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Eagle View Technologies, Inc. v. Xactware Solutions, Inc.

United States District Court, D. New Jersey, Camden Vicinage

May 31, 2018

EAGLE VIEW TECHNOLOGIES, INC., et al., Plaintiffs,
v.
XACTWARE SOLUTIONS, INC. et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          JOEL SCHNEIDER, UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on defendants' “Motion for Leave to Amend Defendants' Second Amended Answer, Affirmative Defenses, Counterclaims, and Jury Demand.” [Doc. No. 374]. Defendants seek to amend their answer to add: (1) a Fourteenth Affirmative Defense that plaintiffs' ‘152, ‘840, ‘770, ‘454, ‘376 and ‘737 patents are invalid for “mis-joinder of inventors”; (2) a Fifteenth Affirmative Defense that the patents are “unenforceable due to inequitable conduct”; (3) a Sixteenth Affirmative Defense that all necessary parties have not been joined; (4) Count XVI to their counterclaim seeking a declaratory judgment that the patents are invalid for incorrect inventorship; and (5) Count XVII to their counterclaim seeking a declaratory judgment of unenforceability (inequitable conduct) as to the patents.[1] The Court received plaintiffs' opposition [Doc. No. 401], defendants' reply [Doc. No. 407], and held oral argument. For the reasons to be discussed, defendants' Motion to Amend is denied.[2]

         Background

         This is a bitter patent dispute between business competitors that was filed on September 23, 2015. The patents at issue are generally directed to software technology for imaging, modeling and rendering aerial rooftop measurements and reports. Plaintiffs are the owners of the patents at issue. Defendant Xactware Solutions is a subsidiary of defendant Verisk Analytics, and provides online tools and systems for determining replacement-cost calculations for damaged buildings and construction estimates. The amended complaint alleges defendants infringe seven patents: ‘436, ‘840, ‘152, ‘770, ‘454, ‘376 and ‘737. The ‘436 patent was filed on October 16, 2008 and names Christopher Pershing and David P. Carlson as co-inventors. The other six patents at issue name Pershing as the sole inventor.

         Defendants' proposed amendments essentially raise two new defenses. One, defendants claim Carlson was improperly omitted as an inventor on the six patents at issue thus rendering the patents invalid.[3] Two, defendants engaged in inequitable conduct by providing incorrect inventorship information to the Patent Office with an intent to deceive the Patent Office.

         The procedural history of the case is instructive. After the December 9, 2015 Fed.R.Civ.P. 16 scheduling conference, the Court's first Scheduling Order mirrored the deadlines in the Local Patent Rules. The first deadline to amend pleadings, including amendments to add claims as to inequitable conduct, was set for September 6, 2016. See December 10, 2015 Order, Doc. No. 38. At the parties' request the amendment deadline was later extended to February 28, 2017, May 12, 2017, May 15, 2017 and eventually to May 16, 2017. See Doc. Nos. 148, 163, 224, 226 and 228. Defendants filed the present motion to amend on February 9, 2018, approximately nine (9) months after the last deadline to move to amend pleadings, and seventeen (17) months after the first deadline to amend pleadings was set. The Markman Opinion and Order were filed on December 5, 2017. [Doc. No. 332].

         Recognizing that their motion is late, defendants attempt to explain away their delay by arguing they filed their motion “as soon as it had sufficient evidence to support all of its allegations.” Defendants' Memorandum in Support of Motion at 2 (“Defts.' Memo.”), Doc. No. 375. Carlson and Pershing founded Eagle View. Carlson was deposed on September 28, 2017 and Pershing was deposed on November 7 and 8, 2017. After Pershing was deposed, defendants served plaintiffs with supplemental interrogatories asking plaintiffs to describe the contributions of Carlson. Plaintiffs answered the interrogatories on December 21, 2017 and supplemented the response on January 21, 2018.[4]

         As to their new inventorship defense, defendants aver that Pershing and Carlson testified at deposition that Carlson contributed to conception of the roof estimate reports recited in the claims of the ‘436 patent. See Proposed Amended Counterclaim (“PAC”) ¶122, Doc. No. 376-1. However, although Pershing and Carlson are listed as co-inventors on the ‘436 patent, defendants emphasize only Pershing is listed as the inventor on the six patents at issue even though plaintiffs' patents contain nearly identical roof estimate report limitations. Defendants argue Carlson should, therefore, be listed as a co-inventor on the six patents.

         The background of defendants' new inequitable conduct defense is more involved. In February 2016 plaintiffs produced portions of Thornberry deposition transcripts from a patent suit Eagle View filed against Aerialogics in 2012. Dale and Chris Thornberry worked for Thornberry Consulting, a company that developed a program that competed with Eagle View. Defendants contend that in November 2009, after Carlson left Eagle View in early 2009, he explored employment with Eagle View's competitor, Aerialogics. The Thornberrys' deposition testimony confirmed this fact. Defendants argue because Carlson did not assign his rights in the ‘904 Provisional to Eagle View, and because he could transfer this interest to any competitor, this gave Eagle View, Pershing and Eagle View's attorneys an incentive not to identify Carlson as a co-inventor on the six patents at issue.

         Although portions of the Thornberrys' transcripts were produced as early as February 2016, defendants did not follow up and request a full copy of the transcripts until November 21, 2017 (Defts.' Memo. at 18-19), which was produced on December 20, 2017. Id. at 20. The exhibits to the deposition were produced on January 25, 2018. Id. Defendants argue the transcripts “revealed an entirely new and important fact, ” i.e., that Eagle View knew about Carlson's conversation with the Thornberrys shortly after the conversation occurred. Id. According to defendants, this shows plaintiffs were “concerned about Mr. Carlson's career path after Eagle View” and, therefore, plaintiffs “had reason to prefer Mr. Carlson not be included as an inventor on the remaining patents.” Id. at 21. In addition, defendants surmise that plaintiffs did not name Carlson as a co-inventor on the six patents because he had knowledge of prior art plaintiffs did not want to disclose.

         In opposition to defendants' motion, plaintiffs argue the motion was filed late and will prejudice them if granted. In addition, plaintiffs argue defendants' inventorship and inequitable conduct claims are futile. Plaintiffs also argue defendants' proposed amendment does not sufficiently plead facts to support their inequitable conduct claim. In particular, plaintiffs argue defendants have not pleaded sufficient facts to show plaintiffs intended to deceive the Patent Office.

         Discussion

         1. Leave to Amend

         Pursuant to Fed.R.Civ.P. 15(a)(2), courts “should freely give leave [to amend pleadings] when justice so requires.” A court should allow a party to amend its pleading so long as there is no undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies, undue prejudice or futility of the amendment. See Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). Despite this liberal standard for permitting amendments, a motion to amend is committed to the “sound discretion of the district court.” Cureton v. Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 272 (3d Cir. 2001).

         While “mere passage of time does not require that a motion to amend a complaint be denied on grounds of delay ... at some point, the delay will become ‘undue, ' placing an unwarranted burden on the court, or will become ‘prejudicial, ' placing an unfair burden on the opposing party.” Id. at 283 (quoting Adams v. Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984)). Delay is “undue” if plaintiff had previous opportunities to amend. In re Caterpillar Inc., 67 F.Supp.3d 663, 668 (D.N.J. 2014) (citing Estate of Oliva ex rel. McHugh v. New Jersey, 604 F.3d 788, 803 (3d Cir. 2010)). Therefore, the issue of undue delay requires courts to “focus on the movant's reasons for not amending sooner.” CMR D.N. Corp. v. City of Philadelphia, 703 F.3d 612, 629 (3d Cir. 2013) (explaining that the Third Circuit has “refused to overturn denials of motions for leave to amend where the moving party offered no cogent reason for the delay in seeking the amendment”).

         In assessing futility, the District Court applies the same standard of legal sufficiency as applies under Rule 12(b)(6). Travelers Indemnity Co. v. Dammann & Co., Inc., 594 F.3d 238, 243 (3d Cir. 2010) (citation omitted). Accordingly, the Court must accept as true all well-pleaded factual allegations and must determine whether the facts as alleged raise a facially plausible claim on the grounds asserted. Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77, 84 (3d Cir. 2011). A complaint need not provide detailed factual allegations but must provide facts sufficient to show a plausible cause of action. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         2. Good Cause, Excusable Neglect and Undue Delay

         In addition to the requirements under Rule 15(a), Rule 16(b) regarding scheduling orders must also be satisfied. There is no dispute defendants' motion to amend filed on February 9, 2018 was filed after the May 17, 2017 deadline to amend pleadings. Nonetheless, although late, the late filing is not necessarily fatal to defendants. Pursuant to Rule 16(b)(4), a Scheduling Order may be modified for good cause. Pursuant to Rule 6(b)(1)(B), the court may extend a deadline for good cause “after the time has expired if the party failed to act because of excusable neglect.” Since defendants' motion was filed after May 17, 2017, defendants must meet the good cause and excusable neglect standards to be granted.

         Good cause requires that a party demonstrate that an existing schedule cannot be met despite the diligence of the party seeking the extension. See Rule 16, Advisory Committee Note on Subdivision (b). The determination of good cause depends upon the diligence of the moving party. Spring ...


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