Defendant. SUMMARY ORDER. Plaintiff PPC Broadband, Inc., d/b/a PPC commenced this action

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 1 of 13 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK PPC BROADBAND, INC., d/b/a PPC, v. Plaintiff, 5:11-cv-761 (GLS/DEP) CORNING OPTICAL COMMUNICATIONS RF, LLC., Defendant. SUMMARY ORDER Plaintiff PPC Broadband, Inc., d/b/a PPC commenced this action against defendant Corning Optical Communications RF, LLC, alleging infringement of several claims in two patents held by PPC. (See generally Compl., Dkt. No. 1.) On February 3, 2015, this court held an interim pretrial conference and scheduled the trial in this matter to begin on July 20, 2015. (Dkt. No. 220.) Following that conference, Corning filed the pending motion to amend/supplement its answer to include an affirmative defense and/or counterclaim alleging inequitable conduct on the part of PPC during proceedings before the United States Patent and Trademark

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 2 of 13 Office (PTO). 1 (Dkt. No. 223.) For the reasons that follow, the motion is granted. As relevant to the pending motion, and as alleged by Corning in its proposed amended pleading, the two patents in suit here, U.S. Patent No. 6,558,194 ( 194 patent ) and U.S. Patent No. 6,848,940 ( 940 patent ), are closely related to, and part of the same family as, a third patent, which is the subject of a different pending action between these two parties, U.S. Patent No. 6,676,446 ( 446 patent ). (Dkt. No. 223, Attach. 2 1, 146, 148-49.) In late 2013, Corning requested that the PTO initiate reexamination proceedings with respect to both the 194 and 940 patents, claiming that they were obvious in light of certain prior art, and, thus, invalid. (Id. 150, 185.) Reexamination of both the 194 and 940 patents was ordered, and ultimately concluded in January 2015 when the PTO issued Reexamination Certificates confirming the validity of the two patents. (Id. 151, 169, 185, 188.) However, while these reexaminations were pending, Corning also sought, in May 2014, an inter partes review 1 Corning has filed a reply memorandum in connection with this motion. (Dkt. No. 225.) Notably, pursuant to this court s local rules on non-dispositive motions such as this, [r]eply papers... are not permitted without the Court s prior permission. N.D.N.Y. L.R. 7.1(b)(2). Corning did not seek the court s prior permission before filing its reply here. In any event, as PPC has not opposed the filing of the reply, the court will construe Corning s filing as seeking permission to file a reply, and grants such request. 2

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 3 of 13 (IPR) proceeding with respect to the related 446 patent. (Id. 152.) In that petition, Corning made similar arguments as those raised in the 194 and 940 patent reexaminations, asserting that certain claims of the 446 patent were likewise invalid for obviousness in light of the same prior art raised in the 194 and 940 patent reexaminations. (Id.) In September 2014, the Patent Trial and Appeal Board (PTAB) granted Corning s petition for IPR, indicating in its decision that Corning has shown a reasonable likelihood that it would prevail in demonstrating that each of claims 1-3 and 7 [of the 446 patent] is unpatentable for obviousness over [the asserted prior art]. (Id. 153; Dkt. No. 223, Attach. 11 at 16.) As alleged by Corning, certain representatives of PPC who were involved in all of the above proceedings, including both its in-house and outside counsel, as well as its long-time expert witness, were personally aware of the PTAB s decision questioning the validity of the 446 patent, and did not disclose this decision to the PTO at any time during the pendency of the reexaminations of the closely related 194 and 940 patents. (Dkt. No. 223, Attach. 2 155-58, 186-87.) Corning maintains that, if this information had been fully disclosed, the patent examiners in the reexaminations would have reached a different outcome, and would not 3

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 4 of 13 have confirmed the validity of the 194 and 940 patents. (Id. 164-70, 189.) Further, Corning alleges that the circumstances surrounding the non-disclosure raise at least an inference that PPC had the requisite intent to deceive or mislead the PTO when it failed to disclose the full extent of the developments in the 446 patent s IPR proceedings. (Id. 171-83, 190.) As a threshold matter, Corning relies on Federal Rule of Civil Procedure 15 as the basis to permit the amendment of its answer and counterclaims here. (Dkt. No. 223 at 1; Dkt. No. 223, Attach. 1 at 3-4.) Rule 15(a) 2 provides that, where a party seeks to amend its pleading before trial, [t]he court should freely give leave when justice so requires. Fed. R. Civ. P. 15(a)(2). However, [w]here a scheduling order has been entered, the lenient standard under Rule 15(a)... must be balanced against the requirement under Rule 16(b) that the Court s scheduling order shall not be modified except upon a showing of good cause. Laskowski v. Liberty Mut. Fire Ins. Co., No. 5:11-cv-340, 2013 WL 5127039, at *2 n.3 2 Although Corning notes that its motion is really one to supplement, under Rule 15(d), and not a motion to amend, under Rule 15(a), (Dkt. No. 225 at 9 n.5), this distinction is of no moment. See Gittens v. Sullivan, 670 F. Supp. 119, 123-24 (S.D.N.Y. 1987) ( The standard for the exercise of discretion on a motion to supplement the pleadings is the same as that for disposition of a motion to amend a complaint under Rule 15(a). ), aff d, 848 F.2d 389 (2d Cir. 1988). 4

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 5 of 13 (N.D.N.Y. Sept. 12, 2013) (quoting Grochowski v. Phoenix Constr., 318 F.3d 80, 86 (2d Cir. 2003)). To satisfy the good cause standard the party must show that, despite its having exercised diligence, the applicable deadline could not have been reasonably met. Id. at *2 (internal quotation marks and citation omitted). Further, the good cause standard is not satisfied when the proposed amendment rests on information that the party knew, or should have known, in advance of the deadline. Enzymotec Ltd. v. NBTY, Inc., 754 F. Supp. 2d 527, 536 (E.D.N.Y. 2010) (internal quotation marks and citation omitted). Here, although Corning did not explicitly identify Rule 16 in its moving papers as the governing standard given the issuance of a pre-trial scheduling order in this case, Corning has made arguments that appear to be directed to the existence of good cause justifying an amendment at this late juncture. (Dkt. No. 223, Attach. 1 at 3-4, 5-6.) Specifically, Corning notes that the reexaminations of the 194 and 940 patents did not conclude until January 2015, and, therefore, Corning could not have asserted a claim of inequitable conduct prior to that point, as PPC could have cured [its omission] by a timely submission, Young v. Lumenis, Inc., 492 F.3d 1336, 1349-50 (Fed. Cir. 2007), to the PTO up until the close of 5

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 6 of 13 the reexaminations. (Dkt. No. 223, Attach. 1 at 5-6; Dkt. No. 225 at 9-10.) Accordingly, the relevant delay for purposes of assessing good cause and due diligence here is just over two months, as the instant motion was filed in March 2015. (Dkt. No. 223.) The court finds that this relatively brief delay does not demonstrate a lack of diligence by Corning, see Tailored Lighting, Inc. v. Osram Sylvania Prods., Inc., 255 F.R.D. 340, 347-48 (W.D.N.Y. 2009) (finding good cause where party seeking amendment filed motion to amend approximately four months after it first learned of the existence of possible inequitable conduct defense), nor would permitting this amendment unduly prejudice PPC, as the court, at the parties request, (Dkt. No. 223, Attach. 1 at 17-18; Dkt. No. 224 at 24-25), intends to bifurcate this issue from the jury issues of infringement, validity, and damages. 3 See Kassner v. 2d Ave. Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007) (noting that [t]he district court, in the exercise of its discretion under Rule 16(b), also may consider other relevant factors 3 Inequitable conduct is an equitable issue decided by the court, not by a jury. See Gen. Electro Music Corp. v. Samick Music Corp., 19 F.3d 1405, 1408 (Fed. Cir. 1994) ( [D]isputed issues of fact underlying the issue of inequitable conduct are not jury questions, the issue being entirely equitable in nature. ); Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1190 (Fed. Cir. 1993) ( The defense of inequitable conduct in a patent suit, being entirely equitable in nature, is not an issue for a jury to decide. (citing Ross v. Bernhard, 396 U.S. 531, 538 (1970))). 6

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 7 of 13 including, in particular, whether allowing the amendment of the pleading at this stage of the litigation will prejudice the opposing party). The parties appear to agree that, should any additional discovery be necessary in connection with the inequitable conduct claim, it should not take place until after the jury trial, so as to not affect the schedule of the trial or the parties preparations therefor, (Dkt. No. 223, Attach. 1 at 17-18; Dkt. No. 224 at 24-25), which would ameliorate the prejudice asserted by PPC, (Dkt. No. 224 at 6-8). As to the underlying defense sought to be added by Corning, [i]nequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011). Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the [PTO], which includes a duty to disclose... all information known to that individual to be material to patentability. 37 C.F.R. 1.56(a); see Critikon Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997). A breach of this duty, by way of the withholding of material information from a patent examiner, can form the basis for a claim of inequitable conduct. See Li 7

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 8 of 13 Second Family Ltd. P ship v. Toshiba Corp., 231 F.3d 1373, 1378 (Fed. Cir. 2000). Thus, a claim of inequitable conduct arises where the accused infringer... prove[s] that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. Therasense, 649 F.3d at 1287. The accused infringer must prove both elements intent and materiality by clear and convincing evidence. Id. Direct evidence of intent or proof of deliberate scheming is rarely available in instances of inequitable conduct, but intent may be inferred from the surrounding circumstances. Critikon, 120 F.3d at 1256. If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant s conduct before the PTO warrants rendering the entire patent unenforceable. Therasense, 649 F.3d at 1287. Here, PPC opposes Corning s motion to amend on the grounds that such amendment would be futile because it is inadequately pleaded, and based on its view that Corning would ultimately be unsuccessful in proving this defense. (Dkt. No. 224 at 8-24.) These arguments are unavailing at this juncture. [I]nequitable conduct... must be pled with particularity under [Federal] Rule [of Civil Procedure] 9(b). Exergen Corp. v. Wal-Mart 8

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 9 of 13 Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009) (internal quotation marks and citation omitted). A pleading that simply avers the substantive elements of inequitable conduct, without setting forth the particularized factual bases for the allegation, does not satisfy Rule 9(b). Id. at 1326-27. [I]n pleading inequitable conduct in patent cases, Rule 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO. Id. at 1327. While the intent element may be averred generally,... the pleadings [must] allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind. Id. Here, the court finds that Corning s inequitable conduct defense is adequately pleaded. Corning has pleaded facts that could reasonably support a claim that PPC representatives misrepresented or omitted material information with the specific intent to deceive the PTO. Therasense, 649 F.3d at 1287. Corning has alleged the specific circumstances of the failure to disclose for example, what exactly was withheld, the specific PPC representatives who were involved and failed to disclose material information that was known to them, and when these disclosures could logically have been made in communications with the 9

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 10 of 13 PTO. (Dkt. No. 223, Attach. 2 144-91.) Further, Corning has cited legal support for its argument that the failure to disclose the PTAB s decision to grant IPR of the 446 patent could be a material omission because the patents are closely related. (Dkt. No. 223, Attach. 1 at 9-11; Dkt. No. 223, Attach. 2 164-70); see Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1337-38 (Fed. Cir. 2009); Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1368 (Fed. Cir. 2003) (holding that a contrary decision of another examiner reviewing a substantially similar claim meets the... threshold materiality test of any information that a reasonable examiner would substantially likely consider important in deciding whether to allow an application to issue as a patent (internal quotation marks and citation omitted)). And, given Corning s allegations that the same actors were involved in all of the relevant proceedings and regarding the temporal proximity between the PTAB s decision and further communications with the PTO in the reexaminations, (Dkt. No. 223, Attach. 2 154-58, 186-87), sufficient facts are alleged from which the fact-finder could reasonably infer that the omission was intentional. See Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181, 1191 (Fed. Cir. 2006) (noting that intent may be inferred where: (1) the applicant knew of the information; (2) the 10

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 11 of 13 applicant knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding ). Again, the court reiterates that it will ultimately be Corning s burden to prove each of these elements by clear and convincing evidence, see Therasense, 649 F.3d at 1290, but, at this stage, the defense has been sufficiently alleged. On a similar note, while PPC spends the bulk of its opposition challenging the merits of Corning s proposed defense, the court is disinclined to deny the amendment on that basis at this juncture. See Tailored Lighting, 255 F.R.D. at 348. While PPC maintains that the record reflects its disclosure of the existence of the 446 patent during the reexaminations of the patents in suit, (Dkt. No. 224 at 14-16), Corning has alleged that PPC failed to disclose the ultimate resolution of the 446 patent s IPR proceeding and the PTO s decision questioning the validity thereof, not simply the existence of the 446 patent, (Dkt. No. 223, Attach. 2 146, 154, 158, 167, 170, 175, 189). PPC contends, by way of affidavits from the individuals who participated in the reexaminations, that it did in fact disclose this information orally to the PTO examiners. (Dkt. No. 224 at 15-16; Dkt. No. 224, Attach. 1 8; Dkt. No. 224, Attach. 2 4.) 11

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 12 of 13 However, in determining the futility of the proposed amendments, Corning s properly pleaded factual allegations are entitled to the assumption of truth, and all reasonable inferences are drawn in its favor, see Louis Chung v. City Univ. of N.Y., No. 14-3611-CV, 2015 WL 1428192, at *1 (2d Cir. Mar. 31, 2015) ( On... a motion [to amend], the Court accepts all factual allegations in the [pleading] as true and draws all reasonable inferences in the [moving party] s favor. ); Hines v. City of Albany, 542 F. Supp. 2d 218, 224 (N.D.N.Y. 2008) ( [A] district court may not deny a motion for leave to amend a pleading when said pleading is sufficient to withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). ). While PPC may ultimately be able to prove that it did make such disclosures, resolving questions of fact like this one is not proper at this stage. See Sweet v. Serpa, No. 91-CV-5, 1993 WL 18938, at *4 (N.D.N.Y. Jan. 28, 1993) ( [S]ubstantive issues are not to be considered on a motion to amend the pleadings. ); T & N plc v. Fred S. James & Co. of N.Y., Inc., No. 89 Civ. 7688, 1991 WL 190581, at *2 (S.D.N.Y. Sept. 16, 1991) (noting that a party is not required to establish a probability it would prevail on the merits in order for the court to grant its motion to amend ). Accordingly, Corning s motion to amend/supplement 12

Case 5:11-cv-00761-GLS-DEP Document 228 Filed 05/20/15 Page 13 of 13 its answer is granted. WHEREFORE, for the foregoing reasons, it is hereby ORDERED that Corning s motion seeking leave to file an amended answer (Dkt. No. 223) is GRANTED and Corning is directed to file its amended pleading in accordance with N.D.N.Y. L.R. 7.1(a)(4); and it is further ORDERED that, upon completion of the jury trial in this matter, which remains scheduled to begin on July 20, 2015, the parties contact Magistrate Judge David E. Peebles for further proceedings on the inequitable conduct defense, if necessary; and it is further the parties. ORDERED that the Clerk provide a copy of this Summary Order to IT IS SO ORDERED. May 20, 2015 Albany, New York 13