Unique Industries, Inc. v. 965207 Alberta Ltd.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNIQUE INDUSTRIES, INC., :
:
Plaintiff, : Civil Action No.: 08-1095 (RMU)
:
v. : Re Document Nos.: 38, 39, 40, 41, 42, 50
:
965207 ALBERTA LTD., :
:
Defendant. :
MEMORANDUM OPINION
RE-OPENING DISCOVERY FOR A PERIOD OF NINETY DAYS; SANCTIONING PLAINTIFF’S
COUNSEL FOR FAILING TO COMPLY WITH THE COURT’S SCHEDULING ORDERS; DENYING
WITHOUT PREJUDICE THE PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT;
DENYING THE PLAINTIFF’S MOTION FOR LEAVE TO AMEND
I. INTRODUCTION
The defendant is the holder of two design patents for numerical and star-shaped sparklers,
a type of firework that throws off sparks when lit. The plaintiff, a company that also produces
numerical and star-shaped sparklers, commenced this action seeking a declaratory judgment that
its products do not infringe on the defendant’s design patents. The plaintiff also challenges the
validity of the defendant’s patents. The defendant maintains that its patents are valid and has
asserted counterclaims against the plaintiff for patent infringement.
This matter is now before the court on the parties’ cross-motions for summary judgment.
The defendant has filed motions for summary judgment that its design patents are not invalid,
that the plaintiff’s products infringe on those patents and that the plaintiff’s infringement has
been willful. The plaintiff, in turn, has moved for summary judgment that its products are non-
infringing. In addition, the plaintiff has moved to amend its pleadings to supplement the factual
allegations underlying its affirmative defenses, to raise new affirmative defenses and a new claim
and to add new defendants to the suit.
In its submissions, the plaintiff relies on evidence of prior art that was not disclosed to the
defendant until after the close of discovery. As discussed below, the plaintiff’s failure to
disclose this evidence before the discovery deadline – indeed, on the eve of the deadline for
filing motions for summary judgment – indicates at best an utter lack of diligence and at worst
bad faith. This conduct constitutes a clear violation of this court’s scheduling orders. It also
prejudices the defendant, which was deprived an opportunity to investigate or properly address
this new evidence before preparing its final contentions and motions for summary judgment.
Most troubling, however, is the fact that this new evidence may prove to be very relevant to the
validity of the patents at issue.
Because of the public interest in assessing the validity of the patents, as well as the
availability of less drastic measures to mitigate the prejudice to the defendant, the court shall not
disregard this evidence, as the defendant suggests. Instead, the court shall re-open discovery for
a period of ninety days to permit the defendant an opportunity to investigate the evidence of prior
art disclosed after the discovery deadline. As a result, the court denies without prejudice the
parties’ cross-motions for summary judgment with leave to renew those motions following the
close of this period of additional discovery. To mitigate the resulting prejudice to the defendant,
the court orders plaintiff’s counsel to pay the reasonable attorney’s fees and costs incurred by the
defendant as a result of the plaintiff’s failure to comply with the court’s orders. Lastly, the court
denies the plaintiff’s motion for leave to amend on the grounds of undue delay and unfair
prejudice.
2
Def.’s Mot. for Claim Construction, Ex. B (’164 Patent).
In June 2008, the plaintiff commenced this action seeking a declaratory judgment that its
line of sparklers does not infringe on the defendant’s design patents. See generally Compl. In
September 2008, the defendant responded to the complaint by asserting counterclaims of patent
infringement. See generally Countercl. The plaintiff answered the counterclaims in October
2008, denying the defendant’s allegations of patent infringement and asserting a variety of
affirmative defenses, including patent invalidity and inequitable conduct. See generally Answer
to Countercl.; Am. Answer to Countercl.
At the initial status hearing held in early November 2008, the court established deadlines
for the exchange of expert reports, final contentions and the close of discovery. Minute Entry
(Nov. 3, 2008). These deadlines were based largely on dates proposed by the parties in the joint
report they submitted prior to the hearing. See generally Joint 16.3 Scheduling Report (Oct. 27,
2008). The court ordered that discovery on liability would close on January 26, 2010, with the
case on damages to follow the resolution of motions for summary judgment on the issue liability.
Id.
In July 2009, the court granted the defendant’s motion to dismiss the plaintiff’s defense
of inequitable conduct because that claim was not pleaded with sufficient particularity.1 Mem.
Op. (July 22, 2009) at 3-8. In the same ruling, the court resolved the parties’ cross-motions for
claim construction. Id. at 8-17. The court construed the ’207 Patent and the ’164 Patent in the
following manner:
1
More specifically, the court concluded although the plaintiff alleged that the defendant had
engaged in inequitable conduct by knowingly withholding from the Patent and Trademark Office
(“PTO”) prior art invalidating its two design patents, the plaintiff had not identified what prior art
the defendant withheld from the PTO and had provided no factual allegations suggesting that the
defendant specifically intended to mislead the PTO. Mem. Op. (July 22, 2009) at 7-8.
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The ’207 Patent is construed as the ornamental design of a set of sparklers, as
shown in Figures 1-5 of the patent. The patented design includes all of the
sparklers illustrated in the drawings, including the number-shaped sparklers and
the “?”-shaped sparkler. The term “set” encompasses sparklers that belong or are
used together, regardless of whether they are packaged or sold together or
separately.
The ’164 Patent is construed as the ornamental design of a star-shaped sparkler, as
shown in Figures 1-4 of the patent.
Id. at 16-17.
On January 20, 2010, the court granted the parties’ joint motion to extend the January 26
discovery deadline set during the initial status hearing. Minute Order (Jan. 20, 2010). The court
ordered the parties to complete discovery on liability by March 26, 2010, exchange final
contentions by April 12, 2010 and file any motions for summary judgment by April 27, 2010.
Id.
The parties exchanged final contentions as directed on April 12, 2010. In its final
contentions, the plaintiff asserted that the inventor listed for the ’207 Patent and the ’164 Patent –
Alok Sharma, a principal of the defendant – had appropriated the designs for these patents from
numerical and star-shaped sparklers manufactured by a Czech company, Drutep Teplice
(“Drutep”), years before Sharma applied for his patents. See Def.’s Mot. for Summ. J. on
Validity of the Design Patents (“Def.’s Validity Mot.”), Ex. 7 at 1-3. The plaintiff also identified
a number of companies and individuals who would verify that the sparklers in the designs
patented by the defendant had been commercially available in Europe, China and Australia
before Sharma applied for his patents. Id. Furthermore, the plaintiff attached to its final
contentions a series of photographs purporting to illustrate these earlier-available sparklers. Id.
at 8-15.
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None of this evidence regarding prior art had been disclosed to the defendant before
discovery closed. Def.’s Validity Mot., Ex. 9. The defendant objected to the inclusion of this
new material in the plaintiff’s final contentions and initiated a conference call with the
undersigned judge’s law clerk on April 15, 2010 to relay its concerns to the court. Id. During
the call, the parties reached an agreement that would permit them to keep the previously-imposed
litigation schedule, which called for the submission of motions for summary judgment by April
27, 2010. See Minute Order (Jan. 20, 2010). Specifically, the parties agreed that the plaintiff
would not use any evidence disclosed after the discovery deadline at the summary judgment
stage and the defendant would not move for sanctions at that time. Def.’s Validity Mot., Ex. 10.
Accordingly, on April 27, 2010, the defendant moved for summary judgment that its
design patents are not invalid. See generally Def.’s Validity Mot. In addition, the defendant
moved for summary judgment on the issue of infringement. See generally Def.’s Mot. for
Summ. J. that the Pl.’s Star Sparklers Infringe Patent D451,164; Def.’s Mot. for Summ. J. that
the Pl.’s Numerical Sparklers Infringe Patent D447,207. Finally, the defendant filed a motion for
summary judgment that the plaintiff’s infringement has been willful. See generally Def.’s Mot.
for Summ. J. that the Pl.’s Infringement of Patent D451,164 and D447,207 Has Been Willful.
The plaintiff, in turn, filed a motion for summary judgment that its products do not infringe on
the defendant’s design patents. See generally Pl.’s Mot. for Summ. J. for Non-Infringement.
In late May 2010, the plaintiff filed its oppositions to the defendant’s motions for
summary judgment. In its opposition to the defendant’s motion regarding the validity of its
design patents, the plaintiff asserts, inter alia, that Alok Sharma is not the inventor of the designs
illustrated in the patents. Pl.’s Opp’n to Def.’s Validity Mot. at 6-7. In support of that
contention, the plaintiff has attached to its opposition the evidence of prior art first disclosed as
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part of the plaintiff’s final contentions. Id., Verified Statement of Kerry Healy; id.; Verified
Statement of Nick Dale.
Also in late May, the plaintiff filed a motion for leave to amend its pleadings to
incorporate the evidence of prior art attached to its final contentions. See generally Pl.’s Mot. for
Leave to Amend. Specifically, the plaintiff seeks leave to amend its affirmative defenses to
incorporate the allegation that other companies had been marketing sparklers in the same
ornamental design for years before Sharma applied for his patent. Id., Ex. A at 14-15, 18-20.
The plaintiff also seeks leave to assert a claim of inequitable conduct against the defendant and
Sharma based on the allegation that Sharma intentionally withheld information about this prior
art in his submissions to the PTO. Id. at 22-25. Finally, the plaintiff seeks leave to add Sharma
and Samrok Canada, Inc., a company controlled by Sharma, as defendants in this case. Pl.’s
Mot. for Leave to Amend at 3. The plaintiff has proposed that the court re-open discovery for a
period of ninety days to permit the parties to investigate the allegations raised in its proposed
amended pleading. Id.
The motions referenced above are ripe for adjudication. The court therefore turns to the
applicable legal standards and the parties’ arguments.
III. ANALYSIS
A. The Court Denies Without Prejudice the Defendant’s Motion for Summary Judgment
on the Validity of Its Patents and Sanctions Plaintiff’s Counsel for Failing to
Comply With the Court’s Scheduling Orders
1. Legal Standard for a Motion for Summary Judgment
Summary judgment is appropriate when the pleadings and evidence show “that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
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law.” FED. R. CIV. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);
Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). To determine which facts are
“material,” a court must look to the substantive law on which each claim rests. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A “genuine dispute” is one whose resolution
could establish an element of a claim or defense and, therefore, affect the outcome of the action.
Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 248.
In ruling on a motion for summary judgment, the court must draw all justifiable
inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as true.
Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than “the mere
existence of a scintilla of evidence” in support of its position. Id. at 252. To prevail on a motion
for summary judgment, the moving party must show that the nonmoving party “fail[ed] to make
a showing sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. By pointing to
the absence of evidence proffered by the nonmoving party, a moving party may succeed on
summary judgment. Id.The nonmoving party may defeat summary judgment through factual representations
made in a sworn affidavit if he “support[s] his allegations . . . with facts in the record,” Greene v.
Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999) (quoting Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir.
1993)), or provides “direct testimonial evidence,” Arrington v. United States, 473 F.3d 329, 338
(D.C. Cir. 2006). Indeed, for the court to accept anything less “would defeat the central purpose
of the summary judgment device, which is to weed out those cases insufficiently meritorious to
warrant the expense of a jury trial.” Greene, 164 F.3d at 675.
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2. The Court Cannot Determine At This Time Whether the Plaintiff Can
Demonstrate the Invalidity of Either Patent at Issue
The defendant argues that it is entitled to summary judgment on the validity of the ’207
Patent and the ’164 Patent because the plaintiff has not produced any evidence of prior art that
would call into question the validity of those patents. See generally Def.’s Validity Mot. The
defendant asserts that although the plaintiff produced a smattering of prior art before the
discovery deadline, none of that prior art has any bearing on the design patents at issue; indeed,
the plaintiff chose not to rely on this prior art in its final contentions. Id. at 2-3. Furthermore,
the defendant states that although the plaintiff disclosed additional evidence of prior art with its
final contentions, the court should not consider it because it was produced after the discovery
deadline and the plaintiff agreed not to rely on it on summary judgment. Id. at 3-4. Thus, the
defendant argues, the plaintiff has produced no evidence of invalidating prior art and the court
should grant summary judgment to the defendant on the validity of the patents. Id. at 5-6.
The plaintiff responds that there is significant evidence that the defendant’s patents are
invalid. See generally Pl.’s Opp’n to Def.’s Validity Mot. The plaintiff asserts that the
defendant’s designs are entirely conventional and therefore not patentable. Id. at 3-5. The
plaintiff also contends that summary judgment is precluded due to the defendant’s spoliation of
evidence. Id. at 5-6. More specifically, the plaintiff contends that Sharma’s patent agent,
George Seaby, discarded the original drawings allegedly sent to him by Sharma in connection
with the patents at issue. Id. Lastly, the plaintiff contends that Sharma is not the inventor of the
designs illustrated in the’207 Patent and the ’164 Patent. Id. at 6-7. In support of that
contention, the plaintiff relies on the evidence of prior art first disclosed as part of its final
contentions – namely, evidence that sparklers in the same ornamental designs had been available
9
in Europe long before Sharma obtained his design patents. Id., Verified Statement of Kerry
Healy; id., Verified Statement of Nick Dale.
“A patent is presumed valid and the party asserting invalidity has the burden of
persuasion to show the contrary by clear and convincing evidence.” Research Corp. Techs. v.
Microsoft Corp., 627 F.3d 859, 870 (Fed. Cir. 2010) (citing Tech. Licensing Corp. v. Videotek,
Inc., 545 F.3d 1316, 1327 (Fed. Cir. 2008)). At the outset of an invalidity challenge, “[t]he
challenger has the burden of going forward with invalidating prior art.” Id. (citing Tech.
Licensing Corp., 545 F.3d at 1327). “The patentee then has the burden of going forward with
evidence to the contrary, i.e., the patentee must show that the prior art does not actually
invalidate the patent or that it is not prior art because the asserted claim is entitled to the benefit
of an earlier filing date.” Id. (citing Tech. Licensing Corp., 545 F.3d at 1327; PowerOasis, Inc.
v. T-Mobile USA, Inc., 522 F.3d 1299, 1304-06 (Fed. Cir. 2008)); accord Titan Tire Corp. v.
Case New Holland, Inc., 566 F.3d 1372, 1376-77 (Fed. Cir. 2009) (observing that “[o]nce the
challenger presents initially persuasive evidence of invalidity, the burden of going forward shifts
to the patentee to present contrary evidence and argument” (citing Tech. Licensing Corp., 545
F.3d at 1327)). “Ultimately, the outcome of the trial on this point will depend on whether, in
light of all the evidence, the party challenging the patent’s validity has carried its burden of
persuasion to prove by clear and convincing evidence that the patent is invalid.” Titan Tire
Corp., 566 F.3d at 1377 (citing Tech. Licensing Corp., 545 F.3d at 1328).
a. Originality of the Defendant’s Patented Designs
The plaintiff begins its attack on the validity of the patent by calling into question the
originality of the defendant’s patented designs. Pl.’s Opp’n to Def.’s Validity Mot at 2-4; see
also 35 U.S.C. § 171(a) (providing that “[w]hoever invents any new, original and ornamental
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design for an article of manufacture may obtain a patent therefor[e]”) (emphasis added).
Specifically, the plaintiff asserts that its own sparklers are based on conventional, existing
designs, such as public domain fonts and earlier designs for birthday candles. Pl.’s Opp’n to
Def.’s Validity Mot at 3-4; see also Pl.’s Mot. for Non-Infringement, Decl. of Joseph Italiano
(“Italiano Decl.”) ¶¶ 3-12, 27-28.2 Because its sparklers are based on conventional designs, the
plaintiff argues, the defendant’s design patents cannot encompass the plaintiff’s products and
still be valid because the patents would then encompass conventional, existing designs. Pl.’s
Opp’n to Def.’s Validity Mot. at 2-4; see also Pl.’s Opp’n to Def.’s Validity Mot. at 2-4.
Yet to demonstrate that these conventional designs invalidate the defendant’s patented
designs, the plaintiff was required to offer some evidence that the conventional designs share the
same overall visual appearance as the patented designs. See Durling v. Spectrum Furniture Co.,
Inc., 101 F.3d 100, 103 (Fed. Cir. 1996) (noting that in assessing whether prior art invalidates a
patent, the court must consider whether prior art “create[s] the same overall visual appearance as
the claimed design”). The plaintiff, however, has offered no evidence comparing the visual
impression created by the conventional designs and the visual impression created by the
defendant’s designs. See generally Pl.’s Opp’n to Def.’s Validity Mot.
Instead, the plaintiff reasons that because the conventional designs are similar to the
plaintiff’s sparklers and the plaintiff’s sparklers are, according to the defendant, similar to the
defendant’s designs, the defendant’s designs must be similar to the conventional designs. Id. at
2-4. This argument is flawed. Although Italiano states that he “consulted” conventional designs
and that the plaintiff’s sparklers “resemble” and are “similar to” existing designs for birthday
candles, Italiano Decl. ¶¶ 3-10, he acknowledges that the plaintiff’s sparklers are not identical to
these conventional designs, id. ¶¶ 13-25. Given these differences in appearance, it does not
2
Joseph Italiano was employed by the plaintiff to design its line of sparklers. Italiano Decl. ¶ 2.
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follow as a matter of logic, as the plaintiff suggests, that any similarity between the defendant’s
patented designs and the plaintiff’s sparklers necessarily entails a similarity between the
defendant’s patented designs and the conventional designs. In fact, Italiano suggests in his
declaration that both the plaintiff’s sparklers and the conventional designs which they resemble,
differ in appearance from the defendant’s patented designs. See, e.g., Italiano Decl. ¶ 13 (stating
that the plaintiff’s “1” sparkler “has the same ornamentation” as a “1” birthday candle marketed
by the plaintiff but “is noticeably different in ornamental design from the numeral ‘1’ sparkler of
the ’207 patent”); see also id. ¶¶ 14-25. Thus, the plaintiff’s assertion that its own sparklers
resemble conventional designs does not raise a genuine of issue of fact as to the validity of the
defendant’s designs.
The only other evidence offered by the plaintiff regarding the originality of the
defendant’s designs – other than the evidence of prior art disclosed after discovery, which is
discussed below – is a snippet of testimony from Sharma’s deposition, in which Sharma testified
that he “tried to make a standard star” when he designed the ’164 Patent. Pl.’s Opp’n to Def.’s
Validity Mot., Decl. of Gerard Dunne (“Dunne Decl.”), Ex. C. This testimony, however, is of
limited significance at best. As an initial matter, Sharma’s testimony does not address the
originality of the numerical sparkler designs in the ’207 Patent. See id. Moreover, even if this
deposition testimony provides some indication of Sharma’s intent at the time he designed the
star-shaped sparkler, it is well established that the originality of a patented design turns on its
appearance, not the designer’s intent. See Gorham Mfg. Co. v. White, 81 U.S. 511, 524 (1871)
(noting that the patentability of a design resides in its appearance); see also In re Harvey, 12 F.3d
1061, 1064 (Fed. Cir. 1993) (observing that the focus of the court’s inquiry into the validity of a
patent is on its appearances rather than its uses); cf. 35 U.S.C. § 103(a) (“Patentability shall not
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be negatived by the manner in which the invention was made.”). Because the originality of the
’164 Patent depends on its visual appearance in relation to the prior art, whether Sharma intended
to create a “standard star” (whatever that may be) or a “novel star” is not directly relevant to the
inquiry. What would be relevant – evidence of prior art having the same visual appearance as
the defendant’s patented designs – the plaintiff has not placed in the record (with the exception
of the evidence of prior art disclosed after discovery deadline). As a result, the plaintiff has not
raised a genuine issue of material fact with respect to the originality of the plaintiff’s designs.
b. Spoliation of Evidence
The plaintiff next argues that the defendant should not be granted summary judgment
because Sharma’s patent agent, Seaby, failed to maintain the original drawings that Sharma
allegedly sent to Seaby in connection with the patents at issue. Pl.’s Opp’n to Def.’s Validity
Mot. at 5-6. Indeed, the spoliation of evidence can, in certain circumstances, can give rise to an
adverse inference against the party that failed to maintain the evidence. See Bolger v. Dist. of
Columbia, 608 F. Supp. 2d 10, 30 (D.D.C. 2009) (citing Mazloum v. D.C. Metro. Police Dep’t,
530 F. Supp. 2d 282, 291 (D.D.C. 2008)). Yet the “destruction of evidence, standing alone, is
[not] enough to allow a party who has produced no evidence – or utterly inadequate evidence –
in support of a given claim to survive summary judgment on that claim.” Talavera v. Fore, 648
F. Supp. 2d 118, 133-34 (D.D.C. 2009) (quoting von Muhlenbrock v. Billington, 579 F. Supp. 2d
39, 45 (D.D.C. 2008)); see also Byrnie v. Town of Cromwell, Bd. of Educ., 243 F.3d 93, 107 (2d
Cir. 2001) (observing that “[i]n borderline cases, an inference of spoliation, in combination with
‘some (not insubstantial) evidence’ for the plaintiff’s cause of action, can allow the plaintiff to
survive summary judgment (citing Kronish v. United States, 150 F.3d 112, 126 (2d Cir. 1998)).
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In this case, the plaintiff has presented almost no evidence that the patents at issue are
invalid, beyond the evidence of prior art disclosed after the discovery deadline. See generally
Pl.’s Opp’n to Def.’s Validity Mot. In addition, although the plaintiff suggests that Seaby had an
obligation to preserve Sharma’s drawings because patent litigation is always a possibility, it has
cited no authority for this blanket proposition. See Pl.’s Opp’n to Def.’s Validity Mot. at 5; see
also Kronish, 150 F.3d at 126 (noting “for an adverse inference to arise from the destruction of
evidence, the party having control over the evidence must have had an obligation to preserve it at
the time it was destroyed”). Furthermore, the only explanation offered for how these records
would have supported its invalidity defense is the plaintiff’s vague speculation that these
materials “would help establish whether the drawings for the ornamental designs of the patents
asserted in this matter had been hand drawn by Mr. Sharma[,] or if the drawings had been made
from pre-existing sparklers already manufactured.”3 Dunne Decl. ¶ 12; see also Bolger, 608 F.
Supp. 2d at 30 (noting that for an adverse inference to be warranted, the missing evidence must
have been “‘relevant’ to the claims or defenses of the party that sought the discovery of the
spoliated evidence, to the extent that a reasonable factfinder could conclude that the lost
evidence would have supported the claims or defense of the party that sought it”). Thus, the
plaintiff has not shown that Seaby’s alleged failure to maintain Sharma’s original drawings
warrants the withholding of summary judgment on the issue of validity.
3
Plaintiff’s counsel states in this declaration that “Sharma testified that the drawings for [the ’207
Patent] were not exact to his drawings because of production issues. This suggests the patent
drawings were made from pre-existing sparklers, and not photocopies of bent wire with sparkler
materials.” Dunne Decl. ¶ 11. How the former “suggests” the latter, however, is simply not clear
and is not explained by counsel.
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c. Inventorship of the Defendant’s Patented Designs and the Plaintiff’s Failure to Comply
With the Court’s Scheduling Orders
Lastly, the plaintiff contends that the design patents are not valid because Sharma, the
defendant’s principal, did not, in fact, invent those designs. Pl.’s Opp’n to Def.’s Validity Mot.
at 6-7. In support of that contention, the plaintiff has submitted statements from two employees
of Octavius Hunt Limited (“Octavius”), a British company that markets decorations. See
generally id., Statement of Kerry Healy; id., Statement of Nick Dale. Both of these individuals
state that long before Sharma obtained his design patents, Octavius had been purchasing
numerical and star-shaped sparklers from a Czech company, Drutep. Id. Statement of Kerry
Healy ¶ 2; id., Statement of Nick Dale ¶ 2. Sharma testified that Drutep was the first company
he used to manufacture numerical sparklers. Dunne Decl., Ex. B.
There is no dispute that the plaintiff did not disclose any evidence regarding Drutep’s sale
of numerical and star-shaped sparklers prior to the March 26, 2010 discovery deadline. See
Def.’s Validity Mot. at 4-5; see generally Pl.’s Opp’n to Def.’s Validity Mot. Indeed, the
correspondence submitted by the parties makes clear that the plaintiff disclosed these materials,
along with all its evidence concerning numerical and star-shaped sparklers sold in Europe, China
and Australia, for the first time with its final contentions on April 12, 2010, Def.’s Validity Mot.,
Ex. 9, just two weeks before the deadline for filing motions for summary judgment, Minute
Order (Jan. 20, 2010). This late disclosure occurred despite the fact that the defendant had
issued document requests and interrogatories to the plaintiff in December 2008 requiring the
disclosure of all evidence of prior art, Def.’s Validity Mot., Ex. 3, 4.
It is also clear that the plaintiff’s failure to disclose this evidence prior to the close of
discovery resulted from the plaintiff’s lack of diligence in investigating its case. In its October
2008 amended answer to the defendant’s counterclaims, the plaintiff challenged the validity of
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the defendant’s patents and expressly alleged that the defendant had failed to disclose evidence
of prior art to the PTO. See Am. Answer to Countercl. ¶¶ 31, 43-48. By that time, plaintiff’s
counsel must have been aware of some evidentiary basis for these allegations. See FED. R. CIV.
P. 11(b)(3) (stating that by presenting a pleading, motion or other paper to the court, the attorney
certifies that to the best of his or her knowledge, formed after a reasonable inquiry, the factual
contentions “have evidentiary support or, if specifically so identified, will likely have evidentiary
support after a reasonable opportunity for further investigation or discovery”). Furthermore, the
plaintiff was aware of Drutep’s role in the manufacture of the defendant’s sparklers by at least
December 2009, when it deposed Sharma. Pl.’s Opp’n to Def.’s Validity Mot., Ex. B.
Nonetheless, the plaintiff did not disclose any evidence regarding Drutep’s alleged prior
production of numerical and star-shaped sparklers until months later, on the eve of the summary
judgment deadline set by the court. Def.’s Validity Mot., Ex. 9.
The only excuse offered by the plaintiff for this delay is the suggestion, made in the
declaration of plaintiff’s counsel, that the investigation that ultimately led to the discovery of this
prior art was sparked by the revelation in January 2010 that Seaby had discarded Sharma’s
original drawings. Dunne Decl. ¶¶ 9-13, 18. Yet the plaintiff has not explained how this
revelation suddenly prompted it to investigate the issue of prior art or, more importantly, how it
excuses its failure to that point to investigate the validity of the patents. See id. After all, the
plaintiff had raised the issue of invalidating prior art more than a year earlier in October 2008.
Answer to Countercl. ¶ 30. Indeed, although counsel exchanged numerous e-mails regarding the
plaintiff’s belated document production, at no point in these contemporaneous discussions did
plaintiff’s counsel cite Seaby’s destruction of evidence as a justification for the lateness of its
16
disclosures.4 See Def.’s Validity Mot., Ex. 9, 10; Dunne Decl., Ex. F; Def.’s Opp’n to Pl.’s Mot.
for Leave to Amend, App. G, H. In sum, counsel’s reliance on Seaby’s purported failure to
maintain records appears to be a post hac rationalization and does not excuse counsel’s lack of
diligence.
Moreover, even if there were some justification for the lateness of the plaintiff’s
investigation or its failure to complete discovery before the discovery deadline, that still would
not excuse the plaintiff’s failure to produce any evidence regarding this prior art until after the
close of discovery. Had this evidence been produced on a rolling basis, at least some of the
prejudice to the defendant might have been avoided, as the defendant would have been able to
obtain some discovery on these new materials. Instead, in an act reeking of gamesmanship and
bad faith, the plaintiff waited until discovery closed to produce all of this evidence of prior art in
a single burst. Def.’s Validity Mot., Ex. 9.
In apparent recognition of the prejudice caused by this conduct, plaintiff’s counsel agreed
that the plaintiff would not rely on any of the evidence disclosed after the discovery deadline at
summary judgment, so that the parties could keep their deadline for filing motions for summary
judgment. Def.’s Validity Mot., Ex. 10; Dunne Decl. ¶ 21 (“During the call . . . referred to by
[the plaintiff], I indicated . . . that I would not use new material disclosed after the close of
discovery for summary judgment inasmuch as counsel for [the defendant] had stated [that they]
would be prejudiced by the use of such material disclosed after the close of discovery.”).
Nonetheless, the plaintiff reneged on that agreement by relying on that evidence in opposing the
4
Instead, plaintiff’s counsel simply asserted, without any explanation or limitation, that the
plaintiff would continue to investigate its case and supplement its responses to the defendant’s
discovery requests as needed, regardless of the discovery deadline. Dunne Decl., Ex. F; Def.’s
Opp’n to Pl.’s Mot. for Leave to Amend, Ex. H.
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defendant’s motion for summary judgment on the issue of validity. Pl.’s Opp’n to Def.’s
Validity Mot. at 5-6.
At the very least, the conduct of plaintiff’s counsel constitutes a clear violation of the
court’s scheduling order, which required the parties to complete discovery by March 26, 2010.5
Minute Order (Jan. 20, 2010). Counsel’s decision to disregard the court-ordered discovery
deadline has clearly prejudiced the defendant, which prepared its final contentions and motions
for summary judgment without having had the opportunity to obtain discovery regarding this
newly disclosed evidence.
Federal Rule of Civil Procedure 16(f) provides that “[o]n motion or on its own, the court
may issue any just orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party or
its attorney . . . fails to obey a scheduling or other pretrial order.” FED. R. CIV. P. 16(f)(1)(C).
Rule 37(b)(2)(A), in turn, expressly authorizes the court to impose the following sanctions:
(ii) prohibiting the disobedient party from supporting or opposing designated
claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order to
submit to a physical or mental examination
Id. 37(b)(2)(A)(ii)-(vii).
Accordingly, the Federal Rules authorize the court to dismiss the plaintiff’s claims in
whole or part or prohibit the plaintiff from relying on the evidence produced after the close of
5
As previously noted, under the court’s original scheduling order, discovery was scheduled to
close on January 26, 2010, Minute Entry (Nov. 3, 2008), and was extended to March 26, 2010 at
the parties’ request, Minute Order (Jan. 26, 2010). Although the request to extend the discovery
deadline was filed by the parties jointly, see Joint Stipulation to File Request for an Extension of
Present Schedule, the plaintiff does not dispute that this request was made at the plaintiff’s
insistence, see Pl.’s Statement of Material Facts ¶ 6; Def.’s Validity Mot. at 4.
18
discovery as a sanction for its failure to comply with the court’s scheduling order.6 Id.; see also,
e.g., Tex. Instruments Inc. v. Powerchip Semiconductor Corp., 2007 WL 1541010, at *12
(S.D.N.Y. May 24, 2007) (precluding the defendant from relying on documents produced after
the close of discovery pursuant as a sanction under Rule 16(f)). The court, however, is not
persuaded that such severe sanctions are appropriate here, despite the plaintiff’s abusive conduct.
The Supreme Court has “emphasized the importance to the public at large of resolving questions
of patent validity.” Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 100 (1993) (citing
Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 330 (1971)). The evidence of
prior art belatedly disclosed by the plaintiff has the potential at least to weigh heavily in the
court’s validity analysis. See, e.g., Pl.’s Opp’n to Def.’s Validity Mot., Statement of Kerry Healy
¶ 2. Furthermore, the court is confident that less severe sanctions can minimize the unfair
prejudice that would result from allowing the plaintiff – and the court – to rely on this evidence.
See Trakas v. Quality Brands, Inc., 759 F.2d 185, 187 (D.C. Cir. 1985) (noting that dismissal of
a case “is a sanction of last resort to be applied only after less dire alternatives have been
explored without success”); C.K.S. Eng’rs, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202,
1209 (7th Cir. 1984) (noting that the imposition of less severe sanctions, such as the award of
attorney’s fees, may be “sufficiently effective in alerting an irresponsible litigant to the
seriousness of his or her neglect, protecting the interests of the other litigants in the case, and
vindicating the integrity of the court”).
6
The court also possesses the inherent authority to impose similar sanctions based on the plaintiff’s
bad faith conduct in waiting until just after the close of discovery to produce this evidence of
prior art, agreeing not to use that information on summary judgment and then simply disregarding
that agreement. See Webb v. Dist. of Columbia, 146 F.3d 964, 971 (D.C. Cir. 1998) (observing
that “[a] district court may order sanctions, including a default judgment, for misconduct either
pursuant to Rule 37(b)(2) of the Federal Rules of Civil Procedure . . . or pursuant to the court’s
inherent power to ‘protect [its] integrity and prevent abuses of the judicial process’” (quoting
Shepherd v. Am. Broad. Cos., Inc., 62 F.3d 1469, 1474 (D.C. Cir. 1995))).
19
Conversely, simply staying the proceedings to provide the defendant an opportunity to
obtain additional discovery is not an acceptable alternative. The defendant, after all, has already
expended substantial resources in preparing final contentions and motions for summary
judgment, which will likely have to be amended to account for any newly discovered
information. Furthermore, allowing additional discovery will inevitably delay the resolution of
this matter. Finally, staying the proceedings without any additional sanction provides no
disincentive for parties who might otherwise disregard the court’s scheduling orders. See Smith
v. Georgetown Univ., 1993 WL 18927, at *1 n.* (D.D.C. Jan. 14, 1993) (“Plaintiffs sought no
enlargement of time from the court for responding to the discovery requests, and sought no
protective order. They cannot simply ignore discovery requests and deadlines, and not incur
sanctions.”).
In light of these considerations, the court will permit the plaintiff to rely on this belatedly
disclosed evidence of prior art and denies without prejudice the defendant’s motion for summary
judgment on the validity of its design patents. See 10A FED. PRAC. & PROC. § 2718 (observing
that “it is within the trial court’s discretion to deny a motion for summary judgment without
prejudice to its being renewed at a later time and the court may grant a renewed motion upon a
showing of good cause”). In addition, the court shall re-open discovery to the defendant for a
period of a ninety days to permit the defendant an opportunity to obtain discovery regarding the
plaintiff’s newly disclosed evidence. See In re Breast Implant Cases, 942 F. Supp. 958, 961
(S.D.N.Y. 1996) (“In cases where additional information is required to adequately pass on a
motion for summary [judgment], the practice has been to deny the motion, with leave to renew,
allowing further discovery and development of evidence.”).
20
Plaintiff’s counsel7 shall, however, pay the reasonable attorney’s fees and costs incurred
by the defendant in revising its final contentions (including the fees and costs associated with
preparing new expert reports) and amending and re-filing its motions for summary judgment
(including any oppositions and replies) to address the evidence of prior art disclosed after the
discovery deadline.8 See FED. R. CIV. P. 16(f)(2) (providing that “the court must order the party,
its attorney, or both to pay the reasonable expenses – including attorney’s fees – incurred
because of any noncompliance with this rule, unless the noncompliance was substantially
justified or other circumstances make an award of expenses unjust”); see also Burton v. R.J.
Reynolds Tobacco Co., 203 F.R.D. 636, 641-42 (D. Kan. 2001) (sanctioning plaintiff’s counsel
for failing to comply with the court’s scheduling orders and ordering plaintiff’s counsel to pay
attorney’s fees, witness fees and costs associated with re-deposing witnesses based on evidence
disclosed after the discovery deadline). Plaintiff’s counsel shall also pay all reasonable
attorney’s fees and costs incurred by the defendant in re-deposing any witnesses who have
already been once deposed, insofar as additional depositions are needed to address the newly
disclosed evidence. See Burton, 203 F.R.D. at 641-62.
7
To date, the court has been presented with no evidence that the plaintiff shares responsibility for
the abusive conduct of its counsel. See Seismic Int’l Research Corp. v. South Ranch Oil Co., Inc.,
793 F.2d 227, 230 (10th Cir. 1986) (noting that “a court should, when possible, enter sanctions
against counsel, and not the parties they represent” when imposing sanctions pursuant to Rule
16(f)).
8
The defendant shall submit a detailed accounting of these expenses, supported by
contemporaneous time records, one week after any renewed motions for summary judgment have
been fully submitted. This accounting shall be sufficiently detailed to permit the court to
ascertain that the expenses resulted from the plaintiff’s disclosure of evidence after the discovery
deadline.
21
B. The Court Denies Without Prejudice the Parties’ Cross-Motions
on the Issue of Infringement
In addition to the defendant’s motion for summary judgment on the issue of validity, the
parties have also filed cross-motions on the issue of infringement. See generally Def.’s Mot. for
Summ. J. that the Pl.’s Star Sparklers Infringe Patent D451,164; Def.’s Mot. for Summ. J. that
the Pl.’s Numerical Sparklers Infringe Patent D447,207; Def.’s Mot. for Summ. J. that the Pl.’s
Infringement of Patent D451,164 and D447,207 Has Been Willful; Pl.’s Mot. for Summ. J. for
Non-Infringement. Although it may be possible for the court to resolve the issue of infringement
before addressing the validity of the defendant’s design patents, see Pandrol USA, LP v. Airboss
Ry. Products, Inc., 320 F.3d 1354, 1364-65 (Fed. Cir. 2003) (observing that “patent infringement
and invalidity are separate and distinct issues”), the court must address the validity issue
regardless of its ruling on the issue of infringement, see Sinclair & Carroll Co. v. Interchemical
Corp., 325 U.S. 327, 330 (1945) (stating that the lower courts should inquire fully into the
validity of the patent even if it is possible to dispose of the case on the ground of non-
infringement). Furthermore, addressing the issue of infringement before resolving the question
of validity may render the latter an advisory ruling. See Altvater v. Freeman, 319 U.S. 359, 363
(1943) (“To hold a patent valid if it is not infringed is to decide a hypothetical case.”); see also
Ditto, Inc. v. Minn. Min. & Mfg. Co., 336 F.2d 67, 69 (6th Cir. 1964) (“The validity question is
of greater public importance than the infringement issue and it is usually the better practice to
first consider the validity issue.”). Finally, although the issues of patent validity and
infringement are separate and distinct, the possibility remains that in the course of investigating
the former issue, additional evidence may be uncovered relevant to the latter.
Thus, rather than addressing the issues of validity and infringement in a piecemeal
fashion, the court denies without prejudice the parties’ cross-motions for summary judgment on
22
the issue of infringement with leave to re-submit these motions following the close of the
supplemental period of discovery ordered above.
C. The Court Grants in Part and Denies in Part the Plaintiff’s Motion
for Leave to Amend Its Pleadings
1. Legal Standard for Amending Pleadings Pursuant to Rule 15(a)
Rule 15(a) governs the amendment of pleadings, stating generously that “[t]he court
should freely give leave when justice so requires.” FED. R. CIV. P. 15(a). Courts shall
“determine the propriety of amendment on a case by case basis.” Harris v. Sec’y, U.S. Dep’t of
Veterans Affairs, 126 F.3d 339, 344 (D.C. Cir. 1997). Whether to grant or deny leave to amend
rests in the district court’s sound discretion. Foman v. Davis, 371 U.S. 178, 182 (1962). Such
discretion is not unlimited, however, for it is an “abuse of discretion” when a district court denies
leave to amend without a “justifying” or sufficient reason. Id. at 181, 182; Firestone v.
Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996). Reasons that justify a denial of leave to amend
include undue delay, bad faith, repeated failure to cure a pleading’s deficiencies, undue prejudice
to the opposing party, and futility of amendment. Foman, 371 U.S. at 182; Richardson v. United
States, 193 F.3d 545, 548-49 (D.C. Cir. 1999); Caribbean Broad. Sys., Ltd. v. Cable & Wireless
P.L.C., 148 F.3d 1080, 1084 (D.C. Cir. 1998).
Courts require a sufficient basis for denial of leave to amend because the purpose of
pleading under the Federal Rules of Civil Procedure is “to facilitate a proper decision on the
merits,” not to set the stage for “a game of skill in which one misstep by counsel may be decisive
to the outcome.” Foman, 371 U.S. at 181-82 (citing Conley v. Gibson, 355 U.S. 41, 48 (1957)).
Under Rule 15(a), the non-movant generally carries the burden in persuading the court to deny
leave to amend. Cf. Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 n.2 (5th Cir. 1981)
(endorsing exceptions to the general rule that the burden of persuasion rests with the non-movant
23
in the Rule 15(a) context); see also Gudavich v. District of Columbia, 22 F. App’x 17, 18 (D.C.
Cir. 2001) (noting that the non-movant “failed to show prejudice from the district court’s action
in allowing the [movant’s] motion to amend”) (unpublished decision).
2. The Plaintiff’s Motion for Leave to Amend Is Unduly Delayed and
Would, if Granted, Unfairly Prejudice the Defendant
The plaintiff has moved to amend its pleadings to include additional affirmative defenses
concerning the alleged invalidity of the defendant’s design patents. See Pl.’s Mot. for Leave to
Amend, Proposed Am. Compl. & Am. Answer ¶¶ 23-30, 36-46. The plaintiff also seeks leave to
supplement its pleadings with a claim of inequitable conduct, based on allegations that the
defendant and Sharma withheld information regarding prior art when they applied for the ’207
and ’164 Patents. Id. ¶¶ 56-69. Both the newly proposed claim and the proposed defenses are
based on the evidence of prior art disclosed after the close of discovery. See id. ¶¶ 23-30, 36-46,
56-69; see also supra Part III.A.2.c. Lastly, the plaintiff seeks leave to add Sharma and an entity
known as Samrok Canada, Inc. as defendants in this action. Pl.’s Mot. for Leave to Amend,
Proposed Am. Compl. & Am. Answer ¶¶ 3-4.
The plaintiff contends that the court should grant it leave to amend its pleadings because
it requested leave to amend promptly after receiving the new evidence of prior art, the new
evidence is crucial to its defense against the infringement claims and the public interest demands
a full exploration into the validity of a patent.9 Pl.’s Mot. for Leave to Amend at 4; Pl.’s Reply
in Support of Pl.’s Mot. for Leave to Amend at 2-3. The plaintiff also requests that the court re-
open discovery for a period of ninety days to permit the parties to obtain additional discovery
regarding these new allegations. Id. at 3. The defendant responds that the plaintiff’s motion
9
The plaintiff also contends, as it did in its opposition to the defendant’s validity motion, that its
discovery of this new evidence was delayed by Seaby’s allegedly wrongful destruction of certain
materials sent to him by Sharma. Pl.’s Mot. for Leave to Amend at 4. As previously discussed,
however, this contention is not credible. See supra Part III.A.2.c n.3.
24
should be denied because the plaintiff was not diligent in investigating these new allegations and
acted in bad faith in failing to disclose any evidence regarding these new allegations during
discovery. Def.’s Opp’n to Pl.’s Motion for Leave to Amend at 3-5. In addition, the defendant
asserts that it would be prejudiced by this last minute addition of new allegations. Id. at 7.
As noted above, both undue delay and prejudice justify the denial of leave to amend. See
Foman, 371 U.S. at 178; Richardson, 193 F.3d at 548-49; see also 6 FED. PRAC. & PROC. § 1488
(noting that “courts have not allowed amendments to be made that seek to add new claims or
theories, parties, or new defenses or counterclaims to the action when allowing the amendment is
deemed to be unduly burdensome, given the stage to which the litigation has advanced”). Here,
the plaintiff’s motion for leave to amend comes after the preparation of expert reports, after the
close of discovery and after the submission of motions for summary judgment. See generally
Pl.’s Mot. for Leave to Amend. The tardiness of the plaintiff’s motion is not excused by the
plaintiff’s failure to discover evidence of prior art until after the close of discovery, for as
previously discussed, the plaintiff’s purported failure to uncover this evidence earlier in the
litigation resulted from its lack of diligence in investigating its case. See supra Part III.A.2.c.
The plaintiff’s failure to seek leave to amend until after the close of discovery and the
submission of summary judgment briefs constitutes an unjustifiable lack of diligence that plainly
weighs against granting leave to amend.
Moreover, it is clear that such a last minute amendment would, if permitted, unfairly
prejudice the defendant. Although the defendant will have an opportunity to obtain discovery
regarding the evidence of prior art disclosed after the discovery deadline, see supra Part
III.A.2.c, the addition of new parties, new defenses and new claims would necessitate yet
additional discovery and result in even more delay. See In re Vitamins Antitrust Litig., 217
25
F.R.D. 30, 33 (D.D.C. 2003) (denying the plaintiff’s motion for leave to amend, which would
have resulted in new claims that the defendant would be forced to deal with after discovery,
because “[a]llowing the addition of this claim at this time [would] create[] an undue delay in trial
preparation and would thus be prejudicial”). This prejudice, coupled with the plaintiff’s lack of
diligence in investigating its case and seeking leave to amend its pleadings, justifies denial of the
plaintiff’s motion for leave to amend. See Acosta-Mestre v. Hilton Int’l of Puerto Rico, Inc., 156
F.3d 49, 51-52 (1st Cir. 1998) (holding that the district court did not abuse its discretion in
denying the plaintiff’s motion to amend the complaint to add an additional party because the
motion, which was filed near the close of discovery, was tardy and the plaintiff lacked any
sufficient excuse for delaying so long before moving for leave to amend); Becker v. Dist. of
Columbia, 258 F.R.D. 182, 184-85 (D.D.C. 2009) (denying the defendants’ motion for leave to
amend their answer on the grounds of undue delay because the motion came years after the filing
of the answer and after discovery had closed and motions for summary judgment had been filed);
see also Cameron v. Thornburgh, 983 F.2d 253, 258 (D.C. Cir. 1993) (affirming the district
court’s denial of a motion for leave to amend on the grounds of undue delay because leave to
amend was not sought until fifteen months after motions to dismiss had been filed);
Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., 810 F.2d 243, 247 (D.C. Cir. 1987)
(affirming the denial of a motion for leave to amend on the grounds of undue delay because the
motion came years after the plaintiff filed its first complaint and after the close of discovery and
after the court had resolved a motion for summary judgment). The court therefore denies the
plaintiff’s motion for leave to amend.10
10
The denial of the plaintiff’s motion for leave to amend does not preclude the plaintiff from
relying on the evidence of prior art disclosed after discovery to attack the validity of the
defendant’s patents. The plaintiff’s operative pleadings include an affirmative defense of
invalidity, invoking, inter alia, 35 U.S.C. § 103, prohibiting patents for inventions anticipated by
26
IV. CONCLUSION
For the foregoing reasons, the court denies without prejudice the parties various motions
for summary judgment, denies the plaintiff’s motion for leave to amend, sanctions the plaintiff’s
counsel based on his failure to abide by the court’s scheduling order and re-opens discovery for a
period of ninety days. An Order consistent with this Memorandum Opinion is separately and
contemporaneously issued this 17th day of February, 2011.
RICARDO M. URBINA
United States District Judge
prior art. Am. Answer to Countercl. ¶ 31. The evidence of prior art is plainly relevant to that
affirmative defense.
27