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XEIKON INTERNATIONAL v. GAMUT INC.

United States District Court, W.D. New York


February 18, 2004.

XEIKON INTERNATIONAL, N.V., a Belgian Corporation, Plaintiff
v.
GAMUT, INC., a New York Corporation, Defendant

The opinion of the court was delivered by: MARIAN PAYSON, Magistrate Judge

DECISION & ORDER

PRELIMINARY STATEMENT

By order dated September 29, 2003, the above-captioned matter has been referred to the undersigned for the supervision of pre-trial discovery and the hearing and disposition of all non-dispositive motions, pursuant to 28 U.S.C. § 636(b)(A) and (B). (Docket # 16). Plaintiff, Xeikon International, N.V. (hereinafter "Xeikon"), has filed suit against defendant, Gamut, Inc. (hereinafter "Gamut"), for infringement of U.S. Patent No. 5,545,501 (hereinafter the "501 Patent"). According to Xeikon, the 501 Patent covers a novel developer composition for use in Xeikon's high speed digital printers, which Xeikon has infringed by selling a competing developer covered by the 501 Patent, (Docket #1).

  On March 24, 2003, Xeikon moved for expedited discovery and a preliminary injunction against Gamut. (Docket ## 6 and 7), To prepare for argument of such motions, the parties agreed to conduct limited, expedited discovery.*fn1 Through such discovery, Xeikon claims Page 2 to have discovered that Xerox Corporation and Merlin International are also involved in Gamut's patent infringing activities. (Docket #17). Xeikon alleges that Xerox and Merlin entered into a "Dry Ink and Developer Supply Agreement" in late 2002, pursuant to which Xerox granted Merlin the exclusive rights to market and distribute a developer manufactured by Xerox for use in Xeikon's printers, (Docket #17), Xeikon further contends that, with Xerox's permission, Merlin subcontracted its United States distribution rights to Gamut, (Docket # 17). Thus, Xeikon now contends that Xerox and Merlin are also infringing the 501 Patent. (Docket # 17),

  According to Xeikon, it did not name Xerox as a defendant in its original complaint despite knowledge that Xerox had manufactured and supplied the allegedly infringing developer to Gamut because it did not know whether Xerox had engaged in activities within the United States — a requirement under 35 U.S.C. § 271 (a). Through, discovery, Xeikon has learned that such purported activities occurred in this country. (Docket # 17). With respect to Merlin, Xeikon. claims that it was ignorant of Merlin's activities until discovery. (Id.)

  Currently pending before this Court is Xeikon's motion to amend its complaint to add Xerox Corporation and Merlin International as co-defendants in the present action. Gamut has filed no papers in opposition to Xeikon's motion. Upon inquiry by this Court, counsel for Gamut stated that although it did not consent to Xeikon's motion to amend, it did not intend to submit any opposing papers. For the reasons set forth, below, Xeikon's motion to amend is granted. Page 3

  DISCUSSION

  A. Amendment of the Complaint: Rule 15(a) of the Federal Rules of Civil Procedure provides that once the time for amending a pleading as of right has expired, a party may request leave of court to amend, which "shall be freely given when justice so requires." Fed, R. Civ. P. 15(a). If the underlying facts or circumstances relied upon by the party seeking leave to amend may be a proper subject of relief, the party should be afforded the opportunity to test the claim on its merits. See United States ex rel. Maritime Admin. v. Continental Illinois Nat Bank and Trust Co. of Chicago, 889 F.2d 1248, 1254 (2d Cir. 1989), "In the absence of any 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. — the leave sought should, as the rules require, be `freely given."' Foman v. Davis, 371 U.S. 178, 182 (1962).

  While the court retains discretion to grant or deny leave to amend under Rule15(a), "[the] outright refusal to grant the leave without any justifying reason for the denial is not an exercise of discretion; it Is merely abuse of that discretion and inconsistent with the spirit of the Federal Rules." Id. at 182; Ruffolo v. Oppenheimer & Co., 987 F.2d 129, 131 (2d Cir. 1993); Evans v. Syracuse City School Dist., 704 F.2d 44, 46 (2d Cir. 1983).

  In the instant matter, no evidence exists In the record before this Court that Xeikon unduly delayed in seeking leave to amend its complaint, "One of the most important considerations in determining whether amendment would be prejudicial is the degree to which it would delay the final deposition of the action." Krumme v. WestPoint Stevens Inc., 143 F.3d 71, Page 4 88 (2d Cir.), cert. denied, 525 U.S. 1041 (1998) (internal quotation omitted). Mere delay, however, unaccompanied by either bad faith or undue prejudice, does not warrant denial of leave to amend. Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993) (citing State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981)). Here, Xeikon contends that prior to filing its complaint, it was unaware of Merlin's participation in the allegedly patent infringing activities; similarly, it claims to have been unaware that Xerox engaged in any allegedly infringing activities in the United States. (Docket #17). Xeikon maintains that during discovery relating to its preliminary injunction motion, it learned of Xerox and Merlin's purported infringement of the 501 Patent. (Id,) Gamut has proffered no facts to the contrary. See Liegey v, Ellen Figg, Inc., 2003 WL 21361724 (S.D.N.Y. 2003) (leave to amend complaint to add co-defendant granted where plaintiff did not learn of such party's involvement until deposition discovery). On this record, this Court finds that Xeikon did not unduly delay in seeking leave to amend Its complaint.

  Similarly, the record in this case is devoid of any evidence Indicating that Gamut or the additional defendants will be prejudiced by the proposed amendment. According to the Second Circuit, when evaluating prejudice, a court must consider "whether the assertion of the new claim would: (i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction," Slick v. First Blood Associates, 988 F.2d at 350 (citations omitted).

  In the instant matter, the parties are in the early of litigation; indeed, a scheduling order has yet to be issued by this Court, Because only limited discovery has been Page 5 conducted thus far, Xerox and Merlin's addition as parties is unlikely to result in duplicative discovery or to necessitate the expenditure of significant additional resources. Indeed, Xeikon has represented that it will withdraw its pending motion for a preliminary injunction if leave to amend, the complaint Is granted. (Docket # 17, n. 1). Moreover, Gamut has not nor could not claim surprise by the proposed amendment because the facts that form the basis of the amendment were likely known by Gamut before they were known by Xeikon and were, in any event, explored during the limited discovery that has occurred since the inception of this action.

  B. Joinder of Additional Parties: Having determined that Xeikon's motion to amend is timely, the remaining question is whether Xerox and Merlin may properly be added as defendants in this matter. Rule 20(a) of the Federal Rules of Civil Procedure provides:

All persons . . . may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.
Fed. R, Civ. P. 20(a). Courts have interpreted the requirements of Rule 20(a) liberally so as to promote judicial economy and to allow related claims to be tried within a single proceeding. See, e.g., Barr Rubber Products Co., v. Sun Rubber Co., 425 F.2d 1114, 1127 (2d Cir. 1970) (Rule 20 "specifically vests in the district court the discretionary power to make such orders as may be required to prevent delay or prejudice"); Liegey v. Ellen Pigg, Inc., 2003 WL 21361724 at *3 ("requirements of Rule 20(a) should be interpreted liberally"); Kovian v. Fulton County Nat. Bank and Trust Co., 1990 WL 36309, *9 (N.D.N.Y. 1990) ("there is no rigid rule as to what constitutes the same series of transactions or occurrences"); City of New York v. Joseph L. Page 6 Balkan, Inc., 656 F. Supp. 536, 549 (E.D.N.Y. 1987) (requirements of Rule 20 are to be "liberally interpreted") (citations omitted).

  Here, Xeikon alleges that Gamut, Xerox, and Merlin violated the 501 Patent through the manufacturing, marketing, and sale of Xerox's infringing developer. Specifically, Xeikon contends that Xerox manufactures the infringing product and has granted marketing and distribution rights for the product to Merlin, which, in turn, has subcontracted to Gamut its United States distribution rights. (Docket #17). Thus, Xeikon's claims against each of the defendants arise out of the same transaction or series of transactions. Moreover, because Xeikon claims that the three defendants jointly introduced the infringing product, common questions of law and fact are likely to exist between the parties. See, e.g., Randolph-Rand Corp. of New York v. Tidy Handbags, Inc., 2001 WL 1286989, *4 (S.D.N.Y. 2001) (granting plaintiff s motion to join co-defendant in, patent infringement suit because separate actions "would ran counter to the interests of judicial economy" and "might welt require the repetition of many of the efforts expended in the [pending] case"); Expoconsul Intern., Inc. v, A/E Systems, Inc., 145 F.R.D. 336, 339 (S.D.N.Y. 1993) (motion to join co-defendants in unfair trade practices case granted because additional parties did not add to complexity of issues and separate actions would undermine interests of judicial economy); Stanley Works v. Haeger Potteries, Inc., 35 F.R, D. 551, 554 (N.D. Ill.1964) (granting plaintiffs motion to join co-defendants in patent infringement suit; "where the party added allegedly made possible the[e] infringement, induced it and contributed thereto, judicial economy would require the parties presence in the original infringement suit"). Finally, Gamut has failed — indeed it has not even attempted — to demonstrate why Xeikon should not be Page 7 permitted to amend its complaint. On this record, I find that Xeikon should be granted leave to amend its complaint to add Xerox and Merlin as co-defendants.

  CONCLUSION

  For the foregoing reasons, it is my Decision and Order that Xeikon's motion to amend its complaint (Docket # 17) is GRANTED.

  IT IS SO ORDER.


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