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Zest Ip Holdings, LLC and Zest Anchors, LLC v. Implant Direct Mfg

April 15, 2013

ZEST IP HOLDINGS, LLC AND ZEST ANCHORS, LLC, PLAINTIFFS,
v.
IMPLANT DIRECT MFG, LLC ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Gonzalo P. Curiel United States District Judge

ORDER GRANTING LEAVE TO FILE AMENDED INFRINGEMENT CONTENTIONS BACKGROUND PLAINTIFFS' MOTION TO JOIN AND MOTION FOR [DKT. NOs.107 and 116]

This is an action for patent and trademark infringement of dental attachment products. Plaintiffs Zest IP Holdings, LLC and Zest Anchors, LLC ("Plaintiffs" or "Zest") filed this action against Defendants Implant Direct Mfg. LLC, Implant Direct LLC, and Implant Direct International ("Defendants" or "Implant Direct") for the alleged infringement of U.S. patents through the manufacture and sale of dental attachment product GoDirect, Zests' unique LOCATOR system, and trademark infringement the "Zest" mark.*fn1

On July 25, 2012, Plaintiffs filed a motion to amend its' infringement contentions and on August 21, 2012, Plaintiffs filed a motion to join Implant Direct Sybron International and Implant Direct Sybron Manufacturing LLC (hereinafter "IDSI") pursuant to Rule 25(c). ECF Nos. 107, 116. On January 23, 2013 this Court issued an order denying Plaintiffs' motion to join parties due to improper service. ECF No. 185. The Court ordered Plaintiffs to effectuate proper service upon IDSI, and upon showing of proper service, the Court would review Plaintiffs' motion to join and Plaintiffs' motion to amend infringement contentions. On January 25, 2013, Plaintiffs properly served IDSI with the motion to join. ECF No. 188. On February 19, 2013, IDSI filed a response in opposition to Plaintiffs' motion to join. ECF No. 190. On February 21, 2013, Plaintiffs filed a reply. ECF No. 191. Having been fully briefed, the Court exercises its authority pursuant to Local Rule 7.1 to rule on the motions without a hearing. For the reasons discussed below, the Court GRANTS Plaintiffs' motion to join and motion to amend its infringement contentions.

DISCUSSION

Motion to Join

The Court first addresses Plaintiffs' motion to join IDSI. Federal Rule of Civil Procedure 25(c) provides:

In the case of any transfer of interest, an action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party. Service of the motion shall be made as provided in subdivision (a) of the rule.

A motion under Rule 25(c) for substitution or joinder of a party after suit has commenced is addressed to the discretion of the court, taking into account all the exigencies of the situation. Educational Credit Mgmt. Corp. V. Bernal (In re Bernal), 207 F.3d 595 (9th Cir. 2000); McComb v. Row River Lumber Co., 177 F.2d 129 (9th Cir. 1949). A corporation's purchase of all assets of corporate defendant constitutes a "transfer of interest" under Rule 25 (c), and court appropriately ordered joinder where purchasing corporation would have burden of liability as result of its purchase. Wainwright v. Kraftco Corp. 58 F.R.D 9, 13 (N.D. Ga. 1973). The Court previously held that a "transfer of interest" had occurred between Defendant Implant Direct and IDSI. (See ECF No. 185 at 4-5, finding that transfer of interest had occurred when Implant Direct transferred 75 percent of its' assets to IDSI, IDSI maintained the same management and leadership as Implant Direct, IDSI continued to manufacture the same accused products that had been manufactured and produced by Implant Direct, and IDSI had agreed to indemnify Implant Direct.)

A transfer of interest having occurred, the Court considers whether joinder is appropriate. Although the rule to join parties refers to a transfer of interest without more, joinder is appropriate when the party to be joined could be called to respond for the liability of the original party. See Moody v. Albemarle Paper Co., 50 F.R.D. 494, 498 (E.D.N.C.1970) (finding joinder under Rule 25 (c) proper where the company that was sought to be joined could have the burden of liability in the litigation). The decision to order joinder should be made by considering how the conduct of the lawsuit will be most facilitated; it in no way alters the substantive rights of the transferor or transferee. Television Reception Corp. v. Dunbar, 426 F.2d 174 (6th Cir. 1970); Luxliner P.L. Export, Co. V. RDI/Luxliner, Inc., 13 F.3d 69, 71 (3d Cir. N.J. 1993). Moreover, joining the parties is a common sense way forward especially when multiplicity of litigation may be avoided regarding the same or similar products. Wainright, 58 F.R.D at 14 (court ordered joinder when party sought to be added had or could have burden of liability and multiplicity of lawsuits might be avoided by joinder).

Defendant Implant Direct and IDSI, party sought to be joined, oppose joinder on the basis of unreasonable delay and prejudice to IDSI. ECF Nos. 146 and 190. The Court addresses these issues in turn.

Unreasonable Delay

Rule 25(c) does not impose a time limit, but rather contemplates continuation of the litigation by or against the original party without substitution or joinder of parties. 7C Writght, Miller & Kane, Fed. Prac. & Proc. Civ. §1958 (3d ed.). Indeed, subsection (c) of the Rule provides that in case of any transfer of interest, action may be continued by or against original party unless court upon motion directs person to whom interest is transferred to be substituted in action or joined with original party. Fed. R. Civ. Pro. 25 (c) (emphasis added). Since November 2010, the parties have proceeded without joinder or substitution of IDSI, a possibility permitted by Rule 25(c). Although continuation is an option under Rule 25(c), Plaintiffs sought to join IDSI due to escalation in the litigation and production and sale of an updated version of the accused product, which is solely produced by IDSI. Plaintiffs would have been well-served to join IDSI following the acquisition two years ago and the Court frowns upon Plaintiffs' failure to request joinder by the scheduling order deadline of March 14, 2011. ECF No. 27. Rule 25(c) does not have a time limit, however, and joinder may occur at any point during litigation, even after judgment has been rendered. 7C Wright et al., supra at §1958.

The Court finds the benefits of joinder outweigh the delay that has taken place. When Implant Direct transferred a majority of its' assets to IDSI, IDSI also assumed liability for the accused products. See ECF No. 116, Exhibit 1, 2012 Transaction agreement between Sybron Canada Holdings, Inc., Implant Direct Manufacturing LLC, Implant Direct Int'l, and Mikana Manufacturing Company. IDSI continues to manufacture and sell the accused products, and IDSI has created a newer version of the accused product, which Plaintiffs seek to add to their infringement contention. ECF No. 107 at 6-7. Without a joinder, Plaintiffs would likely seek a separate lawsuit against IDSI for continued patent infringement of the accused products as well as the updated version of the accused products. As presented before the Court, initiating a separate lawsuit against IDSI would not preserve judicial economy because it would require "the same depositions, the same exact document [production], blueprints, technical drawings..." Transcript Hearing on Motion to Join and Motion to Amend Infringement Contentions at 35. These ...


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