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LRC ELECS., INC. v. JOHN MEZZALINGUA ASSOCS.

August 25, 1997

LRC ELECTRONICS, INC., Plaintiff,
v.
JOHN MEZZALINGUA ASSOCIATES, INC., Defendant.



The opinion of the court was delivered by: SCULLIN

 Introduction

 This is a patent infringement action pursuant to 35 U.S.C. § 271. Plaintiff LRC Electronics Inc. ("LRC") is a New York corporation which designs and sells, among other products, patented coaxial cable connectors, including the patent at issue in this case, United States Patent No. 4,902,246 ("the '246 patent"). *fn1" Defendant John Mezzalingua Associates, Inc. ("JMA") is a New York corporation whose division, Production Products Corporation ("PPC"), manufactures and sells allegedly infringing coaxial cable connectors known as "CMP" connectors. *fn2"

 Plaintiff seeks a judgment declaring that the Defendant has willfully infringed Plaintiff's '246 patent. Plaintiff also seeks a permanent injunction enjoining the Defendant from making or selling products that infringe Plaintiff's '246 patent, lost profits, an increase in damages for wilful infringement pursuant to 35 U.S.C. § 284, interest, attorneys' fees, and costs. In its amended answer, the Defendant asserts two counterclaims for judgment declaring Plaintiff's '246 patent invalid under the statutory doctrines of anticipation and obviousness. Defendant also seeks judgment declaring that Defendant's original and redesigned CMP connectors do not infringe Plaintiff's '246 patent. *fn3"

 Presently before the Court are Plaintiff's motions for leave to amend the complaint and for a preliminary injunction, and Defendant's motions for an order of production, a pre-trial Markman hearing, and summary judgment on its counterclaims.

 Procedural History

 Plaintiff filed its complaint on November 22, 1995. *fn4" On December 12, 1995, Defendant filed an answer with one counterclaim. On April 9, 1996, Defendant filed a motion for summary judgment on its original counterclaim. By letter dated July 12, 1996, Defendant also moved for an order compelling Plaintiff to produce Documents 17-48 listed in Plaintiff's privileged document list, and for an order compelling Plaintiff to produce attorney Stanley M. Schurgin for deposition. *fn5" On August 15, 1996, Defendant filed a second motion for summary judgment on its second counterclaim. *fn6"

 Shortly thereafter, on September 6, 1996, Defendant moved for leave to file an amended answer. Defendant sought leave to add the affirmative defense of "inequitable conduct" and a second counterclaim. On that same date, the Defendant also filed a motion for a pre-trial Markman hearing at which time the Court would receive expert testimony regarding the construction of certain terms in Plaintiff's '246 patent. *fn7"

 At a hearing held on October 10, 1996, Plaintiff consented to Defendant's motion insofar as Defendant sought leave to amend its answer to add a second counterclaim concerning invalidity and non-infringement. However, Plaintiff opposed Defendant's motion for a Markman hearing and Defendant's request for leave to add the inequitable conduct defense. Following oral argument, the Court granted the Defendant leave to file an amended answer asserting both the second counterclaim and the inequitable conduct defense. The Court reserved decision on Defendant's motions for a Markman hearing, for production of documents, and for summary judgment on its second counterclaim.

 Discussion

 As stated, presently before the Court are Plaintiff's motions for leave to amend the complaint and for a preliminary injunction, and Defendant's motions for an order of production, a pre-trial Markman hearing, and summary judgment on its counterclaims. The Court will address these motions seriatim.

 I. Motion for Leave to Amend the Complaint

 Plaintiff moves for leave to amend its complaint to assert a common law unfair competition claim pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. Plaintiff seeks leave to file an amended complaint which will allege that the Defendant has recently embarked on a campaign to hire away Plaintiff's key employees and place them in positions in which they cannot avoid using and/or revealing confidential business and technical information they obtained while in Plaintiff's employ. Plaintiff alleges that the Defendant has already hired away two key engineers and a production specialist, and has attempted to recruit at least two other employees. Plaintiff further alleges, on information and belief, that the Defendant has misappropriated trade secrets of the Plaintiff, including confidential business and technical information.

 Defendant argues that the Court lacks subject matter jurisdiction over Plaintiff's proposed claim, and in the alternative, that Plaintiff has failed to state claims upon which relief can be granted.

 Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend a complaint "shall be freely given when justice so requires." Motions for leave to amend are committed to the sound discretion of the district courts. Zahra v. Town of Southold, 48 F.3d 674, 685 (2d Cir. 1995). "Undue delay and futility of the amendment, among other factors, are reasons to deny leave." John Hancock Mut. Life Ins. Co. v. Amerford Int'l Corp., 22 F.3d 458, 462 (2d Cir. 1994).

 As stated, the Defendant's first argument is that the Court lacks subject matter jurisdiction over Plaintiff's proposed unfair competition claims. *fn9" In considering this jurisdictional issue, the Court is guided by the "fundamental precept that federal courts are courts of limited jurisdiction." Mars Inc. v. Kabushiki-Kaisha Nippon Conlux, 24 F.3d 1368, 1372 (Fed. Cir. 1994). "A party seeking the exercise of jurisdiction in its favor bears the burden of establishing that such jurisdiction exists." Id. (quoting Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 57 L. Ed. 2d 274, 98 S. Ct. 2396 (1978).

 The doctrine of pendent jurisdiction provides district courts with jurisdiction over non-federal claims when the claims derive from a "common nucleus of operative facts." Mars Inc. 24 F.3d at 1374 (citing United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966)). If the claims are such that one would ordinarily expect to try them all in one judicial proceeding, assuming substantiality of the federal issues, a federal court has the power to hear them all. United Mine Workers, 383 U.S. at 725. In fact, exercise of pendent jurisdiction over a plaintiff's state law claims, while not automatic, is generally a favored and normal course of action in the federal courts. Promisel v. First American Artificial Flowers, Inc., 943 F.2d 251, 254 (2d Cir. 1991). However, the exercise of pendent jurisdiction is, at its core, a matter left to the sound discretion of the district court. Conopco, 46 F.3d at 1571.

 In considering whether to exercise pendent jurisdiction over state law claims, courts consider a number of factors including: (1) the degree of overlap between the factual basis of the state and federal claims, (2) whether the state issue substantially predominates over the federal issue in terms of proof, the scope of the issues raised, or the comprehensiveness of the remedy sought, (3) whether the state claim would require substantial additional evidence at trial, (4) whether there is a likelihood of jury confusion, (5) whether the state law claim was asserted as a means of prejudicing the jury against the other party, (6) judicial economy, and (7) convenience and fairness to the litigants. Verdegaal Bros., Inc. v. Union Oil of California, 750 F.2d 947, 952 (Fed. Cir. 1984); see also Conopco, 46 F.3d at 1571.

 Overlap in Factual Bases

 Plaintiff argues that the evidence it intends to introduce on its unfair competition claims is also relevant to the patent issues of wilfulness of infringement, invalidity, and damages.

 With respect to the issue of infringement, Plaintiff alleges that the three employees hired away by the Defendant, and the trade secrets allegedly misappropriated, were all associated with Plaintiff's "Snap-N-Seal" line of connectors (the connectors described in Plaintiff's allegedly infringed '246 patent). However, the Court finds that all of the new allegations in the amended complaint would be either irrelevant, or only minimally relevant, to Plaintiff's patent infringement claims. For example, the conduct alleged in Plaintiff's proposed amended complaint occurred many months, and even years, after the Defendant's decisions to manufacture and sell the original and redesigned CMP connectors. Moreover, evidence of the Defendant's recent hiring practices would be wholly irrelevant to whether the Defendant wilfully infringed Plaintiff's '246 patent by selling the original CMP connectors, and only minimally relevant, if at all, to whether the Defendant wilfully infringed Plaintiff's '246 patent by selling the redesigned CMP connectors because of the time frames involved. *fn10"

  With respect to the issue of patent invalidity, Plaintiff cites to Panduit Corp. v. Dennison Mfg. Co., 774 F.2d 1082, 1099 (Fed. Cir. 1985), and argues that evidence of copying (which the Plaintiff alleges in its proposed unfair competition claims) is relevant to whether the Plaintiff's patent is invalid under the doctrine of obviousness. See 35 U.S.C. § 103. However, obviousness is a multi-faceted concept involving a number of additional factual considerations such as (1) the scope and content of the prior art, (2) the differences between the art and the claims at issue, and (3) the level of ordinary skill in the art. Graham v. John Deere Co., 383 U.S. 1, 17-18, 15 L. Ed. 2d 545, 86 S. Ct. 684 (1966). Moreover, unlike the present case where the issue of copying is disputed, the Defendant in Panduit admitted that it copied Plaintiff's patent; giving the evidence much greater value and relevance to the issue of obviousness. Panduit Corp., 774 F.2d 1082, 1086.

 Finally, with respect to the issue of damages, the Court does not find that evidence of the Defendant's allegedly improper hiring practices would not be relevant to the issue of whether to award Plaintiff a reasonable royalty or lost profits in the event the Plaintiff prevails on its infringement claims. See Minco, Inc. v. Combustion Engineering, Inc., 95 F.3d 1109, 1118-19 (Fed. Cir. 1996).

 After carefully considering the parties' arguments, the Court finds only minimal overlap between the factual bases of Plaintiff's unfair competition and patent infringement claims, and this factor weighs against exercising jurisdiction over Plaintiff's proposed unfair competition claims.

 Predominance and Proof of State Law Issues

 Turning to the second and third factors, the Court finds that while the issues underlying Plaintiff's proposed unfair competition claims would not substantially predominate over the federal issues of patent infringement and invalidity, substantial additional evidence regarding Plaintiff's unfair competition and trade secret claims would have to be offered at trial. For example, the witnesses relevant to Plaintiff's unfair competition claims are not, for the most part, the witnesses relevant for Plaintiff's patent infringement clams. Thus, the Court ...


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