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Wapp Tech Limited Partnership v. Micro Focus International, PLC

United States District Court, E.D. Texas, Sherman Division

August 13, 2019




         Pending before the Court is Defendant Micro Focus International, PLC's Motion to Dismiss for Lack of Personal Jurisdiction, Failure to Serve, and Improper Service of the Complaint (Dkt. #12); Plaintiffs Wapp Tech Limited Partnership and Wapp Tech Corp.'s Motion for Leave to File Amended Complaint (Dkt. #63); Plaintiffs' Request for Oral Argument on Plaintiffs' motion for leave (Dkt. #73); and Plaintiffs' Corrected Request for Oral Argument on Plaintiffs' motion for leave (Dkt. #74). Having considered the motions and the relevant pleadings, the Court finds Defendant's motion to dismiss should be granted (Dkt. #12); Plaintiffs' motion for leave should be granted (Dkt. #63); and Plaintiffs' requests for oral argument should be denied as moot (Dkt. #73; Dkt. #74).

         BACKGROUND I.

         Motion to Dismiss

         Plaintiffs filed this suit on July 2, 2018, alleging patent infringement of United States Patent Numbers 9, 971, 678, 9, 298, 864, and 8, 924, 192 (Dkt. #1).[1] On October 17, 2018, Defendant filed the motion at issue (Dkt. #12). Defendant moves the Court to dismiss Plaintiffs' Complaint arguing (1) the Court lacks personal jurisdiction over Defendant and (2) Plaintiffs failed to properly serve Defendant. Plaintiffs filed a response to Defendant's motion on November 1, 2018 (Dkt. #15). Defendant filed a reply to the motion on November 8, 2018 (Dkt. #16).

         II. Jurisdictional Discovery

         After a careful review of Defendant's motion, the Court ordered the parties to conduct jurisdictional discovery on December 20, 2018 (Dkt. #17). As the parties engaged in jurisdictional discovery, a discovery dispute arose. Accordingly, on January 16, 2019, Defendant filed a Motion for Protective Order (Dkt. #18). Defendant requested a protective order because it believed Plaintiffs' jurisdictional discovery requests were (1) improperly broad; (2) related to piercing the veil-a theory not previously asserted by Plaintiffs; and (3) were irrelevant as they related to the merits of the case, not to jurisdiction (Dkt. #18 at pp. 12-18). The parties filed a response and reply to the motion (Dkt. #19; Dkt. #22). The Court disagreed with Defendant and denied Defendant's motion for protective order finding, “Overall, [Defendant] cannot argue that the contacts cited by [Plaintiffs] are attributable only to its subsidiaries and simultaneously contend that [Plaintiffs are] not entitled to explore [Defendant's] relationship with these subsidiaries.” (Dkt. #24 at p. 4). As a result, on February 7, 2019, the Court ordered that:

The parties shall complete jurisdictional discovery with twenty-one (21) days of this order-February 28, 2019. The parties shall amend or supplement the briefing related to Micro Focus's motion to dismiss within eight (8) days of completing jurisdictional discovery-March 8, 2019.

(Dkt. #24 at pp. 4-5) (emphasis in original).

         III. Amended Complaint, Supplemental Briefing, and Motion to Strike

         On March 8, 2019, the parties filed supplemental briefing on Defendant's motion to dismiss (Dkt. #30; Dkt. #32). On the same day, without seeking leave of court, Plaintiffs filed a First Amended Complaint adding five additional parties-Seattle SpinCo Inc., EntIT Software LLC, EntCo Interactive (Israel) Ltd., Entco Government Software LLC, and Micro Focus (US) Inc. (Dkt. #28 ¶¶ 7-11).

         On March 12, 2019, without seeking leave of court, Defendant filed a reply to Plaintiffs' supplemental briefing (Dkt. #36).[2] The next day, Plaintiffs moved to strike Defendant's reply to Plaintiffs' supplemental briefing and sought clarification concerning the Court's Order denying Defendant's motion for protective order (Dkt. #41). Defendant filed a response to Plaintiffs' motion to strike the same day (Dkt. #42). On June 6, 2019, the Court denied Plaintiffs' motion to strike Defendant's reply (Dkt. #60). The Court also ordered Plaintiffs to file a motion for leave to rectify Plaintiffs' improper filing of the First Amended Complaint without leave of court (Dkt. #60).

         IV. Motion for Leave to Amend Complaint and Oral Argument Requests

         Pursuant to the Court's June 6 order, Plaintiffs filed a Motion for Leave to File First Amended Complaint on June 10, 2019 (Dkt. #63). On June 21, 2019, Defendant filed a response to Plaintiffs' motion for leave (Dkt. #67). Defendant argues the Court should deny Plaintiffs' motion because it is futile and there is evidence that Plaintiffs are acting in bad faith. Plaintiffs filed a reply in support of their motion on June 28, 2019 (Dkt. #69). Defendants filed a sur-reply to the motion on July 5, 2019 (Dkt. #70).

         On July 18, 2019, Plaintiffs filed a Request for Oral Argument on Plaintiffs' motion for leave (Dkt. #73). Plaintiffs request a hearing on the motion because the briefing, “made reference to statements by counsel for [Defendant] pursuant to settlement discussion, but which were not presented to the Court due to potential confidentiality issues.” (Dkt. #73 at p. 1). In the Certificate of Conference to the request, Plaintiffs state that “[d]espite attempts from [Plaintiffs] to schedule a telephonic conference for this Motion for Oral Argument, [Defendant] did not provide any availability.” (Dkt. #73 at p. 2). The next day, Plaintiffs filed a corrected Request for Oral Argument (Dkt. #74). The only difference between the original and corrected requests for oral argument is that Plaintiffs allege in the Certificate of Conference to the corrected request that “[d]espite efforts to do so, [the parties] were unable to find a mutually available time for a telephonic conference.” (Dkt. #74 at p. 2).


         I. Personal Jurisdiction

         Federal Rule of Civil Procedure 12(b)(2) enables a defendant to move to dismiss a case for lack of personal jurisdiction. Courts “apply Federal Circuit law when reviewing claims ‘intimately involved with the substance of the patent laws' and the law of the regional circuit when reviewing state law claims.” NexLearn, LLC v. Allen Interactions, Inc., 859 F.3d 1371, 1375 (Fed. Cir. 2017) (quoting Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed. Cir. 2003)); see also Apicore U.S. LLC v. Beloteca, Inc., 2:19-CV-00077-JRG, 2019 WL 1746079, at *3 (E.D. Tex. Apr. 18, 2019) (quoting Celgard, LLC v. SK Innovation Co., Ltd., 792 F.3d 1373, 1377 (Fed. Cir. 2015)) (“Federal Circuit law governs personal jurisdiction where ‘a patent question exists.'”).

         “When the district court's determination of personal jurisdiction is based on affidavits and other written materials, and no jurisdictional hearing is conducted, the plaintiff usually bears only a prima facie burden.” Celgard, 792 F.3d at 1377 (citing Coyle, 340 F.3d at 1349). The plaintiff also bears a prima facie burden if the parties conduct jurisdictional discovery, the parties dispute the jurisdictional facts, and the court does not conduct a jurisdictional hearing. Id.; accord Polar Electro Oy v. Suunto Oy, 829 F.3d 1343, 1347 (Fed. Cir. 2016) (citing Celgard, 792 F.3d at 1378).[3]Under the prima facie standard, courts “accept the uncontroverted allegations in the plaintiff's complaint as true and resolve any factual conflicts in the affidavits in the plaintiff's favor.” Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1329 (Fed. Cir. 2008). In determining whether a plaintiff has made a prima facie showing of personal jurisdiction, courts ask “‘whether a forum state's long-arm statute permits service of process and whether assertion of personal jurisdiction violates due process.'” NexLearn, LLC, 859 F.3d at 1375 (quoting Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1017 (Fed. Cir. 2009)). “Because the Texas long-arm statute extends to the limits of federal due process, the two-step inquiry collapses into one federal due process analysis.” Johnston v. Multidata Sys. Intern. Corp., 523 F.3d 602, 609 (5th Cir. 2008) (citing Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994)).

         Federal due process requires that an out-of-state defendant have sufficient “minimum contacts” with the forum state such that the suit does not offend “traditional notions of fair play and substantial justice.” Maxchief Invs. Ltd. v. Wok & Pan, Ind., Inc., 909 F.3d 1134, 1137 (Fed. Cir. 2018) (citing Bristol-Myers Squibb Co. v. Superior Court of Cal., ___ U.S. ___, 137 S.Ct. 1773, 1785 (2017)). A defendant's contacts are sufficient to meet the federal due process requirements if the court may exercise general or specific jurisdiction over the defendant. NexLearn, LLC, 859 F.3d at 1375. General jurisdiction exists only when the defendant's contacts with the forum state are so “‘continuous and systematic' as to render them essentially at home in the forum State.” Daimler AG v. Bauman, 571 U.S. 117, 127 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). General jurisdiction does not require the cause of action to relate to the defendant's contacts with the forum. Autogenomics, 566 F.3d at 1017 (citing Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1200 (Fed. Cir. 2003)). In assessing whether the defendant's contacts enable the court to exercise general jurisdiction, courts assess the nature and number of the defendant's contacts. M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda., 890 F.3d 995, 1000 (Fed. Cir. 2018) (quoting Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com de Equip. Medico, 563 F.3d 1285, 1297 (Fed. Cir. 2009)).

         The question of whether a court may exercise specific jurisdiction over a defendant “focuses on ‘the relationship among the defendant, the forum, and the litigation.'” Walden v. Fiore, 571 U.S. 277, 283-84 (2014) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)). Under a specific jurisdiction analysis, “the defendant's suit-related conduct must create a substantial connection with the forum state.” Id. The determine whether specific jurisdiction exists, the court asks whether “(1) the defendant purposefully directed its activities to the forum State; (2) the claims arise out of or relate to those activities (collectively, the minimum contacts prong); and (3) the assertion of jurisdiction is reasonable and fair.” NexLearn, LLC, 859 F.3d at 1376 (citing Avocent, 552 F.3d at 1332). “The plaintiff bears the burden as to the first two requirements, and if proven, the burden then shifts to the defendant to ‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'” M-I Drilling Fluids UK Ltd., 890 F.3d at 1000 (citations omitted).

         II. Amended Pleadings

         “When a trial court imposes a scheduling order, Federal Rules of Civil Procedure 15 and 16 operate together to govern the amendment of pleadings.” Tex. Indigenous Council v. Simpkins, 544 Fed.Appx. 418, 420 (5th Cir. 2013). Rule 15(a) governs a party's request to amend its pleading before a scheduling order's deadline to amend passes. See Id. Rule 16(b)(4) governs a party's request to amend its pleading after the deadline to amend passes. Sapp v. Mem'l Hermann Healthcare Sys., 406 Fed.Appx. 866, 868 (5th Cir. 2010) (citing S&W Enters., L.L.C. v. SouthTrust Bank of Ala., NA, 315 F.3d 533, 536 (5th Cir. 2003)).

         Rule 15(a) provides that a party may amend its pleading once without seeking leave of court or the consent of the adverse party at any time before a responsive pleading is served. After a responsive pleading is served, “a party may amend only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(1)(2). Rule 15(a) also instructs the court to “freely give leave when justice so requires.” The rule “‘evinces a bias in favor of granting leave to amend.'” Jones v. Robinson Prop. Grp., L.P., 427 F.3d 987, 994 (5th Cir. 2005) (quoting Lyn- Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d 282, 286 (5th Cir. 2002)); see also Dueling v. Devon Energy Corp., 623 Fed.Appx. 127, 129 (5th Cir. 2015) (quoting Mayeaux v. La. Health Serv. & Indem. Co., 376 F.3d 420, 425 (5th Cir. 2004)) (“In other words, ‘district courts must entertain a presumption in favor of granting parties leave to amend.'”). But leave to amend “is not automatic.” Matagorda Ventures, Inc. v. Travelers Lloyds Ins. Co., 203 F.Supp.2d 704, 718 (S.D. Tex. 2000) (citing Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981)). Whether to grant leave to amend “lies within the sound discretion of the district court.” Little v. Liquid Air Corp., 952 F.2d 841, 845-46 (5th Cir. 1992). A district court reviewing a motion to amend pleadings under Rule 15(a) considers five factors: (1) undue delay; (2) bad faith or dilatory motive; (3) repeated failure to cure deficiencies by previous amendments; (4) undue prejudice to the opposing party; and (5) futility of amendment. Smith v. EMC, 393 F.3d 590, 595 (5th Cir. 2004) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).

         Rule 16(b)(4) provides that a scheduling order issued by the Court “may be modified only for good cause and with the judge's consent.” See Agredano v. State Farm Lloyds, No. 5:15-CV-1067-DAE, 2017 WL 5203046, at *1 (W.D. Tex. July 26, 2017) (citing E.E.O.C. v. Serv. Temps Inc., 679 F.3d 323, 333-34 (5th Cir. 2012)) (stating, “a party seeking leave to amend its pleadings after a deadline has passed must demonstrate good cause for needing an extension.”). “The good cause standard requires the ‘party seeking relief to show that the deadlines cannot reasonably be met despite the diligence of the party needing the extension.'” S&W Enters., L.L.C., 315 F.3d at 535 (quoting 6A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1522.1 (2d ed. 1990)). In determining whether good cause exists, courts consider a four-part test: “(1) the explanation for the failure to [timely move for leave to amend]; (2) the importance of the [amendment]; (3) potential prejudice in allowing the [amendment]; and (4) the availability of a continuance to cure such ...

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