Ricoh v. Nashua Corp.

• Court: District Court, D. New Hampshire
• Decided: May 28, 1996
• Docket: CV-94-163-M
• Status: Published

Opinion

Ricoh v. Nashua Corp. CV-94-163-M 05/28/96 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Ricoh Company, Ltd.; and Ricoh Corporation, Plaintiffs,

v. Civil No. 94-163-M

Nashua Corporation, Defendant.

O R D E R

Plaintiffs, Ricoh Company, Ltd. ("Ricoh Ltd.") and Ricoh

Corporation ("Ricoh Corp."), sued defendant, Nashua Corporation

("Nashua"), for infringing U.S. Patent No. 4,878,603 ("'603

Patent"). Midway through trial, plaintiffs moved, pursuant to

Federal Rules of Civil Procedure 15 and 21, to join their wholly-

owned subsidiary, Ricoh Electronics, Inc. ("REI"), as a plaintiff

in this action. Plaintiffs wish to add REI in order to avoid

potential difficulties related to damages should Nashua be found

to have infringed plaintiffs' patent. Nashua opposes plaintiffs'

motion. For the reasons discussed below, plaintiffs' motion is

granted. I. DISCUSSION

Federal Rule of Civil Procedure 15 governs leave to amend

pleadings: "[A] party may amend the party's pleading only by

leave of court or by written consent of the adverse party; and

leave shall be freely given when justice so reguires." Fed. R.

Civ. P . 15(a).

In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, futility of the amendment, etc. — the leave sought should, as the rules reguire, be "freely given."

Foman v. Davis, 371 U.S. 178, 182 (19 62); see also Executive

Leasing Corp. v. Banco Popular, 48 F.3d 66, 71 (1st Cir.), cert.

denied, 116 S. C t . 171 (1995); Kalman v. Berlvn Corp., 914 F.2d

1473, 1480 (Fed. Cir. 1990) (stating that law of regional circuit

court governs standard for motion to amend).

The decision to grant or deny a motion for leave to amend

lies within the discretion of the trial court. Benitez-Allende

v. Alcan Aluminio do Brasil, S.A., 857 F.2d 26, 36 (1st Cir.

1988), cert, denied, 489 U.S. 1018 (1989). But because Rule 15

embodies a strong preference for deciding cases on the basis of

2 the evidence presented rather than on the form of pre-trial

pleadings, "unless there is a substantial reason to deny leave to

amend, the discretion of the district court is not broad enough

to permit denial." Id.

Despite this liberal amendment policy, Nashua advances two

separate reasons why plaintiffs' motion should be denied. First,

Nashua argues that REI would have no standing to assert any

rights as a plaintiff if it were joined in this infringement

action. Second, Nashua contends that it would be prejudiced by

plaintiffs' delay if REI were joined as a plaintiff at this late

date.

A. R E I 's Standing to Sue

Nashua contends that REI does not have an exclusive license

to manufacture the toner cartridge described in the '603 Patent

and, as a result, lacks standing to sue for infringement.

Plaintiffs counter that REI does, in fact, have an exclusive

license to manufacture toner cartridges under the '603 Patent and

does, by that very fact, have standing to sue as a co-plaintiff

for infringement of the patent.

The Patent Act of 1952 provides that "a patentee shall have

remedy by civil action for infringement of his patent." 35

3 U.S.C. § 281 (1984). As a general rule, then, a party suing for

patent infringement must have held legal title to the patent at

the time of infringement. Rite-Hite Corp. v. Kelly Co., 56 F.3d

1538, 1551 (Fed. Cir.), cert, denied, 116 S. C t . 184 (1995);

Ortho Pharm. Corp. v. Genetics Inst., Inc., 52 F.3d 1026, 1030

(Fed. Cir.), cert, denied, 116 S. C t . 274 (1995). A party need

not, however, hold all proprietary rights to a patent in order to

have standing to sue for infringement as a co-plaintiff with the

patentee. Ortho, 52 F.3d at 1031; Weinar v. Rollform Inc., 744

F.2d 797, 807 (Fed. Cir. 1984), cert, denied, 470 U.S. 1084

(1985) .

For instance, "[u]nder certain circumstances, a licensee may

possess sufficient interest in the patent to have standing to sue

as a co-plaintiff with the patentee." Rite-Hite, 56 F.3d at

1552. Such a licensee is usually an "exclusive licensee." Id.;

Ortho, 52 F.3d at 1032. In contrast, a non-exclusive licensee

does not have standing to sue for infringement, even as a co­

plaintiff. Ortho, 52 F.3d at 1032; Rite-Hite, 56 F.3d at 1552.

"To be an exclusive licensee for standing purposes, a party

must have received, not only the right to practice the invention

. . ., but also the patentee's express or implied promise that

others shall be excluded from practicing the invention . . . ."

4 Rite-Hite, 56 F.3d at 1552 (emphasis added). "[I]t is the

licensee's beneficial ownership of a right to prevent others from

making, using or selling the patented technology that provides

the foundation for co-plaintiff standing, not simply that the

word 'exclusive' may or may not appear in the license." Ortho,

52 F.3d at 1032. Therefore, if a party has not received a

promise of exclusivity under the patent, it cannot have co­

plaintiff standing in an infringement action. Rite-Hite, 56 F.3d

at 1552. It is important to stress, however, that the exclusive

license need not be express; it may be implied. Id.; Kalman, 914

F.2d at 1481; Weinar, 744 F.2d at 807 (oral contract granting

exclusive right to sell sufficient to confer co-plaintiff

standing).

Here, plaintiffs have demonstrated that Ricoh Ltd., the

owner of the '603 Patent, granted REI an implied exclusive

license to manufacture the toner cartridge technology contained

in the '603 Patent. The "Technical Assistance Contract" entered

into by Ricoh Ltd. and REI clearly granted REI a license to

practice the '603 Patent. Nashua Ex. 197. Although plaintiffs

presented no direct evidence of the strictly exclusive nature of

the license, all of the evidence presented at trial, taken

together, strongly supports the inference that REI held an

5 exclusive right to manufacture the toner cartridges described in

the '603 Patent, including the right to exclude others from doing

so .

This conclusion is supported, first, by the corporate

structures of and relationship among Ricoh Ltd., Ricoh Corp., and

REI. Ricoh Ltd. is the parent company and owner of all Ricoh

copier technology. Trial Tr., Day 3 (a.m.) at 89, 97. Ricoh

Corp. is a wholly-owned subsidiary of Ricoh Ltd. and acts as its

United States distributor. Trial Tr., Day 3 (p.m.) at 111. REI,

in turn, is a wholly-owned subsidiary of Ricoh Corp. and

functions as Ricoh Corp.'s manufacturing arm. Trial Tr., Day 3

(a.m.) at 89-90; Day 3 (p.m.) at 60. Therefore, while REI is a

separate and distinct corporate entity, it is not a mere

licensee; rather, it is a wholly-owned subsidiary that functions

as plaintiffs' manufacturing arm. See Kalman, 914 F.2d at 1478,

1482 (finding nexus between patentee and his 50%-owned sole

manufacturing licensee to be "so clearly defined" as to permit

licensee co-plaintiff standing).

The exclusive character of the manufacturing license held by

REI is demonstrated not only by the reality that Ricoh Ltd.

effectively controls the manufacture of all products subject to

the '603 Patent, but also by the fact that REI was and still is

6 the sole United States manufacturer of Ricoh copier supply

products. REI manufactures nearly all of the copier toners and

developers Ricoh Corp. sells and all of the Type 5000 and Type

670 cartridges involved in this suit. Trial Tr., Day 3 (a.m.) at

93. In addition, Ricoh Ltd. has never granted any party other

than REI a commercial license under the '603 Patent. Trial Tr.,

Day 4 (a.m.) at 58. Of course, the fact that a party holds the

only license granted by the patent owner would not, by itself,

render that license "exclusive" for standing purposes. Rite-

Hite , 56 F.3d at 1553. But the fact that REI is the only

licensee under the '603 Patent and is subject to Ricoh Ltd.'s

effective control over its use of that patent is persuasive

evidence that the license granted REI was impliedly exclusive.

The combination of the Technical Assistance Contract, the

corporate relationship among plaintiffs and REI, and the fact

that REI is the sole manufacturer of the toner cartridges at

issue in this infringement action is sufficient to demonstrate

that REI holds an implied exclusive license to manufacture under

the '603 Patent. As the exclusive copier supply manufacturing

arm of Ricoh Corp., REI holds a sufficient number "of the

proprietary sticks from the bundle of patent rights," Ortho, 52

7 F.3d at 1031, to confer co-plaintiff standing to sue for

infringement of the '603 Patent.

B. Prejudice to Nashua

Nashua next argues that it will be prejudiced by plaintiffs'

delay in seeking to add REI as a plaintiff. Plaintiffs filed

their motion to amend on April 29, 1996, during the trial on the

merits and well after formal discovery had closed. Delay,

standing alone, is usually an insufficient basis on which to deny

leave to amend. Greenberg v. Mynczywor, 667 F. Supp. 901, 905

(D.N.H. 1987) (citing Carter v. Supermarkets Gen'1 Corp., 684

F.2d 187, 192 (1st Cir. 1982)). However, "unseemly delay, in

combination with other factors, may warrant denial of a suggested

amendment." Quaker State Oil Ref, v. Garritv Oil Co., 884 F.2d

1510, 1517 (1st Cir. 1989) (emphasis added). Specifically, the

"district court must consider prejudice to the opposing party."

Greenberg, 667 F. Supp. at 905. Prejudice is present when the

amendment would deprive the non-movant of the opportunity to

present facts or evidence. Bryn Mawr Hosp. v. Coatesville Elec.

Supply C o ., 776 F. Supp. 181, 186 (E.D. Pa. 1991) (citing Foman,

371 U.S. at 182) .

8 Nashua maintains that it would be prejudiced by plaintiffs'

proposed amendment because it did not obtain sufficient discovery

of REI financial information before trial. As a result, the

argument continues, Nashua's ability to rebut plaintiffs' damages

case would be undermined by REI's late addition. Nashua does not

argue, presumably because it cannot credibly do so, that it was

unaware of REI and its role in the manufacture and sale of Ricoh

toner cartridges. In fact, Nashua introduced into evidence the

Technology Assistance Contract that constitutes the manufacturing

license between REI and Ricoh Ltd. Nashua Ex. 197. Nashua has

long been aware of REI's significant role in plaintiffs' business

activities relative to the '603 Patent and its significance

relative to damages calculations in this lawsuit; it cannot claim

to be surprised by or unprepared for plaintiffs' motion to join

REI as a plaintiff. This fact alone weighs strongly against a

finding of prejudice. Ostano Commerzanstalt v. Telewide Svs.,

Inc., 880 F.2d 642, 646 (2d Cir. 1989) (amendment allowed when

defendant was on notice that additional plaintiff was sublicensee

of patentholder); Bott v. Four Star Corp., 229 U.S.P.Q. 241, 247

(E.D. Mich. 1985) (no prejudice found when defendant knew or

should have known that additional plaintiff had a property interest in the patents in suit), aff'd in relevant part, 807

F.2d 1567 (Fed. Cir. 1986).

The absence of prejudice to Nashua is also borne out by the

information Nashua actually obtained from REI during discovery

and by the evidence and expert analysis Nashua presented at

trial. Nashua sought and obtained discovery of detailed REI cost

and sales information prior to trial, including all of the

financial information plaintiffs relied upon in presenting their

damages case.1 Prior to trial, Nashua also deposed Stephen Laky,

one of plaintiffs' witnesses on the injury sustained by

plaintiffs, through REI, as a result of Nashua's alleged

infringement. Indeed, Nashua's own expert witness on damages,

Creighton Hoffman, testified extensively at trial regarding the

damages sustained, or not sustained, by REI. In short,

throughout this case all parties have treated REI as if it were a

party to the suit. Therefore, the addition of REI as a named

plaintiff, even at this late stage, will not prejudice Nashua.

1 Nashua at least implicitly suggests that other relevant material exists but was not produced by REI. During trial, however, plaintiffs repeatedly represented that REI produced all reguested discoverable financial information in its possession relevant to damages. Further, Nashua argues that the information produced was woefully inadeguate to prove the damages claimed by REI. Even if Nashua's argument proves correct, any deficiencies in Ricoh's damages case will certainly benefit, rather than prejudice, Nashua.

10 II. CONCLUSION

Because REI does have standing as a co-plaintiff, and

because the addition of REI as a plaintiff in this action will

not substantially prejudice Nashua, the court shall give effect

to the liberal amendment policy embodied in Federal Rule of Civil

Procedure 15. Accordingly, plaintiffs' motion for leave to amend

(document no. 76) is granted.

SO ORDERED.

Steven J. McAuliffe United States District Judge

May 28, 1996

cc: Lawrence Friedman, Esg. David Herrington, Esg. Arthur Neustadt, Esg. Robert Pous, Esg. Joshua Rawson, Esg. Stephen E. Weyl, Esg. Robert R. Lucic, Esg. Ira B. Winkler, Esg. Bruce W. Felmly, Esg. Mark C. Rouvalis, Esg. Paul Buffum, Esg. Lisa Ferri, Esg.