Federal Judiciary

Motion to Amend Complaint & Infringement Contentions Granted; Motion to Dismiss/Transfer Denied

By Michael Smith

Mass Engineered Design, Inc. v. Ergotron, Inc., 2008 WL 1930299(E.D.Tex. Apr 30, 2008) (NO. 206 CV 272)
Judge: Leonard Davis
Holding: Motion for Leave to File Cross-Claim for Patent Infringement & Amend Infringement Contentions GRANTED; Motion to Dismiss Third Party Complaint GRANTED IN PART
Interesting procedural situation here.  Following the Markman hearing Defendant CDW sought leave to bring in a dozen or so third party defendants (TPDs).  But despite the court's order that it be notified when these parties had answered (one filed a motion to dismiss the third party claim) so it could conduct a status conference, CDW did not do so.  Some time later, the plaintiff filed a motion for leave to assert a "crossclaim" against two of the TPDs.  (Judge Davis noted that this wasn't truly a crossclaim, and treated it simply as a motion for leave to amend its complaint).
The first issue was whether the plaintiff had to show "good cause" for the amendment, i.e. had the deadline to amend  run so the standard changed from easy, pleasy lemon squeezy (as my eight year would accurately term the standard of FRCP 15) to the more stringent "good cause" standard of FRCP 16.  Judge Davis held that because he'd granted leave to add the TPDs, and there wasn't yet a deadline for amending with respect to them, the easy standard applied.  But wait, the TPDs cried, the amendment would cause us prejudice because the court has already conducted the Markman, the case has been ongoing for over a year, deadlines are about to run, and we might actually have to pay money if we lose (okay, maybe not the last part).  Judge Davis held that any prejudice would be slight, since there was still plenty of time - trial was still six months away.  But there's more:

Finally, given the parties' gamesmanship in this matter, the Court is even more reluctant to find that Bretford and CSAV are more than slightly prejudiced by this ruling. CDW stated that before filing its third-party complaint, it had been negotiating with Bretford and CSAV for indemnification in the present suit. Bretford and CSAV certainly knew they would be brought in as third-parties and were on notice that MASS, under Rule 14, could potentially assert infringement claims directly against them at that time. Instead of seeking to join the present suit voluntarily before the Markman, Bretford and CSAV waited for CDW to file its third-party complaint, and then Bretford and CSAV filed two separate declaratory actions-which involve the same patent and products already in issue in this suit-against MASS in two separate forums.

MASS is equally as culpable as it knew Bretford and CSAV manufactured some of the accused products; thus, it also could have brought suit against those parties much earlier. However, granting MASS leave to amend its complaint serves the interest of justice and preserves judicial economy by providing one forum to resolve these related issues expeditiously. Dishong v. Peabody, 219 F.R.D. 382, 385 (E.D.Va.2003) (?The purpose of Rule 14 is to permit additional parties whose rights may be affected by the decision in the original action to be joined and brought in so as to expedite the final determination of the rights and liabilities of all the interested parties in one suit.?).

Thus Judge Davis granted the motion for leave to amend.
Next up was plaintiff's motion for leave to amend its infringement contentions under P.R. 3-6 to add new accused products.  One  defendant didn't object to the amendment, but one, Tech Data, did.  Judge Davis reviewed the factors, and the plasintiff's complaints that Tech Data had stonewalled it, and found all weighed in favor of allowing the amendments, noting that "[i]f Tech Data had properly answered the propounded interrogatory or granted earlier access to its website, then MASS would have known about the newly proposed products prior to the leave to amend deadline, and this entire motion practice might have been avoided." 
Finally, Tech Data (the bad boy of the previous paragraph) moved to dismiss the claim, or in the alternative, for a more definite statement, and moved to transfer, or in the alternative, to bifurcate the third-party claim.  (What, no stay?)  TD's motion to transfer relied essentially only on a forum selection clause in a distributor agreement, offering no substantive analysis of the various transfer factors.  Judge Davis, although noting that a forum selection clause is a significant factor in the 1404 analysis, noted the impending trial setting, the court's familiarity with the case (including the completed Markman proceedings) and the significantly increased delay and inconvenience a transfer of a portion of the dispute would cause.  He concluded that the factors outweighed the forum selection clause, and denied the motion to dismiss or transfer.

Full post as published by Eastern District of Texas Federal Court Practice on May 07, 2008 (boomark / email).