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Strikeforce Technologies, Inc. v. Phonefactor, Inc.

United States District Court, D. Delaware

May 26, 2015

STRIKEFORCE TECHNOLOGIES, INC., Plaintiff,
v.
PHONEFACTOR, INC., and FIRST MIDWEST BANCORP, INC. Defendants.

REPORT AND RECOMMENDATION

MARY PAT THYNGE, Magistrate Judge.

I. INTRODUCTION

This is a patent suit. On March 28, 2013, StrikeForce Technologies, Inc. ("StrikeForce" or "plaintiff') filed suit against PhoneFactor, Inc. ("PhoneFactor'' or "defendant"), Fiserv, Inc. ("Fiserv"), and First Midwest Bancorp, Inc. ("First Midwest") alleging those entities infringe U.S. Patent No. 7, 870, 599 ("the '599 patent").[1] On June 11, 2013, StrikeForce filed a "Notice of Dismissal of Fiserv, Inc. Without Prejudice."[2] On June 25, 2013, StrikeForce filed an amended complaint removing Fiserv as a defendant and adding additional allegations with respect to First Midwest.[3] On July 8, 2014, StrikeForce filed a second amended complaint adding allegations that PhoneFactor and First Midwest also infringe U.S. Patent Nos. 8, 484, 698 ("the '698 patent") and 8, 713, 701 ("the '701 patent").[4] On December 4, 2014, StrikeForce and First Midwest filed a "Stipulation and Order of Dismissal" by which all claims between those two parties were dismissed with prejudice.[5]

Pursuant to Federal Rules of Civil Procedure 15(a) and 20(a), StrikeForce now seeks leave to amend its complaint to add allegations of infringement against Microsoft Corporation ("Microsoft").[6]

II. GOVERNING LAW

Rule 15(a) of the Federal Rules of Civil Procedure provides that "[t]he court should freely give leave [to amend the pleadings] when justice so requires."[7] "Amendment, however, is not automatic."[8]

A court... has discretion to deny a motion to amend for reasons of "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc."[9]

Ill. BACKGROUND

As recited above, StrikeForce filed its initial complaint in this litigation on March 28, 2013, [10] an amended complaint on June 25, 2013, [11] and a second amended complaint on July 8, 2014.[12] A scheduling conference was held on January 30, 2014, and a scheduling order was entered on February 12, 2014.[13] The court held a Markman hearing on November 19, 2014. Two days later, November 21, 2014, StrikeForce filed the instant motion, on the last day the scheduling order provided to move to amend the pleadings and to join parties.

StrikeForce acknowledges it was aware Microsoft acquired PhoneFactor as its wholly-owned subsidiary in October 2012, but maintains it was only shortly before filing its motion to amend its complaint and join Microsoft that it became apparent PhoneFactor is not operating as an independent entity, purportedly necessitating the filing of that motion.[14]

IV. DISCUSSION

StrikeForce states Microsoft is a current infringer of the patents-in-suit in light of Microsoft's incorporation of PhoneFactor's allegedly infringing systems into products Microsoft has manufactured, sold, and offered for sale nationwide, including in the state of Delaware, for instance Microsoft's Azure product.[15] Consequently, StrikeForce contends Microsoft is a current infringer of the patents-in-suit and acknowledges Microsoft can be sued independently.[16]

Despite that acknowledgment, StrikeForce maintains adding Microsoft to this case would preserve judicial resources and expenses for all parties involved. It asserts it has recently become apparent that PhoneFactor is not operating as an independent entity because PhoneFactor's operations have apparently been folded into Microsoft.[17] Additionally, StrikeForce complains its discovery from PhoneFactor has been inhibited because PhoneFactor refuses to produce documents asserted to be Microsoft documents, despite those documents being relevant to the issues in this case.[18]

StrikeForce maintains Microsoft would not be prejudiced by the proposed amendment because it has known of this case from its inception and, in connection with this action, has been represented by the same counsel that represent PhoneFactor.[19] StrikeForce states Microsoft participated in early, unsuccessful, settlement discussions which included claims against Microsoft in addition to those asserted against PhoneFactor.[20] Lastly, StrikeForce avers in-house counsel for Microsoft attended the Markman hearing held in November 2014.[21] Accordingly, ...


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