Transamerica Life Ins. v. Lincoln Nat. Life Ins.

• Decision Date: 05 December 2008
• Docket Number: No. C 06-110-MWB.,C 06-110-MWB.
• Citation: 590 F.Supp.2d 1093
• Parties: TRANSAMERICA LIFE INSURANCE COMPANY, Western Reserve Life Assurance Co. of Ohio, Transamerica Financial Life Insurance Company, Plaintiffs, v. LINCOLN NATIONAL LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Iowa

590 F.Supp.2d 1093

TRANSAMERICA LIFE INSURANCE COMPANY, Western Reserve Life Assurance Co. of Ohio, Transamerica Financial Life Insurance Company, Plaintiffs, v. LINCOLN NATIONAL LIFE INSURANCE COMPANY, Defendant.

No. C 06-110-MWB.

United States District Court, N.D. Iowa, Cedar Rapids Division.

December 5, 2008.

Glenn L. Johnson, Kevin H. Collins, Sarah J. Gayer, Shuttleworth & Ingersoll, Cedar Rapids, IA, James R. Myers, Ropes & Gray, LLP, Washington, DC, John K. Felter, Ropes & Gray, LLP, Boston, MA, for Plaintiffs.

Carrie Marie Raver, Dale Randall Brown, Gary C. Furst, Barnes & Thornburg LLP, Fort Wayne, IN, Denny M. Dennis, Todd A. Strother, Bradshaw Fowler Proctor Fairgrave, Des Moines, IA, for Defendant.

MEMORANDUM OPINION AND ORDER REGARDING TRANSAMERICA'S MOTIONS TO AMEND PLEADINGS

MARK W. BENNETT, District Judge.

TABLE OF CONTENTS

                I. INTRODUCTION................................................1095
                  A. Procedural Background.....................................1095
                  B. The Motions To Amend Pleadings............................1096
                II. LEGAL ANALYSIS.............................................1097
                

                A. Standards For Belated Amendments............................1097
                B. Rule 16(b) Analysis.........................................1100
                  1. Untimeliness of the proffered amendments..................1100
                  2. Diligence.................................................1100
                    a. The "inequitable conduct" claim or defense..............1101
                    b. The "patent-eligible subject matter" claim or defense...1103
                  C. Alternative Rule 15 Analysis..............................1105
                  D. Further Implications......................................1106
                III. CONCLUSION................................................1106
                

I. INTRODUCTION

A. Procedural Background

In its lengthy Markman ruling on claim construction, Transamerica Life Ins. Co. v. Lincoln Nat'l Life Ins. Co., 550 F.Supp.2d 865 (N.D.Iowa 2008), the court set out in some detail the procedural and factual background to the present litigation. The court will not repeat that background here. Rather, suffice it to say that Lincoln National Life Insurance Company (Lincoln) is the assignee of the patent-in-suit, United States Patent No. 7,089,201 B1 (the '201 patent), which is entitled "METHOD AND APPARATUS FOR PROVIDING RETIREMENT INCOME BENEFITS." On August 8, 2006, Transamerica¹ filed a Complaint For Declaratory Judgment (docket no. 1) initiating this action. In its Complaint, Transamerica asserts, in essence, that it is not infringing the '201 patent by selling various annuity product contracts. In contrast, in an Answer To Plaintiffs' Complaint And Patent Infringement Counterclaim (docket no. 14), filed December 29, 2006, Lincoln seeks declarations that the '201 patent is not invalid and that Transamerica is infringing it. Lincoln also seeks damages for infringement, injunctive relief from such infringement, and reasonable attorney fees for litigating this matter. Trial in this matter is currently set to begin on February 2, 2009.

In its original Complaint, Transamerica not only sought a declaration that it is not infringing the '201 patent, but also alleged that "the '201 patent is invalid under the provisions of 35 U.S.C. § 102 [anticipation], under the provisions of 35 U.S.C. § 103 [obviousness], and on other grounds." Complaint, ¶ 23. In its Answer To Lincoln National's Counterclaims (docket no. 20), filed January 23, 2006, Transamerica denied Lincoln's claims of infringement of the '201 patent, but did not assert any affirmative defenses, such as invalidity or unenforceability of the patent-in-suit. Subsequently, in its Amended And Substituted Complaint (docket no. 52) offered on November 1, 2007, the deadline to amend pleadings, and filed by leave of court on November 15, 2007, Transamerica clarified the accused products at issue and clarified that its asserted grounds for invalidity include 35 U.S.C. § 112 (inadequate specification). See Transamerica's Motion To File Amended And Substituted Complaint (docket no. 48), ¶¶ 3-4; Transamerica's Amended And Substituted Complaint (docket no. 52), ¶¶ 17 & 23. Also on November 1, 2007, Transamerica offered an Amended And Substituted Answer To Counterclaim, which asserted four "Affirmative Defenses & Other Matters": (1) Transamerica's non-infringement of the '201 patent; (2) absence of reckless or willful infringement by Transamerica; (3) Lincoln's lack of entitlement to recover for willful infringement as a matter of law; and (4) invalidity and unenforceability of the '201 patent "under the provisions of 35 U.S.C. § 102, under the provisions of 35 U.S.C. § 103, under the provisions of 35 U.S.C. § 112, and on other grounds." Amended And Substituted Answer To Counterclaim, Affirmative Defenses & Other Matters (docket no. 53). After Lincoln renewed its Answer and Counterclaim in response to the Amended And Substituted Complaint, Transamerica renewed its Answer To Counterclaim (docket no. 57) on December 6, 2007, but that Answer did not include the affirmative defenses mentioned above.

Transamerica did not seek leave to amend its pleadings again until November 5, 2008, more than a year after the November 1, 2007, deadline for amendments in the March 16, 2007, Scheduling Order (docket no. 23), almost two-and-one-half years after the suit was filed by Transamerica, more than two months after the extended August 15, 2008, deadline for the close of discovery, and two months or more after the extended September 2, 2008, deadline for dispositive motions.

B. The Motions To Amend Pleadings

This matter comes before the court pursuant to Transamerica's November 5, 2008, Motion To Further Amend Its Amended And Substituted Complaint (D.I. 52) (docket no. 121), which seeks leave to add a claim that the patent-in-suit is unenforceable owing to "inequitable conduct"; Transamerica's November 5, 2008, Motion To Further Amend Its Amended Answer To Lincoln's Counterclaim (D.I. 53) (docket no. 122), which seeks leave to add an affirmative defense of unenforceability of the patent-in-suit owing to "inequitable conduct"; and Transamerica's November 25, 2008, Motion To Amend Pleadings To Include A Defense And Claim For Declaratory Judgment Under 35 U.S.C. § 101 (docket no. 156), which seeks leave to add a claim and defense of invalidity of the patent-in-suit for failure to claim "patent-eligible subject matter." The court will refer to these motions collectively as the Motions To Amend Pleadings. The Motions To Amend Pleadings were originally assigned to Chief United States Magistrate Judge Paul A. Zoss, who had set a hearing on the November 5, 2008, motions (docket nos. 121 & 122) for December 3, 2008. However, on the undersigned's direction, and consistent with the court's statements in a status conference on November 25, 2008, the Motions To Amend Pleadings were all reassigned to the undersigned and the December 3, 2008, hearing was canceled. See Order (docket no. 163).

The Motions To Amend Pleadings have now been resisted by Lincoln and fully briefed by the parties. Although Transamerica requested oral arguments on the earlier Motions To Amend Pleadings, and the court has a strong preference for hearing oral arguments when they are requested by the parties, the court's crowded schedule has not permitted timely scheduling of such oral arguments, and the issues presented in the motions are not novel. Therefore, the motions are now deemed fully submitted on the written submissions.²

In support of each of its Motions To Amend Pleadings, Transamerica contends that new facts and new circumstances, including what Transamerica asserts is a change in the law regarding "patent-eligible subject matter" under 35 U.S.C. § 101 in the recent en banc decision from the Federal Circuit Court of Appeals in In re Bilski, 545 F.3d 943 (Fed.Cir.2008), warrant granting it leave to assert new claims and defenses. Lincoln opposes the proposed amendments on the ground that the proposed amendments are untimely and without good cause, where they are offered well after the November 1, 2007, deadline, and the circumstances demonstrate that Transamerica could reasonably have asserted these claims and defenses before the deadline for amendments.

II. LEGAL ANALYSIS

A. Standards For Belated Amendments

In patent litigation, the Federal Circuit Court of Appeals applies the law of the regional circuit in reviewing orders granting or denying leave to amend a pleading, because the question is not unique to patent law. See Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359, 1364-65 (Fed.Cir.2008); Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1124 (Fed.Cir.2004); Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., L.L.C., 350 F.3d 1327, 1342 (Fed.Cir.2003). An order granting or denying leave to amend is generally reviewed by the Eighth Circuit Court of Appeals for abuse of discretion. See MSK EyEs, Ltd. v. Wells Fargo Bank, Nat'l Ass'n, 546 F.3d 533, 545-46 (8th Cir.2008) (stating this standard for denial of leave to amend); Alternate Fuels, Inc. v. Cabanas, 538 F.3d 969, 974 (8th Cir. 2008) ("Allowing or denying the amendment of a complaint is reviewed for abuse of discretion.") (citing Hammer v. City of Osage Beach, 318 F.3d 832, 844 (8th Cir. 2003), in turn citing Bell v. Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir.1998)).³

More specifically, as the Eighth Circuit Court of Appeals has explained, "there is no absolute right to amend [pleadings]." Baptist Health v. Smith, 477 F.3d 540, 544 (8th Cir.2007); accord Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir.2008); United States ex rel. Lee v. Fairview Health Sys., 413 F.3d 748, 749 (8th Cir.2005). At a minimum, Transamerica's Motions To Amend Pleadings implicate the standards for leave to amend under both Rule 15(a) and Rule 16(b) of the Federal Rules of Civil Procedure. See Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th...