Case 1:04-cv-01436-LPS Document 225 Filed 02/17/09 Page 1 of 7 PageID #: 2998
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF DELA WARE
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`ST. CLAIR INTELLECTUAL PROPERTY
`CONSULTANTS, INC.,
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`. Plaintiff,
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`v.
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`SAMSUNG ELECTRONICS CO., LTD
`et al.,
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`Defendants.
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`Civil Action No. 04-1436-JJF-LPS
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`MEMORANDUM ORDER
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`Pending before the Court is Defendant Hewlett-Packard Company's Motion For Leave
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`To Amend Answer And Affirmative Defenses (D.I. 193). For the reasons discussed, the Court
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`will grant the Motion.
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`I.
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`Parties' Contentions
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`By its Motion, Defendant Hewlett-Packard Company ("Hewlett-Packard") requests leave
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`to amend its Answer and Affirmative Defenses to assert, among other things, a license defense
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`based upon its view that Eastman Kodak Company ("Kodak") was the owner of the patents-in­
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`suit (the "Roberts Patents") until earlier this year when Kodak executed an assignment of the
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`Roberts Patents to Plaintiff, St. Clair Intellectual Property Consultants, Inc. ("S1. Clair") in
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`connection with the settlement of litigation between Kodak and St. Clair in the California state
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`courts (the "California Action"). Hewlett-Packard contends that although it filed its Answer,
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`Affirmative Defenses and Counterclaims to St. Clair's First Amended Complaint on April 15,
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`Case 1:04-cv-01436-LPS Document 225 Filed 02/17/09 Page 2 of 7 PageID #: 2999
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`2005, this action was stayed for more than two and a half years pending resolution of the
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`California Action. Because little progress had been made with respect to discovery prior to the
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`stay and the Court has recently entered a new Scheduling Order modifying all dates in this action,
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`including the imposition of an April 6, 2009 deadline for amending the pleadings, Hewlett-
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`Packard contends that St. Clair will suffer no prejudice as a result of the proposed amendment.
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`In response, St. Clair contends that Hewlett-Packard should be denied leave to amend,
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`because the ownership and license defense it seeks to assert by the amendments is based upon a
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`January 2005 license agreement between Hewlett-Packard and Kodak (the "2005 License
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`Agreement") that Hewlett-Packard improperly withheld from production in this litigation and in
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`the California Action. St. Clair contends that it sought precisely this type of information from
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`Hewlett-Packard in two previous discovery attempts: (1) in discovery requests served in this
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`action on June 25, 2005,1 and (2) through a subpoena in the California Action served on August
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`lThe relevant discovery requests were as follows:
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`Interrogatory No.1:
`If you contend that any party, other than St. Clair, including
`but not limited to Mirage andlor Kodak, has any ownership rights
`in or owns the patents-in-suit for any reason, set forth in detail the
`bases for your contention, including the relevant factual and legal
`support, and identify with specificity all documentation and
`activities on which you base your contention, including without
`limitation, agreements, memoranda, or contracts.
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`Request No.2:
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`All documents referring or relating to your knowledge of any third
`party's, other than St. Clair's, asserted ownership rights of the
`patents-in-suit.
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`(D.I. 204 at Ex. 3-4)
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`2
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`7,2006.2 According to St. Clair, Hewlett-Packard failed to disclose the Agreement it now relies
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`upon, contending in response to the subpoena that it had "no non-privileged documents that are
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`responsive to the subpoena" with the exception of a few letters and e-mails, and failing to
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`identify any such agreement on the privilege log. (D.1. 204 at Ex. 8-9)
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`St. Clair also points out that it sought similar discovery from Kodak, who generically
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`identified an agreement with Hewlett-Packard; however, Hewlett-Packard stepped in and refused
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`to allow Kodak to produce the Agreement, claiming it was irrelevant. St. Clair also directs the
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`Court to deposition testimony of Kodak's in-house counsel stating that Kodak never offered a
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`license to Hewlett-Packard or anyone else because it had not yet perfected its title to the Roberts
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`Patents. (D.!. 204 at Ex. 13 at 43:5-16,45:2-7) According to St. Clair, it first became aware of
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`the 2005 License Agreement relied upon by Hewlett-Packard on December 15,2008, three and a
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`half years after St. Clair first served discovery requests on Hewlett-Packard seeking this type of
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`information and, to date, Hewlett-Packard has still not produced the Agreement. Based upon this
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`discovery misconduct, Kodak's confirmation that it did not own the Roberts Patents at the time
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`of any such license agreement, and Hewlett-Packard's substantial delay in asserting any license
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`and ownership defense, St. Clair contends that the Court should deny Hewlett-Packard's Motion
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`2The subpoena requested the following:
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`Request No. 12:
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`All DOCUMENTS REFERRlNG OR RELATING TO any
`agreement between any DEFENDANT IN LITIGATION or any
`CAMERA MANUFACTURER regarding or relating to the
`ROBERTS PATENTS.
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`(D.1. 204 at Ex. 7)
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`3
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`Case 1:04-cv-01436-LPS Document 225 Filed 02/17/09 Page 4 of 7 PageID #: 3001
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`To Amend.
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`In Reply, Hewlett-Packard denies any discovery misconduct in this case or the California
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`Action. Hewlett-Packard contends that its January 2005 License Agreement with Kodak is not
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`responsive to the June 2005 discovery requests because those requests pertained only to
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`ownership of the patents. Hewlett-Packard also contends that it objected to the California
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`subpoena on the grounds of overbreadth and lack of relevance and invited St. Clair to narrow the
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`request, but St. Clair never responded. Hewlett-Packard contends that it has now produced the
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`2005 License Agreement in response to a third set of discovery requests made by St. Clair on
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`October 16, 2008, as the Agreement is responsive to those requests. Hewlett-Packard
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`acknowledges that although its production was due on December 19, 2008, it did not produce the
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`2005 License Agreement until January 16,2009. Hewlett-Packard contends that this delay was
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`justified because it was required, under the terms of the 2005 License Agreement, to obtain
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`Kodak's consent to disclosure. Hewlett-Packard contends that it was on a "winter recess" from
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`December 19,2008 to January 4, 2009, it promptly contacted Kodak, and it produced the license
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`agreement the day after obtaining Kodak's consent. Because Hewlett-Packard had no obligation
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`to produce the 2005 License Agreement until December 2008, and St. Clair is not prejudiced in
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`litigating this issue, Hewlett-Packard contends that its Motion To Amend should be granted.
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`II.
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`Legal Standard
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`In pertinent part, Rule 15( a) of the Federal Rules of Civil Procedure, provides that after a
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`responsive pleading has been filed, a party may amend its pleading "only by leave of court or by
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`written consent of the adverse party; and leave shall be freely given when justice so requires."
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`Fed. R. Civ. P. J5(a). The decision to grant or deny leave to amend lies within the discretion of
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`the Court. Bjorgung v. Whitetail Resort, LP, 550 F.3d 263,266 (3d Cir. 2008). Factors the
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`Court should consider in exercising its discretion include "undue delay, bad faith, dilatory
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`motive, prejudice, and futility." In re Burlington Coat Factory Sees. Litig., 114 F.3d 1410,1434
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`(3d Cir. 1997). Delay alone, however, is an insufficient reason to deny leave to amend. Rather,
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`any delay in seeking leave to amend must be coupled with either a burden on the Court or undue
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`prejudice to the non-moving party if the amendment is allowed. See Cureton v. Nat 'I Collegiate
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`Athletic Ass 'n, 252 F.3d267, 273 (3d Cir. 2001). A party suffers undue prejudice if the proposed
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`amendment causes surprise, results in additional discovery, or adds costs to the litigation in
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`defending against the new facts or theories alleged. See id. Further, if prejudice to the non­
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`movant exists, the Court must balance the prejudice to the non-moving party against the harm to
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`the movant if leave to amend is not granted, keeping in mind that the goal is to have cases
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`decided on the merits. See e.g., Amquip Corp. v. Admiral Ins. Co., 231 F.R.D. 197 (E.D. Pa.
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`2005).
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`III. Analysis
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`Applying this legal standard to the facts and circumstances of this case, the Court
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`concludes that leave to amend should be granted to Hewlett-Packard. In reaching this
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`conclusion, the Court is not as troubled by Hewlett-Packard's delay in asserting these
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`amendments as it is by Hewlett-Packard's responses to the discovery propounded on it in this
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`case and the subpoena served on it in the California Action. This case was stayed for a
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`significant period of time, and a new Scheduling Order has been entered. Hewlett-Packard filed
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`its Motion For Leave To Amend two months after the stay was lifted and more than three months
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`before the new Scheduling Order's April 6, 2009 deadline for amending pleadings. Given that
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`this case is essentially being restarted, the impact of any delay on St. Clair is de minimis.
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`Hewlett-Packard's discovery responses, however, present a more difficult situation.
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`While the Court acknowledges that the discovery requests were technically framed around the
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`ownership issue and not any alleged license agreements, it is clear that there is significant overlap
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`between the two. For Hewlett-Packard to have a valid defense based upon its purported license
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`agreement with Kodak, Kodak would necessarily have had to have ownership rights to the
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`patents, and Hewlett-Packard would certainly have had some knowledge that Kodak at least
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`purported to own the patents. The latter arguably falls within the scope of both the discovery
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`requests in this case and the subpoena in the California Action, yet Hewlett-Packard, narrowly
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`construing the discovery requests and objecting to the subpoena on grounds of overbreadth, did
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`not disclose its purported license agreement with Kodak until January 16, 2009, in response to St.
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`Clair's October 16,2008 discovery requests? Also troubling is that Hewlett-Packard filed this
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`Motion To Amend on December 23, 2008, prior to disclosing the very document which is the
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`centerpiece of the license defense it seeks to add. Hewlett-Packard contends that it was late in
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`producing this document because it was on "winter recess" and could not obtain Kodak's consent
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`for disclosure - as required by the 2005 License Agreement - until early January. However, the
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`discovery requests were propounded by St. Clair on October 23 and due on December 19, prior
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`3Hewlett-Packard indicated in response to the 2005 discovery requests that it "will
`provide a further response to this interrogatory in the event Defendants' motion for a stay of this
`action is denied (and pursuant to a Scheduling Order by the Court)." (D.I. 204 at Ex. 5.)
`However, it is apparent to the Court from the argument raised by Hewlett-Packard in its Reply
`Brief, that its non-disclosure of the 2005 License Agreement in response to the 2005 discovery
`requests was not so much the result of its then-pending motion to stay as it was based on
`Hewlett-Packard's beliefthat the 2005 License Agreement was simply not responsive to the 2005
`discovery request. As the Court has indicated, this position is troublesome.
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`to Hewlett-Packard taking its winter recess, and therefore, while the delay is not significant,
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`Hewlett-Packard should have been able to contact Kodak for consent in a more timely fashion.
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`In the Court's view, the aforementioned discovery conduct is certainly not exemplary, but the
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`Court cannot conclude that it rises to the level of bad faith so as to preclude Hewlett-Packard
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`from being able to present its defense.
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`Perhaps more important than the characterization of Hewlett-Packard's conduct is that the
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`Court cannot, in the circumstances of this case, conclude that St. Clair will suffer undue
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`prejudice if Hewlett-Packard's Motion To Amend is granted. Because of the previous stay, this
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`case is still in its early stages, and St. Clair will have adequate opportunity to conduct discovery
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`into and defend against Hewlett-Packard's license defense.4Accordingly, the Court will grant
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`Hewlett-Packard leave to amend its Answer and Affirmative Defenses.
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`NOW THEREFORE, IT IS HEREBY ORDERED that Hewlett-Packard's Motion For
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`Leave To Amend Answer And Affirmative Defenses (D.1. 193) is GRANTED.
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`Dated: February 17,2009
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`HonorableLeonard P. Stark
`UNITED STATES MAGISTRATE JUDGE
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`4To the extent St. Clair contends that Hewlett-Packard's defense is futile in light of,
`among other things, the Kodak Confirmation, the Court notes that St. Clair's argument goes to
`the merits of the ownership defense which is the subject of pending motions to dismiss in this
`case and related cases. Accordingly, the Court declines to address futility.
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