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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`TWILIO, INC.,
`Plaintiff,
`
`v.
`
`TELESIGN CORPORATION,
`Defendant.
`
`Case No.16-cv-06925-LHK (SVK)
`
`
`ORDER GRANTING TELESIGN'S
`MOTION FOR LEAVE TO AMEND
`INVALIDITY CONTENTIONS
`Re: Dkt. No. 93
`
`
`
`
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`Twilio, Inc. (“Twilio”) filed this patent infringement action on December 1, 2016, alleging
`
`that TeleSign Corporation’s (“TeleSign”) products infringe its patents. ECF 1. Now pending
`
`before the Court is TeleSign’s motion for leave to amend its invalidity contentions. Having
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`carefully considered the parties’ submissions, and having had the benefit of oral argument on
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`August 15, 2017, the Court grants TeleSign’s motion for leave to amend its invalidity contentions
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`as set forth below.
`
`RELEVANT FACTS
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`Pursuant to this District’s Patent Local Rules, Twilio served its infringement contentions
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`on March 15, 2017. TeleSign served its invalidity contentions on May 1, 2017. In its invalidity
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`contentions, TeleSign stated in relevant part:
`
`TeleSign places Plaintiff on notice that, based on TeleSign’s
`reasonable
`investigation
`to date,
`the
`features accused of
`infringement existed in early versions of the accused products
`(Voice and SMS Verify), including prior to April 2008 and April
`thus—by Plaintiff’s own argument and
`2007, and would
`assertions—invalidate the Asserted Claims . . . .
`ECF 93-4 at 5. TeleSign provided no additional information that identified the prior art or set
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`forth where and how in each alleged item of prior art each limitation of each asserted claim is
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`found. Instead, TeleSign cited to thousands of pages of technical documents produced by
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 2 of 9
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`
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`TeleSign. See ECF 93-4 at 5 n. 4.
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`Despite its reliance on Twilio’s infringement contentions, on May 22, 2017, TeleSign
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`moved to strike the contentions. ECF 78, 79. On May 29, 2017, Twilio notified TeleSign of
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`Twilio’s position that TeleSign’s invalidity contentions were deficient for failing to provide
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`original charts mapping TeleSign’s own products to Twilio’s asserted claims. ECF 93-6 at 2.
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`TeleSign took the position that it was relying on Twilio’s infringement contention charts and that
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`such reliance is permitted under the Local Rules. ECF 93 at 9; ECF 98-4 at 2. On June 5, 2017,
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`pursuant to the case schedule, the parties exchanged their initial claim construction positions. The
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`parties met and conferred on June 14, 2017, at which time TeleSign offered to provide new
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`invalidity contentions with charts mapping its prior art to claim limitations, but Twilio opposed
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`such amendment. ECF 98-4 at 2. On June 23, 2017, in response to an interrogatory, TeleSign
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`served amended charts that map its products to the asserted claims. ECF 102 at 12, 102-1, 102-2.
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`On July 14, 2017, TeleSign filed the instant motion for leave to amend its invalidity
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`contentions in three ways: 1) add newly discovered prior art (the Maes ‘604 patent and Ransom
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`‘756 patent); 2) add charts that map TeleSign’s products as prior art to Twilio’s asserted claims in
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`the ‘021 and ‘465 patents; and 3) add its own products as prior art for the ‘376 patent. The parties
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`have begun briefing for claim construction. See ECF 105. Fact discovery closes May 7, 2018,
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`expert discovery closes July 11, 2018, and trial is currently set for November 26, 2018. ECF 74 at
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`2-3.
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`I. LEGAL STANDARD
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`Pursuant to the Northern District of California’s Patent Local Rules, parties exchange
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`infringement and invalidity contentions early in a case. The contentions are not a mere formality
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`but rather a requirement “to eliminate the gamesmanship of hints in favor of open disclosure.”
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`Largan Precision Co, Ltd. v. Genius Elec. Optical Co., No. 13-CV-02502-JD, 2014 WL 6882275,
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`at *4 (N.D. Cal. Dec. 5, 2014). Patent Local Rule 3-3(a) requires a party serve invalidity
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 3 of 9
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`contentions, which must include:
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`the identity of each item of prior art that allegedly anticipates each
`asserted claim or renders it obvious. Each prior art publication shall
`be identified by its title, date of publication, and where feasible,
`author and publisher. Each alleged sale or public use shall be
`identified by specifying the item offered for sale or publicly used or
`known, the date the offer or use took place or the information
`became known, and the identity of the person or entity which made
`the use or which made and received the offer, or the person or entity
`which made the information known or to whom it was made known.
`In addition, the disclosure must include “[a] chart identifying specifically where and how in each
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`alleged item of prior art each limitation of each asserted claim is found.” Patent Local R. 3-3(c).
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`Amendment of infringement contentions or invalidity contentions may be made only by
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`order of the Court upon a timely showing of good cause. “[A]s a general rule, mistakes or
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`omissions are not by themselves good cause.” Karl Storz Endoscopy-Am., Inc. v. Stryker Corp.,
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`No. 14-CV-00876-RS (JSC), 2016 WL 2855260, at *3 (N.D. Cal. May 13, 2016) (internal citation
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`and quotation omitted). Non-exhaustive examples of circumstances that may, absent undue
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`prejudice to the non-moving party, support a finding of good cause include:
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`(a) A claim construction by the Court different from that proposed by the party seeking
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`amendment;
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`(b) Recent discovery of material, prior art despite earlier diligent search; and
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`(c) Recent discovery of nonpublic information about the Accused Instrumentality which
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`was not discovered, despite diligent efforts, before the service of the Infringement Contentions.
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`Patent Local R. 3–6.
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`Whether a party has been diligent requires a two-step inquiry: “(1) diligence in
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`discovering the basis for amendment; and (2) diligence in seeking amendment once the basis for
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`amendment has been discovered.” Monolithic Power Sys., Inc. v. Silergy Corp., No. 14-1745-VC
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`(KAW), 2015 WL 5440674, at *2 (N.D. Cal. Sept. 15, 2015). “In considering the party’s
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`diligence, the critical question is whether the party could have discovered the new information
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`earlier had it acted with the requisite diligence.” Radware Ltd. v. F5 Networks, Inc., No. C-13-
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`02021-RMW, 2014 WL 3728482, at *1 (N.D. Cal. 2014).
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`If the court determines that the moving party was not diligent, the inquiry may end there.
`3
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`Northern District of California
`United States District Court
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`
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 4 of 9
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`
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`See Acer, Inc. v. Tech. Properties Ltd., No. 5:08-CV-00877 JF/HRL, 2010 WL 3618687, at *5
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`(N.D. Cal. Sept. 10, 2010). However, the court retains discretion to grant leave to amend in the
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`absence of diligence where there is no prejudice to the opposing party. See, e.g., Apple Inc. v.
`
`Samsung Elecs. Co., No. CV 12–00630 LHK, 2012 WL 5632618, at *5–6 (N.D.Cal. Nov. 15,
`
`2012); U.S. Ethernet Innovations, LLC v. Acer, Inc., No. 10–cv–3724 CW, 2013 WL 5609325, at
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`*3 (N.D.Cal. Oct. 11, 2013). Prejudice is typically found when allowing amendment of
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`contentions would disrupt the case schedule or other court orders. See Karl Storz Endoscopy-Am.,
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`Inc., 2016 WL 2855260, at *3.
`
`II. ANALYSIS
`
`TeleSign seeks to amend its invalidity contentions in three ways: 1) add newly discovered
`
`prior art (the Maes ‘604 patent and Ransom ‘756 patent); 2) add charts that map TeleSign’s
`
`products to Twilio’s claims as prior art; and 3) add its own products as asserted prior art for the
`
`‘376 patent. The Court will discuss each in turn.
`
`a. The Court grants leave to amend contentions to include the Maes ‘604 and
`Ransom ‘756 patents.
`Twilio does not oppose TeleSign’s request for leave to add the Maes ‘604 and Ransom
`
`‘756 patents to its invalidity contentions. Therefore, the Court grants leave for TeleSign to add the
`
`Maes and Ransom patents to its invalidity contentions.
`
`b. The Court grants leave to amend contentions to include charts mapping
`prior art to the ‘021and ‘465 patents despite TeleSign’s lack of diligence
`because there will be no prejudice.
`TeleSign has failed to establish diligence. The prior art at issue is TeleSign’s own
`
`products, yet TeleSign’s invalidity contentions neither identify each item of prior art that allegedly
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`anticipates or renders obvious each asserted claim nor chart where and how in each alleged item of
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`prior art each limitation of each asserted claim is found. Patent Local R. 3-3. Instead, Telesign
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`merely “refers Plaintiff to its own infringement charts.” ECF 93-4. Unlike many cases where
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`amendment is sought, the basis for TeleSign’s proposed amendment is not discovery of new
`
`evidence. The essential information TeleSign needed to satisfy the Local Rule was the priority
`
`date of the asserted patents and its own product information. Thus, TeleSign now seeks to include
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 5 of 9
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`charts based on information TeleSign, and only TeleSign, has had all along. Cf. Patent Local
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`R. 3-6.
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`Further, on the first page of its invalidity contentions, TeleSign criticizes Twilio’s
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`infringement contentions, stating “TeleSign contends that Plaintiff’s Infringement Contentions are
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`deficient and fail to put TeleSign on notice of the nature of Plaintiff’s infringement theories.”
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`ECF 93-4 at 3. Indeed, on May 22, 2017, TeleSign moved to strike Twilio’s infringement
`contentions. ECF 78, 79.1 On May 29, 2017, Twilio informed TeleSign of the deficiencies of
`Telesign’s contentions. Rather than timely moving to amend, TeleSign stood by its reliance on
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`Twilio’s infringement contentions. The parties met and conferred regarding TeleSign’s
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`contention charts on June 14, 2017, at which point TeleSign continued to assert the validity of its
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`reliance. On June 23, 2017, TeleSign served responses to an interrogatory, which included
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`updated invalidity charts in which TeleSign charted its own products as prior art.
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`TeleSign’s criticism of Twilio’s charts in its invalidity contentions demonstrates that at the
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`time it served its invalidity contentions, TeleSign understood that relying on Twilio’s charts could
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`not satisfy Local Rule 3-3. Regardless, even if TeleSign had not criticized Twilio’s infringement
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`contentions or moved to strike them, there is no authority allowing a party to rely on an opposing
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`party’s infringement charts rather than charting its own invalidity contentions, when those
`contentions are based upon the party’s own products. See Patent Local R. 3-3(c). 2
`The two cases TeleSign relies upon do not suggest otherwise. Neither case addresses the
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`Northern District’s patent rules generally nor the early disclosure of contentions specifically.
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`Instead, both cases address whether the defendant can rely on the plaintiff’s infringement
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`contention charts at summary judgment to prove that the accused products are prior art. Cf.
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`Vanmoor v. Wal-Mart Stores, Inc., 201 F.3d 1363, 1366-67 (Fed. Cir. 2000); Google Inc. v. Ben.
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`1 At oral argument TeleSign foreswore gamesmanship in attacking Twilio’s infringement
`contentions while at the same time relying upon them for its own invalidity contentions. The
`Court will, at this juncture, give TeleSign the benefit of the doubt.
`2 In some cases, the level of specificity required by Rule 3-3(c) for invalidity contentions is the
`same as that required by Rule 3-1 for infringement contentions. Compare Patent Local R. 3-1
`with Patent Local R. 3-3; see Slot Speaker Techs., Inc. v. Apple, Inc., No. 13-CV-01161-
`HSG(DMR), 2017 WL 235049, at *2 (N.D. Cal. Jan. 19, 2017).
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 6 of 9
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`Innovations, Inc., No. 2:11-cv-00229-JRG-RSP, 2014 U.S. Dist. LEXIS 116824, at *13 (E.D. Tex.
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`Aug. 21, 2014). Allowing a party to rely on infringement contentions as admissions at the
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`summary judgment stage does not establish that a party can rely on infringement contentions in
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`lieu of providing invalidity charts to disclose its invalidity theories as required by the Patent Local
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`Rules.
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`Having determined that TeleSign has failed to show diligence, the Court need not reach the
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`question of prejudice. However, given the early stage in the case, the Court finds there is no
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`prejudice in allowing amendment.
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`An upcoming discovery deadline tends to loom large in the prejudice analysis, and it is the
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`determinative factor here. See Karl Storz Endoscopy-Am., Inc., 2016 WL 2855260, at *7
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`(collecting cases). The parties have just begun discovery, the fact discovery cut off is over nine
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`months away and claim construction briefing is just underway. Twilio did not, in either its brief or
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`at oral argument, identify a single, specific detriment that it would suffer as a result of allowing
`Telesign to amend at this early stage of the case.3 The Court also notes two additional factors that,
`while in no way constituting compliance with Local Rule 3-3, can be considered as mitigating
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`factors for determining prejudice: 1) Twilio has had TeleSign’s proposed invalidity contentions,
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`including charts mapping its products to the relevant claims of Twilio’s ‘021 and ‘465 patents,
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`since June 23, 2017, when TeleSign served responses to interrogatories; and 2) Telesign has
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`produced thousands of pages of technical documents which do appear to provide some relevant
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`product and date information. As a result, in light of the early stage of the proceedings, the Court
`finds there is no prejudice and allows leave to amend on this ground.4
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`c. The Court grants leave to amend TeleSign’s contentions for the ‘376
`Patent despite TeleSign’s lack of diligence because there will be no
`prejudice.
`While TeleSign’s attempt to assert the Voice Verify and SMS Verify products as prior art
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`3 The Court recently granted Twilio leave to amend its infringement contentions on similar
`grounds. ECF 89.
`4 Twilio raises several arguments regarding the sufficiency of TeleSign’s proposed amendments.
`ECF 98 at 11-12. However, these arguments do not support denying leave to amend at this stage
`of the proceedings.
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 7 of 9
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`for the ‘021 and ‘465 patents fell short of complying with this District’s Patent Local Rules, in the
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`instance of the ‘376 patent, TeleSign did not address its own products at all in its initial
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`contentions. See generally ECF 93-4. Rather, TeleSign argues that amendment is justified as a
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`result of action by Twilio, suggesting that Twilio’s claim construction position altered the
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`definition on which TeleSign relied when it initially investigated prior art. This argument is
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`ineffective in establishing diligence. ECF 93:16-18.
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`As an initial matter, TeleSign’s descriptions of Twilio’s proffered construction of “REST
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`API” as “new” (ECF 93:16) and as “now even more clearly encompass[ing] TeleSign’s predating
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`products” (ECF 102:8) are not supported by the record. Preliminary proposed constructions were
`exchanged on June 6th, long after service of TeleSign’s invalidity contentions on May 1, 2017.
`There is no evidence of Twilio proffering a construction prior to TeleSign’s invalidity contentions.
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`Therefore, there is no “new” position by Twilio to act as a catalyst for TeleSign’s amendment.
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`It is not surprising, then, that in providing evidentiary support for its argument in favor of
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`amendment, TeleSign cites not to a prior claim construction by Twilio, but to the specification of
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`the ‘376 patent, which of course has not changed during the course of this action. In relevant part,
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`TeleSign acknowledges:
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`The Call Router API is preferably an application programming
`interface (API) such as a REST API (Representational State
`Transfer) as is known in the art, but the Call Router API may
`alternatively be a SOAP (Simple Object Access Protocol) API or
`any suitable programmatic communication interface.
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`
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`ECF 93:16 (citing ECF 1-3, ‘376 Patent, col. 8, lns. 12-17). TeleSign posits that it did not initially
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`cite its own products as prior art because those products used “SOAP and HTTP.” ECF 93:17.
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`Telesign then points to Twilio’s preliminary claim construction served on June 6, 2017, defining
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`REST API as “[a]n application programming interface that is operable with the Representation
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`State Transfer (REST) conventions.” ECF 93:17 (citing ECF 93-8 at 8).
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`The Court is not persuaded that Twilio’s preliminary (but not “new”) construction for
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`“REST API” broadens the universe of prior art available to challenge the validity of the ‘376
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`patent. Rather, it appears that TeleSign had as much support for the challenge before Twilio’s
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`proffered construction as after. At oral argument, TeleSign’s counsel acknowledged that REST is
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`“not as well defined” as SOAP, and that when looking to how people in the art define RESTful
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`and REST, there are competing definitions on whether SOAP can be operable with REST. ECF
`106. This is as true today as it was when TeleSign served its contentions on May 1st. Therefore
`the Court finds that TeleSign has not demonstrated the requisite diligence in support of its
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`amendment.
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`However, the Court is again presented with the issue of whether to reach the question of
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`prejudice. As the same case schedule considerations which mitigated against prejudice above are
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`present here, the Court will take up the question of whether there would be any prejudice to Twilio
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`in allowing TeleSign to amend its invalidity contentions to now, for the first time, assert its own
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`products as prior art against the ‘376 patent. Discovery in this matter is at a very early stage with
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`the cut off more than nine months away. Similarly, claim construction briefing has just begun.
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`The additional mitigating factors noted above are not present here, except for the fact that Twilio
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`was given leave to amend, also in light of the early stage of the proceedings. Thus, as with the
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`invalidity challenges to the ‘021 and ‘465 patents, Twilio is again unable to identify any prejudice,
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`as is the Court.
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`Nevertheless, allowing TeleSign leave to amend to assert its own products as prior art for
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`the ‘376 patent presents a close call. Unlike the Maes ‘604 and Ransom ‘756 patents, TeleSign
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`was well aware of its own prior-dated products when it served its invalidity contentions on May 1,
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`2017. Nonetheless, despite the lack of diligence by TeleSign, and only because of the nascent
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`posture of the case, the Court will grant leave to amend.
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`Case 5:16-cv-06925-LHK Document 109 Filed 08/18/17 Page 9 of 9
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`CONCLUSION
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`For the above-stated reasons, TeleSign’s motion for leave to amend its invalidity
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`contentions as submitted with its motion (ECF 94-3, 94-4, 94-5) is granted. TeleSign is ordered to
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`serve its amended contentions within three days of this order.
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`SO ORDERED.
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`Dated: 8/18/2017
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`
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`SUSAN VAN KEULEN
`United States Magistrate Judge
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