ORDER GRANTING DEFENDANT'S MOTION FOR LEAVE TO FILE A SECOND AMENDED ANSWER
[Re: ECF 101]
BETH LABSON FREEMAN, District Judge.
Before the Court is the Motion for Leave to File a Second Amended Answer by defendant Blue Coat Systems, Inc. ("Defendant"), which plaintiff Finjan, Inc. ("Plaintiff") opposes. Def.'s Mot., ECF 101; Pl.'s Opp., ECF 105. Having carefully considered the parties' respective written contentions, the Court finds this matter appropriate for submission without oral argument and hereby VACATES the motion hearing scheduled for January 29, 2015. Civ. L.R. 7-1(b). For the reasons stated herein, Defendant's Motion for Leave to File a Second Amended Answer is GRANTED.
On August 28, 2013, Plaintiff filed the instant lawsuit, alleging that Defendant's products—suites of anti-malware hardware, software, and services—infringe six Finjan patents. See Compl., ECF 1. Defendant answered on October 24, 2013 and filed an amended Answer on November 26, 2013. ECF 20, 34. Pursuant to the Court-ordered schedule, the last day to amend the pleadings without leave of court was January 31, 2014. See Amended Minute Entry, ECF 46.
Defendant licenses certain technology used in some of the accused products in this case from third party McAfee, Inc. ("McAfee"). Def.'s Mot. 1. McAfee is an affiliate of Intel, Corp. ("Intel"). Id. Defendant claims that "[a]lthough [it] was known that McAfee had settled with Finjan in a previous litigation and obtained a license, the specific terms of the settlement license were not known until recently when Finjan produced its settlement license agreement with McAfee/Intel on July 25, 2014." Id. Based on the July 25, 2014 production of Plaintiff's settlement license agreement with McAfee/Intel and what the agreement discloses of the covered products, Defendant filed the present motion on September 22, 2014, seeking leave to amend its Answer to include an affirmative defense of implied license/patent exhaustion. Id. at 1-2.
Plaintiff opposes the motion, contending that Defendant neglected to address the Federal Rule of Civil Procedure 16 "good cause" standard required to amend the pleadings at this point in litigation. Pl.'s Opp. 1. Further, Plaintiff argues that even if Defendant establishes good cause under Rule 16, the Rule 15 factors for amendment "weigh heavily against amendment." Id.
Where the deadline for amending pleadings set by a court's scheduling order has passed, a request for leave to amend must first be evaluated under the "good cause" standard of Federal Rule of Civil Procedure 16. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1991). "Rule 16(b)'s `good cause' standard primarily considers the diligence of the party seeking the amendment." Id. at 609. The moving party must demonstrate that it could not have met the deadline set in the scheduling order despite its diligence, and that it was diligent in seeking to modify the deadline once it became apparent that it could not comply. Id.; see also Jackson v. Laureate, Inc., 186 F.R.D. 605, 608 (E.D. Cal. 1999). "If the moving party was not diligent, the inquiry should end." Kuschner v. Nationwide Credit, Inc., 256 F.R.D. 684, 687 (E.D. Cal. 2009) (citing Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002)).
Despite Plaintiff's assertions to the contrary, the Court finds that Defendant has established "good cause" under Rule 16 to seek leave to amend after the deadline set in the Court's scheduling order. Although Defendant knew that Plaintiff had licensed certain patents to McAfee and Intel through settlement in a previous litigation, it did not know the specific terms, the breadth, or what McAfee/Intel products were covered by the settlement—which was confidential—until Plaintiff produced the agreement on July 25, 2014. Def.'s Mot. 1-2, 4. Moreover, the public disclosures concerning the settlement that Plaintiff attached to its opposition do not specifically identify McAfee/Intel as the counterparty, nor do they undercut Defendant's assertion that it could not know that the confidential settlement provided licenses for all Intel products, including those of its affiliate McAfee, until Plaintiff produced the agreement in discovery in this case. Id.; Def.'s Reply 4. Thus, despite diligent discovery, Defendant could not have uncovered the facts underlying its proposed implied license/patent exhaustion defense before the January 31, 2014 deadline for amending pleadings set by the Court. Upon receiving the Finjan/Intel agreement in discovery, Defendant promptly approached Plaintiff asking for consent to amend Defendant's Answer. Def.'s Mot. 3. Not until September 15, 2014 did Plaintiff's counsel indicate that it would oppose Defendant's motion. Id. at 4. One week later (on September 22, 2014), Defendant filed its motion seeking leave to amend. As such, Defendant has demonstrated diligence and accordingly established good cause under Rule 16 to consider its request to amend.1
Once the movant satisfies its burden to establish good cause under Rule 16(b), the Court will then consider the permissibility of amendment under Rule 15. Johnson, 975 F.2d at 608 (citing Forstmann v. Culp, 114 F.R.D. 83, 85 (M.D.N.C. 1987)). In the Ninth Circuit, Rule 15 is applied with "extreme liberality." Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) (citation omitted). When considering whether to grant leave to amend under Rule 15, a district court considers the presence of any of four factors including: (1) bad faith; (2) undue delay; (3) prejudice to the opposing party; and (4) futility. Id.; Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999) (noting "this determination should be performed with all inferences in favor of granting the motion"); see also Foman v. Davis, 371 U.S. 178, 182 (1962). Undue delay on its own does not justify denial of a motion for leave to amend. See, e.g., Bowles v. Reade, 198 F.3d 752, 758-59 (9th Cir. 1999). However, if undue delay would prejudice a defendant, denial of a motion for leave to amend may be justified. See id. In the absence of prejudice or other negative factors, the party opposing the motion to amend has the burden of showing why amendment should not be granted. See DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987).
Plaintiff argues that each of the four Foman factors advocates against permitting the requested amendment. First, Plaintiff asserts that Defendant unduly delayed in moving to amend because Defendant had knowledge of the Intel/McAfee license and its terms long before seeking this amendment. Pl.'s Opp. 8-9. As discussed above, the Court disagrees and finds that Defendant acted diligently in investigating and seeking amendment. Second, Plaintiff argues that Defendant's omission of analysis under Rule 16 demonstrates bad faith. Pl.'s Opp. 9. Defendant remedied any Rule 16 defects in its reply. Def.'s Reply 2. Third, Plaintiff asserts that the proposed amendment is futile because the allegations of infringement in this action are directed toward Defendant's technology and not McAfee's technology. Pl.'s Opp. 9. Defendant, however, makes it very clear that several of the accused products in this lawsuit employ third-party anti-virus scanners, including those manufactured by McAfee. Def.'s Reply 6. On the face of the pleadings, the Court therefore cannot determine that Defendant's proposed defense would be completely futile. Lastly, Plaintiff asserts that it would be prejudiced by amendment due to the advanced stage of discovery in this case. Pl.'s Opp. 9-10. Defendant indicates that it has already produced information concerning the accused products that incorporate McAfee technology, as well as its own licensing agreement with McAfee and, as such, Plaintiff would not be significantly prejudiced by inclusion of this defense. Def.'s Reply 6. Thus, it appears that further discovery into Defendant's proposed defense, if any, would be minimal, and any potential prejudice could be rectified by a brief extension of the deadline for fact discovery.
As such, the Court does not find that the Foman factors weigh strongly against allowing Defendant to assert its proposed implied license/patent exhaustion defense. Defendant's Motion for Leave to File a Second Amended Answer is therefore GRANTED.
IV. ORDER
For the foregoing reasons, Defendant's Motion for Leave to File a Second Amended Answer is GRANTED. Defendant shall file its Second Amended Answer into the record within seven (7) days of the date of this order.
IT IS SO ORDERED.
