that the proposed allegation against Swartwood is untimely and will be highly prejudicial at this
stage. Westell replies that it was not able to obtain documents that suggested Swartwood induced
HyperEdge to infringe the 776 patent until recently. HyperEdge asserts that it will be prejudiced
by the proposed amendment because it would result in increased litigation costs associated with the
additional discovery and briefing required for the new claims. This type of prejudice, however, is
not out of the ordinary whenever a new party is added to a litigation. Weiss, 1995 WL 755328, at
*4. HyperEdge has not demonstrated any extraordinary prejudice resulting from the joinder of
Swartwood. See Packers Trading Co. v. Pederson, No. 84 C 10452, 1985 WL 3491, at *6 (N.D. Ill.
Oct. 29, 1985) (amendment permitted where there was no indication of some specific prejudice other
than the need to brief new issues); see also Pudela y. Swanson, No. 91 C 3559, 1994 WL 163916,
*1 (ND. Il. Apr. 29, 1994) (delay alone is an insufficient basis for finding prejudice). As with
Troncom II, the court does not conclude that the addition of Swartwood would be patently frivolous.
Westell has presented the court with sufficient justification to include Swartwood as a defendant.
In this case, plaintiff seeks relief from HyperEdge, Troncom II and Swartwood based on the same
allegations surrounding the alleged patent infringement and the same accused products. Therefore,
the requirements of Rule 20 are met as to Swartwood because numerous common questions of law
and fact exist, and the claim against him arises from the same transactions as those against
HyperEdge and Troncom II. The court will allow Swartwood to be added as a defendant.

In addition to adding two defendants, Westell also seeks leave to add an additional count.!

'HyperEdge accuses Westell of engaging in deceptive litigation tactics because neither
the motion for leave to amend nor the supporting memorandum mention that Westell intended to
include an additional count alleging contributory infringement. “All motions, including a proper
request for leave to amend a complaint, must set forth with particularity the relief or order
requested and the ground for supporting the application.” Moore v. Indiana, 999 F.2d 1125,

4



HyperEdge customers. None of these counts allege a theory of derivative or secondary liability.
Hyperedge fails to show how the claims it has brought against Krutsinger necessarily rely on the
adjudication of HyperEdge’s liability to Westell. Perez v. Arcobaleno Pasta Machines, Inc., 261 F.
Supp. 2d 997, 1000 (N.D. Ill. 2003) (third-party defendant’s liability necessarily relies on an
adjudication of third-party plaintiff's liability to plaintiff). The mere fact that a third party claim
arose out of the same transaction or occurrence as the original claim is an insufficient basis to
implead another party. U.S. General, Inc. v. Joliet, 598 F.2d 1050, 1053 (7th Cir. 1979).
Krutsinger’s motion to dismiss is granted for failure to allege a proper theory of third-party liability

under Rule 14.

ENTER:

JOAN B. GOTTSCHALL
ited States District Judge

DATED: September 4, 2003


liability under the doctrines of de facto merger and continuation.

Westell seeks to add Troncom II at this stage because it only recently learned of the
connections between HyperEdge and Troncom II through discovery. While HyperEdge asserts that
the motion to add Troncom IL is untimely, the court concludes that Westell has promptly brought this
motion after receiving information through discovery suggesting a close relationship between
HyperEdge and Troncom II. Newly-discovered information may provide sufficient reason to join
a new party as a defendant. Cf Weiss v. Winner’s Circle of Chi., Inc., No. 91 C 2780, 1995 WL
755328, at *4 (N.D. Ill. Dec. 14, 1995). Notably, discovery in this case is on-going and therefore
any prejudice to the defendants would be minimized by the fact that discovery would not need to be
reopened or duplicated. The court rejects HyperEdge’s contention that adding Troncom II as a
defendant would be frivolous. Westell has provided sufficient justification for its alter ego, agency
and successor liability theories and HyperEdge has failed to convince the court that adding Troncom
Il would be frivolous. In addition, both criteria of Rule 20(a) are met here. Because the claims
against Troncom II are all based on the alleged infringement of the ’776 patent, and will focus on
the structure and operation of accused products, the defendants share questions of law or fact in
common. Similarly, the claims against Troncom I arise out of the same transactions or occurrences
as those against HyperEdge. Troncom II will be added as a defendant.

Westell also seeks to join Dwight Swartwood, president of both HyperEdge and Troncom
II, as a defendant personally liable for the inducement of infringement of the ’776 patent by others.
The proposed complaint alleges that Swartwood, by virtue of his actions in directing the affairs of
Troncom I, Troncom II, and HyperEdge, actively induced acts of infringement by those companies

and had knowledge that those acts would infringe the ’776 patent. In opposition, HyperEdge argues



While the first amended complaint alleged only HyperEdge’s direct patent infringement and
inducement of infringement by others, Westell now seeks additionally to charge HyperEdge and
Troncom II with contributory infringement of the 776 Patent. Westell states that on March 21,
2003, in an answer to an interrogatory, HyperEdge first argued that certain elements of claim 1 of
the °776 Patent were missing from the accused infringing products. Specifically, HyperEdge
answered that the products it sold did not meet the claim elements requiring the network interface
unit to be “interconnected between a network span and a premise segment” and the customer nodes
in the network interface unit to be “interconnected to said premise segment” (P1.’s Reply at 3.)
HyperEdge, however, also noted that “[a]n end user may interconnect HyperEdge’s network interface
unit in such a manner.” (/d.). Westell argues that it understood that a contributory infringement
count was appropriate only after it received HyperEdge’s interrogatory responses. Again, the court
notes that prejudice to the defendants is minimal because discovery is currently on-going and
motions for summary judgment will not be filed until later this year. In light of the fact that the
viability of such a claim came to light only through discovery recently received by Westell, the court
will allow the count to be added. Cf Doe v. Sheriff of DuPage County, No. 95 C 200, 1996 WL
189292, at *3 (N.D. Ill. Apr. 17, 1996).

Motion to Dismiss Third-Party Complaint

HyperEdge, the defendant in plaintiff Westell’s patent infringement claims, filed a third-party

1131 (7th Cir. 1993). Undoubtedly, Westell should have discussed the additional count in its
motion and accompanying memorandum. In the end, however, HyperEdge was not prejudiced by
Westell’s failure and clearly had notice of the fact that Westell sought to add an additional count.
In order to avoid an additional motion to amend, the court will address Westell’s request to add
the contributory infringement count.



‘Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge
or Magistrate Judge

Joan B. Gottschal]

Sitting Judge if Other
than Assigned Judge

CASE NUMBER 02 C 3496 DATE 9/3/2003
CASE Westell Technologies, Inc. vs. HyperEdge Corporation
TITLE

[In the following box (a) indicate the party filing the motion, e.g, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented]

MOTION:

DOCKET ENTRY:

(1) Qo Filed motion of [ use listing in “Motion” box above.]

(2) Qo Brief in support of motion due

(3) Oo Answer brief to motion due. . Reply to answer brief due___.

(4) a Ruling/Hearingon__———ssetfor___—_at

(5) im} Status hearing[held/continued to] [set for/re-set for] on setfor at

(6) Qo Pretrial conference[held/continued to} [set for/re-set for] on setfor at,

(7) oO Trial[set for/re-set forlon__—at__

(8) Q {Bench/Jury trial] [Hearing] held/continued to__at

(9) Qo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) ClLocal Rule 41.1 CIFRCP41(a)(1) C1 FRCP41(a)(2).

(10) «xl [Other docket entry} ENTER MEMORANDUM OPINION AND ORDER. Plaintiffs motion to

amend it pleadings [91-1] is granted. Third-party defendant Lawrence Krutsinger’s motion to dismiss HyperEdge
Corporation’s third party complaint [39-1] is granted. Plaintiff's motion to strike certain of HyperEdge’s
affirmative defenses [40-1] and dismiss certain of HyperEdge’s counterclaims [40-2] is denied as moot in light
of the filing of a second amended complaint. Similarly, defendant HyperEdge’s motion to join Larry Krutsinger
as a defendant to HyperEdge’s counterclaims [46-1] and for leave to amend HyperEdge’s counterclaim [46-2]
is also denied as moot in light of the filing of a second amended complaint.

ay) of

No notices required, advised in open court.

[For further detail see order attached to the original minute order.]

No notices required. ;
umber of notices

Notices mailed by judge’s staf,

Motitied counsel by telephone.

V | Docketing to mail notices i Sla-s'n
1D

44N09 Loy
*

Mail AO 450 form. docketing deputy initials

Copy to judge/magistrate judge. anh Ud oH dis eg
courtroom VEN OE
deputy’s, Z
initials
Date/time received in
central Clerk’s Office malng deputy ils



complaint against Lawrence Krutsinger (“Krutsinger”). Krutsinger is a former HyperEdge employee
who currently works for Westell as Westell’s National Account Manager. The third-party complaint
alleges the following seven counts against Krutsinger: (1) breach of confidentiality; (2) breach of
fiduciary duty; (3) misappropriation of trade secrets; (4) business and product defamation;
(5) tortious interference with business advantage; (6) deceptive trade practices; and (7) federal unfair
competition. Krutsinger has filed an unopposed motion to dismiss all counts against him.

The purpose of the Rule 12(b)(6) motion to dismiss is to test the sufficiency of the complaint,
not to test the merits of the case. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990).
In ruling on a 12(b)(6) motion, the court must accept all well-pleaded factual alle; gations in the
complaintas true and draw all reasonable inferences from those factual allegations in the defendant’s
favor. Boim v. Quranic Literacy Inst., 291 F.3d 1000, 1008 (7th Cir. 2002). Thus, the complaint
should not be dismissed for failure to state a claim “unless it appears beyond doubt that the [third-
party] plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief.”
Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

Krutsinger correctly argues that the counts against him are not in accordance with the third-
party practice set forth in the Federal Rules of Civil Procedure. Rule 14 provides that “a defending
party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person who
is or may be liable to the third-party plaintiff for all or part of the plaintiff s claim against the third-
party plaintiff.” Fed. R. Civ. P. 14. The first three counts of HyperEdge’s third-party complaint
allege that Krutsinger has violated statutory and common law duties alleging the misappropriation
of HyperEdge’s confidential, proprietary, and trade secret information. The next four counts arise

out of the false and disparaging statements allegedly made by Krutsinger to existing and potential



UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DOCKE TED

SEP 0g 2003
WESTELL TECHNOLOGIES, INC., )
)
Plaintiff, ) Case No. 02 C 3496

v. )
)

HYPEREDGE CORPORATION, ) Judge Joan B. Gottschall
)
Defendant. )

MEMORANDUM OPINION AND ORDER

Westell Technologies, Inc. (“Westell”) brought this patent infringement action against
HyperEdge Corporation (“Hyperedge”) for the alleged infringement of U.S. Patent No. 5,444,776
(“’776 Patent”) directed to a “Bridge for a Network Interface Unit.” The first amended complaint
contained two counts directed towards HyperEdge’s alleged direct patent infringement under 35
U.S.C. § 271(a) and its inducement of infringement by others under 35 U.S.C. § 271(b). After
receiving new information in a Rule 30(b)(6) deposition and as a result of its own independent
investigation of HyperEdge’s business relationships, Westell now seeks leave to amend its complaint
to add two additional parties, Troncom If and Dwight Swartwood, as defendants and to include an
additional count of contributory infringement under 35 U.S.C. § 271(c).

Since Westell has already amended its pleading “once as a matter of course,” Rule 15(a)
permits a second amended complaint “only by leave of court or by written consent of the adverse
party.” Fed. R. Civ. P. 15(a). Leave shall be freely granted by this court “when justice so requires.”
Id. “This liberal policy of granting amendments is based in part on the belief that decisions on the

merits should be made whenever possible, absent countervailing considerations.” Gregg Comm. Sys.,

/
5



Inc. v. Am. Tel. & Tel. Co., 98 F.R.D. 715, 720 (N.D. Ill. 1983). However, “the district court need
not allow an amendment when there is undue delay, bad faith, dilatory motive, undue prejudice to
the opposing party, or when the amendment would be futile.” Bethany Pharmacal, Ine. v. QVC, Inc.,
241 F.3d 854, 861 (7th Cir. 2001). In addition to satisfying Rule 15(a), an amendment seeking to add
more parties must comport with Rule 20, which governs the permissive joinder of parties. Chavez
v. Illinois State Police, 251 F.3d 612, 632 n. 4 (7th Cir. 2001). Such an amendment must fulfill two
prerequisites: (1) the persons joined must be interested in claims that arise out of the same
transaction or occurrence or series of transactions or occurrences, and (2) they must share in common
at least one question of law or fact. Fed. R. Civ. P. 20(a).

Westell seeks to join Troncom II and Swartwood as defendants in the proposed second
amended complaint. Westell, in support of its motion, contends that HyperEdge represented itself
as “formerly Troncom,” a predecessor company (“Troncom I”) that sold the same allegedly
infringing devices that HyperEdge now sells. As a result of a series of transactions, Troncom
Acquisition Corporation (“Troncom II”) purchased all the assets of Troncom I just before Troncom
Idissolved. Westell alleges that Troncom II owns the machines on which HyperEdge products are
made and the circuit diagrams from which they are manufactured. In addition, Westell alleges that
Troncom I, Troncom II and Westell have numerous connections to each other, including several
common shareholders and officers, most notably Swartwood, who served as president of all three
corporations. Westell asserts that Troncom I] is directly liable for HyperEdge’s acts of patent
infringement under either the “alter ego” or “agency” theory of liability because Troncom II owns
the assets used by HyperEdge to make its infringing products. Westell also asserts that Troncom II

and HyperEdge are liable for Troncom I’s acts of infringement based on successor-in-interest