In two recent decisions, the Federal Circuit has affirmed that patent holders must lay all their cards on the table in their infringement contentions served pursuant to the Northern District's Patent Local Rules, and that if they do not do so or otherwise fail to comply with the requirements of the Patent Local Rules, their infringement claims may be summarily dismissed.
These decisions are a strong indication that the Northern District’s Patent Local Rules have real teeth, providing district court judges with considerable discretionary power in ensuring that parties comply with them, even when failing to do so is outcome determinative.
In 02 Micro International Limited v. Monolithic Power Systems, Inc., 467 F.3d 1355 (Fed. Cir. November 15, 2006), the Federal Circuit affirmed the district court's grant of summary judgment of noninfringement and refusal to grant 02 Micro leave to amend its final infringement contentions. 02 Micro had claimed that it needed to amend its infringement contentions based on new material revealed in discovery after it had submitted its final infringement contentions. The district court denied this request, finding that, although a party's infringement contentions may be amended based on a showing of good cause, the nearly three-month delay between the purported discovery of the new infringement theory and 02 Micro's service of its proposed amended infringement contentions constituted a lack of diligence.
In affirming, the Federal Circuit agreed with the district court that "good cause" requires a showing of diligence. See id. at 1366. The Federal Circuit found that the district did not abuse its discretion in finding a lack of diligence given that (1) the basis for the "new" infringement theory had been disclosed in earlier document discovery, and (2) nearly three months passed between the time 02 Micro took a deposition where the basis for the new infringement theory was clearly disclosed before serving its proposed amended infringement contentions. See id. at 1367-68. Finding that 02 Micro had not carried its burden of establishing that it acted diligently in seeking to amend its final infringement contentions, the Federal Circuit affirmed the summary judgment of noninfringement that had resulted because 02 Micro was limited to an infringement theory that it did not support in its summary judgment papers. See id. at 1369.
Similarly, in a recent unpublished decision, Safeclick, LLC v. Visa International Service Association, 2006 WL 3017347 (Fed. Cir. Oct. 23, 2006), the Federal Circuit affirmed a grant of summary judgment of noninfringement where a theory of infringement advanced in opposition to Visa's summary judgment motion had not been set forth in Safeclick's final infringement contentions. The district court had refused to even consider Safeclick's "new" theory and enforced the Northern District’s Patent Local Rules by granting summary judgment of noninfringement.
On appeal, the Federal Circuit affirmed, finding that the district court did not abuse its discretion in refusing to consider the "new" argument raised in opposition to Visa's summary judgment motion. See id. at *7. The Federal Circuit reached this holding even though it acknowledged that "it might have been reasonable for the district court to interpret Safeclick's latest infringement contentions as a restatement of its earlier infringement contention with a mere change of 'scope and clarity.'" Id. at *5.
These rulings, taken together, should serve as a caution to patent holders contemplating patent litigation in the Northern District to carefully analyze their infringement contentions prior to filing a complaint and to then reevaluate their infringement contentions throughout the course of litigation to ensure that they do not suffer the same fate as the patent holders in 02 Micro and Safeclick. Indeed, in both cases, the Federal Circuit rejected arguments that the sanction resulting from the failure to comply with the Patent Local Rules — effectively dismissal — was too harsh.
The decisions also underscore the fact that the district courts have considerable discretion when enforcing procedural requirements of their respective local rules, which may prove difficult to overturn on appeal. Compared to dismissals based solely on claims construction or summary judgment rulings — which are subject to de novo review by the Federal Circuit and frequently result in reversal — dismissals based on enforcement of local rules in patent cases will likely be harder to overturn on appeal because of the heightened "abuse of discretion" standard of review.
Patent holders litigating in the Northern District should therefore take seriously their obligation to disclose fully their infringement contentions and to promptly seek leave of court to amend their final infringement contentions if they learn something new in discovery. The procedural requirements of the Patent Local Rules should also make the Northern District an attractive forum for alleged infringers contemplating filing actions seeking declaratory judgment of noninfringement, as they serve as an increasingly powerful tool to force patent holders to lay all their cards on the table early in litigation.
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