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Illinois Tool Works, Inc. v. MOC Products Company

October 26, 2010

ILLINOIS TOOL WORKS, INC., PLAINTIFF,
v.
MOC PRODUCTS COMPANY, INC., DEFENDANT.



The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge

ORDER GRANTING DEFENDANT'S MOTION FOR AMENDED ANSWER TO COMPLAINT, AFFIRMATIVE DEFENSES, AND COUNTERCLAIMS LEAVE TO FILE FIRST (Doc. No. 44.)

Presently before the Court is Defendant and Counter-Plaintiff MOC Products Company, Inc.'s (Defendant or MOC) motion for leave to file first amended answer to complaint, affirmative defenses, and counterclaims. (Doc. No. 44 (Mot. to Amend).) Also before the court is Plaintiff and Counter-Defendant Illinois Tool Works, Inc.'s (Plaintiff or ITW) opposition (Doc. No. 55 (Opp'n)) and MOC's reply. (Doc. No. 61 (Reply).) For the reasons stated below, the Court GRANTS Defendant's motion for leave. (Doc. No. 44.)

BACKGROUND

ITW initiated a patent infringement suit against MOC on August 28, 2009. (Doc. No. 1 (Compl.).) The complaint alleged infringement of three patents, U.S. Patent No. 5,806,629 ('629 patent), U.S. Patent No. 6,112,855 ('855 patent), and U.S. Patent No. 6,073,638 ('638 patent). MOC answered the complaint on November 10, 2009. (Doc. No. 16. (Answer).) On top of denying infringement, MOC asserted seven affirmative defenses, and counterclaims for declaratory judgment of noninfringement and invalidity.

Nearly a year later, on August 27, 2010, MOC filed the present motion for leave to file first amended answer to complaint, affirmative defenses, and counterclaims. MOC wishes to assert three additional affirmative defenses: implied license, consent, and waiver. (Doc. No. 44-3 (Proposed Answer).) MOC also wishes to add a new party and assert five additional counterclaims based on breach of contract. (Proposed Answer at 8--11.)

ANALYSIS

I. Affirmative Defenses

MOC wishes to assert three new affirmative defenses: implied license, consent, and waiver. Leave to amend should be freely given "when justice so requires." Fed. R. Civ. P. 15(a)(2). But while the rule should be interpreted extremely liberally, it should not be granted automatically. Jackson v. Bank of Haw., 902 F.2d 1385, 1387 (9th Cir. 1990). A trial court may deny a motion for leave to amend based on various factors, including bad faith, undue delay, prejudice to the opposing party, and futility of amendment. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 538 (9th Cir. 1989).

ITW argues that MOC should not be allowed assert the new affirmative defenses because MOC could have asserted them back when it filed its first answer. (Opp'n at 13.) In support, ITW cites to three cases, all standing for the proposition that "late amendments to assert new theories are not reviewed favorably when the facts and the theory have been known to the party seeking amendment since the inception of the cause of action." Acri v. Int'l Assoc. of Machinists & Aerospace Workers, 781 F.2d 1393, 1398 (9th Cir. 1986). See also Royal Ins. Co. v. Amer. Rigging Co., 194 F.3d 1009, 1010 (9th Cir. 1999); Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir. 1994).

The Court does not find ITW's citations convincing; the three cited cases are factually distinguishable from the present case. In Acri, the case had already proceeded beyond the summary judgment phase. Acri, 781 F.2d 1398. And allowing amendment would have resulted in undue prejudice because it would require reopening discovery. Id. at 1399. Royal Insurance had also progressed past the summary judgment phase when the plaintiff sought leave to file a third amended complaint. Royal Ins., 194 F.3d at 1017. Moreover, the court found that the district court did not abuse its discretion in denying leave because the plaintiff had already amended its complaint twice. Id. And finally, Kaplan had also progressed beyond discovery and amendment was sought during the pendency of a summary judgment motion. Kaplan, 49 F.3d at 1370.

The present case has not progressed as far as the cited cases. The parties in this case are still conducting discovery-fact discovery does not close until December 31, 2010. And thoughts of summary judgment are barely nascent. Moreover, Acri denied amendment based on prejudice to the non-amending party. Acri, 781 F.2d at 1399. No prejudice is found here. And Royal Insurance denied leave to amend because the party seeking leave had already amended twice before. Royal Ins., 194 F.3d at 1017. This is MOC's first bite at the amendment apple.

The Court can find no basis for denying leave to amend additional affirmative defenses. Leave to amend shall be freely given when justice so requires, and this policy is applied with extreme liberality. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). And while the court may deny leave to amend on a showing of bad faith, undue delay, prejudice to the opposing party, or futility of amendment, ITW has made no such showing. The Court GRANTS MOC's motion for leave to amend as to the affirmative defenses.

II. Supplemental Counterclaims and Joinder of Quantum Marketing, Inc.

MOC wishes to assert five additional counterclaims based on breach of contract. MOC alleges in its proposed amended answer that ITW and MOC entered into agreements in 2008 and 2009 whereby MOC would manufacture products pursuant to ITW's specifications. (Proposed Answer at 6--7.) MOC alleges ITW informed MOC on or about August 16, 2010, that ITW refused to pay for the products that it ordered. (Id. at 7.) As part of its new counterclaims, ...


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