Solar Innovations vs. Sunmodo Corporation No. 2013-00825

Civil Action-Law-Breach of Contract-Licensing Agreement-Motion to Amend Complaint-Undue Prejudice-Delay-Statute of Limitations

Plaintiff, who filed a Complaint against Defendant based upon Defendant’s alleged breach of a nonexclusive licensing agreement by which Defendant manufactured and sold a clamp designed by Plaintiff, filed a Motion to Amend Complaint during discovery. In its Motion to Amend, Plaintiff seeks to add causes of action relating to the disclosure by Defendant during discovery that Defendant had a patent application for its own clamp, which Plaintiff indicated incorporates technology Plaintiff developed and provided to Defendant during the term of the licensing agreement, such that Plaintiff is owed royalty payments, damages and injunctive relief prohibiting Defendant from using Plaintiff’s technology and improvements therefrom.

1. Pa.R.C.P. Rule 1033 provides, in relevant part, that a party, either by filed consent of the adverse party or by leave of court, may at any time change the form of action or otherwise amend the pleading, which may aver transactions or occurrences that happened before or after the filing of the original pleading, even though the amendment may give rise to a new cause of action or defense.

2. The court has broad discretion in allowing the amendment of a pleading. Amendment of a pleading should be allowed liberally unless the amendment would prejudice the opposing party or is against a positive rule of law. Leave to amend a pleading should be granted in the absence of surprise or prejudice. Prejudice in this regard must stem from the fact that the new allegations are offered later in the proceedings rather than in the original pleading, not from the fact that the opponent may lose the case on the merits if the pleading were allowed. Further, an amendment introducing a new cause of action will not be permitted if the statute of limitations regarding the new cause of action has expired.

3. A long, unexplained delay between the original pleading and the motion to amend will be considered a factor in determining whether to permit the amendment. However, the timeliness of a request to amend is considered as a factor only in so far as it presents a question of prejudice to an opposing party, such as the loss of a witness or an eleventh hour surprise.

4. In light of the fact that Defendant failed to identify loss of evidence or lack of time to explore the claims sought to be added, Plaintiff was within the applicable statute of limitations to pursue the claims sought to be added, the claims sought to be added also sought recovery pursuant to Plaintiff’s rights under the licensing agreement that is the subject of the original action and the amendment would not cause any appreciable delay in light of the fact that Defendant previously requested a continuance of bench trial so that proceedings regarding its Motion to Compel, which remains outstanding, could be adjudicated, leave was granted to Plaintiff to amend its Complaint.

L.C.C.C.P. No. 2013-00825, Opinion by John C. Tylwalk, President Judge, March 15, 2016.

Timothy J. Huber, Esquire, for Plaintiff

Gina Stowe, Esquire, and Stradley Ronon, Esquire, for Defendant

 

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY

 

PENNSYLVANIA

CIVIL ACTION – LAW NO. 2013-00825

SOLAR INNOVATIONS, INC., Plaintiff

v.

SUNMODO CORPORATION, Defendant

APPEARANCES:

TIMOTHY J. HUBER, ESQUIRE FOR SOLAR INNOVATIONS, INC.

BUZGON DAVIS LAW OFFICES

GINA STOWE, ESQUIRE FOR SUNMODO CORPORATION

STRADLEY RONON

STEVENS & YOUNG, LLP

ORDER OF COURT

AND NOW, this 15^th day of March, 2016, upon consideration of Plaintiff’s Motion to Amend the Complaint, Defendant’s response thereto, the Briefs submitted by the parties, and Oral Argument, it is hereby Ordered that said Motion is GRANTED. Plaintiff may file its Amended Complaint within twenty (20) days of this Order. Plaintiff is directed to set forth with requisite specificity each element of the alleged improvements/changes and the corresponding structures with regard to Defendant’s patent which are at issue in Count II of its Amended Complaint.

 

BY THE COURT:

 

JOHN C. TYLWALK, P.J.

OPINION, TYLWALK, P.J., MARCH 15, 2016.

Plaintiff commenced this action by filing a Praecipe for Writ of Summons on May 2, 2013. Plaintiff filed its Complaint on June 5, 2013 seeking damages for Defendant’s alleged breach of a non-exclusive licensing agreement under which Defendant manufactured and sold a clamp designed by Plaintiff. After the parties engaged in discovery, a bench trial was scheduled for October 8, 9, and 12, 2015. After Defendant filed a Motion to Compel responses to discovery regarding certain patents held by Plaintiff, the bench trial was continued. A status conference and oral argument on the Motion to Compel were scheduled for October 16, 2015. During the status conference, Plaintiff informed the Court and Defendant that it would be seeking leave to amend its Complaint and suggested that argument and decision on the Motion to Compel should be deferred pending filing and resolution of the anticipated Motion to Amend. We deferred argument on Defendant’s Motion to Compel. Plaintiff has filed its Motion to Amend the Complaint which is presently before us for resolution.

The licensing agreement contains the following provisions:

 

11.00 LICENSOR agrees that any and all novel and nonobvious inventive improvements and changes to the LICENSED PRODUCT that are made by LICENSEE shall be the sole property of LICENSOR without royalty or other consideration being provided to LICENSEE.

11.01 LICENSEE agrees to formally assign to LICENSOR all right, title and interest to any and all novel and nonobvious inventive improvements and changes made by LICENSEE to the LICENSED PRODUCT and to sign all papers and take any steps necessary to assist LICENSOR in securing its rights to the inventive improvements and changes.

 

(License Agreement, Exhibit “A” to Complaint at page 6) Paragraph 2.02 of the license agreement provides: “IMPROVEMENT or IMPROVEMENTS means any patentable modification of the device, method, or product described in the PATENT APPLICATIONS.” (Exhibit “A” to Complaint, ¶2.02)

Plaintiff claims that during discovery, Defendant disclosed a patent application for its own clamp. Plaintiff contends that the clamp’s design incorporates technology which was developed and provided to Defendant by Plaintiff during the term of the license agreement and constitutes a novel and nonobvious improvement/change to Plaintiff’s clamp. Plaintiff further alleges that Defendant may have sold these clamps during the term of the licensing agreement and owes royalty payments and other damages to Plaintiff as a result of such sales. In Count II of its proposed Amended Complaint, Plaintiff sets forth a cause of action for Breach of Contract and seeks to add claims for actual loss, unjust enrichment, royalties, exemplary damages, attorney’s fees and expenses. It also seeks a declaratory judgment that Defendant’s patent is the sole property of Plaintiff and an injunction prohibiting Defendant from using Plaintiff’s technology and any improvements developed by Defendant. Defendant opposes the amendment, arguing that it will be unduly prejudiced by the addition of this claim.

With regard to the amendment of pleadings, Pa.R.C.P. No. 1033 provides:

Rule 1033. Amendment

 

A party, either by filed consent of the adverse party or by leave of court, may at any time change the form of action, add a person as a party, correct the name of a party, or otherwise amend the pleading. The amended pleading may aver transactions or occurrences which have happened before or after the filing of the original pleading, even though they give rise to a new cause of action or defense. An amendment may be made to conform the pleading to the evidence offered or admitted.

 

Pa.R.C.P. No. 1033.

The court has broad discretion in granting the right to amend a pleading. Somerset Community Hospital v. Allan B. Mitchell & Associates, Inc., 685 A.2d 141 (Pa. Super. 1996). Amendment of pleadings should be permitted liberally, unless the amendment will prejudice the opposing party or is against a positive rule of law. City of Philadelphia v. Spencer, 591 A.2d 5 (Pa. Commw. 1991). Leave to amend should be granted in the absence of surprise or prejudice. Mistick, Inc. v. City of Pittsburgh, 646 A.2d 642 (Pa. Commw. 1994). With regard to prejudice, the Pennsylvania Supreme Court has stated:

Despite our liberal policy of allowing amendments to pleadings, an amendment will not be permitted if it would result in undue prejudice to the pleader’s opponent. Professor Fleming James, Jr., of Yale Law School has given an accurate and succinct description of the concept of prejudice in this context:

 

‘All amendments have this is common: they are offered later in time than the pleading which they seek to amend. If the amendment contains allegations which would have been allowed inclusion in the original pleading (the usual case), then the question of prejudice is presented by the time at which it is offered rather than by the substance of what is offered. The possible prejudice, in other words, must stem from the fact that the new allegations are offered late rather than in the original pleading, and not from the fact that the opponent may lose his case on the merits if the pleading is allowed . . ..’

 

Nor will an amendment be permitted which would undermine the valid policies embodied in the statutes of limitation. Thus while Rule 1033 provides that an amended pleading ‘may aver transactions or occurrences which have happened before or after the filing of the original pleading, even though they give rise to a new cause of action,’ this Court has consistently held that an amendment introducing a new cause of action will not be permitted after the statute of limitations on the new cause of action has expired.

Bata v. Central Penn National Bank of Philadelphia, 293 A.2d 343, 357 (Pa. 1972), cert. denied 409 U.S. 1108 (1973).

Amendments to pleadings are permitted at any time, including before, during, and after trial.  Horowitz v. Universal Underwriters Ins., 580 A.2d 395 (Pa. Super. 1990), appeal denied 590 A.2d 298 (Pa. 1991). A long unexplained delay between the original pleading and the motion to amend will be considered as a factor in deciding whether to permit the amendment. Tanner v. Allstate Insurance Company, 467 A.2d 1164 (Pa. Super. 1983). When considering a petition to amend pleadings, although the timeliness of a request to amend is a factor to be considered, it is to be considered only in so far as it presents a question of prejudice to opposing party, such as to loss of witnesses or eleventh hour surprise.  Capobianchi v. BIC Corp., 666 A.2d 344 (Pa. Super. 1995), appeal denied 674 A.2d 1065 (Pa. 1996).

Plaintiff argues that this Motion is timely since it learned of the patent during discovery. Plaintiff admits that it has known of the existence of this claim since the patent application was divulged on March 10, 2014 during discovery proceedings. It also notes that, while the patent was issued on November 20, 2014, it waited nearly a year thereafter to seek amendment of its Complaint. However, Plaintiff points out that it had four years to file suit pursuant to the applicable statute of limitations and asserts that the claim should be litigated in this suit as Count I of the Complaint also seeks determination of the parties’ rights under the licensing agreement. Plaintiff contends that it will suffer prejudice if it is precluded from asserting this claim at this juncture in the proceedings. Plaintiff argues that Defendant will not be unduly prejudiced since there is time for additional discovery and pretrial motions necessitated by the additional claim as trial has not yet been rescheduled.

In opposition, Defendant points out that Plaintiff learned of Defendant’s patent application during discovery in March 2014 and that the patent has been addressed in various instances in this litigation since that time. Defendant explains that it was unaware that Plaintiff had any objection to the application. Defendant contends that had it known of Plaintiff’s intention to raise this claim, it could have altered the language in its patent application in order to protect its own rights. Defendant further explains that due to Plaintiff’s timing, it is unduly prejudiced because now that the patent has issued, it is no longer in a position to take such protective action.

Defendant also points out that Plaintiff filed another lawsuit against Defendant in this Court on January 14, 2016. At the time of Argument, it was not aware of the basis of the claims as it had not yet been served with a copy of the Complaint in that action. Defendant argues that Plaintiff’s argument that it is judicious to have all claims between the parties resolved in one lawsuit is therefore defeated by Plaintiff’s own conduct.

Defendant also complains that Count II of Plaintiff’s proposed Amended Complaint is deficient with regard to the identification of the alleged improvements and changes of Plaintiff’s clamp design. In the event that amendment is permitted, Defendant requests that Plaintiff be required to detail the elements of the alleged improvements/changes and the corresponding structures claimed in the patent with more specificity than is provided in the proposed amended pleading.

We will grant Plaintiff leave to amend the Complaint as we find no undue prejudice to Defendant. Defendant does not identify any unfairness sufficient to defeat the request for amendment, such as a loss of evidence or lack of time to explore this claim. Plaintiff had four years under the applicable Statute of Limitations to pursue this claim and cannot be precluded from asserting it. Like the claims in Count I, Plaintiff seeks recovery pursuant to its rights under the licensing agreement and we agree that these claims should be resolved in one suit. If appropriate, we may consolidate this suit with the other litigation commenced by Plaintiff.

We also do not accept Defendant’s argument that it could have better protected its rights by rewording its patent application. The design is either an improvement or change to Plaintiff’s design or it is not, and we fail to see that different language in the patent application would have changed that central fact.

This amendment will not cause any appreciable delay in the proceedings. Defendant previously requested a continuance of the bench trial which was scheduled for this matter so that its Motion to Compel could be resolved. That Motion to Compel has not yet been relisted for argument and trial has not yet been rescheduled. Defendant’s outstanding Motion to Compel seeks information regarding Plaintiff’s patents and it may engage in further discovery with regard to this additional claim.

We do agree with Defendant that Plaintiff should be required to set forth with more particularity the specifics of its claim. Paragraphs 37 through 41 of the proposed amended pleading do not contain sufficient information to identify which elements of Defendant’s design are claimed to have evolved from Plaintiff’s technology and the specific components involved. We believe Defendant is entitled to such information in order to prepare its defense and respond to the Amended Complaint. Therefore, we will grant Plaintiff leave to file an Amended Complaint within twenty (20) days of this Order and Opinion and direct it to set forth with more specificity its identification of the alleged improvements/changes which are the subject of Count II.

1) 42 Pa.C.S.A. §5525.

2) Plaintiff’s counsel provided a copy of the Complaint in that action, No. 2015-02048, to the Court at Oral Argument. In the Complaint in that action, Plaintiff alleges violations of the Uniform Trade Secrets Act, 12 Pa.C.S.A. §5301 et seq and Breach of a Confidentiality Agreement against Defendant and two of its representatives.