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Intellectual Ventures I LLC v. Capital One Fin. Corp.

United States District Court, D. Maryland, Southern Division

March 2, 2015

INTELLECTUAL VENTURES I LLC, et al., Plaintiffs,
v.
CAPITAL ONE FINANCIAL CORP., et al., Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Intellectual Ventures I LLC, Intellectual Ventures II LLC, Plaintiffs: Michael Edward McCabe, Jr, LEAD ATTORNEY, Bryan D Bolton, Funk and Bolton PA, Baltimore, MD; Clayton Walter Thompson, II, Ian Neville Feinberg, Margaret Elizabeth Day, PRO HAC VICE, Feinberg Day Alberti and Thompson LLP, Menlo Park, CA; David L Alberti, Marc Belloli, Sal Lim, Feinberg Day Alberti and Thompson LLP, Menlo Park, CA; Yakov Zolotorev, PRO HAC VICE, Feinberg Day Alverti and Thompson LLP, Menlo Park, CA.

For Capital One Financial Corporation, Capital One Bank (USA), National Association, Capital One, National Association, Defendants, Counter Claimants: Mary Catherine Zinsner, LEAD ATTORNEY, Troutman Sanders LLP, Tysons Corner, VA.

For Intellectual Ventures I LLC, Intellectual Ventures II LLC, Counter Defendants: Michael Edward McCabe, Jr, LEAD ATTORNEY, Bryan D Bolton, Funk and Bolton PA, Baltimore, MD; Clayton Walter Thompson, II, PRO HAC VICE, Feinberg Day Alberti and Thompson LLP, Menlo Park, CA; David L Alberti, Ian Neville Feinberg, Marc Belloli, Margaret Elizabeth Day, Sal Lim, Feinberg Day Alberti and Thompson LLP, Menlo Park, CA; Yakov Zolotorev, Feinberg Day Alverti and Thompson LLP, Menlo Park, CA.

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MEMORANDUM OPINION

Paul W. Grimm, United States District Judge.

Plaintiffs/Counter-Defendants Intellectual Ventures I LLC and Intellectual Ventures II LLC (together, " Intellectual Ventures companies" or " IV" ), two companies whose " businesses include purchasing important inventions from individual inventors and institutions and then licensing the inventions to those who need them," bring patent infringement claims against Defendants/Counterclaimants Capital One Financial Corp., Capital One Bank (USA), N.A., and Capital One, N.A. (collectively, " Capital One companies" ). Compl., ECF No. 1. Specifically, Plaintiffs claim that the Capital One companies infringed four patents " [i]n connection with the[] online banking services and other [electronic] systems and services" that they provide. Id. ¶ ¶ 13 & 23.[1]

The Capital One companies filed, and then twice amended, an Answer, Defenses, and Counterclaims, seeking a declaratory judgment of non-infringement or invalidity of each patent, as well as unenforceability of one patent due to inequitable conduct. ECF Nos. 28, 72, 103. They now timely seek to amend their Second Amended Answer,

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Defenses and Counterclaims to add three antitrust counterclaims " alleging that IV's creation and abuse of monopoly power to hold up Capital One and other banks violates Section 2 of the Sherman Act [15 U.S.C. § 2] and Section 7 of the Clayton Act [15 U.S.C. § 18]." [2] Countercls.' Mot. to Am. 1, ECF No. 106. Their new counterclaims are " based on IV's new and continuing conduct, internal documents that IV produced near the end of its first action against Capital One in Virginia, and from events occurring during and after IV's first case against Capital One." Id. Given that Counterclaimants filed similar counterclaims in the earlier suit between the parties in the Eastern District of Virginia, I must determine whether res judicata bars the proposed counterclaims and, if not, whether the proposed counterclaims are plausible. Because Counterclaimants base the proposed counterclaims on events that occurred after they filed their counterclaims in the Eastern District of Virginia, res judicata is not a bar. Further, Counterclaimants sufficiently state claims in their proposed counterclaims for purposes of surviving a plausibility challenge and to warrant proceeding to discovery on the counterclaims. Therefore, I will grant their Motion to Amend.

I. STANDARD OF REVIEW

Whether to grant a motion for leave to amend is within this Court's discretion. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). When, as here, a party moves to amend for a third time but before the deadline established in the Scheduling Order for doing so, Rule 15(a)(2) provides the standard for whether to grant the motion. See id.; Fed.R.Civ.P. 15(a)(2). Rule 15(a)(2) states that " [t]he court should freely give leave [to amend] when justice so requires." " The Court only should deny leave to amend if amendment 'would prejudice the opposing party, reward bad faith on the part of the moving party, or . . . amount to futility.'" Rao v. Alaska Airlines, 22 F.Supp.3d 529, 540 (D. Md. 2014) (quoting MTB Servs., Inc. v. Tuckman-Barbee Constr. Co., No. RDB-12-2109, 2013 WL 1819944, at *3 (D. Md. Apr. 30, 2013)); Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). Otherwise, " [i]f the underlying facts or circumstances relied upon by a [counterclaimant] may be a proper subject of relief," and the counterclaimant moves to amend, the Court should grant the motion so that the counterclaimant has the " opportunity to test his claim on the merits." Foman, 371 U.S. at 182.

Here, Plaintiffs/Counter-Defendants do not oppose Counterclaimants' proposed amendment insofar as they seek to add as counter-defendants new entities related to the existing Counter-Defendants. Therefore, Counterclaimants' Motion to Amend IS GRANTED as to the addition of the new counter-defendants. Nor do the Intellectual Ventures companies contend that amendment would be prejudicial or that the Capital One companies acted in bad faith. Plaintiffs/Counter-Defendants argue only that amendment to include three antitrust claims would be futile.

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Determining whether amendment would be futile does not involve " 'an evaluation of the underlying merits of the case.'" MTB Servs., 2013 WL 1819944, at *3 (quoting Next Generation Grp. v. Sylvan Learning Ctrs., LLC, No. CCB-11-0986, 2012 WL 37397, at *3 (D. Md. Jan. 5, 2012)). Rather, " the merits of the litigation" are only relevant to the Court's ruling on a motion for leave to amend if " a proposed amendment may clearly be seen to be futile," Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1980), such as " if the proposed amended complaint fails to state a claim under the applicable rules and accompanying standards," Katyle v. Penn Nat'l Gaming Inc., 637 F.3d 462, 471 (4th Cir. 2011); see MTB Servs., 2013 WL 1819944, at *3. Notably, a claim is subject to dismissal for failure to state a claim " 'when the face of the complaint clearly reveals the existence of a meritorious affirmative defense.'" Occupy Columbia v. Haley, 738 F.3d 107, 116 (4th Cir. 2013) (quoting Brockington v. Boykins, 637 F.3d 503, 506 (4th Cir. 2011) (internal quotation marks omitted)).

The affirmative defense of res judicata " 'bars a party from suing on a claim that has already been litigated to a final judgment by that party or such party's privies and precludes the assertion by such parties of any legal theory, cause of action, or defense which could have been asserted in that action.'" Reid v. New Century Mortg. Corp., No. AW-12-2083, 2012 WL 6562887, at *3 (D. Md. Dec. 13, 2012) (quoting Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177, 210 (4th Cir. 2009) (citation and internal quotation marks omitted)). When considering this defense, " 'a court may take judicial notice of facts from a prior judicial proceeding when the res judicata defense raises no disputed issue of fact.'" Kalos, 2012 WL 6210117, at *2 (quoting Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000)). Res judicata provides grounds for dismissal if a defendant or counter-defendant establishes " '(1) a judgment on the merits in a prior suit resolving (2) claims by the same parties or their privies, and (3) a subsequent suit based on the same cause of action.'" Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177, 210 (4th Cir. 2009) (quoting Aliff v. Joy Mfg. Co., 914 F.2d 39, 42 (4th Cir. 1990)). Even if the claimant's legal theory differed in the earlier dispute, res judicata still may bar the current action, provided that " the second suit 'arises out of the same transaction or series of transactions as the claim resolved by the prior judgment.'" Id. (quoting Aliff, 914 F.2d at 42). Further,

The preclusive [e]ffect of a prior judgment extends beyond claims or defenses actually presented in previous litigation, for " [n]ot only does res judicata bar claims that were raised and fully litigated, it prevents litigation of all grounds for, or defenses to, recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior proceeding." Peugeot Motors of America, Inc. v. Eastern Auto Distributors, Inc., 892 F.2d 355, 359 (4th Cir. 1989), quoting Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979) (internal quotation marks deleted).

Meekins v. United Transp. Union, 946 F.2d 1054, 1057 (4th Cir. 1991).

II. DISCUSSION

Plaintiffs/Counter-Defendants oppose the amendment, arguing that it would be futile because res judicata bars the proposed counterclaims. Pls.' Opp'n 9-10. They also contend that the proposed counterclaims do not state plausible claims for relief. Id. at 12. Counterclaimants reply that res judicata is not a bar because the

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earlier opinion was limited to the facts as pleaded, and now there are new facts that were not in existence or known during the earlier litigation, and the counterclaims are plausible. Countercls.' Reply 3, 8.

A. Res Judicata

As noted, this is not the parties' first time facing each other in court. In June, 2013, the Intellectual Ventures companies filed suit against the Capital One companies in the Eastern District of Virginia, and the Capital One companies filed counterclaims in October, 2013 that, as amended, " assert[ed] [three] antitrust claims under Section 2 of the Sherman Antitrust Act and Section 7 of the Clayton Act." Intellectual Ventures I LLC v. Capital One Financial Corp., No. 13-740 (AJT/TRJ), 2013 WL 6682981, at *1 (E.D. Va. Dec. 18, 2013); see E.D. Va. First Am. Countercl., Countercls.' Mot. to Am. Ex. 2, ECF No. 106-5; E.D. Va. First Am. Countercl., Pls.' Opp'n Ex. B, ECF No. 118-2 (same). There, also, the Intellectual Ventures companies opposed the counterclaims. Intellectual Ventures I LLC, 2013 WL 6682981, at *1. The Eastern District of Virginia granted the Intellectual Ventures companies' motion to dismiss all three counterclaims in December, 2013. Id.; E.D. Va. Dec. 5, 2013 Order 1, Pls.' Opp'n Ex. E, ECF No. 118-5. When, after the court granted summary judgment in the Capital One companies' favor on the remaining claims in April, 2014, the Capital One companies asked the court to amend its judgment to make the dismissal of the counterclaims without prejudice, the court denied the motion in May, 2014. E.D. Va. May 27, 2014 Order 1, Pls.' Opp'n Ex. C, ECF No. 118-3. The court noted that the Capital One companies sought " the requested relief pursuant to Fed.R.Civ.P. 59(e) on the grounds that discovery and events since the Court's Order constitute new evidence that supports its allegations." Id. The court also observed that " Capital One [did] not seek leave to amend and pursue its Counterclaim based on that 'new evidence,' but rather [sought] only to modify the effect of the Court's Order." Id. It stated, id. at 2:

The Court's Order therefore adjudicated the defendants' counterclaim on the " merits" of that claim, as the " merits" of that claim were to be determined at that preliminary pleadings stage. For that limited reason and in that limited context, the Court's adjudication was not " without prejudice" in that the counterclaims were disposed of for the purposes of this action and for the purposes of appeal.

Thus, there was " a judgment on the merits in a prior suit." See Ohio Valley Envtl. Coal., 556 F.3d at 210; Jacobs v. Venali, 596 F.Supp.2d 906, 914 (D. Md. 2009) (" It is well established that dismissals with prejudice--including those resulting from settlement agreements or consent decrees--are treated as final judgments on the merits for purposes of res judicata." ). And, that judgment resolved claims between the same parties as those appearing before this Court. See Ohio Valley Envtl. Coal., 556 F.3d at 210. Further, the Capital One companies' three proposed antitrust counterclaims in this suit are based on the same causes of action as the three antitrust counterclaims that the Eastern District of Virginia dismissed with prejudice. See id.

Nonetheless, Counterclaimants argue that they should be allowed to bring these counterclaims because, in their view, they offer new factual allegations that they could not have made in the earlier lawsuit. Countercls.' Mem. 6. According to Counterclaimants, at the time the Intellectual Ventures companies filed the Eastern District of Virginia action,

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IV had only just begun to wield its monopoly power against Capital One and many details of IV's scheme were unknown or unproven: the Virginia action was IV's first against Capital One, no court had weighed the validity or infringement of IV's financial-services patents, and only IV knew the specifics of its acquisitions, strategy, plans, and intent which, quite naturally, it kept as closely guarded secrets. Capital One thus based its Virginia antitrust ...

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