United States District Court, N.D. California
ORDER GRANTING GSI'S MOTION FOR LEAVE TO AMEND ITS MINNESOTA AND CALIFORNIA ANSWERS ECF No. 56
JON S. TIGAR, District Judge.
Plaintiff Cypress Semiconductor Corporation ("Cypress") has brought two now-consolidated patent infringement actions against Defendant GSI Technology, Inc. ("GSI"). California Complaint ("Cal. Compl."), No. 3:13-cv-02013-JST, ECF No. 1; Minnesota Complaint ("Minn. Compl."), No. 3:13-cv-03757-JST, ECF No. 1. GSI now moves to amend both Answers to assert the affirmative defenses of laches, intervening rights, and inequitable conduct. Motion for Leave to File First Amended Answers and Affirmative Defenses ("Mot.") at 4-5, ECF No. 56. Cypress does not oppose the motion insofar as Cypress seeks to assert the affirmative defenses of laches and intervening rights, but it does oppose GSI adding the defense of inequitable conduct. Opposition ("Opp'n.") at 1, ECF No. 58.
A. Procedural History
Cypress and GSI are direct competitors in the memory and technology chips market known as "SRAM" (Static Random Access Memory); they compete for "the same customers and design wins." Cal. Compl. ¶ 9. On May 1, 2013, Cypress filed a complaint against GSI for patent infringement of U.S. Patent Numbers 6, 069, 839; 6, 292, 403, 6, 385, 128, 6, 445, 645 and 6, 967, 861 in this district. Cal. Compl. These claims were consolidated with another complaint previously filed by Cypress on March 30, 2011 in the United States District Court for the District of Minnesota, alleging patent infringement by GSI of U.S. Patent Numbers 5, 903, 174, 6, 534, 805, 6, 651, 134, 7, 142, 477 and 7, 158, 429. Minn. Compl. GSI filed answers to these complaints on May 22, 2013 and April 28, 2011, respectively, denying infringement and asserting various affirmative defenses. California Answer ("Cal. Ans."), ECF No. 11; Mot. at 2.
GSI has filed this motion for leave to amend its answers to add affirmative defenses "based [in part] upon Cypress' failure to provide material prior art references to the United States Patent and Trademark Office ("USPTO") during the prosecution of the 477 patent." Mot. at 4. GSI specifically seeks to add the affirmative defenses of inequitable conduct (Sixth Affirmative Defense) and intervening rights (Seventh Affirmative Defense) with respect to United States Patent No. 7, 142, 477 ("477"); and laches (Eighth Affirmative Defense) with respect to Patent No. 6, 651, 134 ("134"), as well as to amend its California Answer to add an Eighth Affirmative Defense of laches with respect to the 839, 403, 128 and 645 patents. Mot.
B. Legal Standard
Rule 15(a) of the Federal Rules of Civil Procedure provides that "the court should freely give leave [to amend pleadings] when justice so requires." "The purpose of pleading is to facilitate a proper decision on the merits, ' and not to erect formal and burdensome impediments in the litigation process." Barnes v. AT & T Pension Ben. Plan, No. 08-cv-04058 MHP, 2010 WL 1340543, at *3 (N.D. Cal. Apr. 5, 2010) citing Howey v. United States , 481 F.2d 1187, 1190 (9th Cir. 1973). "Unless undue prejudice to the opposing party will result, a trial judge should ordinarily permit a party to amend its complaint." Mora v. U.S. Bank N.A., No. 11-6598 SC , 2012 WL 879248, at *4 (N.D. Cal. Mar. 15, 2012) citing Howey at 1190. However, "[a] district court does not err in denying leave to amend where the amendment would be futile... or would be subject to dismissal." Saul v. United States , 928 F.2d 829, 843 (9th Cir. 1991) (citation omitted).
"The substantive elements of inequitable conduct are: (1) an individual associated with the filing and prosecution of a patent application made an affirmative misrepresentation of a material fact, failed to disclose material information, or submitted false material information; and (2) the individual did so with a specific intent to deceive the PTO." Exergen Corp. v. Wal-Mart Stores, Inc. , 575 F.3d 1312, 1327, n.3 (Fed.Cir.2009) (citations omitted). In addition, an inequitable conduct claim must establish "but-for materiality." Therasense, Inc. v. Becton, Dickinson & Co. , 649 F.3d 1276, 1291 (Fed. Cir. 2011).
This Court has original jurisdiction over this action pursuant to 28 U.S.C. § 1338(a), since it arises under a federal statute relating to patents. 35 U.S.C. § 271(a).
Cypress argues that leave to amend should be denied for two reasons: (1) GSI cannot meet the "but-for materiality" requirement of inequitable conduct because the Patent Examiner reissued the 477 patent despite considering the previously withheld references, and (2) GSI fails to plead sufficient facts to meet the scienter requirement for inequitable conduct. The Court addresses each argument in turn.
A. Futility Because of Lack of But-For Materiality
"The party opposing amendment bears the burden of showing prejudice, ' futility, or one of the other permissible reasons for denying a motion to amend." Eminence Capital, LLC v. Aspeon, Inc. , 316 F.3d 1048, 1052 (9th Cir. 2003) citing DCD Programs, Ltd. v. Leighton , 833 F.2d 183, 187 (9th Cir. 1987). "A proposed amendment is futile if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense.'" Collaboration Properties, Inc. v. Tandberg ASA, No. 05-cv-01940 MHP, 2007 WL 205065, at *2 (N.D. Cal. Jan. 25, 2007) citing Miller v. Rykoff-Sexton, Inc. , 845 F.2d 209, 214 (9th Cir. 1988).
GSI claims that it recently learned of the allegedly withheld prior art during an International Trade Commission ("ITC") investigation. Mot. at 4. GSI alleges that, during the ...