Court Opinion

ID: 9475478
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:28:26.211164+00
Date Added: 2024-06-11T17:44:44.302166
License: Public Domain

BENNETT, Senior Circuit Judge,
dissenting.
I respectfully dissent. I would reverse the district court for abusing its discretion in allowing the defendant in an infringement suit to amend its pleadings to include the defense of patent misuse and a counterclaim for antitrust violations where the motion to do so was not filed until 7 months after a jury verdict against that defendant on validity and infringement and where there was no good cause shown for the delay.1 The court’s action in allowing the motion was actually made over 10 months after the jury verdict. Further, I would vacate the summary judgment which was predicated on the wrongful amendment.
I can only offer my condolences to appellants when they read, as I did, the majority’s approval of the dismissal by the trial court of Senza-Gel’s motion for reconsideration. The majority approves the district court’s view that “a motion for reconsideration is not a chance for a second bite, and that a grant of such a motion not based on newly found previously unknown facts, would enable the movant to ‘sandbag’ an adversary.” How Senza-Gel, has been turned into the “sandbagger” instead of the “sandbagged” in this case is beyond my comprehension, as I am sure it is beyond Senza-Gel’s, when Senza-Gel’s only “crime” was in allegedly rearguing its case in a timely motion to reconsider as contrasted to Goehring’s wait of 7 months after trial and 4V2 years after first being made aware of an issue before raising it.2 Perhaps Senza-Gel would have received a more sympathetic hearing by the district court below and the majority here if it had waited at least 7 months to raise its argument. Even better, it might have been able to think of a completely new issue in that time. In fact, unless Goehring could show some undefined but high level of prejudice, the majority opinion will give Senza-Gel until at least the entry of judgment after the antitrust trial in which to think of a saving argument to add to its pleadings.
*672BACKGROUND
Because the history of this case is material to the unconscionability of Goehring’s conduct in this case, I first set forth some of the background neglected by the majority. Senza-Gel brought suit against Goehring Meat, Inc., on November 1, 1979, for infringement of U.S. Patent No. 3,644,125 (’125), which claims a process for producing whole boneless hams. OHI, Inc., was included as a co-defendant because it supplied Goehring Meat with the machine by which the process was infringed. John Seiffhart, an employee of Goehring Meat, was included as a defendant because it was at his suggestion that the company began using the OHI machine.
The claimed process requires halving and deboning a raw ham, macerating (making parallel closely spaced slits) the cut surfaces of the ham, compressing the ham to cause interlock of the macerated surfaces and cooking the ham while it is compressed. Senza-Gel is also the assignee of U.S. Patent No. 3,893,384 (’384 patent), which claims a machine capable of macerating meat, but infringement of this patent is not alleged in the present suit. The commercial embodiment of the ’384 patent is known as the “MACERATOR.”
During the pretrial period of more than 4 years, Goehring filed three different motions for summary judgment on the issues of patent validity and noninfringement. All were denied. These motions included other elements, some of which were granted, including a partial summary judgment finding defendant OHI, Inc., not liable for contributory infringement. Goehring also twice moved to file supplemental pleadings during this period to raise the affirmative defense of “unclean hands” because of an ad placed by Senza-Gel that allegedly contained false statements concerning the ’125 patent. No mention was made in any of these motions of the affirmative defense of patent misuse or of antitrust violations.
In a Status Conference Order of July 1, 1982, the district court bifurcated the parties’ claims for trial, stating:
The court hereby severs the claims of patent validity and infringement from all other claims in this matter. The issues of patent validity and infringement shall be tried before all other issues.
A jury trial was held on the issues of patent invalidity and infringement from January 11 to January 27,1984. The jury’s verdict, rendered January 30, 1984, was that the ’125 patent was valid and infringed by Goehring.
Goehring moved for a directed verdict, judgment n.o.v., and a new trial on February 6, 1984. These motions were extensively briefed and rebriefed by the parties, and were all denied by order of the district court on July 24, 1984. In addition, the order, which was accompanied by an extensive opinion, stayed entry of judgment pending an accounting for damages and resolution of certain other issues reserved by the Status Conference Order. These other issues included alleged Lanham Act violations, but did not include patent misuse or antitrust issues which even at this late date had yet to appear in the case.
On August 31, 1984, Goehring filed a motion for leave to file an amended answer alleging for the first time the affirmative defense of patent misuse and a counterclaim for antitrust violations. Both were based on an allegation that Senza-Gel was illegally tying its ’125 process with its machine covered by the ’384 patent, the MACERATOR. This motion was granted on December 5, 1984, ten months after a jury verdict finding Senza-Gel’s patent valid and infringed.
On January 29, 1985, Goehring filed motions for summary judgment on the patent misuse defense and the antitrust counterclaim. The district court granted summary judgment on the patent misuse defense and denied summary judgment on the antitrust counterclaim in an order of April 11, 1985. The decisions were left standing after a motion to reconsider was filed by Senza-Gel but, in the order of the court denying the motion, some issues related to the disposition of the motions for summary judgment on the patent misuse and antitrust issues *673were certified to this court for our consideration under 28 U.S.C. § 1292(b).
OPINION
Senza-Gel argues that it was an abuse of discretion for the district court to grant Goehring’s motion for leave to file an amended answer on the grounds that Goehring waived its right to amend by waiting until 7 months after the jury verdict and some 4V2 years after it first came into possession of facts raising the tying issue.
The starting point in considering whether the district court abused its discretion in allowing the amendment is Fed.R.Civ.P. 15(a). Rule 15(a) states that leave to amend “shall be freely given when justice so requires.” The Supreme Court, in Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962), stated that leave to amend should be freely granted unless there is an “apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.”3 Goehring and the majority correctly cite as precedent the Ninth Circuit decision in Howey v. United States, 481 F.2d 1187, 1190 (9th Cir.1973), which stresses that the “crucial factor” in determining “the propriety of a motion for leave to amend” is the “resulting prejudice to the opposing party.” The majority affirms on this issue because it finds that Senza-Gel has failed to show prejudice resulting from the delay.
Senza-Gel argues that it is prejudiced in several ways, although the majority treats only Senza-GePs claim that Goehring’s delay rendered several crucial witnesses unavailable. Here there was evidence that plaintiff’s key witness, Sal LoBiondo, co-owner of Senza-Gel, although ill was available at trial. However, at the hearing on the motion for leave to amend, Senza-Gel’s attorney informed the court that Sal LoBiondo’s condition had deteriorated such that his memory was seriously affected and indicated that this condition would severely impair his usefulness as a witness. In fact, he died before the summary judgment for patent misuse was granted. The majority’s statement that opposing counsel said that Sal LoBiondo was “carrying out business as usual” has no support in the record. Instead, Goehring’s attorney merely alleged that one of his clients had heard that Sal LoBiondo was telling certain customers not to buy Goehring’s products or else they would be sued. Although I agree that neither counsel’s statements are evidence, the district court chose to rely on them, and I think that Senza-Gel’s attorney’s direct observations contrast favorably with Goehring’s attorney’s repetition of double hearsay that only inferentially at best refutes the claim of witness unavailability. Although I might not find this alone sufficient to establish prejudice, Senza-Gel offers proof of additional prejudice ignored by the majority.
Senza-Gel refers us to two cases, Evans v. Syracuse City School Department, 704 F.2d 44 (2d Cir.1983), and Erie Resistor Corp. v. United States, 299 F.2d 950, 156 Ct.Cl. 523, 132 USPQ 641 (1962), claiming that they are analogous on the facts to this case, and that they both indicate that in this case the prejudice required in Howey has been shown.4 In Evans the defend*674ant’s answer was filed on July 3, 1979. The defense of res judicata became available and known to defendant in November 1979. A motion to amend to include the defense was not made until August 24, 1982, “after two pre-trial conferences, and only six days before the scheduled trial date.” Evans, 704 F.2d at 47. The Second Circuit concluded that “[ujnder these circumstances, in order to justify the amendment, defendant had the burden of showing a compelling reason for the delay.” The court then held that the defendant’s reason, that it did not know that it could raise the issue until a Supreme Court decision so held, in a decision issued just before time for trial, was insufficient because there was sufficient existing law within the circuit to indicate that the issue could probably be raised. Evans cited a similar case, Nevels v. Ford Motor Co., 439 F.2d 251, 257 (5th Cir.1971), in which the Fifth Circuit stated that “amendments should be tendered no later than the time of pretrial, unless compelling reasons why this could not have been done are presented.”
Both Evans and Nevels required a showing of “compelling reasons” before allowing an amendment offered after pretrial. Here the case for requiring Goehring to show compelling reasons why leave to amend could not have been requested earlier is even stronger because the motion was not filed until 7 months after a jury verdict on validity and infringement, and 5 weeks after the denial of Goehring’s motions for directed verdict, judgment n.o.v., and new trial.
Further evidence of prejudice is the self-evidence fact of the costs involved in having a trial, jury or otherwise, on the issues of antitrust and misuse added by amendment. Both the Evans court and the Nevel court found sufficient prejudice in the unfair surprise created by the undue delay in raising the issue immediately before trial was to begin. Surely it is more prejudicial to raise the issue after the trial is over.5
I would therefore find that the unavailability of witnesses, coupled with the unconscionable surprise caused by Goehring’s delay would at a minimum, even under Ninth Circuit law, shift the burden to Goehring to explain its delay. An explanation is, of course, what Goehring has been wholly unable to offer in the appeal.6
Goehring claimed at oral argument that its delay in raising the patent misuse and antitrust issues was due to the fact that it had no knowledge of those issues until plaintiff’s witness made them aware of it by testimony at trial. However, a review of the key question asked by Goehring’s counsel at trial indicates that the answer they claim first apprised them of the misuse and antitrust issues came as no surprise.
QUESTION Mr. Townsend [Goehring’s attorney]: The testimony has been, and your brother's I believe was the same [in Salvatore LoBiondo’s February 1980 deposition], that you leased the machine and at the same time, according to your testimony, you granted a license to the user of that machine to practice the process; *675is that your testimony? (Emphasis added.)
A. (Joseph LoBiondo): Not in those exact words, but we never let one out without the other.
The bracketed material included in the quote above was supplied by Senza-Gel in its brief. The insertion was not disputed by Goehring in briefs or at oral argument. In argument, Goehring’s statement was that this response by Joseph LoBiondo was different from Salvatore LoBiondo’s statement in a February 1980 deposition:
I lease my process and loan the machine. That is our operation.
I fail to see any meaningful difference in the two responses. But my analysis of Goehring’s “new evidence” claim does not stop here. Goehring obtained one of the licenses, now challenged as illegal, from Senza-Gel in March 1976, almost 8 years before the trial. Thus, Goehring was on notice of Senza-Gel’s manner of doing business long before the trial. The record simply lends no support to Goehring’s claim that it was not aware of the misuse and antitrust issues until the testimony surfaced at trial. I note further that even accepting this claim, Goehring has made no attempt to explain in the briefs or in oral argument why it waited so many months to raise these issues when it could have raised them in a trial amendment under Rule 15(b), or at the least mentioned them in the motions for directed verdict, judgment n.o.v., or new trial.
Finally, I turn next to Goehring’s principal attempt at justifying its late amendment. Goehring states the following in its brief.
The course of proceedings also included the court’s Status Conference Order of July 1, 1982 (SX 1), wherein the court bifurcated the parties’ claims for trial and stated:
“The court hereby severs the claims of patent validity and infringement from all other claims in this matter. The issues of patent validity and infringement shall be tried before all other issues.’’ (Emphasis supplied by Goehring.)
From this, Goehring concludes:
Accordingly, only the defenses of invalidity and noninfringement were triable at the January, 1984, trial and not patent misuse, among others.
I cannot agree with Goehring’s conclusion that a bifurcation of issues, and a trial on only the issues of validity and infringement precludes the raising of a defense of patent misuse. First and foremost, even if Goehring would have been prevented under the order from trying the misuse issue, he has offered no reason, and indeed there can be none, why he did not at least amend his pleadings to include the issue. Such an amendment would have apprised the court of a newly raised issue which it might have wanted tried with the validity and infringement issues. It certainly would have been more in line with the general bias of the federal rules against “surprise” practice. Except for the fact that the majority bought it, Goehring’s argument that the district court’s order postponing trial of “all other issues” somehow applied to prevent the trial or even the raising of an issue not even in the case at the time the order issued would seem ludicrous.
Goehring asserted at oral argument that patent misuse goes to the enforceability of the patent, and not the validity. It reasons from this that it could not have raised the issue in a trial limited solely to the issues of validity and infringement. This view ignores the patent statute itself, and in particular 35 U.S.C. § 282 (1982), which states in part:
The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:
(1) Noninfringement, absence of liability for infringement or unenforceability. (Emphasis added.)
Chief Judge Markey has stated that .“[t]he doctrine of patent misuse is an affirmative defense to a suit for patent infringement.” Windsurfing International, Inc. v. AFM, Inc., 782 F.2d 995, 1001, 228 USPQ 562, 566 (Fed.Cir.1986), cert. denied, --- U.S. ---, 106 S.Ct. 3275, 91 L.Ed.2d 565 (1986) (citing Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 739 F.2d 604, 617, 222 *676USPQ 654 (FecLCir.), cert. denied, 469 U.S. 1038, 105 S.Ct. 516, 83 L.Ed.2d 405 (1984)). The Erie Resistor court stated that the issue of patent misuse “goes to the question of the right to recover, and not to the question of the amount of recovery.” Erie Resistor, 299 F.2d at 951-52, 132 USPQ at 642.
These references should have been sufficient to put Goehring on notice that patent misuse was to be raised prior to the trial on validity and infringement. Goehring has not claimed here that it attempted to include consideration of the patent misuse issue at trial and that the district court prevented it from doing so. Here the statute and our pronouncements on the issue were sufficiently clear to put Goehring on notice that patent misuse was an issue to be raised in a trial on validity and infringement. The state of the law is much clearer here than it was in Evans, where that court quoted Strauss v. Douglas Aircraft Co., 404 F.2d 1152, 1155 (2d Cir.1968):
[T]he party wishing to raise the defense (of res judicata) is obliged to plead it at the earliest possible moment. Certainty of success is not an essential element in determining whether to set forth the affirmative defense in a pleading. If the defense lurks in the case, vacillation can cause the other party irreparable injury.
Evans, 704 F.2d at 47.
Goehring also claims justification for its delay in that the amended pleading was relevant to its pending Lanham Act counterclaim, and that the antitrust counterclaim might be compulsory. Both of these may be justification for amending the pleadings, but neither supplies justification for the late date at which the amendment was offered. Nothing in these two justifications explains why the amendment could not have been timely made before trial. For the same reason, I reject Goehring’s attempt to justify its late filing by reasoning that the public policy against misuse of patents will otherwise be harmed. This was as true before the start of the trial as it was after.
For the reasons discussed above, I am convinced that at the time the motion for leave to amend was filed, Senza-Gel would necessarily have been prejudiced by the granting of the motion, and that Goehring failed to show at that time and on appeal any compelling reason justifying an amendment to assert new issues 7 months after the jury trial on validity and infringement. Accordingly, I would reverse the grant of that motion because the issues were waived under the circumstances described in this case, and the district court abused its discretion when it granted the motion to amend. This would preclude Goehring from raising the issues of patent misuse and antitrust violations in the trial of this case, and my disposition would render moot Goehring’s appeal from the denial of summary judgment on the antitrust issue. I would also vacate the district court’s summary judgment on patent misuse which arose from the improvident grant of the motion to amend. I would accordingly direct that the proceedings be taken up again from the state they were in prior to the granting of the motion for leave to amend on December 5, 1984. I do not reach the res judicata issue nor issues certified to us, as my disposition would render them moot in this case.

. I agree with the majority that under our precedents we have jurisdiction to consider the issue of whether the district court abused its discretion in granting Goehring’s motion for leave to amend. Minnesota Chippewa Tribe (No. 19) Red Lake Band v. United States, 768 F.2d 338, 340 n. 2 (Fed.Cir. 1985); United States v. Connolly, 716 F.2d 882, 884 (Fed.Cir.1983), cert. denied, 465 U.S. 1065, 104 S. 1414, 79 L.Ed.2d 740 (1984). See also Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d 958, 962 n. 7 (3d Cir.1983), cert. denied, 465 U.S. 1024, 104 S.Ct. 1278, 79 L.Ed.2d 682 (1984); Murphy v. Heppenstall Co., 635 F.2d 233, 235 n. 1 (3d Cir.1980), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71 L.Ed.2d 293 (1982); In re Oil Spill by the “Amoco Cadiz” off the Coast of France March 16, 1978, 659 F.2d 789, 793 n. 5 (7th Cir.1981); see generally 9 J. Moore, B. Ward, & J. Lucas, Moore’s Federal Practice ¶ 110.25[1] (2d ed. 1985).

. This says nothing of the chutzpah of Goehring who brazenly asserts in its brief on this same issue:
"The trial court also ruled that the mandate of Rule 56, Rule 1 (requiring construction of the Federal Rules ‘to secure the just, speedy, and inexpensive determination of every action,’), and Local Rule 230(k) required plaintiffs to make their arguments and offer their evidence in the original briefing (JX 369-370). Having failed to do so, defendants submit that all of plaintiffs' arguments, other than ‘coercion’ and ‘voluntary agreements’ are waived and should not be considered on appeal.’’

. Although it was not argued, this case is one falling squarely within Foman's exception that amendments should be freely granted unless there is a "repeated failure to cure deficiencies by amendments previously allowed." Here Goehring made numerous pretrial amendments and failed to include the misuse or antitrust issues, even though the record is clear that Goehring was aware of the evidence underlying the issue years before the trial.

. In Erie Resistor, the United States Court of Claims was presented with a motion by the defendant for leave to amend its pleadings in an infringement suit to include the defense of patent misuse. Erie Resistor, 299 F.2d at 951, 132 USPQ at 642. This motion was made after the court had rendered judgment on validity and infringement, and had remanded the case for an accounting. The court took note of the fact that 5 years before the motion was made, when *674the validity and infringement issues were pending before the trial commissioner, the defendant had made the statement in discovery that patent misuse is an issue bearing directly on validity. The court decided that this statement was evidence showing that the defendant had been afforded ample opportunity to raise the defense and held that it could not be raised after judgment had been rendered on validity and infringement.

. I would see some merit in analogizing to the finding of prejudice in laches cases where the rule is also that delay alone ordinarily cannot create prejudice. In those cases, the courts have said however:
" 'The longer the delay by a plaintiff in filing suit, the less need there is to search for specific prejudice and the greater the shift to plaintiff of demonstrating lack of prejudice.'" Deering v. United States, 620 F.2d 242, 246, 223 Ct.Cl. 342 (1980). If a plaintiff fails to meet this burden in a meaningful way, it may be presumed, in a proper case, that prejudice is manifest from undue delay. Wilmot v. United States, 205 Ct.Cl. 666, 685 (1974).
Pepper v. United States, 794 F.2d 1571 (Fed.Cir. 1986). See also Leinoff v. Milona & Sons, 726 F.2d 734, 742 (Fed.Cir. 1984).

. Perhaps the only plausible explanation was offered by the district court when it said at the hearing on the motion for leave to amend: “If the test is where [has Goehring] been for the last 9 months, the answer would be they are sticking their finger in their ear and they ought to be denied."