Unicorn Energy AG v. Tesla, Inc. ( 2022 )

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 UNICORN ENERGY GMBH, Case No. 21-cv-07476-BLF 8 Plaintiff, ORDER GRANTING MOTION TO 9 v. FILE FIRST AMENDED ANSWER 10 TESLA INC., 11 Defendant. 12 13 Before the Court is Defendant Tesla, Inc.’s (“Tesla”) motion for leave to file a first 14 amended answer in this patent infringement action brought by Unicorn Energy GMBH 15 (“Unicorn”). Tesla seeks to add an inequitable conduct defense. See Mot., ECF No. 127. 16 Unicorn opposes. See Opp’n, ECF No. 138. 17 Pursuant to Civil Local Rule 7-1(b), the Court finds that Tesla’s motion is appropriate for 18 determination without oral argument. Based on the below reasoning, the Court GRANTS Tesla’s 19 motion. 20 I. BACKGROUND 21 On October 26, 2020, Unicorn filed a complaint against Tesla in the Eastern District of 22 Texas, alleging that Tesla’s manufacture, use, sale, and offers to sell its Powerpack infringed 23 Unicorn’s U.S. Patent No. 10,008,869 (the “asserted patent”). See ECF No. 1, ¶ 1. Tesla 24 answered on December 17, 2020, denying the alleged infringement and asserting affirmative 25 defenses. See ECF No. 13. Tesla also moved to transfer the case to this District under 28 U.S.C. 26 §1404. ECF No. 12. 27 On February 9, 2021, Unicorn amended its complaint, adding Tesla’s Megapack and 1 amended complaint on February 23, 2021, denying that the additional products infringed the 2 asserted patent. See ECF No. 38. Tesla also amended its motion to transfer. See ECF Nos. 37. 3 Judge Gilstrap, presiding in the Eastern District of Texas, granted Tesla’s motion to 4 transfer on September 3, 2021 (see ECF No. 80), and this case was transferred to this District on 5 September 28, 2021 (see Dkt. 84). 6 On March 14, 2022, this Court adopted a modified version of the parties’ joint stipulation 7 regarding further case deadlines, including a deadline of August 2, 2022, for the parties to request 8 leave to amend the pleadings. See ECF No. 118 at 2. Tesla timely moved to amend its answer on 9 August 2, 2022. See Mot. 10 II. LEGAL STANDARD 11 Under Federal Rule of Civil Procedure 15, “a party may amend its pleading only with the 12 opposing party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). “The court 13 should freely give leave when justice so requires.” Id. A district court ordinarily must grant leave 14 to amend unless one or more of the following “Foman factors” is present: (1) undue delay, (2) bad 15 faith or dilatory motive, (3) repeated failure to cure deficiencies by amendment, (4) undue 16 prejudice to the opposing party, or (5) futility of amendment. See Eminence Capital, LLC v. 17 Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182 18 (1962)). “[I]t is the consideration of prejudice to the opposing party that carries the greatest 19 weight.” Id. However, a strong showing with respect to one of the other factors may warrant 20 denial of leave to amend. Id. 21 III. DISCUSSION 22 Tesla seeks to amend its answer to add an inequitable conduct defense. The proposed 23 amendment alleges that the patent attorney who prosecuted the application that would become the 24 ’869 Patent withheld material prior art from the USPTO with the specific intent to deceive the 25 patent examiner. Mot. 4. Tesla argues that the Court should grant leave to amend because none of 26 the Foman factors is present and justice so requires. Id. at 3-6. Unicorn opposes, arguing that (1) 27 Tesla unduly delayed in bringing its motion to amend, and (2) Tesla’s proposed amendment is 1 Procedure 9(b). Opp’n 4-10. 2 Unicorn does not dispute Tesla’s contention that granting leave to amend will not unduly 3 prejudice Unicorn. Mot. 5. This lack of prejudice strongly counsels in favor of granting Tesla’s 4 motion for leave to amend. See Eminence Capital, 316 F.3d at 1052 (“[I]t is the consideration of 5 prejudice to the opposing party that carries the greatest weight.”). Unicorn instead focuses on two 6 other Foman factors: (1) undue delay and (2) futility of amendment. The Court addresses each 7 argument in turn. 8 The Court finds that Tesla has not unduly delayed filing its motion to amend. Tesla 9 contends in its opening brief that it uncovered the facts supporting its defense with “reasonable 10 diligence.” Mot. 4. But Tesla does not dispute Unicorn’s contention that Tesla knew of these 11 facts at least as early as October 2021—ten months before Tesla filed its motion to amend. See 12 Opp’n. 10. A ten-month delay may be undue in some circumstances. But here, where the 13 proposed amendment was timely filed under the Court’s ordered deadline and submitted over a 14 year before the close of fact discovery, the Court does not find undue delay. See Giuliano v. 15 SanDisk Corp., No. C 10-02787 SBA, 2014 WL 4685012, at *5 (N.D. Cal. Sept. 19, 2014). 16 The Court also finds that Unicorn has failed to meet its heavy burden of proving futility of 17 amendment. Ordinarily, “courts will defer consideration of challenges to the merits of a proposed 18 amended pleading until after leave to amend is granted and the amended pleading is filed.” 19 Microsoft Corp. v. Hon Hai Precision Indus. Co., No. 19-CV-01279-LHK, 2020 WL 836712, at 20 *14 (N.D. Cal. Feb. 20, 2020) (quoting Snap! Mobile, Inc. v. Croghan, No. 18-CV-04686-LHK, 21 2019 WL 3503071, at *4 (N.D. Cal. Aug. 1, 2019)). This is because a proposed amendment is 22 futile for the purposes of a motion for leave to amend only if no set of facts can be proved under 23 the amendment to the pleadings that would constitute a valid claim or defense, and such 24 arguments are better left for full briefing on a motion to dismiss. Id. 25 The Court cannot say at this stage that there is no set of facts that can be proved under the 26 amendment to the pleadings that would constitute a valid claim or defense. See Microsoft, 2020 27 WL 836712, at *14. “The substantive elements of inequitable conduct are: (1) an individual 1 misrepresentation of a material fact, failed to disclose material information, or submitted false 2 material information; and (2) the individual did so with a specific intent to deceive the PTO.” 3 Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 n.3 (Fed. Cir. 2009). Tesla’s 4 proposed answer alleges facts to support that the patent attorney who prosecuted the application 5 that issued as the asserted patent knowingly withheld material prior art from the PTO. The answer 6 identifies the allegedly material prior art reference and alleges facts to support materiality, 7 including that the PTO found the reference to be invalidating prior art to the claims of an 8 application that shares a common ancestor with the asserted patent. ECF No. 127-3, ¶ 76. It 9 further alleges that the patent attorney knew of the allegedly material reference because he 10 prosecuted both applications. Id. ¶¶ 71-81. Finally, it alleges that the patent attorney did not 11 disclose the reference while prosecuting the application that would become the asserted patent. Id. 12 ¶ 80. At this stage, based on these allegations, the Court declines to find that Unicorn has shown 13 futility of amendment. 14 The Court’s decision is not meant to suggest that Tesla’s allegations are necessarily pled in 15 a manner sufficient to withstand a motion to dismiss or strike. See Snap!, 2019 WL 3503071, at 16 *4 (“Ordinarily, however, courts will defer consideration of challenges to the merits of a proposed 17 amended pleading until after leave to amend is granted and the amended pleading is filed.” 18 (quotation marks omitted)). And more robust factual pleading of the materiality element as 19 described in Exergen may be required upon later review. Unicorn is of course free to move to 20 dismiss or strike this affirmative defense at a later stage. 21 Given that Unicorn does not dispute the lack of prejudice and is unable to make a “strong 22 showing” any other Foman factor, see Eminence Capital, 316 F.3d at 1052, the Court GRANTS 23 Tesla leave to amend its answer as proposed in ECF No. 127-3.1 24 25 26 1 In addition to adding the affirmative defense of inequitable conduct, Tesla’s proposed amended 27 complaint appears to have several non-substantive revisions that Unicorn has not opposed. See, 1 IT IS SO ORDERED. 2 For the foregoing reasons, IT IS HEREBY ORDERED that: 3 1. Tesla’s motion to file a first amended answer is GRANTED; and 4 2. Tesla SHALL file its proposed first amended answer on or before November 1, 2022. 5 6 Dated: October 28, 2022 han tn) 7 BETH LABSON FREEMAN 8 United States District Judge 9 10 11 12 13 15 16 = 17 Z 18 19 20 21 22 23 24 25 26 27 28