Spectrum Dynamics Medical Limited v. General Electric Company

Background

Spectrum Dynamics Medical Limited developed a medical-imaging device called the Veriton and discussed a possible acquisition with General Electric Company. Spectrum shared confidential information during those discussions, but the acquisition did not occur. Spectrum alleges that GE later used its confidential information, including trade secrets, to develop the competing StarGuide device.

Spectrum’s original complaint included claims under 35 U.S.C. § 256 seeking correction of inventorship for GE patents. After Spectrum filed its First Amended Complaint, GE obtained another patent related to the StarGuide. The Patent and Trademark Office issued that patent in October 2021. Spectrum says its employee Nathaniel Roth found the patent in June 2022, and Spectrum completed an investigation into whether Roth and Yoel Zilberstien were the true inventors in September 2022.

Spectrum then sought permission under Rule 15(a)(2) of the Federal Rules of Civil Procedure to file a Second Amended Complaint. The proposed amendment would correct typographical errors, remove claims and one defendant already dismissed, remove certain patents from correction-of-inventorship claims, and add the new patent. The defendants did not object to most of these changes but opposed adding the new patent and argued that the proposed pleading did not remove certain claims and allegations.

The parties’ arguments

The defendants argued that Spectrum unduly delayed because the patent application had been published in December 2020. They also argued that adding the patent near the end of fact discovery would require additional discovery and expense and that some proposed claims would be futile, meaning they would not survive a motion to dismiss. Finally, they argued that Spectrum should remove trade-secret claims it had said it was no longer pursuing and allegations concerning statutes of limitations and equitable tolling that discovery had allegedly shown to be inaccurate.

Spectrum argued that it acted after discovering and investigating the patent, that the new patent involved the same technology as the other patents in the case, and that the additional discovery would not be significant.

Court’s analysis

The court applied Rule 15’s general standard, under which permission to amend should generally be granted unless there is undue delay, bad faith or an improper motive, unfair prejudice to the opposing party, or futility. The court noted that no scheduling order set a deadline for seeking leave to amend.

The court found no undue delay. Even assuming Spectrum had constructive knowledge of the patent when it was issued in October 2021, Spectrum moved to amend less than one year later and after investigating the patent. The court also noted that Spectrum moved before trial and before discovery ended, and GE offered no evidence that Spectrum acted in bad faith or with an improper motive.

The court found no undue prejudice. Adding the patent would require additional time and expense, but the need for additional discovery alone was not enough to establish unfair prejudice. The court found that the new claims were closely related to the existing claims and that the defendants would not face unfair surprise. The court also reasoned that refusing the amendment could require the parties to litigate the claims in a separate action.

The court rejected the futility argument. The defendants had previously made a similar standing argument concerning Spectrum’s fraud-on-the-Patent-and-Trademark-Office claims, and the court had previously found that Spectrum adequately alleged standing. The court stated that the same reasoning supported the proposed new claim and that the argument did not apply to the correction-of-inventorship claims. The court also stated that the defendants had not shown that the proposed amendment would be futile as to the statute-of-limitations and equitable-tolling allegations.

Although the defendants argued that the amendments did not go far enough, they did not provide a legal argument that this issue required denying leave to amend. The court nevertheless directed Spectrum to remove all claims it was no longer pursuing and all claims it agreed were no longer viable. The court said it could not evaluate the accuracy of the statute-of-limitations and equitable-tolling allegations at that stage, but warned that Rule 11 sanctions could result if Spectrum continued to assert claims or positions after discovery showed they were inaccurate.

Ruling and effect

Judge Katharine H. Parker granted Spectrum’s motion to file the Second Amended Complaint. The court required Spectrum to make the additional removals described in the order and to file the amended complaint within 30 days. The court also reopened fact discovery to permit discovery concerning any added claims and directed the parties to discuss the necessary discovery and propose changes to the discovery schedule in their next status letter. The order did not decide the ultimate merits of Spectrum’s claims or the defendants’ defenses.