Precision Energy Services, Inc. v. ThruBit, LLC
Filing
124
MEMORANDUM AND ORDER denying 111 Plaintiff's Motion to Dismiss or for Final Judgment Under Rule 54(b); denying 113 Defendant's Motion for Leave to File Second Amended Answer and Counterclaim.(Signed by Judge Nancy F. Atlas) Parties notified.(TDR)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
PRECISION ENERGY SERVICES,
INC.,
Plaintiff,
v.
THRUBIT, LLC,
Defendant.
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CIVIL ACTION NO. H-11-4492
MEMORANDUM AND ORDER
This patent case is before the Court on the Motion for Leave to File Second
Amended Answer and Counterclaims (“Motion to Amend”) [Doc. # 113] filed by
Defendant Thrubit, LLC (“Thrubit”), to which Plaintiff Precision Energy Services,
Inc. (“Precision”) filed a Response [Doc. # 121]. Also pending is Plaintiff’s Motion
to Dismiss Thrubit’s Counterclaims or, In the Alternative, to Enter Final Judgment on
Precision’s Infringement Claim Under Rule 54(b) (“Motion to Dismiss”) [Doc. # 111],
to which Defendant filed an Opposition [Doc. # 118], and Plaintiff filed a Reply [Doc.
# 119]. In its Motion to Dismiss, Plaintiff seeks to pursue an immediate appeal from
the Court’s Memorandum and Order on Claim Construction [Doc. # 109] issued
March 19, 2013. The Court has reviewed the full record and the cited legal
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authorities. Based on this review, the Court denies Defendant’s Motion to Amend and
denies Plaintiff’s Motion to Dismiss.
I.
BACKGROUND
Plaintiff Precision Energy Services, Inc. (“Precision”) is the owner of the ’061
Patent, entitled “System and Method for Releasing and Retrieving Memory Tool with
Wireline in Well Pipe.” The patent covers a system for deploying memory tools used
to conduct measurements and record data in sub-surface earth formations through the
borehole of a well drilled in the earth. The patented system facilitates the deployment
of memory tools in wells that are deviated or horizontal.
Precision sued Defendant ThruBit, LLC (“ThruBit”) alleging infringement of
various claims in the ’061 Patent. ThruBit filed a Counterclaim, seeking a declaratory
judgment of non-infringement, invalidity, and unenforceability. Following a hearing
pursuant to Markman v. Westview Instruments, Inc., 517 U.S. 370, 390 (1996), the
Court issued its claim construction ruling. Plaintiff then filed its Motion to Dismiss
and Defendant filed its Motion to Amend. Both motions have been fully briefed and
are ripe for decision.
II.
MOTION TO AMEND
The deadline for amendments to pleadings was August 24, 2012. See Docket
Control Order [Doc. # 15]. Where, as here, a scheduling order has been entered
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establishing a deadline for amendments to pleadings, Federal Rule of Civil Procedure
16(b) provides the standard for requests to amend after a scheduling order’s deadline
has expired. See E.E.O.C. v. Serv. Temps Inc., 679 F.3d 323, 333-34 (5th Cir. 2012);
Marathon Financial Ins., Inc. v Ford Motor Co., 591 F.3d 458, 470 (5th Cir. 2009);
Fahim v. Marriott Hotel Servs., Inc., 551 F.3d 344, 348 (5th Cir. 2008). “Rule 16(b)
provides that once a scheduling order has been entered, it ‘may be modified only for
good cause and with the judge’s consent.’” Marathon, 591 F.3d at 470 (quoting FED.
R. CIV. P. 16(b)). Rule 16(b) requires a party “to show that the deadlines cannot
reasonably be met despite the diligence of the party needing the extension.” Id.
(quoting S&W Enters., LLC v. Southtrust Bank of Ala., NA, 315 F.3d 533, 535 (5th
Cir. 2003)). To determine whether the moving party has established good cause, the
Court considers the following four factors: “(1) the explanation for the failure to
timely move for leave to amend; (2) the importance of the amendment; (3) potential
prejudice in allowing the amendment; and (4) the availability of a continuance to cure
such prejudice.” Id. (quoting Sw. Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 546
(5th Cir. 2003)); see also Serv. Temp, 679 F.3d at 334.
“In the context of a motion for leave to amend, the court may deny the motion
if the movant ‘knows or should have known of the facts upon which the proposed
amendment is based but fails to include them’” in the original pleading. Udoewa v.
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Plus4 Credit Union, 2010 WL 1169963, *2 (S.D. Tex. Mar. 23, 2010) (quoting
Pallottino v. City of Rio Rancho, 31 F.3d 1023, 1027 (10th Cir. 1994), and citing Pope
v. MCI Telecomms. Corp., 937 F.2d 258, 263 (5th Cir. 1991) (denying, under Rule
15(a)’s more lenient standard, a late-filed motion to amend to include claims based on
same facts); Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1419 (11th Cir. 1998) (denying
leave to amend under Rule 16(b) when facts were known at time of first pleading);
Parker v. Columbia Pictures Indus., 204 F.3d 326, 340-41 (2d Cir. 2000) (denying
leave to amend under Rule 16(b) where movant “had all the information necessary”
to support the amendment at the time he filed the original pleading)).
In this case, which has been pending since December 20, 2011, Defendant
previously filed counterclaims for declaratory judgments of non-infringement, patent
invalidity, and unenforceability. See First Amended Answer and Counterclaims [Doc.
# 22]. Defendant now seeks to amend to add an additional counterclaim for
declaratory judgment that Douwe Johannes “John” Runia was an inventor of the ’061
Patent and for an order directing the United States Patent and Trademark Office to
issue a certificate correcting the inventorship issue. Defendant seeks also to add a new
counterclaim for a declaration that this is an exceptional case and for an award of costs
and attorneys’ fees under 35 U.S.C. § 285. Defendant concedes that the factual basis
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for these counterclaims was known at the time the Original and the First Amended
Counterclaims were filed. As a result, leave to amend should be denied on that basis.
Additionally, Defendant has failed to demonstrate good cause under Rule 16(b).
As to the first factor, Defendant offers no explanation for its failure to include the
proposed counterclaims in the Original or in the First Amended Counterclaims.
Instead, Defendant states that it has now decided that it prefers to seek different
remedies. Regarding the second factor, Defendant has failed to show that the
proposed amendment is important. Indeed, in its Motion to Amend, Defendant
maintains that the Court can grant all requested relief based on the current pleading,
the First Amended Answer and Counterclaim. See Motion to Amend, p. 1. For
instance, Defendant in the current pleading asserts that the case is exceptional under
§ 285. Defendant fails to explain, however, why it is important to convert that
assertion into a separate counterclaim. On the “prejudice” and “cure” factors, Plaintiff
argues that allowing the proposed amendment may prejudice its Motion to Dismiss,
and that the prejudice that cannot be cured by a continuance.
Defendant had knowledge of the factual and legal basis for its proposed
amended counterclaims at the time the Original and First Amended Counterclaims
were filed. Additionally, Defendant has failed to demonstrate good cause for the late
amendment. As a result, Defendant’s Motion to Amend is denied.
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III.
MOTION TO DISMISS
In its Motion to Dismiss, Plaintiff first proposes having Defendant’s
counterclaims dismissed without prejudice and then agreeing to entry of a final
judgment of non-infringement. Alternatively, Plaintiff seeks entry of final judgment
of non-infringement under Rule 54(b) of the Federal Rules of Civil Procedure, with
Defendant’s counterclaims being stayed pending Plaintiff’s appeal of the Court’s
claim construction ruling.1 Defendant opposes both of these two alternatives.
A.
Dismissal Without Prejudice of Defendant’s Counterclaims
Upon entry of a judgment of non-infringement, the Court has discretion to
dismiss without prejudice, as moot, counterclaims asserting patent invalidity and
unenforceability. See Liquid Dynamics Corp. v. Vaughan Co., 355 F.3d 1361, 137071 (Fed. Cir. 2004). In its First Amended Counterclaim, Defendant asserts a
counterclaim seeking a declaration that the ’061 Patent is invalid. Where, as here,
invalidity is asserted as a counterclaim, “the question of validity does not become
moot when there has been a determination of noninfringement.” Solomon Techs., Inc.
v. Int'l Trade Comm., 524 F.3d 1310, 1319 (Fed. Cir. 2008); see also Aerotel, Ltd. v.
1
Plaintiff suggested also the entry of a stipulated judgment of non-infringement with
Defendant voluntarily dismissing without prejudice its counterclaims. See Motion to
Dismiss [Doc. # 111], p. 1. Defendant does not agree to a voluntary dismissal of its
counterclaims.
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Telco Group, Inc., 433 F. App’x 903, 916-17 (Fed. Cir. July 26, 2011). As a result,
Defendant’s invalidity counterclaim is not mooted by any judgment of noninfringement, and involuntary dismissal is inappropriate.
B.
Rule 54(b) Final Judgment
Rule 54(b) allows a Court to “direct entry of a final judgment as to one or more,
but fewer than all, claims or parties only if the court expressly determines that there
is no just reason for delay.” iLOR, LLC v. Google, Inc., 550 F.3d 1067, 1072 (Fed.
Cir. 2008) (quoting FED. R. CIV. P. 54(b)). A Rule 54(b) final judgment “reflects a
balancing of two policies: avoiding the danger of hardship or injustice through delay
which would be alleviated by immediate appeal and avoid[ing] piecemeal appeals.”
Eldredge v. Martin Marietta Corp., 207 F.3d 737, 740 (5th Cir. 2000) (internal
quotations and citations omitted). “A court should consider such factors as: “(1) the
relationship between the adjudicated and the unadjudicated claims; (2) the possibility
that the need for review might or might not be mooted by future developments in the
district court; (3) the possibility that the reviewing court might be obliged to consider
the same issue a second time; (4) the presence or absence of a claim or counterclaim
which could result in set-off against the judgment sought to be made final; [and] (5)
miscellaneous factors such as delay, economic and solvency considerations,
shortening the time of trial, frivolity of competing claims, expense, and the like.”
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Abecassis v. Wyatt, 2010 WL 2671576, *2 (S.D. Tex. June 30, 2010) (Rosenthal, J.)
(quoting Akers v. Alvey, 338 F.3d 491, 495 (6th Cir. 2003)). Rule 54(b) motions are
disfavored and should be granted only “when there exists some danger of hardship or
injustice through delay which would be alleviated by immediate appeal.” PYCA
Indus., Inc. v. Harrison Cnty. Waste Mgmt., 81 F.3d 1412, 1421 (5th Cir. 1996).
Regarding the first factor of this test, the relationship between Plaintiff’s
infringement claim and Defendant’s invalidity and unenforceability counterclaims is
slight. Defendant’s invalidity and unenforceability counterclaims, for example, are
based in part on the argument that John Runia, an inventor of the device covered by
the ’061 Patent, was not listed as an inventor in the patent application. This aspect of
these counterclaims would not necessarily rely only on the Court’s claim construction.
Second, there always exists the possibility that the need for appellate review
may be mooted by a future settlement of this lawsuit or by other future events
occurring before entry of final judgment. Third, absent settlement, there exists a
strong possibility that the Federal Circuit could be required to consider the case on
appeal more than once if, for example, the claim construction ruling is affirmed
following entry of a Rule 54(b) judgment and the party dissatisfied by subsequent
rulings pursued a later, second appeal. The judgment Plaintiff seeks to have made
final is a judgment of non-infringement and, as a result, there is no issue of set-off.
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Miscellaneous factors also weigh against a Rule 54(b) judgment. Plaintiff seeks
entry of a Rule 54(b) final judgment of non-infringement only if the Court also stays
consideration of Defendant’s counterclaims pending appeal. Plaintiff argues that the
parties should not be burdened with the expense involved in litigating Defendant’s
counterclaims because the Federal Circuit may disagree with the Court’s claim
construction ruling. Although entry of a Rule 54(b) final judgment on the noninfringement issue may result in savings to Plaintiff, Defendant will be significantly
prejudiced by the delay in resolving its counterclaims while a potentially unsuccessful
appeal is pursued. It is unfair to preclude Defendant for a significant period of time
from conducting discovery to obtain and preserve evidence in support of its
counterclaims.
Additionally, Plaintiff acknowledged that, to its knowledge, the Federal Circuit
has never permitted an interlocutory appeal under 28 U.S.C. § 1292(b).2 This
2
Title 28, United States Code, § 1292(b) provides:
When a district judge, in making in a civil action an order not otherwise
appealable under this section, shall be of the opinion that such order
involves a controlling question of law as to which there is substantial
ground for difference of opinion and that an immediate appeal from the
order may materially advance the ultimate termination of the litigation,
he shall so state in writing in such order. The Court of Appeals which
would have jurisdiction of an appeal of such action may thereupon, in
its discretion, permit an appeal to be taken from such order, if
application is made to it within ten days after the entry of the order:
(continued...)
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indicates the Federal Circuit opposes multiple appeals in the same case and, instead,
prefers to consider all appellate issues in one, single review.
The Court concludes that Plaintiff has not demonstrated that a disfavored Rule
54(b) final judgment should be entered in this case with consideration of Defendant’s
counterclaims stayed pending an appeal of the Court’s claim construction ruling. As
a result, Plaintiff’s Motion for this relief is denied.
IV.
CONCLUSION AND ORDER
Defendant has not demonstrated good cause pursuant to Rule 16(b) of the
Federal Rules of Civil Procedure for leave to add new counterclaims based on
information available at the time the Original and First Amended Counterclaims were
filed. Plaintiff has not shown an adequate basis for this Court to dismiss Defendant’s
counterclaims or, alternatively, to enter a Rule 54(b) final judgment of noninfringement and stay Defendant’s counterclaims pending appeal. Consequently, it
is hereby
ORDERED that Defendant’s Motion to Amend [Doc. # 113] is DENIED. It
is further
2
(...continued)
Provided, however, That application for an appeal hereunder shall not
stay proceedings in the district court unless the district judge or the
Court of Appeals or a judge thereof shall so order.
28 U.S.C. § 1292(b) (italics in original).
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ORDERED that Plaintiff’s Motion to Dismiss or to Enter Final Judgment
Under Rule 54(b) [Doc. # 111] is DENIED.
All deadlines in the current Docket Control Order remain in effect.
SIGNED at Houston, Texas, this 13th day of May, 2013.
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