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Cochlear Ltd. v. Oticon Medical AB

United States District Court, D. New Jersey

July 29, 2019

COCHLEAR LTD., Plaintiff,
v.
OTICON MEDICAL AB, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          DOUGLAS E. ARPERT United States Magistrate Judge.

         This matter comes before the Court on a Motion by Plaintiff Cochlear Ltd. for leave to file an Amended Complaint pursuant to Fed.R.Civ.P. 15 and 16, as well as L. Civ. R. 3.7. ECF No. 57. Plaintiff also seeks leave to amend its Infringement Contentions, as well as to amend its responses to Defendant's Invalidity Contentions. Id. Defendant Oticon Medical AB opposes the Motion in its entirety. See ECF No. 69. Having reviewed the parties' written submissions and considered the Motion without oral argument pursuant to Fed.R.Civ.P. 78, for the reasons stated below, Plaintiff's Motion is GRANTED.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         Because the Court writes for the parties, it recites only those facts and the procedural history necessary to its disposition.[1] On April 13, 2018, Cochlear filed a Complaint alleging that Oticon's Ponto BHX Implant infringed on Cochlear's '807 patent for a “Bone Anchor Fixture for a Medical Prothesis.” ECF No. 1. More plainly, the Patent covers a bone-anchoring screw that has two, distinct screw. ECF No. 37-2, Ex. 5; ECF No. 3-4, ¶8. At the same time, Cochlear filed a Motion for a Preliminary Injunction, seeking to prevent Oticon from selling the Ponto BHX Implant. ECF No. 3. Oticon filed its Answer to the Complaint in July 2018. ECF No. 35. Following an August 23, 2018 Initial Conference, this Court issued a Discovery Plan and Order on September 12, 2018. ECF No. 50. Pursuant to that Order, the last day to file a Motion to Amend Pleadings was set for October 1, 2018. Id. at ¶5. Among other relevant dates included in that Order, October 9, 2018 was set as the deadline for service of Invalidity Contentions, with October 15, 2018 being the date for responses to Invalidity Contentions. Id. The Order was silent about any deadlines for amending Invalidity Contentions and Responses. The Order did state that while the Parties exchanged initial disclosures on July 31, 2018, they “have not yet commenced formal discovery.” Id. at ¶2. The Order did not set a date for the end of discovery. U.S. District Judge Brian R. Martinotti denied the Motion for Preliminary Injunction on October 26, 2018. ECF No. 54-55. Plaintiff filed the instant Motion to Amend on December 4, 2018. ECF No. 57. Pursuant to the briefing schedule agreed to by the Parties and Ordered by this Court, ECF No. 64, Oticon's opposition was filed on January 9, 2019, ECF No. 69, while Cochlear filed a Reply on January 23, 2019. ECF No. 74.

         II. DISCUSSION

         A. Amending the Complaint

         1. Cochlear's reasons for amending the Complaint.

         Cochlear seeks to amend the Complaint to add an allegation that Defendants willfully infringed the '807 patent and to seek increased damages. See proposed Amended Complaint at ECF No. 58-1, Exhibit A at ¶¶31, b. At the heart of the willful- infringement claim is Cochlear's assertion that Oticon hired the inventor of the '807 patent, Lars Jinton, and then had Mr. Jinton, among other things, “lead Oticon Medical's development of infringing features of the Ponto BHX implant.” Id. at ¶23. Because of Mr. Jinton's employment history with Cochlear and his being the one-time named holder of the patent, Cochlear contends, Oticon “knew or should have known, immediately upon becoming aware of the '807 patent, that the Ponto BHX implant infringed that patent.” Id. at ¶25. As a result, Cochlear contends, Oticon's “infringement of the '807 patent was willful.” Id. at ¶31. Because it now believes the infringement was willful, Cochlear seeks “increasing damages.” Id. at p.18, ¶b.

         Procedurally, Cochlear contends the Motion should be granted pursuant to the liberal standard of Fed. R. Civ. R. 15, which states that a “court should freely give leave [to amend a pleading] when justice so requires.” See Pl. Br. in Support of Mot. to Am. Complaint, ECF No. 59 at p.9 (quoting Rule 15). Cochlear says Rule 15 should govern the Motion because “[f]act discovery is not close to completion; it has barely started, and no deadline for finishing fact discovery has even been set. Expert discovery has not yet begun.” Id. at p.10. Cochlear cites High 5 Games LLC v Marks for the proposition that, as U.S. Magistrate Judge Mark Falk there stated, “it makes zero sense to hold Plaintiffs to an amendment deadline of December 2014 when discovery may now remain open well into 2016.” Id. at p.11 (quoting High 5 Games, 2017 WL 349375 at *3 (D.N.J. 2017).

         Still, Cochlear is cognizant that the Court set October 1, 2018 as the deadline for filing any motion to amend a pleading or add a party. See Pl. Br. in Support of Mot. to Am. Complaint, ECF No. 59 at p.3. Rule 16 applies “where a motion to amend is made after a scheduling order deadline has passed.” Id. at 9-10 (quoting Jani v. The Provident Bank, 2016 WL 830802, at *1 (D.N.J. 2016). Cochlear contends the Motion should be granted even under the stricter standard of Rule 16, which requires a showing of “good cause.” Id. at 10 (quoting Rule 16). Cochlear quotes the Jani Court to the effect that a “moving party may show good cause by establishing ‘that the scheduling order deadlines could not be reasonably met despite the party's diligence.'” Id. at 9-10 (quoting Jani, 2016 WL 830802, at *4. Cochlear contends the October 1, 2018 deadline for motions to amend could not be met because it did not receive the discovery from which it learned of Mr. Jinton's role from Oticon until October 4, 9 and 11, 2018. Id. at pp.4-5. Cochlear says that “[b]y October 23, 2018 Cochlear had diligently uncovered the evidence in this document production” that it now seeks leave to include in its pleadings. Id. at 12-13. Cochlear contends that upon learning of these facts it quickly raised the prospect of amending the Complaint with Oticon, which “declined to stipulate to any of the amendments.” Id. at p.8. Thus, Cochlear says, “strictly applying the October 1, 2018 date to amend the pleadings would be incongruous and unjust.” Id. at p.11.

         2. Oticon's objections to amending the Complaint.

         Oticon nowhere addresses Cochlear's contention that the Court should be guided by the Rule 15 standard in considering the Motion. Instead, Oticon focuses its opposition on Rule 16's required “good cause” showing, which it contends Cochlear can not meet. First, Oticon says, Mr. Jinton's employment at Oticon was well-known in the industry and was publicized on Oticon's website. See Def.'s Br. in Opp., ECF No. 69 at pp.2-3. Therefore, Cochlear was on notice of this information before it filed the Complaint and cannot claim to have first learned of Mr. Jinton's involvement in designing Oticon products until after the October 1, 2018 deadline had lapsed for motions to amend the pleadings. More substantively, Oticon contends Mr. Jinton did not work on the Ponto BHX, but rather on other products, including a predecessor product called Ponto Wide. Id. at p.2. Oticon contends Ponto Wide is not an infringing product and that Cochlear recognized this during the Preliminary Injunction stage of this litigation when Plaintiff argued that “Oticon Medical could avoid the hardship of an injunction by ‘simply return[ing] to selling the implant it offered prior to the BHX implant.'” Id. at 2 (quoting Pl.'s Mem. in Support of Prelim. Inj., ECF No. 3-1 at p.16.

         Oticon further contends that, even if Cochlear did not learn about the implications of Mr. Jinton's Oticon employment until after October 1, 2018, Cochlear cannot meet the “good cause” standard because it was not diligent in pursuing discovery. That is because, Oticon asserts, Cochlear waited until August 31, 2018 to serve its discovery requests while, pursuant to Fed.R.Civ.P. 26(d)(1), it could have served those discovery requests on July 17, 2018, the date of the Rule 26 conference between the parties. Id. at pp.8-9. A consequence of Cochlear's delay, Oticon contends, was a deadline for discovery production that fell after the scheduling order's deadline for filing motions to amend. Id. at p.9. Oticon further contends that Cochlear was not diligent in reviewing this discovery because Cochlear failed to “factor it into its October 15, 2018 contentions.” Id. at p.11.

         Finally, Oticon contends the Motion is an attempt by Cochlear to change direction after the Court “rejected the flawed theories in Cochlear's preliminary injunction application.” Id. at p.5. “[R]eturning this case to the starting gate” by granting leave to amend the Complaint, Oticon contends, would prejudice it by “forcing Oticon Medical to devote substantial resources to defend against what Cochlear now tacitly concedes was an ill-formed and poorly developed theory of its case.” Id. at p.5-6.

         3. Cochlear's Reply

         Cochlear replies that Oticon's contention that all the facts about the alleged willful infringement were known to Cochlear before Cochlear filed the Complaint is belied by the fact that Oticon's documents describing its product in detail and the role Mr. Jinton played in its development was produced in discovery designated as “Highly Confidential-Outside Attorneys' Eyes Only, ” pursuant to a discovery confidentiality agreement between the Parties. See Pl. Reply Br., ECF No. 74 at p.1.

         Cochlear further contends that Oticon's suggestion that Cochlear is abandoning its initial allegations and recasting its case is rebutted by the fact that the proposed Amended Complaint still includes “[e]very allegation made when the case was filed.” Id. All Cochlear seeks to accomplish via the Motion, it says, is the addition of “facts and claims based on newly discovered evidence.” Id. Cochlear notes that the preliminary injunction was “a hearing in which neither party [is] required to prove his case in full” and thus the denial of a preliminary injunction “does not foreclose Cochlear from taking discovery and proceeding with its case on all theories.” Id. at p.2 (quoting Illinois Tool Works, Inc. v. Grip-Pak, Inc., 906 F.2d 679, 681 (Fed. Cir. 1990); citing PPG Indus., Inc. v. Guardian Indus. Corp., 75 F.3d 1558, 1567 (Fed. Cir. 1996).

         More specifically, Cochlear contends that while the Oticon website identified Mr. Jinton as Oticon's Director of Engineering it is silent about Mr. Jinton's “direct and personal role designing the Ponto BHX implant, which is revealed for the first time in Oticon's confidential production documents.” Id. at p.6. Regardless, Cochlear contends, the factual basis of Oticon's opposition to the Motion is “not particularly proper for a motion to amend, essentially treating the motion like one for summary judgment.” Id. at p.3. Cochlear cites two cases, Sprint Comm'ns Co. v. Time Warner Cable, Inc., 2013 WL 6589564 (D.Kan. 2013) and Prism Techs., LLC v. Adobe Sys., Inc., 2012 WL2577213 (D.Neb. 2012), for the proposition that a Complaint can be amended to include willful-infringement claims where leave to amend was sought well after a deadline to amend pleadings had passed because the patent owner did not learn relevant facts until after that deadline had passed. Id. at p.8. Here, Cochlear contends, it did not learn about Mr. Jinton's role in working on the accused implant until after it received discovery from Oticon. Id. at p.8-9. Also, Cochlear says, “Oticon's protest that Mr. Jinton did not work on the accused Ponto BHX implant is factually incorrect.” Id. at p.8 (citing Def.'s Opp., ECF No. 69 at pp.2, 9). Cochlear contends the discovery produced by Oticon shows that Mr. Jinton worked on a Wide Diameter Implant that is the basis of the Ponto BHX implant. Id. at p.5. Thus, Cochlear says, Mr. Jinton was “personally and directly involved in designing the BHX implant, although it was not called that at the time.” Id. As a result, Cochlear contends, Cochlear has good cause to add an allegation of willful infringement and “Oticon's arguments to the contrary are not meritorious.” Id.

         B. Amending the Infringement Contentions

         1. Cochlear's reasons for amending the Infringement Contentions.

         Cochlear seeks leave to amend its Infringement Contentions in order to add allegations of willful infringement based on the claims detailed above related to Oticon's hiring of Mr. Jinton and Mr. Jinton's subsequent involvement with the Ponto BHX implant. See proposed Amended Infringement Contentions, ECF No. 58 at §H. Here too Cochlear contends it was “diligent” in seeking leave to amend because it brought the evidence it found in “recently uncovered nonpublic evidence” discovery to Oticon's attention “within weeks of receiving the production.” See Pl. Br in Support, ECF No. 59 at p.15. It further contends that Oticon will not suffer “undue prejudice, as parties have just barely started fact discovery, expert discovery has not yet begun and most case dates have yet to be calendared.” Id.

         Cochlear also seeks leave to amend its infringement claims regarding what it calls a microgroove on the bone-anchoring screw. Id. As with the willful-infringement claim, Cochlear says leave to amend should be granted because it “diligently served its production requests” and then “diligently uncovered the evidence in the resulting document production that Oticon's Ponto BHX implant has an infringing micro grove.” Id. Cochlear further contends that it “promptly alerted Oticon that Cochlear wanted to update its infringement contentions in view of” the above claims in late October 2018 and sent its proposed amended Infringement Contentions to Oticon. Id. at p.15-16.

         2. Oticon's objections to amending the Infringement Contentions.

         Oticon contends Cochlear's Motion here also is “untimely and unsupported by [the] ‘good cause'” required by Rule 16. See Def.'s Opp. Br., ECF No. 69 at p.11.

         The Motion is untimely, Oticon contends, because Cochlear had or should have had via reasonable prelitigation due diligence notice of what Cochlear describes as the Ponto BHX's infringing microgroove before Cochlear filed its Complaint. Id. at pp.1112. Oticon makes two arguments. First, Oticon says the Ponto BHX has been in the U.S. marketplace since mid-2015, so Cochlear should have been able to get either a version of or photographs of the Ponto BHX implant before filing the Complaint that would have “revealed the structure Cochlear now says is a ‘circumferential groove.'” Id. at p.12. Second, Oticon says Cochlear should have been able to learn from public materials, such as the Oticon website, that the previous Ponto Wide product on which the Ponto BHX implant is based included a “‘micro groove on the bone-facing surface of the implant's screw head.'” Id. The website, it says, even included a photograph that labeled the “micro groove” and discussed its purpose. Id. “The presence of the ‘micro groove' in the previous-generation non-infringing product, ” Oticon contends, “would have alerted a reasonable and diligent litigant to the possibility of a similar structure appearing on the ‘Ponto BHX.'” Id. at p.13.

         Oticon also contends the Motion is unsupported by good cause because the proposed amendments will harm Oticon. Id. Oticon says Cochlear is seeking merely to switch infringement theories after Oticon was forced to “devote substantial resources to defend against Cochlear's preliminary injunction motion, ” a forum in which the Court “rejected Cochlear's first and best theory of infringement.” Id. at pp.1, 6, 13. Granting this Motion, Oticon contends, “threatens yet another round of redundant costs on Oticon Medical, as [Cochlear] returns to the starting line” of this litigation. Id. at p.13.

         3. Cochlear's Reply

         Cochlear responds that its Motion is timely because Cochlear diligently served production requests within a week of the Initial Conference, and it then diligently uncovered the evidence of the infringing micro-groove after Oticon produced its discovery. See Pl. Reply Br., ECF No. 74 at p.10. Cochlear contends also that it was diligent in informing Oticon of its intent to amend the Complaint and Infringement Contentions based on the documents Oticon produced. Id.

         Cochlear rejects Oticon's contention that the Ponto BHX microgroove was readily knowable either from obtaining the product or from surveying publicly available materials to discern the engineering of that product. Id. at p.11. First, Cochlear says that, contrary to Oticon's contention, the Ponto BHX “implant is not easily obtainable by a competitor to Oticon.” Id. Cochlear further asserts that it “did not have access to a Ponto BHX implant until Oticon produced one in October 2018.” Id. Second, Cochlear said the publicly available materials “did not, however, clearly show the geometry of the micro groove in the Ponto BHX implant.” Id. What public documents showed, Cochlear contends, was “one groove in the Ponto BHX implant.” Id. But, it was not until receiving documents from Oticon-documents Oticon “designated Highly Confidential-Outside Attorneys' Eyes Only”-that, Cochlear says, it was able to observe that the “Ponto BHX implant has a second infringing circumferential groove-the micro groove.” Id. at pp.1112. Cochlear further contends that, even if Cochlear had discovered that information on Oticon's website, Oticon describes the microgroove as under a flange, while the confidential drawings produced by Oticon show that this microgroove “is not under the flange, but rather between the flange and the ...


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