Mirror Worlds, LLC v. Apple, Inc.

Filing 56

MOTION for Leave to File First Amended Answer, Affirmative Defenses, and Counterclaims by Apple, Inc.. (Attachments: #1 Text of Proposed Order)(Mehta, Sonal)

Mirror Worlds, LLC v. Apple, Inc.

Doc. 56

IN THE UNTED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION

MIRROR WORLS, LLC,
Plaintiff,
v.
APPLE

§ §

INC.,
Defendant.

§ § § § § § § §

Civil Action No. 6:08-CV-88 LED

JURY TRIL DEMANED

APPLE INC.'S MOTION FOR LEAVE TO FILE ITS FIRST AMENDED ANSWER, AFFIRM TIVE DEFENSES AND COUNTERCLAIMS

Defendant Apple Inc. respectfully moves for leave to file its First Amended
Answer, Affirmative Defenses And Counterclaims, submitted herewith. Because good cause

exists for this request, Apple's motion should be granted.
I. Introduction

This motion presents a simple issue: should Apple be permtted to file a new
counterclaim three weeks after the deadline for amendment of pleadings without leave where
that counterclaim is integrally tied to the claims and defenses already in the case and where no
prejudice results from that modest delay?

Apple's counterclaim is for infringement of U.S. Patent No. 6,613,101 by Mirror

Worlds and its predecessor Mirror Worlds Technologies through their acts relating to the
Scopeware product. Neither the '101 patent nor Scopeware are new to this case. The '101
patent is one of Apple's key prior art references and is expected to feature prominently in

Apple's invalidity defense. Likewise, the Scopeware product appears to be at the hear of

Mirror

Worlds' wilfulness and marking allegations as a product that allegedly embodies Mirror

Dockets.Justia.com

Worlds' patents. In other words, with or without Apple's counterclaim, the Court - and perhaps
a jury - wil have to adjudicate the implications of the paries' contentions as to both the '101

patent and the Scopeware product. All that Apple's counterclaim does is provide the
decisionmaker(s) in this case with context for one of the fundamental questions underlying the
paries'

dispute: who invented the technology at issuefirst? As such, Apple's counterclaim is an

important piece to the puzzle of this case. This fact alone weighs strongly in favor of granting

Apple leave to fie its counterclaim.
This is paricularly true because Apple's counterclaim comes without any

prejudice to Mirror Worlds. Apple filed its counterclaim only three weeks after the agreed-upon

deadline for amending pleadings without leave of Court, and stil more than a year before the
Court's Markman hearing and eighteen months before the close of fact discovery. Any claim of

prejudice resulting from the modest delay in filing Apple's counterclaim so early in the case is
not credible.

In these circumstances, Apple has shown good cause for

its request to amend its

pleadings to add a counterclaim for infringement of the '101 patent. Yet, were good cause under

the traditional analysis somehow not found, Apple's counterclaim should nonetheless be
accepted because allowing Apple to file its counterclaim in this case instead of as a separate
claim promotes judicial economy. Apple would have the right to file a new lawsuit alleging

infringement of the '101 patent and to seek consolidation of the two cases under Rule 42(a).
Were Apple to take that path, the common factual and legal questions underlying the two cases
and the early stage of this case would support consolidation. As such, denial of Apple's motion

for leave - as urged by Mirror Worlds - would not only elevate form over substance, but would
do so at the cost of judicial economy.

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II. Factual Background

This case is in its very early stages. Initial document productions are just staring.
The Markman hearng is not until Januar 28,2010. The close of fact discovery is not until June

2010. And trial is not scheduled until September 13, 2010. In short, the litigation between
Mirror Worlds and Apple is just beginning.

In the course of investigating its invalidity defenses, Apple uncovered evidence
that Apple had in fact first invented - and patented - the very concepts that Mirror Worlds claims

to have invented. This investigation led to U.S. Patent No. 6,613,101, an Apple patent on an
Apple invention nicknamed "Piles." Apple determned that its Piles work invalidates the Mirror

Worlds' patents-in-suit, and on November 3, 2008, identified the '101 patent as invalidating

prior ar in its Patent Local Rule 3-3 and 3-4 Preliminar Invalidity Contentions.
Apple also investigated whether Mirror Worlds Technologies' Scopeware product

infringed Apple's '101 patent. As of the November 3, 2008 date for amendment of pleadings
without leave, Apple was evaluating its patent infringement counterclaim. See Declaration of

Nicholas A. Brown in Support of Apple Inc.' s Motion For Leave To File Its First Amended
Answer, Affirmative Defenses And Counterclaims ("Brown Decl.") at en 2. Apple concluded its

investigation and decision-making process related to that claim over the following weeks, and

once its evaluation was complete, promptly filed an amended pleading that included a
counterclaim for infringement of the '101 patent and added Mirror Worlds Technologies as a
counterclaim defendant. Ąd. at en 3. Apple's filing was dated November 25,2008, approximately

three weeks after the deadline for filing without leave.1 D.1. # 48 (Apple's November 25,2008

Concurrently herewith, Apple is fiing its Motion to Withdraw Apple's November 25, 2008 First Amended Answer, Affirmative Defenses And Counterclaims. In lieu of that pleading (D.!. #48), Apple is submitting herewith a revised First Amended Answer, Affirmative Defenses
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First Amended Answer, Affirmative Defenses And Counterclaims).

Although Apple of course could have filed a new lawsuit against Mirror Worlds
alleging infringement of the' 101 patent, Apple chose instead to assert its infringement claim as a
counterclaim to the pending litigation in which the '101 patent was already at issue. Apple

hoped to obtain Mirror Worlds' consent to add the claim despite the three weeks that had passed

since the deadline. Over the first two weeks of December, Apple met and conferred with Mirror

Worlds about Apple's request for leave to file its new counterclaim. Brown Decl. at en 4. After
multiple calls between the paries, Mirror Worlds advised that it would need until December 16,

2008 to decide whether or not it would consent to the extension Apple was requesting. Brown

Decl. at en 4, Exh. A (12/11/08 Brown email). On December 16, Mirror Worlds stated that it
would oppose a motion for leave to fie an amended answer. Brown Decl., Exh. B (12/16/08
Stein letter). This motion followed.
III. Good Cause Exists For Apple's Request

A trial court has broad discretion in allowing scheduling order modifications. Alt

v. Medtronic, Inc., 2006 U.S. Dist. LEXIS 4435, *4-*6 (E.D. Tex. Feb. 1, 2006) (Davis, J.)

(citations omitted). The Court considers four factors when determning whether to allow a
scheduling order modification: (1) the explanation for the failure to meet the deadline; (2) the
importance of the thing that would be excluded; (3) potential prejudice in allowing the thing that

would be excluded; and (4) the availability of a continuance to cure such prejudice. Id. Here,
each of

these factors overwhelmingly supports Apple's motion.

And Counterclaims, which it intends to be the operative pleading should leave be granted.
Although the pleading being submitted herewith has been updated, the patent infringement counterclaim against Mirror Worlds is identical to that fied on November 25,2008.
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A. Apple's Explanation For Its Modest Delay Supports A Finding Of Good

Cause
Apple has provided a reasonable and legitimate explanation for its failure to meet

the November 3, 2008 deadline and the modest delay in filing its new counterclaim. Apple was
evaluating its patent infringement counterclaim as of the November 3, 2008 deadline for

amendment of pleadings without leave. Brown Decl. at en 2. Once Apple concluded its
evaluation, it promptly filed its amended pleading. Id. at en 3. That Apple's evaluation went

three weeks beyond the deadline for amendment without leave cannot be faulted. See, e.g.,
Eisai, Ltd. v. Teva Pharmaceuticals USA, Inc., 247 F.R.D. 445, 449 (D.N.J. Dec. 6, 2007).
B. Apple's Infringement Counterclaim Is Important To Adjudication Of This

Case And Directly Coupled With The Claims And Defenses Already At Issue
With or without Apple's counterclaim, the Court - and perhaps a

jury - wil have

to adjudicate the implications of the paries' contentions as to both the '101 patent and the

Scopeware product. Apple's Piles work and '101 patent are key prior ar references in Apple's

affirmative defense. Mirror Worlds itself has injected the Scopeware product into this case as

related to its wilfulness and marking allegations for the Mirror Worlds' patents-in-suit. See,
e.g., D.I. #1 (Complaint) at enen 14, 15, 19,23,27.

The fact that Apple has an earlier patent on the technology that Mirror Worlds

claims to have invented - a patent infringed by the very product Mirror Worlds appears to allege
embodies its patents-in-suit - is important to this case. See, e.g., Alt v. Medtronic, Inc., 2006

us. Dist. LEXIS 4435, *12-*13 (E.D. Tex. Feb. 1, 2006) (Davis, J.). Indeed, the relationship
between Apple's Piles work and the '101 patent, on the one hand, and Mirror Worlds'
Scopeware product and the Mirror Worlds patents-in-suit, on the other, goes to the very hear of
this case. Who invented the technology at issue first? Thus, Apple's patent infringement

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counterclaim is not only important to Apple,2 but to a full and fair adjudication of this litigation.
C. Mirror Worlds Wil Not Suffer Any Prejudice From The Modest Delay In

Filng Of Apple's Counterclaim, Nor Would Any Continuance Be Necessary
Mirror Worlds has been unable to ariculate any real prejudice as a result of the
three weeks that elapsed between the deadline for amendment of pleadings without leave and
Apple's amendment. Mirror Worlds has implied that the addition of a new pary and new patent
at this stage wil throw the case schedule into turmoil, and has complained that Apple's

counterclaim is too late because the paries have already exchanged infringement and invalidity

contentions. Brown Decl., Exh. B (12/16/08 Stein letter). But this case is at such an early stage

and the delay in fiing Apple's counterclaim is so modest that these claims are not credible.
Discovery is just staring and the Markman hearng is more than a year away.

It is true that if Apple's claim is added the invalidity contentions for Apple's
patent wil be on a slightly different schedule than for Mirror Worlds' patents. This is not

unusual or prejudiciaL. There is no reason to believe that the case schedule wil have to be
adjusted to accommodate the addition of Apple's counterclaims a mere three weeks after the

3 To the contrary, other than the identification of new dates for
agreed-upon deadline.

Mirror Worlds' suggestion that Apple's patent infringement counterclaim is unimportant because the damages for Mirror Worlds' and Mirror Worlds Technologies' infringement would be, according to Mirror Worlds, "de minimis" is inaccurate. See Brown Decl., Exh. B (12/16/08 Stein letter). Where Apple's patent rights are violated, Apple has an interest in enforcing those rights even if the accused infringer's sales are small relative to Apple's.
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2

Other than service of initial disclosures and of a handful of third-pary subpoenas, there was no meaningful activity in the case between November 3 and November 25, 2008. Having agreed to the November 3rd date for amendment without leave, Mirror Worlds has no basis to object to the November 25th date. Moreover, any additional delay since November 25th has largely been the result of Mirror Worlds' request for additional time to consider whether or not it
would consent to Apple's motion for leave. See Brown Decl., Exh. A (12/11/08 Brown email). Indeed, Mirror Worlds has been in no hurry to resolve this issue or to move forward with the

case. To date, Mirror Worlds and its counsel have requested a number of extensions - for its
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infringement and invalidity contentions on Apple's patents, the current case schedule provides
ample time - eighteen months - for the paries to conclude discovery on both the Mirror Worlds

patents-in-suit and Apple's patent. This is paricularly true because the facts underlying Apple's
counterclaim are already at issue in the case and wil already be subject to discovery and

development regardless.

For the same reason, Mirror Worlds' suggestion that Apple's counterclaim wil

add further complexity to the case falls flat. The paries wil have to conduct discovery on
Apple's Piles work, the '101 patent and the Scopeware product, and the Court wil have to
understand and adjudicate their implications, whether or not Apple's counterclaim is in the case.4

All that Mirror Worlds is really saying is that it does not want to defend against
Apple's claim in this case. This is not prejudice. See, e.g., Garmin Ltd., vs. TomTom, Inc., 2007
U.S. Dist. Lexis 74032, *21 (B.D. Tex. Oct. 3, 2007) (Davis, J.).
iv. Apple's Patent Infringement Claim Against Mirror Worlds Would Be

Consolidated With This Action If It Had Been Filed Separately
Apple could have filed a separate suit against Mirror Worlds for infringement of
the '101 patent and then simply moved for consolidation of

the two cases pursuant to Rule 42(a).

See Fed. R. Civ. P. 42(a); Local Rule CV-42(b). There is little question that a motion for
consolidation should be granted under these circumstances. Not only do Mirror Worlds' claims
and Apple's counterclaim present common issues of fact and law between the same paries, but

infringement contentions, for its initial disclosures, and for discovery responses - to which Apple has consented every time.
4

Addition of Mirror Worlds Technologies as a pary also does not cause any prejudice. Until this year, Mirror Worlds Technologies was the assignee of the patents-in-suit; it simply assigned the patents to Mirror Worlds LLC, a Texas-based shell company, for purposes of litigation. Indeed, Mirror Worlds LLC identified several former Mirror Worlds Technologies' officers and directors, all represented by counsel of record in this case, as knowledgeable about "Mirror Worlds Technologies, Inc.'s business" and the patents-in-suit in its initial disclosures.
Brown Decl., Exh. C (Mirror Worlds' Initial Disclosures).
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they both go to the same central dispute between the paries. Consolidation would promote

judicial economy and prevent unnecessary repetition and inconsistent judgments, all without
undue delay in either of the cases. Accordingly, denial of Apple's motion for leave merely

because Apple choose to fie its claim as a counterclaim and not a separate suit would elevate
form over substance at the cost of judicial economy.

V. Conclusion

For the foregoing reasons, Apple respectfully requests leave to fie its First
Amended Answer, Affirmative Defenses And Counterclaims.
Respectfully submitted,
lsI Sonal N. Mehta Matthew D. Powers Lead Attorney Steven S. Cherensky
Sonal N. Mehta (Pro Hac Vice) Stefani C. Smith (Pro Hac Vice)

Dated: December 23,2008

WElL, GOTSHAL & MANGES LLP 201 Redwood Shores Parkway Redwood Shores, CA 94065 650-802-3000 (phone) 650-802-3100 (fax)
matthew. powers (g weil.com steven.cherensky (g weil.com sonal.mehta (g weil.com smith (gweil.com stefani.

Eric M. Albritton Texas State Bar No. 00790215

ALBRITTON LAW FIM
P.O. Box 2649 Longview, Texas 75606 [phone] (phone) [phone] (fax)
ema (gemafirm.com

Attorneys for Defendant Apple Inc.

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CERTIFICATE OF CONFERENCE
I certify that counsel for Apple have satisfied the "meet and confer" requirements
of

Local Rule CV-7(h).

The personal conference requirement of Local Rule CV-7(h) has been met. On

December 5, 2008 Richard An of Jenner & Block LLP, counsel of record for Mirror Worlds,
LLC, and Nicholas Brown of Weil, Gotshal & Manges, LLP, counsel of record for Apple Inc.
met and conferred telephonically. In that conference, the paries discussed their viewpoints, and
the conference ended with Mr. An resolved to discuss the matter with the Mirror Worlds counsel

team. On December 11, 2008 Kenneth Stein of Jenner & Block LLP and Nicholas Brown met
and conferred telephonically. The paries discussed their viewpoints and the conference ended

with a statement by Mr. Stein that Mirror Worlds would make its final decision by December 16,

2008. On December 16, 2008, Mr. Stein sent a letter informng Apple of its intent to oppose this

Motion. The discussions have conclusively ended in an impasse leaving the issue open for the
Court of whether Apple should be granted leave to amend its answer, affirmative defenses, and
counterclaims.

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document was filed
electronically in compliance with Local Rule CV -5 on this 23rd day of December, 2008. As of

this date, all counsel of record have consented to electronic service and are being served with a
copy of

this document through the Court's CM/CF system under Local Rule CV-5(a)(3)(A).
lsI Sonal N. Mehta

Sonal N. Mehta

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