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SITRICK v. FREEHAND SYSTEMS

March 30, 2004.

DAVID H. SITRICK, Plaintiff,
v.
FREEHAND SYSTEMS, INC., Defendant



The opinion of the court was delivered by: RONALD GUZMAN, District Judge

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff David H. Sitrick's Motion for Leave to Amend the Complaint to Add Theodore L. Schroeder as a Defendant [doc. no. 41-1]. For the reasons set forth below, Plaintiffs motion is granted.

BACKGROUND

  Plaintiff filed this patent infringement suit against Defendant FreeHand Systems, Inc. ("FreeHand") on March 5, 2002. The complaint alleges that electronic music display systems sold by FreeHand infringe two of Sitrick's patents that cover systems for electronically displaying music scores. FreeHand moved to dismiss for lack of `personal jurisdiction on June 6, 2002, and the Court allowed Sitrick to conduct discovery on the issue of jurisdiction alone.*fn1 The motion to dismiss was denied on October 29, 2002, On November 12, 2002, FreeHand answered the complaint and moved Page 2 to transfer the case to the Northern District of California. FreeHand's motion to transfer venue was denied on March 24, 2003,

  The parties engaged in settlement discussions in early to mid-2003, and they began the process of merits discovery al around the same time. Due to various disputes, the merits of which the Court need not decide here, FreeHand did not begin to produce documents related to discovery on the merits until June 2003.

  On August 12, 2003, one day before the close of discovery, Sitrick took the deposition of Theodore Schroeder, whom FreeHand had designated as its corporate representative pursuant to Federal Rule of Civil Procedure 30(b)(6), Schroeder was Freehand's Vice President of Engineering and a member of its board of directors. The following day, Sitrick took the deposition of Kim Lorz, Freehand's Chief Executive Officer.

  According to Sitrick, he discovered in the course of these two depositions that Schroeder exerted substantial control over FreeHand; he was a majority owner of FreeHand and was essentially the only source of FreeHand's funding; after he was informed about the Sitrick patents and FreeHand's alleged infringement thereof, Schroeder determined that FreeHand's systems were not infringing and/or that Sitrick's patent claims would he invalid based on prior art; he was responsible for the development and production of the hardware and software used in the accused systems; and he was in charge of the development of the user's guide for the systems. In addition, Sitrick claims to have learned that Lorz did not have nearly as much control over FreeHand as Schroeder did.

  Sitrick now seeks to amend the complaint to add Schroeder as a defendant in the case, alleging that he induced FreeHand to commit infringement, in violation of 35 U.S.C. § 271 (b), which provides that: "[W]hoever actively induces infringement of a patent shall be liable as an infringer," Page 3

  DISCUSSTON

  For procedural issues in a patent case that are not unique to patent law, such as a motion to amend, courts are directed to apply the law of the regional circuit. See Datascope Corp, v. SMEC, Inc., 962 F.2d 1043, 1045 (Fed. Cir. 1992), To the extent that analysis of the motion involves substantive patent law, however, the law of the Federal Circuit controls. See In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 803 (Fed. Cir. 2000).

  Federal Rule of Civil Procedure ("Rule") 15(a) provides that leave to amend a pleading "shall be freely given when justice so requires, "*fn2 Fed.R.Civ.P. 15(a); see Foman v. Davis, 371 U.S. 178, 182 (1962) ("If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits."). Whether to grant a motion to amend is within the discretion of the trial court, Foman, 371 U.S. at 182, and the Seventh Circuit "has adopted a liberal policy respecting amendments to pleadings so that cases may be decided on the merits and not on the basis of technicalities." Stern v. U.S. Gypsum, Inc., 547 F.2d 1329, 1334 (7th Cir. 1977) (citations omitted); see also Nebraska v. Wyoming, 515 U.S. 1, 8 (1995) (noting "the solicitude for liberal amendment of pleadings animating" Rule 15(a)).

  Courts are instructed that leave to amend should be "freely given" under Rule 15(a) "[i]n the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on Page 4 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." Foman, 371 U.S. at 182; see Textor v. Bd. of Regents of N. III. Univ., 711 F.2d 1387, 1391 (7th Cir. 1983). Undue prejudice "is the most important factor in determining whether to allow an amendment to a complaint." Ameritech Mobile. Communications, Inc. v. Computer Sys. Solutions, Inc. (In re Ameritech Corp.), 188 F.R.D. 280, 283 (N.D. Ill. 1999) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-31 (1971)); see also Tragarz v. Keene Corp., 980 F.2d 411, 432 (7th Cir. 1992) ("[D]elay is an insufficient basis for denying a motion to amend unless this delay results in undue prejudice to the opposing party.").

  Freehand argues Sitrick's motion for leave to amend should be denied because it was not timely filed, Freehand will be prejudiced if the complaint is amended, and the amendment is fufile, I. UNDUE DELAY

  Sitrick contends that it was delayed in filing the motion to amend because it was prevented from knowing the facts underlying Schroeder's alleged personal liability until the end of discovery due to FreeHand's dilatory discovery tactics. FreeHand responds that Sitrick knew or should have known about Schroeder's involvement with FreeHand well before the end of merits discovery. See In re Ameritech, 188 F.R.D. at 284 ("Where the party seeking an untimely amendment knows or should have known of the ...


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