Echologics, LLC v. Orbis Intelligent Systems, Inc.

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ECHOLOGICS, LLC, et al., Case No.: 21-cv-01147-RBM-AHG 12 Plaintiff, ORDER: 13 v. (1) DENYING DEFENDANT’S 14 ORBIS INTELLIGENT SYSTEMS, MOTION FOR LEAVE TO AMEND INC., 15 ANSWER AND COUNTERCLAIMS; Defendant. AND 16 17 (2) GRANTING DEFENDANT’S MOTION FOR LEAVE TO AMEND 18 INVALIDITY CONTENTIONS 19 [Doc. 82] 20 21 22 On November 18, 2022, Defendant Orbis Intelligent Systems, Inc. (“Orbis”) filed a 23 motion for leave to amend its answer and counterclaims and its final invalidity contentions. 24 (Doc. 82.) On December 1, 2022, Plaintiffs Echologics, LLC, Mueller International, LLC 25 (“Mueller International”), and Mueller Canada, Ltd. d/b/a Echologics (“Mueller Canada”) 26 (collectively, “Plaintiffs” or “Echologics”) filed a response in opposition to Orbis’ motion. 27 (Doc. 85.) On December 9, 2022, Orbis filed its reply. (Doc. 87.) For the reasons 28 discussed below, the Court grants in part and denies in part Orbis’ motion. Specifically, 1 the Court denies Orbis leave to amend its answer and counterclaims, and the Court grants 2 Orbis leave to amend its final invalidity contentions. 3 I. BACKGROUND 4 “Plaintiffs are indirect subsidiaries of Mueller Water Products, Inc. (‘MWP’), a 5 public company with subsidiaries that are leading manufacturers of products and services 6 used in the transmission, distribution, and measurement of water.” (Doc. 1, Compl. ¶ 10.) 7 Echologics provides technologies, products, and services that can non-invasively detect 8 underground leaks and assess the condition of water mains. (Id. ¶ 11.) Orbis is a company 9 that has developed sensors that can be used to detect leaks in water pipes and defects in 10 pipe walls. (Doc. 46 at 3.) 11 Mueller International is the owner via assignment of U.S. Patent No. 10,881,888 12 (filed Nov. 18, 2017) (issued Jan. 5, 2021) (“the ’888 Patent”). (Doc. 1, Compl. ¶ 14.) See 13 also ’888 Patent, at [73]. In the present action, Echologics alleges that Orbis’ design, 14 manufacture, testing, use, importation, sale, and/or offering for sale in the United States of 15 Orbis’ nozzle cap products, specifically its Prodigy SmartCap product, directly infringe at 16 least claims 1, 2, 3, 5, and 7 of the ’888 Patent. (Id. ¶¶ 22, 27, 31-38.) 17 The ’888 Patent is titled “Infrastructure Monitoring Devices, Systems, and 18 Methods,” and “is directed to devices, systems, and methods related to monitoring and 19 controlling an infrastructure such as, but not limited to, the supply and use of commercial, 20 industrial or residential water, gas and/or electric utilities, and, in particular, to devices, 21 methods, and systems for monitoring and controlling a municipality and alerting a user to 22 potential faults and actions required.” ’888 Patent at [54], col. 1 ll. 19-25. In describing 23 the background of the invention, the ’888 Patent explains that municipalities administer 24 and/or outsource numerous complex utility and safety systems, including water distribution 25 systems. See id. at col. 1 ll. 29-35. “Each of these systems needs to be monitored for use 26 (authorized or unauthorized), faults, tampering, events, interruptions or blockages, leaks, 27 contamination, and/or other issues.” Id. at col. 1 ll. 35-38. 28 The ’888 Patent explains that typically, in order to obtain an understanding of the 1 state of any one system, personnel must check for problems within the system manually. 2 Id. at col. 1 ll. 39-42. “This process is slow, is labor-intensive, and can lead to overlooked 3 problems. Furthermore, preferred aspects of the system may be evaluated irregularly or 4 infrequently, thereby allowing a problem to go unchecked for long periods of time.” Id. at 5 col. 1 ll. 42-46. 6 The ’888 Patent seeks to overcome the problems and disadvantages discussed above 7 by providing new systems and methods for monitoring municipality infrastructure. Id. at 8 col. 2 ll. 11-14. Specifically, the ’888 Patent explains that in water infrastructure systems, 9 monitoring devices can be located throughout the system, for example, as attachments to component parts, for feedback to a network that can provide 10 real-time information to the utility operating the network. The network 11 operators can use the information transmitted to activate controlling devices on the network, or to dispatch repair or other services as directed by the 12 information provided by the network. For example, if water pressure monitors 13 on a water meter indicate a variance between locations, a water leak can be reported using the network, and controlling devices can divert water. 14 Id. at col. 4 ll. 49-60. 15 Independent claim 1 of the ’888 Patent, the sole independent claim in the ’888 patent 16 and the only independent claim asserted by Echologics in this action, claims: 17 1. An infrastructure monitoring assembly comprising: 18 a fire hydrant, the fire hydrant defining a nozzle, the nozzle defining external 19 threading at a nozzle end of the nozzle; 20 a nozzle cap, the nozzle cap comprising a metallic material, the nozzle cap 21 defining a first nozzle cap end and a second nozzle cap end, a threaded bore extending into the nozzle cap from the second nozzle cap end to a bore 22 shoulder defined between the first nozzle cap end and the second nozzle cap 23 end, the threaded bore engaging the external threading, a gasket contacting the nozzle end and the bore shoulder in sealing engagement and sealing a 24 nozzle bore of the nozzle; 25 an antenna cover attached to the nozzle cap, the antenna cover comprising a 26 non-metallic material, the antenna cover defining a first antenna cover end and a second antenna cover end, the first antenna cover end defined opposite 27 from the second antenna cover end, the second antenna cover end positioned 28 between the first nozzle cap end and the bore shoulder of the nozzle cap, the 1 second antenna cover end positioned between the first antenna cover end and the second nozzle cap end; and 2 an antenna covered by the antenna cover. 3 ’888 Patent at col. 18 ll. 5-28. 4 On June 22, 2021, Echologics filed a complaint for patent infringement against 5 Orbis, alleging infringement of the ’888 Patent. (Doc. 1, Compl.) On July 19, 2021, Orbis 6 filed an answer to Echologics’ complaint and counterclaims. (Doc. 14.) On November 8, 7 2021, the Court issued a scheduling order. (Doc. 30.) 8 On November 9, 2021, the Court denied Orbis’ motion to transfer venue. (Doc. 31.) 9 On June 27, 2022, the Court issued a claim construction order, construing the disputed 10 claim terms from the ’888 Patent. (Doc. 64.) 11 On November 17, 2022, the Court issued a first amended scheduling order. (Doc. 12 79.) Under the November 17, 2022 amended scheduling order, all outstanding fact 13 discovery must be completed by December 11, 2022; expert discovery will close on 14 February 3, 2023; the pre-trial motion cutoff deadline is set for February 13, 2023; a pretrial 15 conference is scheduled for March 27, 2023; and a trial date is scheduled for May 23, 2023. 16 (Id. at 1-2, 5.) 17 By the present motion, Orbis moves for leave to file an amended answer and 18 counterclaims and to serve amended final invalidity contentions. (Doc. 82-1 at 1.) 19 Specifically, Orbis moves to amend its answer and counterclaims to assert a new 20 affirmative defense and counterclaim for unenforceability of the ’888 Patent due to patent 21 misuse. (Id.) Orbis also moves to amend its invalidity contentions to assert two new 22 theories of invalidity and to correct a clerical mistake. (Id.) 23 II. DISCUSSION 24 A. Defendant’s Motion to Amend Its Answer and Counterclaims 25 Orbis moves to amend its answer and counterclaims to assert a new affirmative 26 defense and counterclaim for unenforceability of the ’888 Patent due to patent misuse. 27 (Doc. 82-1 at 1, 7, 10-15.) Orbis concedes that the deadline to amend its pleadings passed 28 1 on August 30, 2021, but argues that “good cause” exists for it to amend its pleadings 2 because Orbis only discovered the factual basis for its claim of patent misuse via discovery 3 that occurred in October and November of 2022. (Id. at 2, 10-11.) In response, Echologics 4 argues that the Court should deny Orbis’ motion for leave to amend because the proposed 5 affirmative defense and counterclaim for patent misuse is futile. (Doc. 85 at 1, 6-11.) 6 i. Legal Standard1 7 After a pretrial scheduling order has been issued pursuant to Federal Rule of Civil 8 Procedure 16, the district court must first apply Rule 16’s standard for amending the 9 scheduling order if the deadline to amend the pleadings has passed. See Johnson v. 10 Mammoth Recreations, Inc., 975 F.2d 604, 607–08 (9th Cir. 1992); Turrey v. Vervent, Inc., 11 No. 20-CV-0697 DMS (AHG), 2021 WL 5042120, at *1 (S.D. Cal. Oct. 28, 2021); Jackson 12 v. Laureate, Inc., 186 F.R.D. 605, 607 (E.D. Cal. 1999) (“[A] motion seeking to amend 13 pleadings is governed first by Rule 16(b), and only secondarily by Rule 15(a).”). Rule 14 16(b)(4) states that “[a] schedule may be modified only for good cause and with the judge’s 15 consent.” Fed. R. Civ. P. 16(b)(4). “‘Good cause’ is a non-rigorous standard that has been 16 construed broadly.” Turrey, 2021 WL 5042120, at *1 (citing Ahanchian v. Xenon Pictures, 17 Inc., 624 F.3d 1253, 1259 (9th Cir. 2010)). “‘Rule 16(b)’s “good cause” standard primarily 18 considers the diligence of the party seeking the amendment.’” In re W. States Wholesale 19 Nat. Gas Antitrust Litig., 715 F.3d 716, 737 (9th Cir. 2013), aff’d sub nom. Oneok, Inc. v. 20 Learjet, Inc., 575 U.S. 373 (2015) (quoting Johnson, 975 F.2d at 609). The focus of the 21 Rule 16(b) inquiry is upon the moving party’s reasons for seeking modification of the 22 scheduling order; if the party was not diligent, the inquiry should end. Id. at 737; Johnson, 23 975 F.2d at 609. 24 25 1 In an action for patent infringement, a motion for leave to amend a pleading under Federal 26 Rule of Civil Procedure 15(a) “is a procedural matter . . . governed by the law of the 27 regional circuit.” Pressure Prod. Med. Supplies, Inc. v. Greatbatch Ltd., 599 F.3d 1308, 1315 (Fed. Cir. 2010) (citing Cent. Admixture Pharmacy Servs., Inc. v. Advanced Cardiac 28 1 If the party can satisfy the good cause standard of Rule 16(b), the district court must 2 then determine if the party can satisfy the Rule 15(a) standard for leave to amend. See 3 Turrey, 2021 WL 5042120, at *1. Federal Rule of Civil Procedure 15(a) provides that once 4 a responsive pleading is served, “a party may amend its pleading only with the opposing 5 party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). “The court should 6 freely give leave when justice so requires.” Id. The Ninth Circuit has instructed that this 7 policy is “‘to be applied with extreme liberality.’” Hoang v. Bank of Am., N.A., 910 F.3d 8 1096, 1102 (9th Cir. 2018) (quoting Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 9 1051 (9th Cir. 2003)). The decision whether to grant leave to amend “is entrusted to the 10 sound discretion of the trial court.” Pisciotta v. Teledyne Indus., 91 F.3d 1326, 1331 (9th 11 Cir. 1996). When exercising its discretion, “a court must be guided by the underlying 12 purpose of Rule 15—to facilitate decision on the merits rather than on the pleadings or 13 technicalities.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987) 14 (quoting United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981)). 15 When determining whether to grant leave to amend, courts generally consider five 16 factors, known as the Foman factors as stated by the Supreme Court in Foman v. Davis, 17 371 U.S. 178, 182 (1962). These factors include: (1) undue delay; (2) bad faith on the part 18 of the party seeking leave to amend; (3) undue prejudice to the non-moving party; (4) 19 futility of amendment; and (5) whether the plaintiff has previously amended the complaint. 20 Foman, 371 U.S. at 182; see Desertrain v. City of Los Angeles, 754 F.3d 1147, 1154 (9th 21 Cir. 2014); Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). “Absent prejudice, 22 or a strong showing of any of the remaining Foman factors, there exists a presumption 23 under Rule 15(a) in favor of granting leave to amend.” Eminence Cap., 316 F.3d at 1052. 24 ii. Futility of Amendment 25 “‘Futility of amendment can, by itself, justify the denial of a motion for leave to 26 amend.’” Kroessler v. CVS Health Corp., 977 F.3d 803, 815 (9th Cir. 2020) (quoting Bonin 27 v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995)). “‘[A] proposed amendment is futile only 28 if no set of facts can be proved under the amendment to the pleadings that would constitute 1 a valid and sufficient claim or defense.’” Sweaney v. Ada Cty., Idaho, 119 F.3d 1385, 1393 2 (9th Cir. 1997) (quoting Miller v. Rykoff–Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988)); 3 accord Barahona v. Union Pac. R.R. Co., 881 F.3d 1122, 1134 (9th Cir. 2018). In other 4 words, “[a] proposed amended [pleading] is futile if it would be immediately ‘subject to 5 dismissal.’ Thus, the ‘proper test to be applied when determining the legal sufficiency of 6 a proposed amendment is identical to the one used when considering the sufficiency of a 7 pleading challenged under Rule 12(b)(6).’” Nordyke v. King, 644 F.3d 776, 788 n.12 (9th 8 Cir. 2011), on reh’g en banc, 681 F.3d 1041 (9th Cir. 2012) (citations omitted); see Miller, 9 845 F.2d at 214; May v. Northrop Grumman Sys. Corp., 680 F. App’x 556, 559 (9th Cir. 10 2017). 11 Pursuant to Federal Rule of Civil Procedure 12(b)(6), an action may be dismissed 12 for failure to allege “enough facts to state a claim to relief that is plausible on its face.” 13 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility 14 when the plaintiff pleads factual content that allows the court to draw the reasonable 15 inference that the defendant is liable for the misconduct alleged. The plausibility standard 16 is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that 17 a defendant acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal 18 citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the court “‘accept[s] 19 all factual allegations in the [pleading] as true and construe[s] the pleadings in the light 20 most favorable to the nonmoving party.’” Ariix, LLC v. NutriSearch Corp., 985 F.3d 1107, 21 1114 (9th Cir. 2021). 22 Here, the claim at issue is an affirmative defense and counterclaim for 23 unenforceability due to patent misuse. (Doc. 82-3, Ex. A, Proposed Amended Affirmative 24 Defenses ¶¶ 9-20, Proposed Amended Counterclaims ¶¶ 17-21.) The doctrine of “[p]atent 25 misuse is an affirmative defense to patent infringement and an ‘accused infringer may 26 invoke the doctrine of patent misuse to defeat the patentee’s claim.’” Finjan, Inc. v. ESET, 27 LLC, No. 17-CV-00183-CAB-BGS, 2017 WL 4358128, at *3 (S.D. Cal. Oct. 2, 2017) 28 (quoting Princo Corp. v. Int’l Trade Comm’n, 616 F.3d 1318, 1328 (Fed. Cir. 2010) (en 1 banc)); see Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860, 868 (Fed. Cir. 1997) 2 (“Patent misuse is an affirmative defense to an accusation of patent infringement.”). The 3 doctrine of patent misuse is “grounded in the policy-based desire to ‘prevent a patentee 4 from using the patent to obtain market benefit beyond that which inheres in the statutory 5 patent right.’” Princo, 616 F.3d at 1328 (quoting Mallinckrodt, Inc. v. Medipart, Inc., 976 6 F.2d 700, 704 (Fed. Cir. 1992), abrogated by Impression Prod., Inc. v. Lexmark Int’l, Inc., 7 581 U.S. 360 (2017)). “[T]he key inquiry under the patent misuse doctrine is whether, by 8 imposing the condition in question, the patentee has impermissibly broadened the physical 9 or temporal scope of the patent grant and has done so in a manner that has anticompetitive 10 effects.” Id.; see Virginia Panel, 133 F.3d at 868. “[T]he basic rule of patent misuse [is] 11 that the patentee may exploit his patent but may not ‘use it to acquire a monopoly not 12 embraced in the patent.’” Princo, 616 F.3d at 1327 (quoting Transparent-Wrap Mach. 13 Corp. v. Stokes & Smith Co., 329 U.S. 637, 643 (1947)). 14 “[T]he Federal Circuit has emphasized the ‘narrow scope of the doctrine’ and 15 clarified that even otherwise unlawful anticompetitive conduct does not establish patent 16 misuse ‘unless the conduct in question restricts the use of that patent and does so in one of 17 the specific ways that have been held to be outside the otherwise broad scope of the patent 18 grant.’” Finjan, 2017 WL 4358128, at *3 (quoting Princo, 616 F.3d at 1329). “Where the 19 patentee has not leveraged its patent beyond the scope of rights granted by the Patent Act, 20 misuse has not been found.” Princo, 616 F.3d at 1328. 21 In order to state a claim for patent misuse, Orbis must allege that Echologics 22 “impermissibly broadened the physical or temporal scope” of its patent grant. See Princo, 23 616 F.3d at 1328; Virginia Panel, 133 F.3d at 868; Finjan, 2017 WL 4358128, at *4; see 24 also Duke Univ., Allergan, Inc. v. Akorn, Inc., No. 318CV14035BRMTJB, 2019 WL 25 4410284, at *12 (D.N.J. Sept. 16, 2019) (“Where a litigant fails to plead specifics as to 26 how a defendant in a patent misuse action impermissibly broadened the physical or 27 temporal scope of the patent, the patent misuse claim cannot withstand a motion to 28 dismiss.” (citing Otsuka Pharm. Co. v. Torrent Pharm. Ltd., Inc., 118 F. Supp. 3d 646, 659 1 (D.N.J. 2015))). In its proposed amended answer and counterclaims, Orbis alleges that 2 Echologics’ conduct has had the effect of “broadening the temporal scope of their patent 3 grant with anticompetitive effect.” (Doc. 82-3, Ex. A, Proposed Amended Affirmative 4 Defenses ¶ 19.) 5 To provide factual support for its “broadening [of] temporal scope” allegation, Orbis 6 alleges the following additional facts in its proposed amended answer and counterclaims. 7 Orbis alleges that the statutory term for the ’888 Patent – the patent-in-suit – is through 8 May 5, 2031; the statutory term for U.S. Patent No. 10,386,257 (“the ’257 Patent”) is 9 through June 8, 2032; and the statutory term for U.S. Patent No. 10,305,178 (“the ’178 10 Patent”) is through September 2, 2036.2 (Doc. 82-3, Ex. A, Proposed Amended 11 Affirmative Defenses ¶¶ 11, 13, 15.) Orbis further alleges: 12 The purported inventions of each of the ’888, ’257, and ’178 patents are indistinguishable. According to the claims, each of these patents is to the 13 same invention. 14 [B]y pursuing three applications predicated upon independent initial filings, 15 Plaintiffs have illicitly extended by approximately six years the term during which they can assert the exclusive rights afforded by a patent on that 16 invention. 17 . . . 18 Plaintiffs[’] conduct has had the effect of impermissibly extended[sic] the 19 limited protected[sic] from competition by the patent by broadening the temporal scope of their patent grant with anticompetitive effect, and have 20 thereby committed patent misuse. 21 (Id. ¶¶ 16, 17, 19.) 22 These factual allegations are insufficient to state a claim for patent misuse under the 23 circumstances alleged by Orbis. In order for a patent misuse claim to be valid, “‘[t]he 24 misuse must be of the patent in suit.’” Intell. Ventures I LLC v. Cap. One Fin. Corp., No. 25 26 27 2 Plaintiff Mueller International is the listed owner via assignment of the ’257 Patent and the ’178 Patent. See U.S. Patent No. 10,386,257, at [73] (issued Aug. 20, 2019); U.S. 28 1 1:13-CV-00740 AJT, 2013 WL 6682981, at *9 (E.D. Va. Dec. 18, 2013) (quoting Princo, 2 616 F.3d at 1329; Kolene Corp. v. Motor City Metal Treating, Inc., 440 F.2d 77, 84 (6th 3 Cir. 1971)); see Princo, 616 F.3d at 1331 (Patent misuse “requires, at minimum, . . . that 4 the patent in suit must ‘itself significantly contribute[] to the practice under attack.’”). 5 Here, the patent-in-suit is the ’888 Patent. (See Doc. 1, Compl. ¶ 1.) Under Orbis’ own 6 allegations, the ’888 Patent is the patent with the shortest remaining statutory term out of 7 the three patents referenced in the proposed amended answer and counterclaims. (See Doc. 8 82-3, Ex. A, Proposed Amended Affirmative Defenses ¶¶ 11, 13, 15.) Orbis fails to 9 adequately explain how it is plausible that Echologics has impermissibly “broaden[ed] the 10 temporal scope of [its] patent grant” by bringing an action for infringement of the patent 11 with the shortest remaining statutory term and only that patent. Because Echologics only 12 asserts infringement of the ’888 Patent and that patent has a specific statutory term that 13 expires before the other two patents mentioned in the proposed answer and counterclaims, 14 Echologics’s assertion of the ’888 Patent in this action cannot constitute an impermissible 15 broadening of the temporal scope of its patent grant as to the ’888 Patent as a matter of 16 law. Cf. C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1373 (Fed. Cir. 1998) (“It is not 17 patent misuse to bring suit to enforce patent rights not fraudulently obtained.”) 18 Orbis may allege that the longer remaining statutory terms for the’257 Patent and 19 the ’178 Patent compared to the remaining statutory term for the ’888 Patent impermissibly 20 broaden the temporal scope of Plaintiffs’ patent grant as to those two patents. But the ’257 21 Patent and the ’178 Patent are not at issue in this action; they are not patents-in-suit. 22 “‘[T]he misuse must be of the patent in suit.’” Intell. Ventures I, 2013 WL 6682981, at *9 23 (quoting Princo, 616 F.3d at 1329; Kolene, 440 F.2d at 84). Therefore, Orbis cannot rely 24 on misuse allegations related to non-asserted patents as the basis for its claim of patent 25 misuse in this case. Further, in the proposed amended answer and counterclaims, Orbis 26 admits that the ’257 Patent and the ’178 Patent were the subject of a prior action between 27 the same parties as this action: Echologics, LLC, v. Orbis Intelligent Systems, Inc., No. 28 1 1:19-cv-2036-RGA (D. Del., filed Oct. 28, 2019) (“the Delaware action”). (Doc. 82-3, 2 Ex. A, Proposed Amended Answer ¶ 17; see also Doc. 18-1 at 2-3; Doc. 82-3 at 1-2.) Orbis 3 further admits that the Delaware action was dismissed on June 21, 2021, and that 4 Echologics’ infringement claims as to the ’178 patent and the ’257 patent against Orbis 5 were dismissed with prejudice. (Doc. 82-3, Ex. A, Proposed Amended Answer ¶ 19; see 6 also Doc. 82-3 at 2; Doc. 19-7, Ex. 6.) This is significant because to the extent Orbis is 7 contending that Plaintiffs’ prior assertion of the ’178 Patent and the ’257 Patent against it 8 constitutes patent misuse based on an impermissibly broadened temporal scope as to those 9 two patents, “such misuse has now been purged by [Echologic’s] dismissal with prejudice” 10 of its infringement claims as to the ’178 Patent and the ’257 Patent against Orbis. Princeton 11 Digital Image Corp. v. Off. Depot Inc., No. CV 13-239, 2016 WL 1533697, at *8 (D. Del. 12 Mar. 31, 2016); see Nationwide Sales & Servs. Inc. v. Steel City Vacuum Co., No. 13 16CV06223DRHST, 2021 WL 982867, at *4 (E.D.N.Y. Feb. 16, 2021), report and 14 recommendation adopted by No. 216CV6223DRHST, 2021 WL 980872 (E.D.N.Y. Mar. 15 16, 2021) (concluding that “any alleged misuse has already been purged” because the court 16 granted summary judgment on plaintiff’s patent infringement claims in favor of defendant); 17 see also Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, 1025 (Fed. Cir. 2008) (“[T]he 18 successful assertion of patent misuse may render a patent unenforceable until the 19 misconduct can be purged; it does not render the patent unenforceable for all time.”); C.R. 20 Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1372 (Fed. Cir. 1998) (“[A] holding of misuse 21 renders the patent unenforceable until the misuse is purged; it does not, of itself, invalidate 22 23 3 In addition, pursuant to Federal Rule of Evidence 201, the Court takes judicial notice of 24 the Delaware action, and the dismissal with prejudice in that action. See Lee v. City of Los 25 Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (explaining that a court may take judicial notice of matters of public record under Federal Rule of Evidence 201 “without converting a 26 motion to dismiss into a motion for summary judgment”); U.S. ex rel. Robinson Rancheria 27 Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (explaining that courts “‘may take notice of proceedings in other courts, both within and without the federal 28 1 the patent.”). In sum, Orbis’ proposed affirmative defense and counterclaim for patent 2 misuse is deficient as a matter of law under the factual circumstances alleged in Orbis’ 3 proposed amended answer and counterclaims. 4 In an effort to sustain its claim for patent misuse, in its reply brief, Orbis contends 5 that its patent misuse claim is based in part on its allegations that Echologics has engaged 6 “in anticompetitive behavior to make it cost prohibitive for Orbis to participate in the 7 market and using such lawsuits to dissuade customers and potential customers from 8 purchasing Orbis’ products, including those not accused of infringement.” (Doc. 87 at 3; 9 see also id. at 1, 5.) The problem with this argument is that Orbis does not allege this 10 anywhere in its proposed amended answer and counterclaims. Orbis’ proposed amended 11 answer and counterclaims do not contain any allegations asserting that Echologics has 12 dissuaded customers from purchasing non-accused products. (See generally Doc. 82-3, 13 Ex. A, Proposed Amended Affirmative Defenses ¶¶ 9-20, Proposed Amended 14 Counterclaims ¶¶ 17-21.) 15 In sum, Orbis has failed to adequately state a claim for unenforceability due to patent 16 misuse against Echologics in its proposed amended answer and counterclaims. As such, 17 Orbis’ proposed affirmative defense and counterclaim for patent misuse is futile, and the 18 Court denies Orbis’ motion for leave to amend its answer and counterclaims on that basis. 19 See Kroessler, 977 F.3d at 815 (“‘Futility of amendment can, by itself, justify the denial of 20 a motion for leave to amend.’”). 21 B. Defendant’s Motion to Amend Its Invalidity Contentions 22 Orbis moves to amend its invalidity contentions pursuant to Patent Local Rule 23 3.6(b)(3). (Doc. 82-1 at 1, 7-10.) Specifically, Orbis requests to amend its invalidity 24 contentions, so that it may assert: (1) a new theory of invalidity based on the on-sale bar 25 under 35 U.S.C. § 102(b) (pre-AIA); and (2) a new theory of invalidity based on lack of 26 27 28 1 written description under 35 U.S.C. § 112 ¶ 1 (pre-AIA). (Id. at 7-8.) In addition, Orbis 2 moves to amend its final invalidity contentions to correct a clerical mistake.5 (Id. at 1 n.2.) 3 1. Legal Standard 4 “‘The Court’s Patent Local Rules are designed to require parties to crystallize their 5 theories of the case early in the litigation and to adhere to those theories once they have 6 been disclosed.’” CliniComp Int’l, Inc. v. Cerner Corp., No. 17-CV-02479-GPC-DEB, 7 2022 WL 16985003, at *12 (S.D. Cal. Nov. 15, 2022) (quoting Wi-LAN Inc. v. LG Elecs., 8 Inc., No. 18-CV-01577-H-BGS, 2019 WL 5790999, at *2 (S.D. Cal. Sept. 18, 2019)); 9 accord O2 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1366 n.12 (Fed. 10 Cir. 2006). The Rules “‘are also designed to provide structure to discovery and to enable 11 the parties to move efficiently toward claim construction and the eventual resolution of 12 their dispute.’” Simpson Strong-Tie Co., Inc. v. Oz-Post Int’l, LLC, 411 F. Supp. 3d 975, 13 981 (N.D. Cal. 2019) (quoting Golden Bridge Tech. Inc v. Apple, Inc., No. 5:12-CV-04882- 14 PSG, 2014 WL 1928977, at *3 (N.D. Cal. May 14, 2014)). The Patent Local Rules 15 accomplish this “by requiring both the plaintiff and the defendant in patent cases to provide 16 early notice of their infringement and invalidity contentions, and to proceed with diligence 17 in amending those contentions when new information comes to light in the course of 18 discovery. The rules thus seek to balance the right to develop new information in discovery 19 20 4 Congress amended 35 U.S.C. §§ 102 and 112 when it enacted the Leahy–Smith America 21 Invents Act (“AIA”). Junker v. Med. Components, Inc., 25 F.4th 1027, 1029 n.1 (Fed. Cir. 22 2022); In re Durance, 891 F.3d 991, 1002 n.9 (Fed. Cir. 2018). “However, the amended version of § 112 applies only to patent applications ‘filed on or after’ September 16, 2012.” 23 Durance, 891 F.3d at 1002 n.9. And the amended version of § 102 does not apply to patent 24 applications “filed before March 16, 2013.” Junker, 25 F.4th at 1029 n.1. Here, Orbis contends that the pre-AIA versions of § 102 and § 112 apply to the ’888 Patent. (See Doc. 25 82-1 at 1 n.2.) 26 5 In its motion, Orbis explains that each of the claim charts in its final invalidity contentions 27 has a header that incorrectly cites to the current versions of 35 U.S.C. §§ 102 and 103. (Doc. 82-1 at 1 n.2.) Orbis requests to amend its final invalidity contentions to change the 28 1 with the need for certainty as to the legal theories.” O2 Micro, 467 F.3d at 1365–66. “‘A 2 district court has wide discretion in enforcing the Patent Local Rules.’” CliniComp, 2022 3 WL 16985003, at *12; see Howmedica Osteonics Corp. v. Zimmer, Inc., 822 F.3d 1312, 4 1320 (Fed. Cir. 2016) (reviewing “a district court’s application of its local rules for abuse 5 of discretion”). 6 Under Patent Local Rule 3.3, an accused infringer must serve on all parties its 7 “Invalidity Contentions,” and those contentions must disclose specific information 8 regarding the accused infringer’s theories of invalidity in the case. See S.D. Cal. Pat. L.R. 9 3-3. In a lawsuit for patent infringement in the Southern District of California, an accused 10 infringer is limited to the invalidity theories and prior art references it sets forth in its 11 invalidity contentions. Multimedia Pat. Tr. v. Apple Inc., No. 10-CV-2618-H (KSC), 2012 12 WL 12868264, at *3 (S.D. Cal. Nov. 20, 2012); see Verinata Health, Inc. v. Sequenom, 13 Inc., No. C 12-00865 SI, 2014 WL 4100638, at *3 (N.D. Cal. Aug. 20, 2014) (“‘Any 14 invalidity theories not disclosed pursuant to Local Rule 3–3 are barred . . . from 15 presentation at trial (whether through expert opinion testimony or otherwise).’”). 16 The Court’s Patent Local Rules “do not allow amendments to contentions ‘as a 17 matter of course when new information is revealed in discovery.’” Zest IP Holdings, LLC 18 v. Implant Direct MFG, LLC, No. 10CV0541-GPC-WVG, 2014 WL 358430, at *3 (S.D. 19 Cal. Jan. 31, 2014). Rather, a party seeking to amend its infringement or invalidity 20 contentions must satisfy the relevant provisions set forth in Patent Local Rule 3.6. See id.; 21 InfoGation Corp. v. ZTE Corp., No. 16-CV-01901-H-JLB, 2017 WL 11420583, at *2 & 22 n.2 (S.D. Cal. June 7, 2017); see also Phigenix, Inc. v. Genentech, Inc., 783 F. App’x 1014, 23 1017 (Fed. Cir. 2019) (“Infringement contentions may only be amended by order of the 24 district court upon a timely showing of good cause.”). “In contrast to the more liberal 25 policy for amending pleadings, the philosophy behind amending contentions under the 26 Patent Local Rules is decidedly conservative, and designed to prevent the ‘shifting sands’ 27 approach to claim construction.” Regents of Univ. of California v. Affymetrix, Inc., No. 28 17-CV-01394-H-NLS, 2018 WL 4053318, at *2 (S.D. Cal. Aug. 24, 2018) (internal 1 quotation marks omitted) (quoting Verinata Health, Inc. v. Ariosa Diagnostics, Inc., 236 2 F. Supp. 3d 1110, 1113 (N.D. Cal. 2017)); accord Genentech, Inc. v. Amgen, Inc., 289 F.3d 3 761, 774 (Fed. Cir. 2002). 4 Patent Local Rule 3.6(b) provides: 5 As a matter of right, a party opposing a claim of patent infringement may serve “Amended Invalidity Contentions” no later than the completion of claim 6 construction discovery. Thereafter, absent undue prejudice to the opposing 7 party, a party opposing infringement may only amend its validity contentions: 8 . . . 9 3. Upon a timely motion showing good cause. 10 The moving party bears the burden of demonstrating “good cause” under Patent 11 Local Rule 3.6(b)(3). O2 Micro, 467 F.3d at 1366; Multimedia Pat. Tr. v. Apple Inc., No. 12 10-CV-2618-H KSC, 2012 WL 4547449, at *2 (S.D. Cal. Sept. 28, 2012). To establish 13 “good cause,” “the moving party must demonstrate that it ‘has acted diligently and the 14 opposing party will not be prejudiced.’” Regents of Univ. of California, 2018 WL 15 4053318, at *2 (quoting Verinata, 236 F. Supp. 3d at 1113); see Google LLC v. Sonos, Inc., 16 No. 20CV03845EMCTSH, 2021 WL 4061718, at *4 (N.D. Cal. Sept. 7, 2021) (“‘The good 17 cause inquiry is two-fold: (1) whether the moving party was diligent in amending its 18 contentions; and (2) whether the non-moving party would suffer prejudice if the motion to 19 amend were granted.’”) “‘[T]he diligence required for a showing of good cause has two 20 subparts: (1) diligence in discovering the basis for amendment; and (2) diligence in seeking 21 amendment once the basis for amendment has been discovered.’” Regents of Univ. of 22 California, 2018 WL 4053318, at *2 (quoting Karl Storz Endoscopy-Am., Inc. v. Stryker 23 Corp., No. 14-CV-00876-RS (JSC), 2016 WL 2855260, at *3 (N.D. Cal. May 13, 2016)); 24 accord Evolusion Concepts, Inc. v. Juggernaut Tactical, Inc., No. 818CV01378JLSDFM, 25 2020 WL 5898974, at *3 (C.D. Cal. July 9, 2020). “However, good cause ‘does not require 26 perfect diligence.’” In re Koninklijke Philips Pat. Litig., No. 18-CV-01885-HSG, 2019 27 WL 2359206, at *2 (N.D. Cal. June 4, 2019); accord Evolusion, 2020 WL 5898974, at *3. 28 “Further, even if the moving party establishes diligence, the Court should then 1 consider prejudice to the non-moving party in determining whether leave to amend should 2 be granted.” InfoGation, 2017 WL 11420583, at *2. “[I]n the context of a motion for leave 3 to amend contentions, ‘[p]rejudice is typically found when amending contentions stand to 4 disrupt the case schedule or other court orders.’” Regents of Univ. of California, 2018 WL 5 4053318, at *2 (quoting Karl Storz, at *3); see Google, 2021 WL 4061718, at *6 6 (“Prejudice is typically found when the movant seeks to amend late in a case’s pre-trial 7 schedule or when amendment would disrupt a previous motion or order.”). “In considering 8 good cause, courts also examine other factors including ‘the relevance of the newly 9 discovered prior art, the difficulty in obtaining such prior art, and whether the motion 10 appears to be motivated by gamesmanship.’” Karl Storz, 2016 WL 2855260, at *3; accord 11 Evolusion, 2020 WL 5898974, at *3. 12 2. Analysis 13 Here, Orbis has demonstrated that it has acted diligently in seeking to amend its 14 invalidity contentions to assert its two new theories of invalidity. In its motion, Orbis 15 details the various discovery it has performed in this action in an effort to reveal potential 16 theories of invalidity. (See Doc. 82-1 at 2-, 157.) Further, Orbis explains that it only 17 recently discovered the underlying facts that form the basis for its two new theories of 18 invalidity. Specifically, Orbis explains that its new on-sale bar theory of invalidity is based 19 on facts revealed during the deposition of Mr. Keefe that took place on October 21, 2022. 20 (Id. at 6-8.) And Orbis’ new lack of written description theory of invalidity is based on 21 facts revealed during the deposition of Mr. Gibson that took place on October 12, 2022. 22 (Id. at 5, 8.) Orbis filed the present motion for leave to amend its final invalidity 23 contentions on November 18, 2022 – only five weeks after Mr. Gibson’s deposition and 24 only four weeks after Mr. Keefe’s deposition. As such, because Orbis sought leave to 25 amend its invalidity contentions within five weeks of discovering the facts underlying its 26 two new theories of invalidity, Orbis has demonstrated that it has acted diligently in seeking 27 to amend its contentions. See, e.g., Regents of Univ. of California, 2018 WL 4053318, at 28 *3 (finding moving party diligent where the party moved for leave to amend its contentions 1 within two months of discovering the relevant facts). 2 Further, Orbis has demonstrated that Echologics will not be prejudiced by its 3 proposed amendments to its final invalidity contentions. Neither party suggests that the 4 proposed amendments will require any alterations to the Court’s scheduling order in this 5 action. “‘Courts have found no prejudice where, as here, the proposed amendments did 6 not pose a risk to discovery and motion deadlines or the trial schedule.’” Regents of Univ. 7 of California, 2018 WL 4053318, at *3 (quoting Karl Storz, 2016 WL 2855260, at *7); 8 accord Google, 2021 WL 4061718, at *6. 9 In response to Orbis’ motion for leave to amend its final invalidity contentions, 10 Echologics does not challenge Orbis’ diligence or contend that it will be prejudiced by the 11 amendments. Rather, Echologics challenges the sufficiency of the evidence underlying 12 Orbis’ new theories of invalidity. (See Doc. 85 at 11-12 (“[T]he new information on which 13 Orbis bases its proposed amendments do not support a finding of invalidity and are 14 irrelevant.”).) In evaluating whether an accused infringer has demonstrated “good cause” 15 to amend its invalidity contentions under Patent Local Rule 3.6(b)(3), district courts 16 consider the diligence of the moving party and the prejudice to the non-moving party. See 17 Regents of Univ. of California, 2018 WL 4053318, at *2; InfoGation, 2017 WL 11420583, 18 at *2; Multimedia Pat. Tr., 2012 WL 4547449, at *2; Google, 2021 WL 4061718, at *4. 19 District courts do not consider the sufficiency of the evidence supporting the proposed new 20 theories of invalidity, and Echologics has not provided the Court with any case law to the 21 contrary.6 As such, the Court rejects Echologics’ challenges to factual sufficiency of 22 23 6 Echologics notes that “the relevance of the newly discovered prior art” may be considered 24 during a “good cause” determination. (Doc. 85 at 11.) The Court agrees that “the relevance 25 of the newly discovered prior art” is a factor that a court may examine when evaluating “good cause” under Patent Local Rule 3.6(b)(3). See Evolusion, 2020 WL 5898974, at *3; 26 Karl Storz, 2016 WL 2855260, at *3. This factor comes from the district court decision in 27 Yodlee, Inc. v. CashEdge, Inc., No. C05-01550 SI, 2007 WL 1454259, at *2 (N.D. Cal. May 17, 2007). In Yodlee, the district court examined the relevance of the newly 28 1 || Orbis’ new theories of invalidity at this stage in the proceedings.’ 2 In sum, Orbis has demonstrated “good cause” under Patent Local Rule 3.6(b)(3) to 3 |}amend its final invalidity contentions. Accordingly, the Court grants Orbis’ motion for 4 || leave to amend its final invalidity contentions. 5 Hr. CONCLUSION 6 For the reasons discussed above, the Court GRANTS IN PART AND DENIES IN 7 || PART Defendant Orbis’ motion for leave to amend. Specifically, the Court DENIES 8 ||Orbis leave to file its proposed amended answer and counterclaims, and the Court 9 || GRANTS Orbis leave to serve its proposed amended final invalidity contentions. Orbis is 10 |} ORDERED to serve its amended final invalidity contentions (Doc. 82-5) no later than 11 || fourteen (14) days from the date this order is filed. 12 IT IS SO ORDERED. 13 || DATE: December 15, 2022 Rx Barrick Nery 15 HON. RUTH BERMUDEZ MONTENEGRO UNITED STATES DISTRICT JUDGE 16 17 18 19 20 movant’s final invalidity contentions. See id. at 2 (“According to [defendant], the newly discovered prior art is more material than ‘any one of the dozens of prior art references 22 discussed in [defendant]’s Final Invalidity Contentions.’’). The district court did not 43 || engage in an analysis of the sufficiency of evidence supporting the proposed new theory of invalidity. See id. As such, the cited case law does not provide support for Echologics’ 24 ||/contention that the Court may examine the factual sufficiency of Orbis’ proposed new 5 theories of invalidity in determining whether to grant Orbis leave to amend its final invalidity contentions. 26 The Court notes that its denial of Echologics’ challenges is without prejudice to 27 || Echologics challenging the sufficiency of the evidence supporting Orbis’ on sale bar theory 28 of invalidity and lack of written description theory of invalidity at a later stage in the proceedings, such as through a motion for summary judgment. 18