Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-02138/USCOURTS-cand-4_06-cv-02138-34/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

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ATMEL CORPORATION, a Delaware

corporation; ATMEL SWITZERLAND, a

corporation; ATMEL FRANCE, a

corporation; ATMEL SARL, a

corporation,

Plaintiffs,

v.

AUTHENTEC, INC., a Delaware

corporation,

Defendant.

 /

No. C 06-2138 CW

ORDER GRANTING IN

PART AND DENYING IN

PART PLAINTIFFS'

MOTION TO AMEND THE

CASE MANAGEMENT

ORDER AND DENYING

PLAINTIFFS' MOTION

FOR LEAVE TO FILE A

SECOND AMENDED

COMPLAINT

Plaintiffs have filed a motion for leave to file a second

amended complaint (SAC). Because the deadline for amendment has

passed, Plaintiffs have also filed a motion to amend the case

management order. Defendant opposes the motions. The motions were

submitted on the papers. Having considered all of the parties'

papers, the Court grants the motion for leave to amend the case

management order in part and denies it in part and denies the

motion for leave to file a SAC.

BACKGROUND

Plaintiffs filed this action on March 22, 2006. At the

initial case management conference, the Court set November 1, 2006

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as the deadline to add parties or claims. Docket No. 21. The fact

discovery cut off was initially set for June 19, 2007. The fact

discovery deadline was extended once by stipulation to September

21, 2007 and again by Plaintiffs' motion to December 21, 2007. 

Plaintiffs filed the instant motions on December 6, 2007. Although

Plaintiffs assert that they will need additional discovery to

support their proposed claims, they do not move for relief from the

December 21, 2007 discovery deadline. 

LEGAL STANDARDS

I. Rule 16

Under Federal Rule of Civil Procedure 16(b), "[a] schedule

shall not be modified except upon a showing of good cause and by

leave of the district judge." Fed. R. Civ. Pro. 16(b). Where a

schedule has been filed, the plaintiff's ability "to amend his

complaint [is] governed by Rule 16(b), not Rule 15(a)." Johnson v.

Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). A

party seeking to amend a pleading after the date specified in a

scheduling order must first show "good cause" for the amendment

under Rule 16(b), and second, if good cause is shown, the party

must demonstrate that the amendment is proper under Rule 15. Id.

In order to determine whether good cause exists, courts

primarily consider the diligence of the party seeking the

modification. Johnson, 975 F.2d at 609; see also Coleman v. Quaker

Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). "[N]ot only must

parties participate from the outset in creating a workable Rule 16

scheduling order but they must also diligently attempt to adhere to

that schedule throughout the subsequent course of the litigation." 

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Jackson v. Laureate, Inc., 186 F.R.D. 605, 607 (E.D. Cal. 1999). A

party moving for an amendment to a scheduling order must therefore

show it was diligent in assisting the Court to create a workable

schedule at the outset of litigation, that the scheduling order

imposes deadlines that have become unworkable notwithstanding its

diligent efforts to comply with the schedule, and that it was

diligent in seeking the amendment once it became apparent that

extensions were necessary. See id. at 608. 

II. Rule 15

Federal Rule of Civil Procedure 15(a) provides that leave of

the court allowing a party to amend its pleading "shall be freely

given when justice so requires." Leave to amend lies within the

sound discretion of the trial court, which 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) (citations

omitted). Thus, Rule 15's policy of favoring amendments to

pleadings should be applied with "extreme liberality." Id.; DCD

Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)

(citations omitted).

The Supreme Court has identified four factors relevant to

whether a motion for leave to amend should be denied: undue delay,

bad faith or dilatory motive, futility of amendment, and prejudice

to the opposing party. Foman v. Davis, 371 U.S. 178, 182 (1962). 

The Ninth Circuit holds that these factors are not of equal weight;

specifically, delay alone is insufficient ground for denying leave

to amend. Webb, 655 F.2d at 980. Further, the "liberality in

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granting leave to amend is not dependent on whether the amendment

will add causes of action or parties." DCD Programs, 833 F.2d at

186. Rather, the court should consider whether the proposed

amendment would cause the opposing party undue prejudice, is sought

in bad faith, or constitutes an exercise in futility. Id. (citing

Acri v. Int’l Ass'n of Machinists & Aerospace Workers, 781 F.2d

1393, 1398-99 (9th Cir. 1986); United States v. City of Twin Falls,

806 F.2d 862, 876 (9th Cir. 1986); Howey v. United States, 481 F.2d

1187, 1190-91 (9th Cir. 1973); Klamath-Lake Pharm. Ass’n v. Klamath

Med. Serv. Bureau, 701 F.2d 1276, 1293 (9th Cir. 1983)).

Prejudice typically arises where the opposing party is

surprised with new allegations which require more discovery or will

otherwise delay resolution of the case. See, e.g., Acri, 781 F.2d

at 1398-99; Guthrie v. J.C. Penney Co., 803 F.2d 202, 210 (5th Cir.

1986). The party opposing the motion bears the burden of showing

prejudice. DCD Programs, 833 F.2d at 186; Beeck v. Aquaslide 'N'

Dive Corp., 562 F.2d 537, 540 (8th Cir. 1977).

DISCUSSION

Plaintiffs seek leave to amend their complaint in two general

areas. First, Plaintiffs seek leave to include allegations about

five additional sensors that were not mentioned in their first

amended complaint (FAC). Plaintiffs also seek leave to allege

infringement under 35 U.S.C. § 271(f) based on Defendants'

distribution of software created in the United States to foreign

manufacturers. Plaintiffs allege that they only recently

discovered the existence of the other sensors and Defendant's

distribution of essential software components from the United

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1Plaintiffs also seek to amend their complaint to state

correctly the principal place of business of Plaintiff Atmel SARL. 

This amendment is not necessary. 

2

Plaintiffs also seek to add allegations about two pieces of

Defendant's software, AuthenTec Performance Analysis Tool (PAT) and

AuthenTec Software Development Kit (SDK). However, it appears that

these two pieces of software are relevant only to Plaintiffs'

proposed § 271(f) claim discussed below.

5

States to foreign manufacturers.1

I. Additional Sensors

Plaintiffs argue that they were unaware of five additional

infringing sensors, EntrePad Sensors AES 2500, 2550, 2810, 1710 and

1711, until they were disclosed during depositions of Defendant's

employees and Rule 30(b)(6) witnesses.2 Defendant counters that

the proposed amendment is not necessary because Plaintiffs are not

required to name every infringing product in their complaint under

the notice pleading requirements of Federal Rule of Civil Procedure

8. Defendant notes that the FAC alleges that "AuthenTec has been

and still is offering for sale, selling, marketing, using and

importing biometric sensors, including the following." FAC ¶ 12. 

Defendant argues that "this allegation is more than sufficient to

cover all biometric sensors sold by AuthenTec" and contends that it

"has provided all necessary discovery on these products, despite

their omission from the complaint and the initial infringement

contentions." Opposition at 5. In other words, Defendant concedes

that Plaintiffs need not amend their complaint to pursue claims

based on the additional sensors. 

However, Defendant argues that such an amendment would not be

sufficient to allow Plaintiffs to pursue claims based on these

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products pursuant to Patent Local Rule 3-1(b), which requires

Plaintiffs to include in their Disclosure of Asserted Claims and

Preliminary Infringement Contentions, "each accused apparatus,

product, device, process, method, act, or other instrumentality." 

Defendant states that, if Plaintiffs had "appropriately requested

to serve infringement contentions on these products, [it] would

have stipulated to permit Atmel to serve supplemental contentions"

on the 2500, 1710 and 2810 sensors." Opposition at 5. 

In the interest of judicial economy, the Court will consider

whether Plaintiffs have met the requirements of Patent Local Rule

3-7, which, like Federal Rule of Civil Procedure 16, requires a

"showing of good cause" in order to allow amendment of infringement

contentions. Patent L.R. 3-7. Because Defendant states that it

would stipulate to supplemental contentions regarding the 2500,

1710 and 2810 sensors, the Court grants Plaintiffs leave to serve

such contentions. 

Defendant's only argument against amendment to allow claims

regarding the remaining products, the 1711 and 2550 sensors, is

that they are still in development and not being sold. Therefore,

Defendant argues that the products do not give rise to liability

under the patent laws. Plaintiffs assert that they seek to pursue

claims based on the 1711 and 2550 sensors because they learned

during the November 28, 2007 deposition of Defendant's employee Art

Stewart that Defendant is selling the two sensors. Plaintiffs'

counsel first asked Stewart, "has AuthenTec sold any AES 1711

products?" McKenzie Decl., Ex. 8 at 148. Stewart responded, "It's

very early in the product life. So, we might still be shipping

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pre-production samples for that part. So, I would say sold, maybe

not yet." Id. Although this statement does not unambiguously

establish that AuthenTec has sold the 1711 sensor, 35 U.S.C. 

§ 271(a) provides that making, using and offering to sell

infringing products can give rise to liability. The creation of

pre-production samples is enough, at this stage, to support a claim

under § 271(a). Plaintiffs also asked Stewart if AuthenTec had

begun providing the 2550 sensor to its customers. Stewart

responded, "I believe we are now selling that to Fujitsu PC." Id.

at 149. Defendant states only that Stewart "was incorrect" but

provides no declaration or evidence in support of its contention

that "the 2550 is still in development." Opposition at 6 n.3. 

Plaintiffs have demonstrated that they recently discovered

that Defendants are making and selling the 1711 and 2550 sensors. 

In doing so, Plaintiffs have demonstrated good cause for allowing

them to amend their infringement contentions as required by Patent

Local Rule 3-7.

Plaintiffs assert that they will need additional discovery in

order to supplement their infringement contentions, but have not

formally requested modification of the case management order's

December 21, 2007 discovery deadline. Defendant argues that it has

already produced all relevant documents related to these products. 

However, Plaintiffs state that they need "data sheets" for the 2810

and 1710 sensors. In the interest of judicial economy, the Court

orders Defendant to produce any such documents within one week of

the date of this order or to file a certification that it has

already produced such documents or that they do not exist. 

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If Plaintiffs intend to seek other additional discovery, they

shall, within two weeks of the date of this order, file a Rule 16

motion seeking an extension of the discovery deadline, describing

with specificity the information they intend to seek and why they

were not able to obtain that information prior to the discovery cut

off. If Plaintiffs do not intend to seek additional discovery,

they shall serve any supplemental infringement contentions within

that time. 

II. Section 271(f) Claim

Plaintiffs next seek to amend their complaint to include a 

§ 271(f) claim. Title 35 U.S.C. § 271(f)(1), creates liability for

(1) Whoever without authority supplies or causes to be

supplied in or from the United States all or a

substantial portion of the components of a patented

invention, where such components are uncombined in

whole or in part, in such manner as to actively induce

the combination of such components outside of the

United States in a manner that would infringe the

patent if such combination occurred within the United

States, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be

supplied in or from the United States any component of

a patented invention that is especially made or

especially adapted for use in the invention and not a

staple article or commodity of commerce suitable for

substantial noninfringing use, where such component is

uncombined in whole or in part, knowing that such

component is so made or adapted and intending that such

component will be combined outside of the United States

in a manner that would infringe the patent if such

combination occurred within the United States, shall be

liable as an infringer.

Plaintiffs argue that they recently learned that Defendant supplies

essential software to foreign customers. Plaintiffs further argue

that those customers use the software in combination with foreignproduced semiconductors in a manner that infringes the patents in

suit. 

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Defendant counters that Plaintiffs cannot demonstrate good

cause under Rule 16 to permit this late amendment. Further,

Defendant argues that, even if Plaintiffs are permitted to modify

the case management schedule, the proposed amendment is futile and

should not be allowed under Rule 15.

Because the Court finds that Plaintiffs' claims are foreclosed

by Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746 (2007), and are

therefore futile, it does not address the sufficiency of

Plaintiffs' showing under Rule 16. In Microsoft, the Supreme Court

held that software "abstracted from a tangible copy" is simply

information that does not constitute a component supplied from the

United States for purposes of § 271(f). Id. at 1755. The Supreme

Court found, "The master disk or electronic transmission Microsoft

sends from the United States is never installed on any of the

foreign-made computers in question." Id. at 1751. Rather, the

foreign manufacturers made copies of the software, which were

ultimately installed. Id. Therefore, the Supreme Court held,

"Because Microsoft does not export from the United States the

copies actually installed, it does not 'supply from the United

States' 'components' of the relevant computers, and therefore is

not liable under § 271(f) as currently written." Id. In other

words, "the very components supplied from the United States, and

not copies thereof, trigger § 271(f) liability when combined abroad

to form the patented invention at issue." Id. at 1757.

According to Plaintiffs, Defendant supplies its software

electronically to customers overseas. Therefore, Plaintiffs

attempt to distinguish Microsoft by arguing that the "master copy

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of the software remains in the United States." Motion at 11. 

However, Microsoft also addressed "the electronic transmission" of

the software at issue there and held that such transmissions are

not themselves installed on the computers. Rather, the

transmissions are copied onto the receiving computer and then

copied for installation on the products in question. 

Therefore, the Court finds that Plaintiffs' proposed § 271(f)

claim is futile.

CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART and DENIES

IN PART Plaintiffs' motions to modify the case management order and

DENIES Plaintiffs' motion for leave to file a SAC. Unless

Plaintiffs intend to seek leave to conduct additional discovery,

they shall file amended infringement contentions within two weeks

of the date of this order. 

IT IS SO ORDERED.

Dated: 1/31/08 

CLAUDIA WILKEN

United States District Judge

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