United States District Court, E.D. Wisconsin
MILWAUKEE ELECTRIC TOOL CORPORATION, METCO BATTERY TECHNOLOGIES LLC, AC MACAO COMMERCIAL OFFSHORE LIMITED, and TECHTRONIC INDUSTRIES CO. LTD., Plaintiffs,
POSITEC TOOL CORPORATION and POSITEC USA INC., Defendants. MILWAUKEE ELECTRIC TOOL CORPORATION, METCO BATTERY TECHNOLOGIES LLC, AC MACAO COMMERCIAL OFFSHORE LIMITED, and TECHTRONIC INDUSTRIES CO. LTD., Plaintiffs,
SNAP-ON INCORPORATED, Defendant.
Stadtmueller U.S. District Judge
these two related patent infringement actions, Defendants
seek leave to amend their answers to add defenses and
counterclaims. Defendants Positec Tool Corporation and
Positec USA Inc. (collectively, “Positec”) seek
to add allegations related to inequitable conduct by
Plaintiffs with respect to the U.S. Patent and Trademark
Office during the prosecution of the patents-in-suit.
Defendant Snap-On Incorporated (“Snap-On”) wants
to join these allegations plus a defense of patent exhaustion
based on third-party licenses. In two other related cases
involving different defendants, Plaintiffs did not oppose
similar requests for amendment. This time, however, they have
changed their tune, and they now oppose Defendants'
motions for leave to file amended answers. For the reasons
stated below, the Court will grant Defendants' motions.
15(a)(2) of the Federal Rules of Civil Procedure provides
that courts should freely grant leave to amend a pleading
where justice so requires. See Fed.R.Civ.P. 15(a)(2);
Foman v. Davis, 371 U.S. 178, 182 (1962). Indeed,
“[a]s a general rule, district courts should liberally
grant leave to amend pleadings.” Mulvania v.
Sheriff of Rock Island County, 850 F.3d 849, 854 (7th
Cir. 2017). That said, courts enjoy discretion to deny such
leave “where there is undue delay, bad faith, dilatory
motive, repeated failure to cure deficiencies, undue
prejudice to defendants, or where the amendment would be
futile.” Arreola v. Godinez, 546 F.3d 788, 796
(7th Cir. 2008).
urge the Court to deny the motions because Defendants'
requests are untimely and futile. Neither contention has
merit. First, Plaintiffs claim that Snap-On's motion was
untimely even when it was first filed prior to the long stay
in this matter. Snap-On originally filed this motion, in
materially identical form, on September 25, 2015, after
summary judgment briefing was complete. Plaintiffs assert
that Snap-On knew of the facts underlying these proposed
amendments since mid-2015 at the latest, so its pre-stay
filings alone reflect dilatoriness worthy of denying its
motion. As for Positec, Plaintiffs note that it never filed a
pre-stay motion to amend their answer at all, making the
present motion even less timely than Snap-On's.
Plaintiffs also contend that Defendants' motions, which
were filed in mid-April 2017, are untimely when considered
against the expeditious progress of litigation since the
Court lifted its stay in December 2016.
the Court appreciates that these cases are beginning to enter
their later stages, the delays Plaintiffs cite do not warrant
denial of leave to amend. Only in especially egregious cases
should delay, standing alone, require such a result.
Feldman v. Allegheny Int'l, Inc., 850 F.2d 1217,
1225 (7th Cir. 1988); Perrian v. O'Grady, 958
F.2d 192, 195 (7th Cir. 1992). More often, an initial delay
in seeking amendment justifies denial of leave where it would
work prejudice against the other parties or cause
unacceptable additional delay in the ultimate resolution of
the case. See Dubicz v. Commonwealth Edison
Co., 377 F.3d 787, 793 (7th Cir. 2004); McCoy v.
Iberdrola Renewables, Inc., 760 F.3d 674, 687 (7th Cir.
2014) (“The underlying concern is the prejudice to the
[party] rather than simple passage of time.”).
instance, in the related case involving Defendant Chervon
North America, Inc. (“Chervon”), Plaintiffs
recently sought to join Chervon's foreign parent
corporation. Milwaukee Elec. Tool Corp. v. Chervon N.
Am., Inc., Case No. 14-CV-1289-JPS, 2017 WL 1322183, at
*2 (E.D. Wis. Apr. 10, 2017). The Court denied Plaintiffs
leave to do so, observing that Plaintiffs not only knew from
the very start of the litigation that Chervon's parent
might be joined as a defendant, but also that joining a
foreign defendant at this time would substantially delay
discovery and trial. Id. Such added delay was
inconsistent with the Court's prerogative to move these
now nearly three-year-old cases to a final resolution.
contrast, here Defendants' proposed amendments would not
cause any disruption to the Court's schedule. In fact,
because Chervon has already been granted leave to pursue a
similar inequitable conduct defense, discovery on these
matters is ongoing. Thus, this is not an eleventh-hour
attempt to change the scope of the litigation or delay trial.
See Perrian, 958 F.2d at 195. Instead, it is simply
a matter of whether Snap-On and Positec are allowed to join
in the discovery efforts on these issues. Allowing them to so
participate will not force Plaintiffs to scramble to combat
new allegations, since the inequitable conduct allegations
are already being litigated by Chervon. See Select
Creations, Inc. v. Paliafito Am., Inc., 830 F.Supp.
1213, 1217 (E.D. Wis. 1993) (“The proscribed prejudice
is that which ‘outweighs the moving party's right
to have the case decided on the merits.'”) (quoting
Alberto-Culver Co. v. Gillette Co., 408 F.Supp.
1160, 1161-62 (N.D. Ill. 1976)).
while Plaintiffs raise the specter that Snap-On's patent
exhaustion defense, which Chervon has not raised, will
require additional time and discovery, it does not offer
sufficient details to permit the Court to draw such a
conclusion. J.P. Morgan Chase Bank, N.A. v. Drywall Serv.
& Supply Co., 265 F.R.D. 341, 352 (N.D. Ind. 2010)
(rejecting conclusory assertions that opposing party will be
prejudiced by a need for time-consuming new discovery). Nor
can Plaintiffs credibly contest that they have known the
factual bases for the patent exhaustion defense-whether or
not they agree with them-since Snap-On filed first filed this
motion in September 2015. In this way, this case is different
from Inline Connection Corp. v. AOL Time Warner
Inc., 237 F.R.D. 361, 366 (D. Del. 2006), relied on by
Plaintiffs, where the court refused the defendants leave to
join entirely new factual claims to support novel defense
theories. In sum, viewed in context, it does not appear that
Defendants' attempt to join these defenses at this time
bespeaks “carelessness or gamesmanship.” Feldman,
850 F.2d at 1225; see also Mulvania, 850 F.3d at 855
(affirming district court's denial of leave to add a
claim that was strategically delayed for years into the
litigation). Accordingly, untimeliness is not an obstacle to
next argue that Snap-On's proposed patent exhaustion
defense is futile.Plaintiffs' complaint appears to
be that Snap-On needed to plead more-or more credible-facts
supporting its position, but the Court finds, accepting
Snap-On's allegations as true for present purposes, that
its proposed amendments contain sufficient factual matter to
state a patent exhaustion defense.
patent exhaustion doctrine provides that “the initial
authorized sale of a patented item terminates all patent
rights to that item.” Quanta Computer, Inc. v. LG
Elecs., Inc., 553 U.S. 617, 625 (2008). This defense
requires that (1) the sale be authorized by the patent holder
and (2) the product sold must embody essential features of
the patented invention and must have as “their only
reasonable and intended use. . .to practice the
patent.” Id. at 631, 636 (citing United
States v. Univis Lens Co., 316 U.S. 241, 249-51
(1942)). Snap-On says that Plaintiffs' rights under the
patents-in-suit were exhausted as to certain accused products
because the products' batteries were sold to them by Moli
under a licensing agreement with Plaintiffs. Plaintiffs deny
that such an agreement exists, arguing that the contract they
have with Moli does not allow it to sell the patented
inventions, only the lithium-ion cells which form a component
part of the inventions. Moreover, Plaintiffs claim that Moli
eventually assigned all of its rights in the patents-in-suit
to Plaintiffs. Snap-On disagrees with Plaintiffs'
characterization of the agreement and maintains that the
contract at issue authorizes Moli to sell Plaintiffs'
battery packs-not just the lithium-ion cells
therein-notwithstanding the later assignment of rights,
thereby raising a plausible inference of exhaustion.
facts as Snap-On pled them, the Court must agree. Whatever
the merit of Plaintiffs' interpretation of its contract
with Moli, Snap-On's view is, at a minimum, plausible.
This is enough to pass the pleading stage. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). Indeed, when the
Seventh Circuit affirms a decision to deny leave to amend on
futility grounds it usually involves much more obvious
pleading failures than any Snap-On may have committed.
See, e.g., McCoy, 760 F.3d at (noting obvious
defects in certain proposed contract and prima-facie tort
claims, like failure to allege any breach); Gandhi v.
Sitara Capital Mgmt., LLC, 721 F.3d 865, 870
(7th Cir. 2013) (proposed fraud claim was futile because,
despite having the benefit of substantial discovery, the
plaintiffs could not identify with sufficient particularity
the substance of the purported misrepresentations). Thus, the
Court concludes that Defendants offer non-futile defenses and
counterclaims that are not so untimely as to justify denial
of leave to join them in these suits. As a result, the Court
will grant Defendants leave to amend their answers.
IT IS ORDERED that the following motions for leave to file
amended answers be and the same are hereby GRANTED:
14-cv-1295, Docket #125; and