Razor USA LLC v. DGL Grp., Ltd.
| Decision Date | 02 July 2020 |
| Docket Number | Civil Action No. 19-12939 (JMV) |
| Parties | RAZOR USA LLC and SHANE CHEN, Plaintiffs, v. DGL GROUP, LTD, Defendant. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
This is a patent infringement case. Before the Court is Defendant DGL Group, LTD.'s motion for leave to amend its invalidity contentions. Plaintiffs, Razor USA LLC and Shane Chen, oppose the motion. No oral argument is necessary. For the reasons stated below, the motion is GRANTED.
This infringement case involves patents related to two-wheeled electric vehicles commonly known as "hoverboards." Plaintiff Shane Chen ("Chen") is the owner of the patents at issue. Plaintiff Razor USA LLC (referred to jointly with Chen as "Razor" or "Plaintiffs") is the exclusive licensee. Reissue Patent No. RE46,964 (the "RE964 Patent") is one of the patents in suit. It is a reissue of U.S. Patent No. 8,738,278 (the "'278 Patent").
The '278 Patent had been issued on May 27, 2014. In May 2016, Chen filed an application with the U.S. Patent and Trademark Office ("USPTO") requesting reissue of the '278 Patent. During the reissue prosecution proceedings before the USPTO, Chen also filed additional continuation reissue applications seeking multiple reissue patents.1 The '278 Patent reissued as the RE964 Patent on July 24, 2018.2 Other reissue applications from the '278 Patent remained pending before the USPTO. (Pl.'s Letter Br. at 3.)3
On May 24, 2019, Razor filed its Complaint asserting that DGL infringed its RE964 Patent. Razor did not assert the '278 Patent. The initial scheduling conference was held on September 18, 2019, and an initial scheduling order was entered on September 19, 2019. Fact discovery is scheduled to close on October 15, 2020.
On October 2, 2019, Razor served its Infringement Contentions4 on DGL. According to DGL, Razor identified claims from the RE964 Patent, but did not assert any claims from the '278 Patent. DGL served its Invalidity Contentions5 on Razor on November 20, 2019.
In late December, Chen sent cease and desist letters to DGL's customersstating, among other things, that the RE964 Patent is the reissue patent of the '278 Patent, and that due to pending reissue applications, the '278 Patent had not been surrendered. According to DGL, it became aware of the letters in January 2020. DGL claims that Plaintiffs had not previously notified DGL of the pending reissue applications, nor had they apprised DGL of their theory that the '278 Patent had not been surrendered.
Having allegedly only learned of Plaintiffs' position regarding surrender of the '278 Patent in January, on February 18, 2020, DGL sent Razor its proposed amended invalidity contentions and requested Razor's consent to amend. DGL explained that if Plaintiffs' position is that the '278 Patent is not surrendered, amendment is necessary because the asserted claims of the RE964 Patent are invalid under the doctrine of statutory and/or non-statutory double patenting. (CM/ECF No. 42, Ex. H.) On February 21, Plaintiffs requested that DGL provide legal support for its double patenting theory which DGL supplied the same day. On February 25, Razor responded and declined to give consent to the amendments.
On February 27, 2020, the Undersigned held a conference and authorized briefing on the amendment issue. On March 17, 2020, DGL filed its request to amend pursuant to Local Patent Rule 3.7. DGL seeks to amend its invalidity contentions for the limited purpose of adding the defenses of statutory and/or non-statutory double patenting against the asserted claims of the RE964 Patent. DGL explained:
The grounds for the amendment is Plaintiff's position, recently expressed in connection with this litigation, that (1) at least one claim of the RE964Patent is substantially identical to at least one claim of the ['278 Patent] from which the RE964 Patent reissued, and (2) the '278 Patent was not surrendered in obtaining the RE964 Patent.
(Def.'s March 17 Letter Br. at 1.) DGL argues that leave to amend should be granted because it can demonstrate "good cause", Plaintiffs will not suffer undue prejudice, and DGL has timely filed its application for amendment.
On March 31, 2020, Razor filed opposition, arguing that DGL failed to establish "good cause" and claiming that DGL's arguments in support of amendment are based on an "incorrect" assertion—that DGL first learned of Plaintiff's position after it served its invalidity contentions. (Pl.'s Letter Br. at 1.)
"The Local Patent Rules exist to further the goal of full, timely discovery and provide all parties with adequate notice and information with which to litigate their case." King Pharm., Inc. v. Sandoz, 2010 WL 2015258, at *4 . The Patent Rules "are designed to require the parties to crystallize their theories of the case early in the litigation and to adhere to those theories once they have been disclosed." Celgene Corp. v. Natco Pharma Ltd., 2015 WL 4138982, at *4 (D.N.J. July 9, 2015). Nevertheless, the Patent Rules are not "a straightjacket into which litigants are locked from the moment their contentions are served . . . [a] modest degree of flexibility exists, at least near the outset." Astrazeneca AB v. Dr. Reddy's Labs, Inc., 2013 WL 1145359 (D.N.J. Mar. 18, 2013).
Local Patent Rule 3.7 governs requests to amend contentions. The Rule allowsfor amendments "only by order of the Court upon a timely application and showing of good cause." Id. Good cause "considers first whether the moving party was diligent in amending its contentions and then whether the non-moving party would suffer prejudice if the motion to amend were granted." Astrazeneca, 2013 WL 1145359, at *3.
Rule 3.7 provides a "non-exhaustive" list of examples that may, absent undue prejudice to the adverse party, support a finding of good cause: "(a) a claim construction by the Court different from that proposed by the party seeking amendment; (b) recent discovery of material prior art despite earlier diligent searches; (c) recent discovery of nonpublic information about the Accused Instrumentality which was not discovered, despite diligent efforts, before the service of Infringement contentions; (d) disclosure of an infringement contention by a Hatch-Waxman Act party asserting infringement . . . that requires response by the adverse party because it was not previously presented or reasonably anticipated . . . ." Id.
Courts have also considered the following in determining whether good cause exists: reason for the delay; importance of the information to be excluded; the danger of unfair prejudice; and the availability of a continuance and the potential impact of a delay on judicial proceedings. See, e.g., Int'l Development, LLC v. Simon Nicholas Richmond and Adventive Ideas, LLC, 2010 WL 3946714, at *3 (D.N.J. Oct. 4, 2010).
In sum, amendment will be permitted when there is "(1) a timely application, (2)there is a showing of good cause, and (3) the adverse party does not suffer undue prejudice." Celgene Corp., 2015 WL 4138982, at *4; see also Abraxis BioScience, LLC v. Actavis, LLC, No. 16-1925, 2017 WL 2079647, at *2 .
The Court is satisfied that DGL has been diligent and demonstrated good cause for its proposed amendments to its invalidity contentions, and that the amendments will not cause undue prejudice to Plaintiffs.
DGL claims that it did not become aware during this litigation of Chen's pending reissue applications and Plaintiffs' position on surrender until January 2020, some two months after it served its invalidity contentions, when it learned that Chen had sent letters to DGL customers. Pointing to the fact the '278 Patent is not asserted in Plaintiffs' Complaint, DGL contends that it did not elaborate on its liability theory under 35 U.S.C. § 101 in its Answer because it reasonably relied on the statutory authority that the original patent was surrendered upon the reissue of the RE964 Patent.
Plaintiffs oppose claiming that DGL's proposed amendments are not based on new information and that DGL was aware of Plaintiffs' position at the time it served its invalidity contentions. Plaintiffs rely on two letters to support their contention that DGL had knowledge: (1) an August 30, 2018 letter to DGL that the previous statements made in proceedings at the International TradeCommission ("ITC") and Federal Circuit proceedings. Finally, Plaintiffs argue that DGL was not diligent and its request to amend was not timely.
The Court finds that DGL acted diligently and has shown good cause. The letters relied upon by Plaintiffs have little, if any, relevance to DGL's request to amend. First, the August 30, 2018 letter was sent by another law firm to DGL before this litigation even began. While a footnote in the letter states "there has not been a surrender of the '278 Patent", it appears, at least from the pleadings and Plaintiffs' infringement contentions, that Plaintiffs had never taken this position in this litigation. (CM/ECF No. 45-1.) Given the complexity of statutory authority governing effect of reissue, it is reasonable, whether correct or not, for DGL to have believed that the '278 Patent had been surrendered when RE964 reissued. The reasonableness of DGL's belief is underscored by the fact that Plaintiffs did not assert the '278 Patent in the Complaint in this case. See 35 U.S.C. § 252 (); see also Pfizer Inc. v. Apotex Inc., 731 F. Supp. 2d 741, 753 n. 7 (N.D. Ill. 2010) ()
DGL's November 12, 2019 letter to Razor...
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