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Steuben Foods, Inc v. Shibuya Hoppmann Corp

August 3, 2012


The opinion of the court was delivered by: Honorable Hugh B. Scott United States Magistrate Judge



Pending before the Court are three different motions filed by the two parties in this case. Defendant Shibuya Hoppmann Corporation has filed a motion (Dkt. No. 53) for entry of a protective order that would govern the exchange of information that the parties consider confidential to at least some extent. Defendant also has filed a motion (Dkt. Nos. 73, 77) to stay the existing scheduling order and to compel plaintiff to specify its infringement contentions in the style of the Patent Local Rules from the United States District Court for the Northern District of California. As noted in the proposed schedule (Dkt. No. 48-1) submitted pursuant to Rule 26(f) of the Federal Rules of Civil Procedure ("FRCP"), the parties agreed voluntarily to use those Patent Local Rules in this case. Finally, plaintiff has filed a motion (Dkt. No. 76) for leave to amend the complaint to add Shibuya Kogyo Co., Ltd. ("Kogyo") as a second defendant. In short, the arguments from each side regarding the respective motions reduce to how to manage different levels of confidentiality for different information; whether plaintiff has provided enough detail about its infringement contentions; and whether the Court should permit plaintiff to amend the complaint to include Kogyo, which purchased all of defendant's shares in 2005.

The Court deemed all three motions submitted on papers pursuant to FRCP 78(b). For the reasons below, the Court grants plaintiff's motion for leave to amend*fn1 and denies both of defendant's motions without prejudice to renew as needed after Kogyo formally appears in the case.


The Court assumes familiarity with the case and will not repeat background details more than necessary. Very briefly, however, this case concerns plaintiff's allegations that defendant manufactures and sells automated bottling machines that infringe on six of its patents. Among other products or services, both parties manufacture and sell "aseptic filling systems"-that is, automated machines that fill aseptically sterilized bottles at high rates of speed.

Defendant filed its motion for a protective order after the parties could not agree on several issues related to managing confidential information. The first issue is who could view information designated as "confidential."*fn2 Plaintiff believes that any party employee should be allowed to see "confidential" information, while defendant would restrict access to a limited number of employees, none of whom could be "involved in competitive decisionmaking." (Dkt. No. 54 at 11.) The second issue is whether each party should have notice and an opportunity to object before the opposing party shares confidential information with employees or outside experts. Defendant wants notice; plaintiff objects in part on the grounds that such notice essentially would upset the FRCP 26 structure for disclosure of trial experts. The third issue concerns the scope of the proposed "patent prosecution bar." The parties have agreed that anyone accessing confidential or highly confidential information should not be allowed to participate in prosecuting patent applications pertaining to the patents in question in this case. However, defendant wants that prohibition to include the ongoing reexamination proceedings for the two patents in this case that have been challenged. Plaintiff opposes this expansion in part on the grounds that patent claims can only be narrowed, not expanded, during re-examination proceedings, meaning that nothing can happen in the re-examination proceedings that would hurt defendant's interests.

As for the motion to stay the scheduling order and to compel infringement contentions, defendant argues that plaintiff is not following the Patent Local Rules that it agreed to apply to this case. Specifically, defendant argues that plaintiff's initial infringement contentions did not identify products that allegedly infringed particular claims and did not present its information in the required format. Plaintiff counters that it provided additional voluntary details after defendant filed its motion, and that these additional details suffice under the Patent Local Rules.

While defendant's motions were pending, plaintiff filed its own motion for leave to amend the complaint. Plaintiff wants to add Kogyo as a defendant because Kogyo owns all of defendant's shares. According to plaintiff, Kogyo's direct participation in this case will help eliminate some ambiguities and some discovery disputes that have arisen regarding the relationship between certain corporate entities connected to defendant and regarding which corporations will produce documents for which time frames. Plaintiff acknowledges that its request has come some three months after the deadline in the scheduling order for motions to amend. Nonetheless, plaintiff claims to have good cause for an amendment in that document production will proceed more smoothly; the claims against Kogyo would be identical to the claims against defendant; and the avoidance of a second lawsuit against Kogyo would promote judicial economy. Defendant opposes leave to amend by citing to plaintiff's admission that it knew from the beginning of this case that Kogyo had some role in promoting the allegedly infringing machinery. According to defendant, plaintiff is trying to backtrack from a conscious decision not to include Kogyo in the original complaint.


A. Motion for Leave to Amend

The Court will address plaintiff's motion for leave to amend first, because adding a defendant to this case might affect how to proceed with the other pending motions.

The first issue to resolve under the motion for leave to amend is what standard to apply. Plaintiff seeks leave under a combination of FRCP 15(a) and 20(a)(2), but this approach would ignore that this Court set a scheduling order on November 2, 2011 (Dkt. No. 52) that, in turn, set a December 2, 2011 deadline for motions seeking to join parties and to amend pleadings. "[D]espite the lenient standard of Rule 15(a), a district court does not abuse its discretion in denying leave to amend the pleadings after the deadline set in the scheduling order where the moving party has failed to establish good cause. Moreover, . . . a finding of 'good cause' depends on the diligence of the moving party." Parker v. Columbia Pictures Indus., 204 F.3d 326, 340 (2d Cir. 2000) (citations omitted); accord Presbyterian Church Of Sudan v. Talisman Energy, Inc., 582 F.3d 244, 267 (2d Cir. 2009) ("Once the deadline for amendment in a scheduling order has passed, leave to amend may be denied 'where the moving party has failed to establish good cause.'") (citing Parker). Plaintiff's request thus hinges on FRCP 16(b) and whether it has established good cause for an amendment of the scheduling order.

The standard for modifying a scheduling order is straightforward. "A schedule may be modified only for good cause and with the judge's consent." FRCP 16(b)(4). As the Second Circuit noted in Parker, diligence is a factor when assessing good cause. See also Carnrite v. Granada Hosp. Grp., Inc., 175 F.R.D. 439, 446 (W.D.N.Y. 1997) (Arcara, J.) ("'Good cause' means that scheduling deadlines cannot be met despite a party's diligence.") (citations omitted). "It is not, however, the only consideration. The district court, in the exercise of its discretion under Rule 16(b), also may consider other relevant factors including, in particular, whether allowing the amendment of the pleading at this stage of the litigation will prejudice defendants." Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007). "This Court interprets Kassner to mean that a district court is obliged to consider the diligence of the moving party, as the 'primary' consideration, and it may consider other factors such as the prejudice to the non-moving party, where the consideration of such other factors is necessary to a reasonable exercise of discretion. For example, where the moving party was diligent, but allowing the amendment would prejudice the non-moving party because discovery was ...

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