Douglas Press' claims of prejudice center on the imminent close of discovery. It claims
that it will have to take additional discovery from third parties which will take considerable time
and resources. Tabco's affirmative defenses, however, include a claim that the '737 patent was
not patentable over the prior art, including the seal card games at issue in the mequitable conduct
defense. Tabco now seeks to add an allegation that Douglas Press knew of the prior art. Because
the invalidity and inequitable conduct defenses are closely related, Douglas Press will not be
unduly prejudiced by the amendment. See Bower v. Jones, 978 F.2d 1004, 1010 (7th Cir. 1992)
(finding no undue prejudice where claim was similar to those in original complaint). Lf it needs
to extend the discovery deadline, il will have to ask the court for additional time. Tabco could
not in good conscience object to another extension, where the reason for the extended discovery
was the amendment to its answer.

Finally, the Court finds that Tabco's claims of inequitable conduct do not constitute a
compulsory counterclaim, Inequitable conduct is recognized as an affirmative defense. Eg.
Int'l Rectifier Corp. v. IXYS Corp., 361 F.3d 1363, 1376-77 (Fed. Cir, 2004); About Labs. v.
TorPharm, Inc., 300 ¥.3d 1367, 1379-80 (Fed. Cir. 2002), We will allow Tabco leave to amend
its answer to add an affirmative defense of inequitable conduct. See of. Mercexchange, LLC v.

eRay, Inc., 271 F, Supp. 2d 784, 789 (E.D. Va. 2002).



9(b); Heidelberg Harris, Inc. v. Mitsubishi Heavy Indus., Ltd., 95 C 0673, 1996 WL 680243, at
*2 (N.D. Til. Nov. 21, 1996) (noting that inequitable conduct must be pled with the specificity
tequirements of Rule 9(b)). Tabco does not deny that it knew at a much earlier date of the former
employec's testimony revealing that the inventor of the '737 patent and others at Douglas Press
were aware of rclevant seal card games before the Douglas Press Bonus 300 game at issue was
invented. This testimony was allegedly confirmed in depositions taken last year. Allegations of
inequitable conduct are serious and we cannot fault Tabco for waiting for further evidence before
filing such an affirmative defense, especially keeping in mind Rule 11 of the Federal Rules of
Civil Procedure, Although Douglas Press disputes that such confirmation was necessary, it still
asserts that the cmployee's testimony has been discredited. If the cvidence were not reliable, it
would be alf the more reason for Tabco to wait to file its allegations.

Even if Tabco had unduly delayed in secking leave to amend, we would still grant the
motion because we also find that Douglas Press will not suffer undue prejudice if the proposed
amendment is allowed. While the court will consider delay as one factor when deciding whether
lo grant a motion to amend, it must also find thal the non-movant has suffered undue prejudice.
King v. Cooke, 26 F.3d 720, 723 (7th Cir. 1994); Stone Container Corp. v. Arkwright Mut. Ins.
Co., No. 93 C 6626, 1996 WL 238904, at *3-5 (N.D. IN. May 2, 1996) (holding that even if the
plaintiff did not provide a sufficient explanation for the delay, a complaint may be amended
unless it burdens or causcs undue prejudice to the defendant). Almost every amendment will
result in some prejudice to the non-moving party, therefore the question is whcther the prejudice

is undue. Bell vy, Am. Med. Ass'n, 00 C 0573, 2000 WL 1367946, at *2 (N.D. Ul Sept. 15, 2000).


TLL. Conclusion
For the reasons above, the Court grants Defendants' Motion for Leave to File its
Amended Answer.

ENTER ORDER:

Dec lee Cobban

MARTIN C, ASHMAN
Dated: May 17, 2004. United States Magistrate Judge



United States District Court, Northern District of Minois

Name of Assigned Judge Martin Cc. Ashman Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 00 C 7338 L DATE 5/17/2004
CASE Douglas Press, Inc. vs. Yabco Inc., et al.
TITLE

In the fullowing box (a) indicate the party filing the nation, ¢.g,, plaintiff, defendant, 3rd party plaintiff, and (b) stat
‘af the motion being presented.]

MOTION:

te briefly the nature:

DOCKET ENTRY:

qa) o Filed motion of [ use listing in “Motion” box above.]

(2) QO Bricf in support of motion due _____.

(3) Qa Answer brief to motion duc____. Reply to answer briefdue_

(4) ia Ruling/Hearing onset for at

(5) QO Status hearing[held/continued to] [set for/re-set for] on _—s_sset for at

(6) im Pretrial conference[held/continued to] [set for/re-set for]on set for at

(7) im Trial{set for/re-set forJon_ ats

(8) ia] {Bench/Jury trial] [[learingfheld/continuedto_—_at_

(9) im) This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to)

DrRCP4(m) ClLocal Rule 41.1 CIPRCP41(a\1) Ol FRCP41(a)(2).

ao) i [Other docket entry) Enter memorandum opinion and order. Defendants’ motion for leave to file
an amended answer to the second amended complaint,

qt) a (For further detail see order (on reverse side ol/attached (0) the original minute order]

Y | No notices required, advised in open court

No notices required

Documerit!
Nutaber,

i

Copy to judue/mayistrate judge.

die mailed noticg
courtroom,

nr
Is depuly’s BG Lb ae
initials

Dute/time received in
soiling depaty inital

number af nutiges
Notices mailed by judge's staff, MAY 17 aunty
Notified counsel by telephone. dite decked
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Mail AQ 450 form. cat Des initials \ U

a1 central Glerk’s gpilice



Copies have been mailed to:

RICHARD D, HARRIS, Esq.

HERBERT H. FINN, Esq.
Greenberg Traurig, L.L.P.
77 West Wacker Drive
Suite 2500

Chicago, LL 60601

Attorneys for Plaintiff

RICHARD A. ZACHAR, Esq.

BRUCE A. RADKE, Esq

Vedder, Price, Kaufman & Kammholz, P.C
222 North LaSalle Street

Suite 2600

Chicago, [I], 60601-1003

Attorneys for Defendants



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
DOUGLAS PRESS, INC., )
an Hlinois corporation, )
) tan 4
Plaintiff, ) Case No. 00 7338MAY 17 200
)
v. ) Magistrate Judge
) Martin C. Ashman
TABCO INC., a Delaware corporation, et al., )
)
Defendants, )

MORANDUM OPINION AND ORDER

Pursuant to Federal Rule of Civil Procedure |5(a), Defendants Tabco Inc., Tabco Canada,
and Specialty Print (collectively "Tabco") have filed a motion for Icave to file an amended
answer to the second amended complaint. Plaintiff Douglass Press, Inc. objects to this motion.
The parties have consented to have this Court conduct any and all proceedings in this casc,
including the entry of final judgment. See 28 U.S.C. § 636(c); Local R. 73.1(a). For the

following reasons, Tabco's motion is granted.

I. Background

Tn January of 2002, Douglas Press filed a second amended complaint alleging
infringement of United States Patent No. 5,046,737 ("the '737 patent"). Tabco timely answered
the second amended complaint, denied infringement of the '737 patent, and alleged that the '737

patent was invalid, Discovery ensued, and Tabco asserts that it recently obtained corroborating

evidence supporting a defense of inequitable conduct by Douglas Press. It filed its motion to



amend its answer on March 31, 2004. Douglas Press responds that the theory and facts behind
the inequitable conduct defense, which include the testimony of a "disgruntled" former employee
of Douglas Press, have been publically available to Tabco since approximately 1996, The
employee's testimony was given to Tabco in 2002 during discovery of the instant case. Tabco
responds that corroboration for the employee's testimony was found during depositions taken in

late 2003, The deadline for the amendment of pleadings was March 11, 2003.

II. Discussion

Rule 15(a) provides that leave to amend responsive pleadings "shall be freely given when
justice so requires." Nevertheless, the court may deny leave to amend where the exists "undue
delay, bad faith, dilatory motive, unduc prejudice to the opposing party, or when the amendment
would be futile." Bethany Pharmacal Co. v. QVC, Inc., 241 F.2d 854, 861 (7th Cir. 2001), The
discretion (o grant or deny a motion to amend remains with the trial court. Villa v. City of
Chicago, 924 F.2d 629, 632 (7th Cir, 1991). Douglas Press argues that the motion to amend
should be denied because Tabco unduly delayed in seeking to amend its answer because it knew
the facts behind the inequitable conduct allegations several years ago. It also argues that the
proposed amendment will prejudice Douglas Press because the close of consolidated discovery
May 31, 2004, and it will need to take discovery from third parties. Finally, Douglas Press
argues that the inequitable conduct charge is a compulsory counterclaim, that having not been
pled, has been waived.

The Court finds that Tabco did not unduly delay in secking leave to amend its answer. AS

with fraud, allegations of inequitable conduct must be pled with particularity. Fed. R. Civ. P.

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