Alifax Holding Spa v. Alcor Scientific Inc. et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
ALIFAX HOLDING SPA; and SIRE 	)
ANALYTICAL SYSTEMS SRL, 	)
)
Plaintiffs, 	)
)
v. 	) 	C.A. No. 14-440 S
)
ALCOR SCIENTIFIC INC.; and 	)
FRANCESCO A. FRAPPA, 	)
)
Defendants. 	)
___________________________________)
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
I. Background
Plaintiff 	Alifax 	Holding 	SpA 	(“Alifax”) 	initiated 	this
patent 	infringement 	case 	against 	a 	former 	employee, 	Defendant
Francesco 	Frappa, 	and 	the 	former 	employee’s 	new 	employer,
Defendant 	Alcor 	Scientific 	Inc. 	(“Alcor”), 	in 	October 	2014.
(Compl. 	¶ 	1, 	ECF 	No. 	1.) 	Alifax 	alleges 	that 	Defendant 	Alcor
developed 	a 	diagnostic 	erythrocyte 	sedimentation 	rate 	(“ESR”)
analyzer 	using 	patented 	intellectual 	property 	to 	which 	Defendant
Frappa 	had 	access 	while 	working 	for 	Alifax 	and 	then 	shared 	with
Alcor. (Id. ¶ 5.)
Alifax 	filed 	an 	Amended 	Complaint 	in 	March 	2015 	with 	assent
from 	Defendants, 	adding 	Alifax’s 	subsidiary, 	Sire 	Analytical
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Systems 	Srl 	(“Sire”), 	as 	a 	Plaintiff. 	(Mem. 	in 	Supp. 	of 	Pl.’s
Assented 	to 	Mot. 	to 	Am. 	Compl., 	ECF 	No. 	19; 	3/17/15 	Text 	Order.)
The 	Amended 	Complaint 	lists 	three 	counts: 	patent 	infringement
against 	Alcor, 	misappropriation 	of 	trade 	secrets 	against 	Alcor
and 	Frappa, 	and 	breach 	of 	a 	confidential 	relationship 	against
Alcor 	and 	Frappa. 	The 	Court 	denied 	Defendants’ 	Motion 	to
Dismiss 	two 	counts 	of 	the 	Amended 	Complaint 	in 	September 	2015.
Defendants 	then 	answered 	the 	Amended 	Complaint 	and 	asserted 	two
counterclaims, 	alleging 	that 	both 	patents 	at 	issue 	are 	invalid.
(Defs.’ 	Answer 	and 	Countercl. 	13, 	ECF 	No. 	28.) 	Thereafter, 	the
parties 	engaged 	in 	fact 	discovery 	and 	claim 	construction
briefing.
In 	October 	2016, 	Alifax 	filed 	a 	motion 	to 	amend 	and
supplement 	the 	Amended 	Complaint. 	(ECF 	No. 	55.) 	On 	February 	22,
2017, 	the 	Court 	held 	a 	claim 	construction 	hearing 	and 	also 	heard
oral 	argument 	regarding 	Alifax’s 	request 	to 	file 	a 	Second
Amended 	and 	Supplemental 	Complaint. 	This 	Memorandum 	and 	Order
will 	address 	Alifax’s 	motion 	to 	amend 	its 	pleading; 	a 	separate
Memorandum 	and 	Order 	regarding 	the 	parties’ 	request 	for 	the
Court 	to 	construe 	seven 	claim 	terms 	in 	the 	patents 	at 	issue 	is
forthcoming.
II. Discussion
Plaintiffs’ 	proposed 	Second 	Amended 	and 	Supplemental
Complaint 	reflects 	four 	main 	changes 	to 	the 	Amended 	Complaint:
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it 	(1) 	removes 	Sire 	as 	a 	named 	plaintiff 	because 	Sire 	has
completely 	merged 	into 	Alifax 	and 	no 	longer 	exists 	as 	a 	discrete
business 	entity; 	(2) 	adds 	detail 	to 	the 	patent 	infringement
claim 	against 	Alcor 	regarding 	its 	alleged 	infringement 	and
introduces 	allegations 	about 	induced 	infringement; 	(3) 	adds 	a
supplemental 	claim 	for 	copyright 	infringement; 	and 	(4) 	amends
some 	of 	the 	factual 	allegations 	pertinent 	to 	the
misappropriation 	of 	trade 	secrets 	claim 	to 	clarify 	that 	this
claim 	is 	not 	based 	on 	ultrasound 	technology 	but 	is 	based 	instead
in 	part 	on 	computer 	source 	code. 	(Pls.’ 	Mem. 	in 	Supp. 	3, 	ECF 	No.
55; Ex. 2, ECF No. 55-2.)
Alifax 	asserts 	that 	the 	proposed 	changes 	to 	the 	Amended
Complaint 	are 	intended 	to 	clarify 	facts 	learned 	during 	discovery
and 	to 	reflect 	an 	evolution 	of 	its 	theories 	of 	Defendants’
liabilities 	for 	their 	alleged 	misconduct. 	(Pls.’ 	Mem. 	in 	Supp.
4.) 	Alifax 	argues 	that 	Defendants 	will 	not 	suffer 	any 	unfair
prejudice 	from 	these 	changes 	because 	discovery 	is 	in 	the 	early
stages; 	depositions 	have 	not 	been 	either 	scheduled 	or 	taken, 	the
parties 	have 	not 	finished 	exchanging 	documents, 	and 	the 	scope 	of
discovery 	will 	not 	be 	materially 	affected 	by 	the 	changes. 	(Id.
at 	5, 	6; 	Pls.’ 	Reply 	Mem. 	7, 	ECF 	No. 	60.) 	Alifax 	also 	argues
that 	it 	could 	not 	have 	brought 	this 	claim 	as 	part 	of 	its 	initial
or 	amended 	pleading 	because 	the 	factual 	basis 	for 	the 	copyright
infringement 	claim 	was 	not 	discovered 	until 	it 	reviewed 	Alcor’s
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source 	code 	as 	part 	of 	the 	discovery 	process 	during 	Spring 	2016.
(Pls.’ Reply Mem. 9.)
Alcor 	vigorously 	opposes 	Alifax’s 	motion 	to 	amend 	and
supplement 	on 	the 	basis 	that 	the 	addition 	of 	the 	copyright
infringement 	claim 	reflects 	an 	abuse 	of 	the 	protective 	order 	in
place 	governing 	confidential 	material 	and 	is 	futile 	because 	it
will 	not 	survive 	a 	motion 	to 	dismiss. 	(Defs.’ 	Mem. 	in 	Supp. 	of
Obj. 	1-2, 	12-13, 	ECF 	No. 	56.) 	Defendants 	also 	argue 	that 	they
will 	be 	unfairly 	prejudiced 	by 	the 	new 	claim 	because 	it 	has
already 	translated 	many 	of 	the 	documents 	that 	Alifax 	produced
from 	Italian 	to 	English, 	but 	would 	need 	to 	re-review 	all 	of 	the
documents 	produced 	by 	Alifax 	thus 	far 	to 	determine 	whether 	any
are relevant to the new claim. (Id. at 10.)
Rule 	15(a)(2) 	of 	the 	Federal 	Rules 	of 	Civil 	Procedure
provides 	that 	the 	court 	should 	“freely 	give 	leave 	[to 	amend]
when 	justice 	so 	requires.” 	A 	motion 	for 	leave 	to 	amend 	may 	be
denied 	“[i]n 	appropriate 	circumstances 	— 	undue 	delay, 	bad 	faith,
futility, 	and 	the 	absence 	of 	due 	diligence 	on 	the 	movant’s 	part
. 	. 	. 	.” 	Palmer 	v. 	Champion 	Mortg., 	465 	F.3d 	24, 	30 	(1st 	Cir.
2006) 	(citing 	Foman 	v. 	Davis, 	371 	U.S. 	178, 	182 	(1962)). 	“[A]
request 	to 	amend 	. 	. 	. 	requires 	the 	court 	to 	examine 	the
totality 	of 	the 	circumstances 	and 	to 	exercise 	its 	informed
discretion 	in 	constructing 	a 	balance 	of 	pertinent
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considerations.” 	Id. 	at 	30-31 	(citing 	Quaker 	State 	Oil 	Ref.
Corp. v. Garrity Oil Co., 884 F.2d 1510, 1517 (1st Cir. 1989)).
Defendants 	do 	not 	oppose 	removing 	Sire 	as 	a 	named
plaintiff. 	(Defs.’ 	Mem. 	in 	Supp. 	of 	Obj. 	9 	n.3.) 	Other 	than
questioning 	Alifax’s 	purpose 	for 	adding 	factual 	allegations 	and
clarifying 	the 	basis 	for 	the 	misappropriation 	of 	trade 	secrets
claim, 	Defendants 	have 	not 	provided 	a 	compelling 	argument 	that
these 	proposed 	changes 	to 	the 	Amended 	Complaint 	are 	either
unduly 	delayed, 	made 	in 	bad 	faith, 	futile, 	or 	a 	reflection 	of
the 	absence 	of 	due 	diligence 	on 	Alifax’s 	part. 	See 	Palmer, 	465
F.3d 	at 	30. 	Instead, 	Defendants 	focus 	their 	objections 	to 	the
proposed 	amendments 	primarily 	on 	the 	addition 	of 	the 	new 	claim
for 	copyright 	infringement. 	Therefore, 	to 	the 	extent 	that
Alifax 	seeks 	to 	amend 	its 	pleading, 	its 	proposed 	amendments 	will
be 	allowed 	because 	this 	litigation 	is 	still 	in 	a 	relatively
early 	stage. 	The 	fact 	discovery 	period 	has 	not 	been 	closed 	and
neither 	party 	has 	yet 	scheduled 	depositions. 	In 	fact, 	the
parties 	have 	filed 	a 	joint 	motion 	to 	extend 	the 	discovery
schedule 	to 	allow 	fact 	discovery 	to 	continue 	until 	four 	months
from 	the 	date 	of 	this 	Order. 	(ECF 	No. 	63.) 	Allowing 	Alifax 	to
amend 	its 	pleading 	at 	this 	stage 	will 	not 	result 	in 	unfair
prejudice to Defendants.
Turning 	to 	Alifax’s 	proposed 	supplemental 	claim 	for
copyright 	infringement, 	Rule 	15(d) 	provides 	that 	“the 	court 	may,
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on 	just 	terms, 	permit 	a 	party 	to 	serve 	a 	supplemental 	pleading
setting 	out 	any 	transaction, 	occurrence, 	or 	event 	that 	happened
after 	the 	date 	of 	the 	pleading 	to 	be 	supplemented.” 	According
to 	Alifax, 	it 	reviewed 	Alcor’s 	source 	code 	in 	compliance 	with
the 	terms 	of 	the 	protective 	order, 	secured 	copyright 	protection
for 	its 	own 	source 	code, 	and 	now 	seeks 	to 	supplement 	its
pleading 	in 	this 	litigation 	with 	a 	copyright 	infringement 	claim.
(Pls.’ 	Reply 	Mem. 	9.) 	According 	to 	Defendants, 	the 	request 	to
add 	this 	claim 	is 	futile 	because 	it 	will 	not 	survive 	a 	motion 	to
dismiss.1 (Defs.’ Mem. in Supp. of Obj. 2.)
This 	Court 	has 	previously 	considered 	whether 	a 	proposed
supplement 	to 	a 	pleading 	pursuant 	to 	Rule 	15(d) 	is 	futile 	by
using 	the 	same 	standard 	as 	that 	applied 	when 	it 	considers
whether 	a 	proposed 	amendment 	to 	a 	pleading 	pursuant 	to 	Rule
15(a) 	is 	futile. 	Pelletier 	v. 	Rhode 	Island, 	CA 	No. 	07-186S, 	2008
WL 	4900951, 	at 	*1 	(D.R.I. 	Nov. 	14, 	2008). 	While 	futility 	can 	be
a 	reason 	to 	deny 	a 	motion 	to 	amend 	or 	supplement 	a 	pleading,
“[i]f 	leave 	to 	amend 	is 	sought 	before 	discovery 	is 	complete 	and
1 Defendants 	also 	assert 	that 	Alifax 	violated 	the 	terms 	of
the 	protective 	order 	when 	it 	filed 	for 	copyright 	protection 	of
its 	source 	code 	after 	reviewing 	Alcor’s 	source 	code. 	(Defs.’
Mem. 	in 	Supp. 	of 	Obj. 	11.) 	During 	oral 	argument 	it 	became 	clear
that 	Defendants 	considered 	the 	timeline 	of 	Alifax’s 	copyright
infringement 	claim 	development 	to 	be 	suspicious, 	but 	were 	not
asserting 	any 	nefarious 	conduct 	on 	the 	part 	of 	Alifax’s
attorneys of record.
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neither 	party 	has 	moved 	for 	summary 	judgment, 	the 	accuracy 	of
the 	‘futility’ 	label 	is 	gauged 	by 	reference 	to 	the 	liberal
criteria” 	of 	Rule 	12(b)(6) 	of 	the 	Federal 	Rules 	of 	Civil
Procedure. 	Hatch 	v. 	Dep’t 	for 	Children, 	Youth 	& 	Their 	Families,
274 	F.3d 	12, 	19 	(1st 	Cir. 	2001) 	(citing 	Glassman 	v.
Computervision 	Corp., 	90 	F.3d 	617, 	623 	(1st 	Cir. 	1996)). 	“In
this 	situation, 	amendment 	is 	not 	deemed 	futile 	as 	long 	as 	the
proposed 	amended 	complaint 	sets 	forth 	a 	general 	scenario 	which,
if 	proven, 	would 	entitle 	the 	plaintiff 	to 	relief 	against 	the
defendant on some cognizable theory.” Id.
A 	claim 	for 	copyright 	infringement 	requires 	a 	plaintiff 	to
demonstrate 	that 	it 	has 	registered 	its 	copyright, 	that 	it 	owns 	a
valid 	copyright, 	and 	that 	a 	defendant 	has 	copied 	original
elements 	of 	the 	copyrighted 	work. 	Airframe 	Sys., 	Inc. 	v. 	L-3
Commc’ns 	Corp., 	658 	F.3d 	100, 	105 	(1st 	Cir. 	2011). 	A 	review 	of
the 	proposed 	Second 	Amended 	and 	Supplemental 	Complaint 	reveals
that 	Alifax 	has 	sufficiently 	pleaded 	to 	each 	of 	these 	elements.
(Second 	Am. 	and 	Suppl. 	Compl. 	¶¶ 	78-82, 	ECF 	No. 	55-2.) 	For 	this
reason, 	and 	the 	reasons 	articulated 	above 	regarding 	Alifax’s
request 	to 	amend 	its 	Amended 	Complaint, 	Alifax 	may 	add 	the
copyright 	infringement 	claim 	and 	file 	its 	proposed 	Second
Amended and Supplemental Complaint.
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III. Conclusion
Alifax’s Motion to File Amended Pleading (ECF No. 55) is
GRANTED.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: March 20, 2017
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