Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-00541/USCOURTS-casd-3_10-cv-00541-10/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ZEST IP HOLDINGS, LLC and

ZEST ANCHORS, LLC,

Plaintiffs,

CASE NO.10cv0541-GPC-WVG

ORDER:

1. DENYING DEFENDANTS’

MOTION TO CLARIFY

ANSWER; AND

2. DENYING MOTION FOR

LEAVE TO AMEND ANSWER

[Dkt. No. 282]

vs.

IMPLANT DIRECT MFG, LLC et

al.,

Defendants.

Pending before the Court is Defendants Implant Direct Mfg. LLC, Implant

Direct LLC, and Implant Direct International’s (collectively, “Defendants”) Motion

to Clarify That it May Assert Patent Exhaustion and Implied License at Trial, or in

the alternative Motion for Leave to Amend Answer. (Dkt. No. 282.) The parties

have fully briefed the motion. (Dkt. Nos. 288, 303.) Pursuant to Civil Local Rule

7.1(d)(1), the Court finds the matter suitable for adjudication without oral argument.

Having reviewed the parties’ briefs and relevant legal authority, the Court hereby

DENIES Defendants’ motion to clarify and DENIES Defendants’ motion in the

alternative for leave to amend Defendants’ Answer. 

BACKGROUND

This is an action for patent and trademark infringement of dental attachment

products. Plaintiffs Zest IP Holdings, LLC and Zest Anchors, LLC (“Plaintiffs”)

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filed this action against Defendants for alleged infringement of U.S. patents through

the manufacture and sale of dental attachment product GoDirect, Plaintiffs’ unique

LOCATOR system, and trademark infringement of the “Zest” mark. (Dkt. No. 13.) 

On March 12, 2010, Plaintiffs filed an initial complaint in the abovecaptioned matter. (Dkt. No. 1.) On August 27, 2010, Plaintiffs filed a first amended

complaint (“FAC”), the current operative complaint. (Dkt. No. 13.) On September

17, 2010, Defendants filed an answer to Plaintiff’s FAC. (Dkt. No. 17.) Defendants’

Answer claimed the affirmative defenses of: (1) non-infringement; (2) no

inducement; (3) invalidity under 35 U.S.C. §§ 102 and/or 103; (4) invalidity under

35 U.S.C. § 112, first paragraph; (5) invalidity under 35 U.S.C. § 112, second

paragraph; (6) prosecution history estoppel; and (7) unenforceability. (Id. at 9-11.) 

On December 9, 2010, U.S. Magistrate Judge William V. Gallo entered a case

management conference order setting a March 14, 2011 deadline for any motions to

amend the pleadings. (Dkt. No. 27 at 1.) On May 19, 2011, Defendants filed a

motion to amend the Answer to assert a counterclaim against Plaintiffs for

declaratory judgment of invalidity as to U.S. Patent No. 6,299,447. (Dkt. No. 32.)

On January 20, 2012, U.S. District Judge Larry Alan Burns denied Defendants’

motion due to Defendants’ failure to show diligence in seeking to amend the

Answer. (Dkt. No. 81 at 4) (finding a lack of diligence because Defendants sought

to amend the Answer two months after the deadline and took eight months to

conduct a prior art search after learning new information). 

On October 22, 2012, this case was transferred to the undersigned Judge.

(Dkt. No. 142.) On September 11, 2013, Defendants filed the present motion to

clarify or amend the Answer. (Dkt. No. 282.) 

LEGAL STANDARD

Under Federal Rule of Civil Procedure 15(a), leave to amend a pleading

should be granted as a matter of course, at least until the defendant files a

responsive pleading. After that point, leave to amend should be granted unless

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amendment would cause prejudice to the opposing party, is sought in bad faith, is

futile, or creates undue delay. Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d

1149,1159 (9th Cir. 1989).

However, once a court has issued a scheduling order and the pleading

amendment deadline has passed, amendment of the pleadings is only permitted if

there is “good cause” for modification of the scheduling order. Coleman v. Quaker

Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000) (citing Johnson v. Mammoth

Recreations, Inc., 975 F.2d 604, 607-09 (9th Cir. 1992)); See also Fed. R. Civ. P.

16(b)(4) (“A schedule may be modified only for good cause and with the judge’s

consent.”). This standard “primarily considers the diligence of the party seeking the

amendment.” Johnson, 975 F.2d at 609. “Good cause” exists if a party can

demonstrate that the schedule “cannot reasonably be met despite the diligence of the

party seeking the extension.” Id. (citing Fed. R. Civ. P. 16 advisory committee’s

notes (1983 amendment)). The party seeking to continue or extend the deadline

bears the burden of proving good cause. See Zivkovic v. Southern California Edison

Co., 302 F.3d 1080, 1087 (9th Cir. 2002); Johnson, 975 F.2d at 608. Only where a

party shows good cause for a belated motion to amend may the Court consider

whether the amendment would be proper under Rule 15. Johnson, 975 F.2d at 607-

09.

DISCUSSION

1. Motion to Clarify Answer

Defendants move the Court to clarify that Defendants’ Answer, (Dkt. No. 17,

“Answer”), adequately raises patent exhaustion and implied license as affirmative

defenses. (Dkt. No. 283 at 8) (citing Fed. R. Civ. P. 8(e) (“[p]leadings must be

construed so as to do justice.”)). Defendants so move on two grounds: (1) that

Defendants’ Answer denies Plaintiffs’ infringement allegations, (Dkt. No. 283 at 8)

(citing Answer ¶¶ 26, 27); and (2) that the Second Affirmative Defense in

Defendants’ Answer, labeled “no inducement,” includes the defenses of patent

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exhaustion and implied license. (Dkt. No. 283 at 8) (quoting Answer at 9:21-24). 

The Court declines to clarify that Defendants’ Answer raises the affirmative

defenses of patent exhaustion and implied license. “The key to determining the

sufficiency of pleading an affirmative defense is whether it gives plaintiff fair notice

of the defense.” Wyshak v. City Nat’l Bank, 607 F.2d 824, 827 (9th Cir. 1979); see

also Simmons v. Navajo County, Ariz., 609 F.3d 1011, 1023 (9th Cir. 2010). In

Wyshak, the United States Court of Appeals for the Ninth Circuit held that an

amended answer sufficiently pleaded a statute of limitations defense where the

defendant mentioned the statute of limitations defense in an amended answer and

detailed the defense in a memorandum of points and authorities attached to the

motion to file an amended answer. 607 F.2d at 827. 

Here, Defendants’ Answer provides no such notice to Plaintiffs of

Defendants’ intent to assert the affirmative defenses of patent exhaustion and

implied license. First, the Court rejects Defendants’ argument that one-word denials

of Plaintiffs’ allegations regarding dentists’ infringement of Plaintiff’s patents can

constitute the raising of an affirmative defense. (Dkt. No. 283 at 8) (citing Answer

¶¶ 26, 27). Particularly where Plaintiffs’ dentist infringement allegations contain

multiple allegations spanning twenty seven lines of pleading paper, (Dkt. No. 13,

“First Amended Complaint” ¶¶ 26, 27), Defendants’ flat assertion that these

allegations are “denied,” (Answer ¶¶ 26, 27), fails to raise the affirmative defense of

patent exhaustion or implied license. 

The Court also rejects Defendants’ argument that pleading a “no inducement”

defense in the original Answer raised the affirmative defense of implied license or

patent exhaustion. (Dkt. No. 283 at 8) (quoting Answer at 9:21-24). The “no

inducement” defense alleged in Defendants’ Answer asserts that Defendants “did

not have, and does not have, any specific intent to cause third parties to infringe

Plaintiffs’ patents and has therefore not induced infringement of the Plaintiffs’

patents.” (Answer at 9:21-24.) The Court finds that the “no inducement” defense

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alleged in Defendants’ Answer focuses on negating the requisite specific intent

needed for Plaintiffs to prove induced infringement. See Forest Laboratories, Inc. v.

Ivax Pharmaceuticals, Inc., 501 F.3d 1263, 1272 (Fed. Cir. 2007) (“An inquiry into

induced infringement focuses on the party accused of inducement as the prime

mover in the chain of events leading to infringement.”) On the other hand, the

affirmative defense of implied license or patent exhaustion focuses on whether the

patent holder’s rights have been exhausted by the authorized sale of an article that

substantially embodies a patent. Quanta Computer, Inc. v. LG Electronics, Inc., 553

U.S. 617, 638 (2008). The Court finds that because the “no inducement” and “patent

exhaustion” defenses require different showings and focus on different actors,

Defendants’ pleading of “no inducement” failed to put Plaintiffs on fair notice of

Defendants’ intent to raise the affirmative defenses of patent exhaustion or implied

license. Accordingly, the Court concludes that Defendants’ Answer failed to raise

the defenses of patent exhaustion or implied license.

2. Motion to Amend Answer

In the alternative, Defendants seek leave to amend Defendants’ Answer to

assert the affirmative defenses of patent exhaustion and implied license. (Dkt. No.

283 at 9.) Because the pleading amendment deadline has long passed, Defendants

bear the burden of showing “good cause” to amend the Answer under Federal Rules

of Civil Procedure 16(b). Zivkovic v. Southern California Edison Co., 302 F.3d

1080, 1087 (9th Cir. 2002). “Rule 16(b)’s ‘good cause’ standard primarily considers

the diligence of the party seeking the amendment.” Johnson v. Mammoth

Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). 

Defendants advance three explanations for seeking to amend the Answer

nearly two and a half years after the amendment deadline: (1) Plaintiffs indicated

expanded claims against Defendants in reply papers to a recent motion, (Dkt. No.

183 at 10) (citing Dkt. No. 156 at 6:28-7:28; Dkt. No. 261 at 7:8-9); (2) Plaintiffs’

recently revised infringement contentions accuse a new product, (id.) (citing Dkt.

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No. 202; Dkt. No. 107-1 at 1:4-8); and (3) Plaintiffs’ recently revised infringement

contentions expand and clarify Plaintiffs’ claims, (id. at 11) (citing Dkt. 107-2, Ex.

10 at 3:8-10; Dkt. No. 202). In other words, Defendants claim Plaintiffs’ August 19,

2013 reply papers, (Dkt. No. 261), and the Court’s April 15, 2013 Order granting

Plaintiffs leave to file amended infringement contentions, (Dkt. No. 202), justify

Defendants’ motion to file an amended answer.

The Court finds Defendants have not acted diligently in seeking to amend the

Answer nearly five months after the triggering events Defendants claim justify

amendment of the Answer. First, Defendants move to amend the Answer because

Plaintiffs have asserted in recent reply papers filed August 19, 2013, that Plaintiffs

“seek to hold Implant Direct liable for post-[acquisition] events [as successors-ininterest] based on Rule 25(c) of the Federal Rules of Civil Procedure.” (Dkt. No.

283 at 10.) However, the Court finds Defendants were on notice of Plaintiffs’ intent

to do so when Plaintiffs moved to join successors-in-interest Implant Direct Sybron

Int’l and Implant Direct Sybron Mfg. LLC on August 21, 2012. (Dkt. No. 116-1 at

9) (arguing that without joinder, Defendants will continue to maintain they are not

responsible for post-acquisition acts alleged to be infringing by Plaintiffs). The

Court granted the Rule 25(c) motion on April 15, 2013. (Dkt. No. 202.) 

Second, Defendants claim the Court’s granting of Plaintiffs’ motion to amend

infringement contentions justifies Defendants’ motion to amend the Answer. (Dkt.

No. 283 at 10-11.) The Court finds Defendants were on notice of Plaintiffs’

amended infringement contentions at the time of the Court’s April 15, 2013 Order.

(Dkt. No. 202.) The Court therefore finds that nearly five months passed between

the events Defendants claim justify amendment of the Answer and Defendants’

September 11, 2013 filing of the present motion to amend the Answer. 

In reply, Defendants argue that Defendants notified Plaintiffs of intent to

amend the Answer to assert patent exhaustion on December 17, 2012, and notified

the Court of intent to file a motion to clarify or amend the Answer in a joint status

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report on May 17, 2013. (Dkt. No. 303) (citing Dkt. No. 304-8; Dkt. No. 217, “Joint

Status Report”). Defendants explain that the case was “essentially on hold pending

ruling on invalidity contention motions the Magistrate indicated should be decided

first.” (Dkt. No. 303 at 7) (citing Dkt. No. 228 at 2:20-3:3, 53:8-15, 54:16-56:20,

91:22-92:2). 

The Court finds that neither notification satisfies Defendants’ burden of

demonstrating good cause to amend the scheduling order. As an initial matter,

notification to opposing counsel of intent to file a motion does not establish

diligence in filing said motion. To the contrary, Defendants’ proffered

communications with Plaintiffs show that Defendants intended to seek leave to

amend the Answer as early as December 17, 2012. (Dkt. No. 304-8.) This date is

nearly four months before the events Defendants claim triggered the need to amend

the Answer. (Dkt. No. 283 at 10-11.)

Furthermore, a review of the transcript of the parties’ May 29, 2013

scheduling conference hearing before United States Magistrate Judge William V.

Gallo shows that, contrary to Defendants’ assertion, the case was not “essentially on

hold” at that time. (Dkt. No. 228.) In fact, Judge Gallo sought to set a “date by

which any motions, if they’re going to be filed by the Defendant, must be filed,” but

Defendants failed to mention intent to file a motion to amend the Answer. (Dkt. No.

228 at 54:16-56:20.) 

The Court concludes that a delay of nearly five months fails to show

diligence in seeking to amend the Answer and therefore DENIES, for lack of good

cause, Defendants’ belated motion to modify the scheduling order to allow

Defendants to amend the Answer. 

CONCLUSION

For the aforementioned reasons, the Court hereby DENIES Defendants’

motion to clarify the Answer and DENIES Defendants’ motion, in the alternative,

to file an amended answer. 

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Accordingly, the hearing on Defendants’ motion, currently set for January 17,

2014, is hereby VACATED.

IT IS SO ORDERED. 

DATED: January 8, 2014

HON. GONZALO P. CURIEL

United States District Judge

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