Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Document Security Systems, Inc. v. Adler Technologies

February 29, 2008

DOCUMENT SECURITY SYSTEMS, INC. F/K/A NEW SKY COMMUNICATIONS, INC., AS SUCCESSOR-IN-INTEREST TO THOMAS M. WICKER, THOMAS M. WICKER ENTERPRISES, INC. AND DOCUMENT SECURITY CONSULTANTS, PLAINTIFFS,
v.
ADLER TECHNOLOGIES, INC. N/K/A ADLERTECH INTERNATIONAL, INC., ANDREW MCTAGGART, RAY MAXON AND BLANKS/USA, JUDY WU A/K/A JUDITH WU A/K/A JUDY MCTAGGART AND ARCIS DIGITAL SECURITY, INC., DEFENDANTS.



The opinion of the court was delivered by: Michael A. Telesca United States District Judge

DECISION and ORDER

INTRODUCTION

Plaintiff Document Security Systems, Inc. ("DSS") f/k/a New Sky Communications, Inc., as successor-in-interest to Thomas Wicker, Thomas M. Wicker Enterprises, Inc. and Document Security Consultants ("DSC") (collectively "plaintiff"), owner of patented document security technology used to thwart counterfeiting and forgery, brings this action against defendants Adler Technologies, Inc. ("Adler") n/k/a Adlertech International, Inc., Andrew McTaggart ("McTaggart"), Ray Maxon ("Maxon"), Blanks/USA, Judy Wu a/k/a Judy McTaggart ("Wu") and Arcis Digital Security, Inc. ("Arcis") (collectively "defendants") seeking relief in the form of damages for breach of contract and injunctive and declaratory relief arising out of the alleged wrongful use and retention of plaintiff's technologies.

Before the Court are two motions. On July 19, 2007, plaintiff filed a motion to strike defendants' First Amended Answer to the Third Amended Complaint. Subsequently, on August 30, 2007, defendants cross-moved to amend and supplement their pleadings. For the reasons set forth below, the plaintiff's motion to strike is granted in part and denied in part as moot, and defendants' motion to amend the pleadings is granted in part and denied in part.

BACKGROUND

A. Procedural Background

On January 31, 2003, plaintiff filed its complaint against defendants. In May of 2003, the original defendants answered the complaint and asserted counterclaims. On May 12, 2003, original defendants filed a third party complaint and in June 2003 third party plaintiffs filed a motion to dismiss the defendants' third party complaint. Defendants then filed a cross-motion on July 16, 2003 for joiner of third party defendants as counterclaim defendants. On July 28, 2003, the Court denied the cross-motion for joinder of third party defendants and granted third party defendants' motion to dismiss. In August 2004, plaintiff's filed an initial motion to compel disclosure and the Court granted plaintiff's motion. Plaintiff filed an amended and supplemental complaint to add defendants Blanks/USA and Ray Maxon as additional defendants in May 2005. The additional defendants answered the amended complaint on July 15, 2005. In August 2005, Maxon filed an amended answer to the amended complaint. The first depositions in this action were conducted in June 2006. On August 10, 2006, plaintiff filed a motion for leave to file and serve an amended complaint and for issuance of a supplemental summons. In February 2007, the Court granted plaintiff leave to file a Second Amended Complaint permitting plaintiff to add additional defendants Judy Wu and Arcis and the amended complaint was filed on February 6, 2007.

Throughout this period, the parties were engaged in discovery and the Court issued several scheduling orders. Depositions of parties, their representatives and third party witnesses were conducted locally and in Minnesota in February, March and June 2007.*fn1 On May 21, 2007, the Court issued a Stipulated Order permitting leave to serve a Third Amended Complaint and to amend the current scheduling order. The scheduling order provided that all factual discovery was to be completed by August 6, 2007, with any motion directed to discovery due thirty days prior to the deadline. Defendants filed their Answer in response to the Third Amended Complaint on June 18, 2007. On July 9, 2007, plaintiff filed replies to the Answers of the McTaggart defendants and Maxon.

Following the filing and service of plaintiff's replies to the Answers to the Third Amended Complaint of the McTaggart defendants and Maxon, all defendants filed First Amended Answers to the Third Amended Complaint. Upon receipt of the pleadings, plaintiff's counsel informed counsel for defendants that they were not entitled to an amendment as of right as to the Amended Answers as plaintiff had already served its responsive pleadings to defendants' answers to the Third Amended Complaint. In response, defense counsel argued that the defendants were entitled to file the Amended Answers as of right and without leave of Court. According to defendants, defense counsel submitted defendants' proposed third amended counterclaims to plaintiff's counsel for consideration on June 19, 2007. However, plaintiff was not willing to agree to a stipulated Order permitting the counterclaims to be amended. Because plaintiff was unwilling to consent to amendment of the counterclaims, defendants decided to amend their affirmative defenses contained in their answers by including a majority of the factual allegations that are contained in the proposed amended counterclaims.

As a result of the pending motions relating to the pleadings, Magistrate Judge Feldman issued a Stipulated Order staying the Scheduling Order that was in effect and, which provided that all factual discovery was to be completed by August 6, 2007, until the motions related to the pleadings are resolved.

B. Maxon's Counterclaims*fn2

Maxon proposes three additional counterclaims and seeks to add new defendants to the counterclaims. See Proposed Counterclaims 13 to 17. Maxon seeks to add as counterclaim defendants, Thomas Wicker, Thomas M. Wicker Enterprises, Inc. ("Wicker Enterprises"), Christine Wicker and Kenneth Wicker, as Executors of the Estate of Ralph Wicker ("Estate of Wicker"). In Maxon's Thirteenth Counterclaim, he alleges that in addition to DSS, Thomas Wicker, Wicker Enterprises and the Estate of Wicker are liable to him for breach of contract with respect to the sale or licensing of the '285 Patent. This relates to the "Maxon Agreement" between Wicker Enterprises and Maxon dated October 1998. In his proposed Fourteenth Counterclaim, Maxon seeks to add Thomas Wicker, Wicker Enterprises and the Estate of Wicker as well as raise a new theory of liability, which is the breach of duty of good faith and fair dealing. In the Fifteenth Counterclaim, Maxon seeks to join additional defendants Thomas Wicker, Wicker Enterprises and Estate of Wicker to his counterclaim.

In Maxon's proposed Sixteenth Counterclaim, he seeks to add as a new theory of liability the alleged "fraudulent conveyance" of the '285 Patent as against not only DSS but also Thomas Wicker, Wicker Enterprises and the Estate of Wicker. According to defendants, during the course of its investigation relating to the '285 Patent, it was discovered that Wicker Enterprises and the Estate of Wicker caused an assignment to be filed in the United States Patent & Trademark Office ("USPTO"), which purported to assign Wicker Enterprises' interest in the '285 Patent to the Estate of Wicker. The recording date of November 25, 2002 was several months after the July 2002 assignment of all of Wicker Enterprises' shares of stock to plaintiff, but only a few weeks after Maxon's inquiry. Defendants claim however, that the '285 Patent assignment filed on or about November 25, 2002 was backdated and reflected a December 10, 2001 date. Further, defendants claim that the '285 Patent assignment was not notarized. In his proposed Seventeenth Counterclaim, Maxon seeks a judgment declaring ownership of the '285 Patent as against not only DSS, but also Thomas Wicker, Wicker Enterprises and the Estate of Wicker.

C. Supplemental Counterclaim Relating to Defamation

In defendants' proposed Eighteenth Counterclaim, defendants Adler, Arcis, McTaggart and Wu seek to add a counterclaim against both plaintiff and proposed additional counterclaim defendant Michael Caton (Plaintiff's Vice President of Implementation) ("Caton"), for defamation arising out of alleged statements made by Caton on December 29, 2006. Defendants contend that this counterclaim is supplemental pursuant to Fed. R. Civ. P. 15(d) and 13(e) because the events occurred since the counterclaims were originally plead against plaintiff. According to defendants, on December 29, 2006, Caton posted false statements on an internet web log entitled, "Philip Brook Patent Infringement Updates."*fn3 Defendants claim the statements were intended to harm the character of Adler and its owners, McTaggart and Wu and imply that they misappropriated technology, which are not true and are defamatory.

D. Patent Invalidity and Unenforceability Counterclaims

The proposed Nineteenth, Twentieth and Twenty-First Counterclaims against plaintiff seek declaratory judgments that United States patents 5,018,767 (the "'767 patent"), 5,707,083 (the "'083 patent") and 5,735,547 (the "'547 patent")*fn4 are not infringed by the defendants, are invalid for a variety of reasons and/or are unenforceable due to the alleged failure of the inventors to disclose to the USPTO information material to patentability of such patents. Moreover, Adler seeks to join as an individual counterclaim defendant Thomas Wicker to a breach of contract claim regarding an alleged agreement between Adler and Thomas Wicker.

In defendants' prosed Nineteenth Counterclaim, they seek a judgment of non-infringement and absence of liability for infringement with respect to all of the said patents. Defendants claim that they have not infringed directly or indirectly, or contributed to the infringement of others of the said patents. In their proposed Twentieth Counterclaim, all defendants seek a declaration that all of the subject patents are invalid for failure to comply with one or more of 35 U.S.C. §§ 102 and 103.*fn5 The Twentieth Counterclaim also seeks to invalidate all of the subject patents for alleged failure to comply with 35 U.S.C. § 112.*fn6 Adler distributes and supplies anti-counterfeit currency devices. In the proposed Twenty-First Counterclaim, all defendants seek a declaration that none of the subject patents are enforceable due to alleged inequitable conduct during the prosecution of said patents before the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.