complaint on May 13, 1996. In that Order, the Court rejected SciMed's argument that ACS lacked standing to bring suit on the Yock patents.
SciMed filed its first amended answer on June 21, 1996. The answer asserted nine affirmative defenses. In its September 6, 1996 Order, this Court struck with prejudice SciMed's Ninth Defense (that ACS should be estopped from enforcing the '395 or '233 patents based on delay in prosecution).
In March 1997, the parties stipulated to proceed in conformity with the proposed Local Rules of Practice in Patent Cases. Pursuant to the deadlines contained in the March 10, 1997 stipulation and order, ACS provided SciMed with a pleading setting forth the asserted claims of the Yock patents on February 28, 1997. On April 18, 1997, ACS was served with SciMed's Initial Disclosure of Prior Art which set forth the bases for the asserted claims of invalidity of the Yock patents.
On July 23, 1997, SciMed filed a motion for leave to amend its first amended answer. SciMed's second amended answer would add new defenses of invalidity based on obviousness and anticipation and unenforceability based on inequitable conduct before the U.S. Patent Office.
On August 18, 1997, ACS filed an opposition to defendant's motion as well as a counter-motion for judgment on the pleadings as to certain of SciMed's affirmative defenses. In addition to arguing that SciMed unduly delayed in raising its defenses, ACS's opposition argues that previous settlement agreements and consent judgments in related litigation have a preclusive effect on SciMed's proposed amended defenses. ACS argues that principles of claim and issue preclusion render SciMed's amendments futile.
In response, on September 8, 1997, SciMed filed a contingent counter-motion to stay pending arbitration. In its counter-motion, SciMed contends that, if denying its motion for leave to amend its answer would be based on interpretation of the earlier agreements between the parties, arbitration would be the proper forum in which to seek interpretation of those agreements.
B. Legal Standards
1. Leave to Amend
Federal Rule of Civil Procedure 15 governs the amendment of pleadings. The rule provides that, aside from amendment of right as provided in the Rule, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). This rule reflects an underlying policy that disputes should be determined on their merits, and not on the technicalities of pleading rules. See Foman v. Davis, 371 U.S. 178, 181-82, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). Accordingly, the court must be very liberal in granting leave to amend a complaint. Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (leave to amend granted with "extreme liberality"); Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989); Genentech, Inc. v. Abbott Laboratories, 127 F.R.D. 529, 530 (N.D. Cal. 1989) (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)).
Once a party seeking leave to amend has given a legitimate reason for amendment, the burden shifts to the party opposing amendment to demonstrate why leave to amend should not be granted. Genentech, 127 F.R.D. at 530-31 (citing Senza-Gel Corp. v. Seiffhart, 803 F.2d 661, 666 (Fed.Cir. 1986)); William W. Schwarzer et al., Federal Civil Procedure Before Trial, § 8:415, at 8-75 (1991). There are several accepted reasons why leave to amend should not be granted, including the presence of bad faith on the part of the plaintiff, undue delay, prejudice to the defendant, futility of amendment, and that the party has previously amended the relevant pleading. See Ascon Properties, 866 F.2d at 1160; McGlinchy v. Shell Chemical Co., 845 F.2d 802, 809 (9th Cir. 1988). The court has the discretion to determine whether the presence of any of these elements justifies refusal of a request to amend the pleading.
2. Judgment on the Pleadings