Trusted Knight Corporation v. International Business Machines Corporation

Background

Trusted Knight sued IBM for allegedly infringing United States Patent No. 9,503,473, which concerns systems and methods for protecting against keylogging malware that uses form-grabbing techniques to steal financial and identity information from users’ browsers. Trusted Knight originally asserted claims 1–6, 8, 10–17, 19–20, 22–23, and 25–27.

IBM later petitioned the Patent and Trademark Office for inter partes review, a proceeding to challenge patent validity, covering every claim Trusted Knight had asserted in the lawsuit. The Patent and Trademark Office instituted review on all those claims. The court then stayed the lawsuit while that review proceeded. The Patent Trial and Appeal Board later invalidated 27 of Trusted Knight’s 29 claims. Claims 7 and 18 remained because Trusted Knight had not previously asserted them and they were not included in the review. Trusted Knight’s appeal of the Board’s decision was pending when the court considered this motion.

Motion to Amend

Trusted Knight asked for permission to amend its disclosure of asserted claims and infringement contentions to add claims 7 and 18. Under the applicable Patent Local Rules, a party seeking to amend its infringement contentions must show good cause. The moving party must first establish diligence; if it does so, the court then considers whether the amendment would prejudice the opposing party.

Trusted Knight argued that it had acted diligently but had been hindered by deficiencies and delays in IBM’s production of code and documents. It also argued that IBM would not be prejudiced even if Trusted Knight had not shown diligence. IBM argued that Trusted Knight’s delay reflected an effort to keep the case alive after the claims it had asserted were likely to be invalidated.

Court’s Analysis

The court concluded that Trusted Knight had not shown diligence. The court noted that Trusted Knight did not identify what it had discovered, or when it discovered it, that justified asserting claims 7 and 18 later. The court also noted that IBM had produced more than 99 percent of the documents produced to date by November 13, 2019, and that Trusted Knight’s last inspection of IBM’s source code had occurred on October 15, 2019—about 10 months before Trusted Knight filed the motion.

The court further found that Trusted Knight had not explained why prior-art references in IBM’s patent-review filings changed the circumstances enough to justify adding the previously unasserted claims. Because Trusted Knight failed to establish diligence, the court stated that it did not need to decide whether the amendment would prejudice IBM. Nevertheless, the court held that IBM would have been prejudiced even if Trusted Knight had shown diligence, because IBM had relied on Trusted Knight’s original list of claims in deciding which claims to challenge. The court noted that the deadline for challenging claims 7 and 18 in the patent review had passed.

Disposition

The court denied Trusted Knight’s motion for leave to amend its disclosure of asserted claims and infringement contentions. The order disposed of Docket No. 106.