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Jenkins v. Smead Manufacturing Corp.

October 28, 2009

PETER JENKINS, DBA J&S SYSTEMS, INC., PLAINTIFF,
v.
SMEAD MANUFACTURING COMPANY, A MINNESOTA CORPORATION; CALIFORNIA SPACE MANAGEMENT, INC., DBA FILEFAX, A CALIFORNIA CORPORATION; AND DOES 1 THROUGH 20, INCLUSIVE, DEFENDANT.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) GRANTING PLAINTIFF'S MOTION FOR LEAVE TO FILE FIRST AMENDED COMPLAINT, and (2) DENYING AS MOOT DEFENDANTS' MOTION TO TRANSFER VENUE. [Doc. Nos. 24; 10]

This is a patent infringement and an unfair competition case. Currently before the Court are Defendants' Motion to Transfer Venue, filed on June 29, 2009, and Plaintiff's Motion to File First Amended Complaint, filed August 27, 2009. [Doc. Nos. 10; 24]. Having considered the parties' arguments, and for the reasons set forth below, the Court GRANTSPlaintiff leave to file First Amended Complaint, and DENIES AS MOOTDefendants' Motion to Transfer Venue.

BACKGROUND

Plaintiff, Peter Jenkins, dba J&S Systems, Inc. ("Jenkins") is an Ohio resident and is the holder of the U.S. Patent No. 5,902,440 ("the '440 patent"), which was issued by the United States Patent and Trademark Office ("USPTO") on May 11, 1999. The invention covered under the '440 patent is a method for making paper labels having protective transparent covering. (Complaint, Ex. A at 2.) Jenkins alleges that he "markets his patented product in the Southern District of California and elsewhere." (Id. ¶ 1.) Jenkins further alleges that Defendant Smead Manufacturing Corporation ("Smead") is currently making, advertising, and selling clear label laminates that are "nearly identical in all respects, form and function" to the invention protected by the '440 patent. (Id. ¶ 11.) Smead distributes its clear label laminate products, which are called "ColorBar" ("ColorBar product"), through independent dealers. (Id. ¶ 13; Answer ¶ 13.) Defendant California Space Management, Inc., dba FileFax ("FileFax") is one such authorized dealer, having its place of incorporation and principal place of business in California. (Complaint ¶¶ 3, 14; Answer ¶¶ 3, 14.)

On February 12, 2009, Jenkins commenced this action by filing a complaint against Smead, a Minnesota Corporation, and FileFax, a California Corporation (collectively, "Defendants") alleging three causes of action: (a) for patent infringement in violation of 35 U.S.C. §§ 271, 281, (b) for unfair competition under Ca. Bus. & Prof. Code §§ 17000 et. seq., and (c) for unfair competition under the California common law.

On June 29, 2009, Defendants filed an answer to Jenkins' complaint and a Motion to Transfer Venue. Defendants admit that the venue is proper in the Southern District of California. (Answer ¶ 6.) Defendants, however, request that the Court transfer this case to the District of Minnesota pursuant to 28 U.S.C. § 1404(a). In support of their motion, Defendants allege that: (1) Jenkins, being a resident of Ohio, has no connection to the Southern District of California except for the presence of his counsel here; (2) Smead, having its headquarters and principal place of business in Minnesota, likewise "has no employees, offices or documents" in the Southern District of California; (3) the only connection that Smead has with the Southern District of California is due to its sale of 25 units of ColorBar product there (in six separate sales) out of the 6,818 units sold nationwide; (4) FileFax, apart from accepting orders for 20 of those 25 ColorBar products in the Southern District of California, had no other involvement in their development, manufacture, or creation; and (5) all of Smead's records as well as witnesses with knowledge of the conception and development of the ColorBar product are located in Minnesota. (Answer at 2-9.)

On July 24, 2009, Jenkins filed a Motion for Extension of Time to File Response and a Motion for Expedited Limited Discovery. [Doc. No. 15]. Jenkins' primary reason for the extension and limited discovery was to "adequately respond to Defendants' pending Motion to Transfer Venue" by discovering the identities of Smead's other dealers, so that they could be joined as parties. The Court granted both motions, giving Jenkins an extension of 30 days to file his response and allowing limited expedited discovery to address the venue motion. [Doc. No. 17].

According to Jenkins, the limited discovery provided him with the identities of ninety companies that should be added as party defendants in this action (collectively, "Proposed Defendants"). As a result, Jenkins filed a Motion for Leave to File First Amended Complaint on August 27, 2009, seeking to add these Proposed Defendants as party defendants and seeking to add a cause of action for contributory infringement of the '440 patent as to each of them. Jenkins also filed his Opposition to Defendants' Motion to Transfer Venue on the same day, arguing that the convenience of the parties and witnesses did not favor a transfer to the District of Minnesota. Moreover, Jenkins argues that if the Court allows him to file an amended complaint, the addition of ninety new defendants favors keeping the case in the Southern District of California, seeing as the transfer to the District of Minnesota would be inconvenient for many of them.

LEGAL STANDARD

Federal Rule of Civil Procedure 15(a) allows a party to amend its pleading with leave of court after the period for amending as a matter of course has expired. Fed. R. Civ. P. 15(a)(2). Pursuant to Rule 15(a), "[t]he court should freely give leave when justice so requires." Id. The Ninth Circuit has construed this broadly, requiring that leave to amend be granted with "extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (citation omitted); Poling v. Morgan, 829 F.2d 882, 886 (9th Cir. 1987) (noting "the strong policy permitting amendment" (citation omitted)). This broad discretion "must be guided by the underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the pleadings or technicalities." United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981) (citing Conley v. Gibson, 355 U.S. 41, 47-48 (1957)).

The Supreme Court has articulated five factors that the court should consider in deciding whether to grant leave to amend: (1) bad faith; (2) undue delay; (3) prejudice to the opposing party; (4) futility of amendment; and (5) whether the party has previously amended its pleadings. Forman v. Davis, 371 U.S. 178, 182 (1962); see also Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003). Not all factors merit equal weight, however. Eminence Capital, 316 F.3d at 1052. "Prejudice is the 'touchstone of the inquiry under rule 15(a)'" and "carries the greatest weight." Id. (citations omitted). Nevertheless, "[f]utility of amendment can, by itself, justify the denial of a motion for leave to amend." Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995).

DISCUSSION

I. Amendment of Pleadings

Based on the information received from the expedited discovery, Jenkins seeks leave to amend his complaint to add the Proposed Defendants as party defendants and to allege a cause of action for contributory infringement of the '440 patent against each of them. Defendants Smead and FileFax oppose the motion on two grounds. First, Defendants argue that the Court should postpone ruling on Jenkins' motion to amend until after the decision on Defendants' Motion to Transfer Venue. Second, and in the ...


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