Raceway Components, Inc. v. Butler Mfg. Co.

• Decision Date: 27 February 1989
• Docket Number: Civ. A. No. 83-A147.
• Citation: 707 F. Supp. 856
• Court: U.S. District Court — Southern District of West Virginia
• Parties: RACEWAY COMPONENTS, INC., Plaintiff, v. BUTLER MANUFACTURING COMPANY, Defendant.

707 F. Supp. 856

RACEWAY COMPONENTS, INC., Plaintiff, v. BUTLER MANUFACTURING COMPANY, Defendant.

Civ. A. No. 83-A147.

United States District Court, S.D. West Virginia, Parkersburg Division.

February 27, 1989.

Edward G. Atkins, Charleston, W.Va., Howad N. Sommers, I. Morley Drucker, Beverly Hills, Cal., for plaintiff.

Frederick J. Olsson, Wayne, Pa., Daniel A. Ruley, Jr., Ruley & Everett, Parkersburg, W.Va., John J. Held, Robert C. Ryan, Gregory J. Vogler, McAndrews, Held & Malloy, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending before the Court is Defendant's motion to amend its answer to plead the affirmative defense of license to Plaintiff's patent infringement claim. The parties have submitted memoranda in support of their respective positions and the matter is mature for the Court's consideration.

Considering the nature of Defendant's motion, the Court believes that a brief procedural history is necessary to place Defendant's motion in proper perspective.

On November 15, 1983, Plaintiff filed the complaint in this action alleging, inter alia, that its patent (hereinafter '102 patent)¹ had been infringed by the Butler Series 1400 poke-thrus. Plaintiff also served upon Defendant, along with its complaint, "Plaintiff's First Set of Interrogatories" and "Plaintiff's First Request for Production." The November 15, 1983, date thus serves as the genesis for what the Court characterizes as a thorough, long, intensive, and arduous legal battle. The parties, however, were not unfamiliar with the federal court system. Prior to this litigation there was another action involving the parties relating to infringement of the '102 patent by the Series 1300 poke-thrus. The prior action reached resolution on June 28, 1982, when a license agreement was entered between the parties in settlement of the action. It is the June 28, 1982, license which the Defendant now wishes to include in its pleadings alleging that the Butler Series 1400 poke-thrus fall within the provisions of the 1982 license agreement.

As mentioned before, the parties have been involved in intensive litigation before this Court for over five years. The parties engaged in active, intense and comprehensive discovery from November 15, 1983, through January 14, 1986, including interrogatories, requests for productions of documents, depositions, and numerous motions relating to such discovery.

After the close of discovery Defendant filed four separate summary judgment motions between March 3, 1986, and March 17, 1986. Each of Defendant's motions received extensive and comprehensive briefing from the parties in support of their respective positions. On April 9, 1987, the Court denied Defendant's summary judgment motions and rescheduled several pretrial matters so that the action could proceed to trial expeditiously. This case was placed on inactive status from April 22, 1987, through November 12, 1987, due to an illness of defense counsel. Once the case was returned to active status, the case was again scheduled on the Court's trial docket.

On March 10, 1988, a telephonic pretrial conference was conducted wherein the parties discussed with the Court the extensive consolidated pretrial order the parties were to submit and the extensive proposed findings of fact and conclusions of law previously submitted. During the pretrial conference, the parties proposed that the trial of this action be bifurcated as to liability and damages. The Court approved the parties' proposal.

After a final settlement conference on March 28, 1988, the liability trial was conducted from March 29 through March 31, 1988. At the conclusion of the trial, the Court announced its decision that the Plaintiff's patent was valid and infringed. Accordingly, the Court found for the Plaintiff on the issue of liability. The Court recessed pending a hearing on the damage issue, in the event the parties were unable to agree. On April 8, 1988, the Court issued a Memorandum Opinion and Order to supplement its earlier ruling delivered from the bench.

At no time throughout any of the aforementioned stages of this intense five-year litigation did the Defendant once assert license as an affirmative defense to Plaintiff's patent infringement claim. Nor was the issue of license raised in any of the numerous motions filed by the Defendant or any memoranda submitted in support thereof.

Subsequent to the Court's ruling on the issue of liability, the parties were unable to resolve their differences with respect to the appropriate measure of damages. Accordingly, the Court entered an abbreviated Time Frame Order on September 30, 1988, scheduling trial on the issue of damages for February 28, 1989.² Prior to this Order, Defendant apparently sought additional counsel to aid in its representation in the damage phase of the litigation. On September 7, 1988, Robert C. Ryan and John J. Held from the Chicago law firm of McAndrews, Held and Malloy, Ltd., filed their statement of nonresident attorney with the Court.³ Approximately one week prior to this filing, the Defendant tendered a check to Plaintiff for payment of royalties plus interest for the Series 1400 poke-thrus. In the letter accompanying the check Defendant asserts for the first time that the June 20, 1982, license, in view of the Court's decision, covers the Series 1400 poke-thrus. Plaintiff returned the check and rejected the offered payment asserting that the Series 1400 poke-thrus are not licensed products. On October 4, 1988, the Defendant filed the motion in issue herein.

In its motion, Defendant argues that the proposed amendment, including license as an affirmative defense, is seasonable and only necessary now that the Court has held that Plaintiff's patent is valid and that the Series 1400 poke-thrus are within the scope of the '102 patent. The Defendant further contends that the amendment sought solely affects the damages and injunction issues still pending before the Court. Finally, Defendant asserts that it is entitled, via alternative pleading, to contest both the validity of the patent in issue and whether the Series 1400 poke-thrus are licensed products under the 1982 agreement.

With regard to the final argument proffered by Defendant, the Court agrees that a patent licensee has the right, by virtue of Rule 8(e)(2) of the Federal Rules of Civil Procedure and existing case law, to challenge both the validity of a licensed patent and whether the product in issue is a licensed product. The Court in Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969) explained

"On the one hand, the law of contracts forbids a purchaser to repudiate his promises simply because he later becomes dissatisfied with the bargain he has made. On the other hand, federal law requires that all ideas in general circulation be dedicated to the common good unless they are protected by a valid patent.

* * * * * *

Surely the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain. Licensees may often be the only individuals with enough economic incentive to challenge the patentability of an inventor's discovery. If they are muzzled, the public may continually be required to pay tribute to would-be monopolists without need or justification. We think it plain that the technical requirements of contract doctrine must give way before the demands of the public interest in the typical situation involving the negotiation of a license after a patent has issued."

Id. at 668, 670-71, 89 S.Ct. at 1910, 1911-12.

The Defendant's right to defend on alternative theories, however, must be considered in conjunction with the pleading requirements of Rule 8(c) of the Federal Rules of Civil Procedure and 35 U.S.C. § 282. Rule 8(c) specifically identifies license as an affirmative defense which must be specifically asserted in responsive pleadings or is deemed to be waived. Jones v. Miles, 656 F.2d 103 (11th Cir. 1981).⁴ Additionally the fact that license must be pled as an affirmative defense in patent cases is made clear by 35 U.S.C. § 282(1), which provides:

"The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded: (1) ... absence of liability for infringement. ..."

In the present case the Defendant first mentioned the affirmative defense of license more than five years after this intense litigation began, and nearly six months after the Court ruled for the Plaintiff on the issue of liability. Additionally, the Defendant was aware of the 1982 agreement for a period in excess of six years prior to the date its motion for leave to amend was filed. Given these circumstances, Defendant argues that justice requires the liberal provisions of Rule 15(a) be adhered to in allowing it to amend its pleadings to assert license as an affirmative defense. For the following reasons, the Court denies Defendant's motion.

Rule 15(a) of the Federal Rules of Civil Procedure provides in relevant part that "a party may amend his pleadings only after leave of the court" and that leave "shall be freely given when justice so requires." The decision to grant or deny leave to amend, however, is vested in the discretion of the trial judge who is familiar with the history of the proceedings and with the circumstances surrounding the party's motion. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1977). Proper grounds for denying a party's motion to amend are that the amendment would result in delay or undue prejudice to the opposing party, or that a party's delay in filing a motion is accompanied by prejudice, bad faith or futility. Island Creek Coal Co. v. Lake Shore, Inc., 832 F.2d 274, 279 (4th Cir.1987); Sweetheart Plastics, Inc. v. Detroit Forming, Inc., ...