R2 Sols. v. Deezer S.A.

R2 SOLUTIONS LLC, Plaintiff, v. DEEZER, S.A., Defendant.

Civil Action No. 4:21-cv-90

United States District Court, E.D. Texas, Sherman Division

March 4, 2022

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE.

Pending before the Court is Plaintiff's Sealed Motion for Leave to Amend the Complaint (Dkt. #49). Having considered the motion and the relevant pleadings, the Court finds that the motion should be GRANTED.

BACKGROUND

Plaintiff R2 Solutions LLC (“R2”) filed the instant suit against Defendant Deezer, S.A. (“Deezer”) on January 29, 2021, for infringement of United States Patents No. 8, 190, 610 (the “'610 Patent”), 8, 341 157 (the “'157 Patent”), 7, 698, 329 (the “'329 Patent”), 8, 209, 317 (the “'317 Patent”), 9, 928, 279 (the “'279 Patent”), and 7, 370, 011 (the “'011 Patent”) (Dkt. #49). The parties refer to these patents collectively as the “R2 Patents.”

R2's Original Complaint asserted theories of direct infringement of the R2 Patents (Dkt. #1). On February 11, 2021, R2 filed its First Amended Complaint (Dkt. #9). The First Amended Complaint merely removed the patents-in-suit as exhibits to the complaint.

On July 28, 2021, the Court entered a Patent Scheduling Order, which set September 24, 2021, as the deadline for the parties' final amended pleadings (Dkt. #22). Meanwhile, the parties continued conducting discovery.

On December 15, 2021, Deezer provided responses to R2's first set of interrogatories. In its responses, Deezer asserted that it could not directly infringe because all accused instrumentalities and/or functionalities regarding the R2 Patents are located exclusively in and/or occur exclusively in France (Dkt. #49, Exhibit 3).

On December 16, 2021, the Court held a Markman hearing. The Court entered its claim construction order on January 4 2022 (Dkt. #45). Pursuant to the parties' request, the Court entered an amended scheduling order on January 18 2022, extending several deadlines (Dkt. #48).

On January 21, 2022, R2 moved for leave file its Second Amended Complaint, which adds four counts of induced infringement of the R2 Patents (Dkt. #49). On February 4, 2022, Deezer responded (Dkt. #51).

LEGAL STANDARD

“When a trial court imposes a scheduling order, Federal Rules of Civil Procedure 15 and 16 operate together to govern the amendment of pleadings.” Tex. Indigenous Council v Simpkins, 544 F. App'x. 418, 420 (5th Cir. 2013). Rule 15(a) governs a party's request to amend its pleading before a scheduling order's deadline to amend passes. See Id. Rule 16(b)(4) governs a party's request to amend its pleading after the deadline to amend passes. Sapp v. Mem'l Hermann Healthcare Sys., 406 F. App'x. 866, 868 (5th Cir. 2010) (citing S&W Enters., L.L.C. v. SouthTrust Bank of Ala., NA, 315 F.3d 533, 536 (5th Cir. 2003)).

Rule 15(a) provides that a party may amend its pleading once without seeking leave of court or the consent of the adverse party at any time before a responsive pleading is served. After a responsive pleading is served, “a party may amend only with the opposing party's written consent or the court's leave.” Id. Rule 15(a)instructs the court to freely give leave when justice so requires.” Id. The rule “‘evinces a bias in favor of granting leave to amend.'” Jones v. Robinson Prop. Grp., L.P., 427 F.3d 987, 994 (5th Cir. 2005) (quoting Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d 282, 286 (5th Cir. 2002)). But leave to amend “is not automatic.” Matagorda Ventures, Inc. v. Travelers Lloyds Ins. Co., 203 F.Supp.2d 704, 718 (S.D. Tex. 2000) (citing Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981)). Whether to grant leave to amend “lies within the sound discretion of the district court.” Little v. Liquid Air Corp., 952 F.2d 841, 845-46 (5th Cir. 1992). A district court reviewing a motion to amend pleadings under Rule 15(a) considers five factors: (1) undue delay; (2) bad faith or dilatory motive; (3) repeated failure to cure deficiencies by previous amendments; (4) undue prejudice to the opposing party; and (5) futility of amendment. Smith v. EMC, 393 F.3d 590, 595 (5th Cir. 2004) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).

Rule 16(b)(4) provides that a scheduling order issued by the Court “may be modified only for good cause and with the judge's consent.” See Agredano v. State Farm Lloyds, No. 5:15-CV-1067-DAE, 2017 WL 5203046, at *1 (W.D. Tex. July 26, 2017) (citing E.E.O.C. v. Serv. Temps Inc., 679 F.3d 323, 333-34 (5th Cir. 2012)) (stating, “a party seeking leave to amend its pleadings after a deadline has passed must demonstrate good cause for needing an extension.”). “The good cause standard requires the ‘party seeking relief to show that the deadlines cannot reasonably be met despite the diligence of the party needing the extension.'” S&W Enters., L.L.C., 315 F.3d at 535 (quoting 6A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1522.1 (2d ed. 1990)). In determining whether good cause exists, courts consider a four-part test: “(1) the explanation for the failure to [timely move for leave to amend]; (2) the importance of the [amendment]; (3) potential prejudice in allowing the [amendment]; and (4) the availability of a continuance to cure such prejudice.” Id. (quoting Reliance Ins. Co. v. La. Land & Expl. Co., 110 F.3d 253, 257 (5th Cir. 1997)). Only after the movant demonstrates good cause under Rule 16(b)(4) does “the more liberal standard of Rule 15(a)” apply to a party's request for leave to amend. Id.

ANALYSIS

Pursuant to the original scheduling order, R2's deadline to file amended pleadings expired on September 24, 2021 (Dk. #22). On January 22, 2022, R2 moved for leave to amend (Dkt. #49). To succeed, R2 must demonstrate good cause under Rule 16(b)(4). Only then may the Court turn to the more liberal Rule 15(a) standard. S&W Enters., L.L.C., 315 F.3d at 535.

I. Rule 16(b)(4)

In determining whether good cause exists, courts consider a four-part test: “(1) the explanation for the failure to [timely move for leave to amend]; (2) the importance of the [amendment]; (3) potential prejudice in allowing the [amendment]; and (4) the availability of a continuance to cure such prejudice.” Id. (quoting Reliance Ins. Co., 110 F.3d at 257). The Court examines these factors in turn.

A. Explanation for Delay

R2 cites Deezer's allegedly dilatory discovery practices, combined with Deezer's contention that it could not infringe because its servers are all located in France, as the reasons for any delay (Dkt. #49 at p. 4). Deezer responds R2 was not diligent in seeking leave to amend because: (1) R2 could have pleaded inducement in its original complaint, (2) there is no new evidence giving rise to the inducement claims, and (3) server location is irrelevant, but if it was relevant, R2 failed to seek such information (Dkt. #51 pp. 7-12).

The Court is satisfied with R2's explanation for delay. In its original complaint, R2 pleaded Deezer is a company organized under the laws of France with its principal place of business in France (Dkt. #1 ¶ 2). While R2 was aware some of Deezer's business activities occurred in France, there was no proof or support for where the alleged infringement took place. Contra Sw. Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 547 (5th Cir. 2003) (denying leave to amend upon finding that “[movant] was aware of the contract that forms the basis of its proposed [counterclaim] months in advance of the deadline and does not offer a satisfactory explanation for its delay in seeking leave to amend”). It was reasonable for R2 to believe Deezer's alleged infringement could have occurred in both France and the United States. Especially considering Deezer advertises and sponsors events in the United States (Dkt. #9 ¶ 2). R2 did not have confirmation from Deezer that its activities occur exclusively in France until December 15, 2021, and this motion was filed roughly one month later. Accordingly, this factor favors amendment.

B. Importance of the Amendment

R2 argues the ability to assert indirect infringement theories is vital to R2's success (Dkt. #49). Deezer responds the amendment is unimportant and futile (Dkt. #51).

The Court acknowledges R2's amendment is highly important to R2's potential success in this case. Section 271(a) of the Patent Act reaches only activity occurring in the United States. MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1375 (Fed. Cir. 2005) (“It is well-established that the reach of section 271(a) is limited to infringing activities that occur within the United States.”); NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1315 (Fed. Cir. 2005) (“The grammatical structure of the [35 U.S.C. § 271(a)] indicates that ‘within the United States' is a separate requirement from the infringing acts clause.”). Consequently, a patentee must establish that infringing activity occurred in the United States to succeed on an infringement claim. Litecubes, LLC v. N. Light Prods., 523 F.3d 1353, 1357 (Fed. Cir. 2008) (“A plaintiff must prove that allegedly infringing activity took place in the United States to prevail on claims of patent . infringement[.]”); Shockley v. Arcan, 248 F.3d 1349, 1364 (Fed. Cir. 2001) (“To be liable for infringement under 35 U.S.C. § 271, a party must make, use, offer to sell, or sell within the United States, or import into the United States, the patented invention.”). Conversely, an infringement claim cannot be premised on activity that occurred entirely in a foreign country. Forrester Envtl. Servs. v. Wheelabrator Techs., Inc., 715 F.3d 1329, 1334 (Fed. Cir. 2013) (“[T]he use of a patented process outside the United States is not an act of patent infringement.”). Thus, assuming all of the...