures the length
of delay by the motion before it rather than by an earlier filed motion. With trial a month away,
Defendants’ addition of invalidity charts for the Envoy system would require depositions and
other discovery that would risk delaying the trial date.
Accordingly, this factor weighs against granting leave to amend.
Reason for the Delay
Defendants assert Tech Pharmacy contributed to the delay by not complying with the
Court’s local rules. Defendants contend that had Tech Pharmacy complied with P.R. 3-2 and
disclosed the Envoy materials with its infringement contentions, then there may have been no
delay at all. Defendants further contend that Tech Pharmacy failed to produce such documents
until November 30, 2016. Due to Tech Pharmacy’s delay, Defendants indicate they served their
original invalidity contentions in May 2016 with limited knowledge of the Envoy system.
Local Patent Rule 3-2 requires a party claiming patent infringement to serve its
infringement contentions along with all documents related to the conception, reduction to
practice, design, and development of the claimed invention to the opposing party. P.R. 3-2(b).
Tech Pharmacy does not contest that it did not produce all documents in compliance with P.R. 32 until November 30, 2016, which was after the deadline to serve infringement contentions and

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after the deadline to serve invalidity contentions. Tech Pharmacy’s late production alone is not
sufficient reason for the delay. Defendants have not identified any specific document from Tech
Pharmacy’s November 2016 document production that prevented them from moving to amend
their invalidity contentions earlier. In fact, Defendants’ proposed amendment may not be based
upon that November production at all. Defendants state they pursued third-party discovery for
the Envoy system and received relevant documents on and after August 26, 2016. On October
14, 2016, Defendants moved for leave to supplement their P.R. 3-3 invalidity contentions with
evidence related to the Envoy machine. Defendants already sought leave to supplement before
Tech Pharmacy’s November disclosure.

Considering this, the Court is unconvinced that

Defendants’ reason for the delay is based upon Tech Pharmacy’s November 2016 document
production.

Even if the Court gives credit to Defendants’ asserted reason for the delay,

Defendants compounded their eleven-month delay by refusing to notify the Court of Tech
Pharmacy’s failure to comply with the local rules or seeking a motion for leave after the
November document production.
Accordingly, this factor weighs against granting leave to amend.
Diligence
The Court finds that Defendants did not exercise diligence in filing their motion seeking
leave to supplement. Defendants state they diligently supplemented their invalidity contentions
within six weeks after becoming aware of additional information concerning the Envoy system.
However, the six weeks that Defendants refer relates to their motion to leave filed in October
2016. In that October 2016 motion for leave, Defendants sought a different amendment than
what they currently seek from the Court today. Here, Defendants admit they first discovered the
additional Envoy-related information on or about August 26, 2016, when they received third-

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party discovery related to the Envoy system (Dkt. #244 at pp. 11–12). After obtaining this new
material, Defendants waited seven months before filing the present motion for leave. The Court
understands that part of this seven-month delay was due to the magistrate judge’s consideration
of the October 2016 motion for leave and the Court’s reconsideration of the magistrate judge’s
order. Nevertheless, the Court must assess the present motion as filed rather than mix-and-match
considerations from an earlier motion.
Accordingly, this factor weighs against granting leave to amend.
Importance of the Matter
Defendants claim the Envoy prior art is their most critical prior art. Defendants argue the
Envoy machine and its associated software practiced all of the elements of Tech Pharmacy’s
asserted claims.
Tech Pharmacy contests Defendants’ claim that the Envoy system is their most critical
art. Tech Pharmacy indicates that if this claim was true, then Defendants would have properly
asserted this prior art in their original invalidity contentions. In addition, Tech Pharmacy asserts
it is difficult to see what makes the Envoy system Defendants’ most critical prior art, especially
since the Patent Office granted patent protection after considering the Envoy prior art.
Based on the parties’ arguments, the Court is uncertain of the importance of the Envoy
prior art to the case. On one hand, Defendants represent that their amendment is a mere
supplement of detail concerning Envoy prior art. On the other hand, Defendants state the Envoy
prior art is the most critical prior art in the case. If the amendment is just mere supplement of
detail, then the prior art is not important and would not functionally affect the case. Because
Defendants have not convinced the Court of the importance of the Envoy prior art, the Court
cannot establish that it is important to this matter.

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Accordingly, this factor weighs against granting leave to amend.
Danger of Unfair Prejudice to Tech Pharmacy
Defendants quote the magistrate judge’s January 19, 2017 Order that stated, “To the
extent the Proposed Invalidity Contentions merely provide additional supporting details of the
Envoy machine’s operation, details which appear to be known to Plaintiff, the Court finds that
Plaintiff would not be unfairly prejudiced.” (Dkt. #244 at p.13 (citing Dkt. #146 at p. 11)).
Defendants assert that nothing has changed with respect to the lack of unfair prejudice to Tech
Pharmacy.
Tech Pharmacy responds by stating the addition of new prior art after the close of
discovery would be highly prejudicial. Tech Pharmacy contends that the Envoy system was not
properly disclosed in Defendants’ initial invalidity contentions, and if it had, then Tech
Pharmacy would have gathered extensive fact and expert testimony regarding the inoperability of
the Envoy system.
After reviewing Defendants’ amendment, the Court finds that it is more than a mere
supplement concerning the Envoy prior art. Defendants’ amendment seeks to include for the
first time charts identifying where in the Envoy system each element of the asserted claims is
allegedly found. The amendment also contains various combinations of the Envoy system with
other pieces of prior art. Defendants argue that the Envoy system is not actually new because it
was originally disclosed in their invalidity contentions.

However, nothing about the way

Defendants disclosed the Envoy system in their original invalidity contentions supports what
Defendants seek in their amendment. Defendants’ original invalidity contentions identified the
Envoy system, previously known as the PyxisEnvoy, as follows:
Defendants rely upon the PyxisEnvoy machine, which, on information and
belief, included each and every limitation claimed regarding the operation of the
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claimed ‘electronic dispensing carts’ and ‘storage and dispensing apparatus’ and
‘electronic dispensing machine’ and ‘medication dispensing apparatus’ included
in the asserted claims. . . . Each and every function of the PyxisEnvoy, which
functions are presently unknown to Defendants, is included herein by reference
for each and every applicable claim element of the asserted claims.
(Dkt. #244, Exhibit A at pp. 5–6). Besides this conclusory description, Defendants did not
explain how the Envoy system includes each and every element of the asserted claims. As such,
Defendants cannot rely on this description to provide adequate notice to Tech Pharmacy of how
Defendants planned to use the Envoy system to establish invalidity. Local Patent Rule 3-3
requires a party’s invalidity contentions to include “a chart identifying where specifically in each
alleged item of prior art each element of each asserted claim is found.” P.R. 3-3. The Court
understands that Defendants may have lacked certain documents to aid in describing the Envoy
system sufficiently, but Defendants made the strategic decision not to chart the Envoy system at
all. Now, under the guise of an amendment, Defendants want to chart for the first time a
reference that was known when they served their original invalidity contentions.
When the magistrate judge indicated that Tech Pharmacy would not be unfairly
prejudiced by Defendants’ amendment, the magistrate judge contemplated the amendment would
clarify or offer additional details for information already known to Tech Pharmacy. If this were
the case, then Tech Pharmacy would not be unfairly prejudiced because Defendants’ amendment
would not come as a surprise or require additional costs, discovery, and delays associated with
the amendment. Here, Defendants’ amendment is not the type of clarification or additional
details contemplated by the magistrate judge.
Substantial late changes, like those proposed in Defendants’ amendment, would be
significantly prejudicial to Tech Pharmacy. Tech Pharmacy has justifiably relied on Defendants’
invalidity theories as a framework for proceeding through discovery and preparing for trial. By

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the time Defendants filed the present motion to amend, the Court had already issued its claim
construction order and the parties were briefing motions for summary judgment. To allow such
an amendment at this stage in the litigation would run counter to the purpose of invalidity
contention requirements under the Court’s local rules. Local Patent Rules “exist to further the
goal of full, timely discovery and provide all parties with adequate notice and information with
which to litigate their cases, not to create supposed loopholes through which parties may practice
litigation by ambush.” Comput. Acceleration Corp., 503 F. Supp. 2d at 822.
Accordingly, this factor weighs against granting leave to amend.
CONCLUSION

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It is therefore ORDERED that Defendants’ Motion for Leave to Supplement Their
Invalidity Contentions with Additional Information Concerning the Originally Disclosed Envoy
Prior Art (Dkt. #244) is DENIED.

SIGNED this 2nd day of August, 2017.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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