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Fraunhofer-Gesellschaft Zur Forderung Der Angewandten Forschung E.V. v. Sirius XM Radio Inc.

United States District Court, D. Delaware

July 16, 2018


v.
SIRUS XM RADIO INC., Defendant.

          MEMORANDUM OPINION

          SHERRY R. FALLON UNITED STATES MAGISTRATE JUDGE.

         I. INTRODUCTION

         Presently before the court in this patent infringement action is a motion for leave to amend the complaint pursuant to Federal Rule of Civil Procedure 15(a)(2), filed by plaintiff Fraunhofer-Gesellschaft Zur Forderung der angewandten Forschung e.V. ("Fraunhofer"). (D.I. 156) Defendant Sirius XM Radio Inc. ("SXM") opposes the motion. (D.I. 160) For the following reasons, Fraunhofer's motion to amend is DENIED.

         II. BACKGROUND

         Fraunhofer is an applied research organization in Europe, encompassing over sixty institutes and research units which develop real-world innovations in the fields of health, communications, security, transportation, and energy for both privately and publicly funded projects. (D.I. 1 at ¶ 1) In 1996, Fraunhofer developed patented technology related to multicarrier modulation (the "MCM technologies") for use in satellite radio broadcasting. (Id. at ¶¶ 4, 20) MCM is a method of transmitting data by splitting it into several components and sending each of the components over separate carrier signals. (Id. at ¶ 4)

         On March 4, 1998, Fraunhofer entered into an exclusive license agreement[1] with WorldSpace International Network Inc. ("WorldSpace") to license all patents for MCM technologies (the "MCM License")- (Id. at ¶ 21; D.I. 12, Ex. 1) Fraunhofer subsequently obtained U.S. Patent Nos. 6, 314, 289 ("the '289 patent"), 6, 931, 084 ("the '1084 patent"), 6, 993, 084 ("the '3084 patent"), and 7, 061, 997 ("the '997 patent") (collectively, the "patents-in-suit"), which relate to MCM technologies and are covered by the MCM License. (D.I. 1 at ¶ 21) Thereafter, on July 24, 1998, WorldSpace granted a sublicense under the MCM License to American Mobile Radio Corporation, which was renamed as XM Satellite Radio, Inc. ("XM Satellite"). (Id. at ¶ 22; D.I. 12, Ex. 3 at § 2) XM Satellite used the sublicensed technology to develop its Digital Audio Radio Services System (the "XM DARS System"). (D.I. 1 at ¶ 22) In 2008, XM Satellite merged with Sirius Satellite Radio to form SXM. (Id. at ¶ 26)

         On October 17, 2008, WorldSpace filed a voluntary petition under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. (Id. at ¶ 27) On June 18, 2009, the debtors filed a motion for approval of a settlement agreement (the "Settlement Agreement") to terminate certain contracts between the parties and to pay the debtors a sum to fully satisfy the current and future payment obligations owed under the sublicense agreement. (D.I. 12, Ex. 5) The bankruptcy court approved the Settlement Agreement on July 13, 2009. (Id., Ex. 6)

         During a sale hearing on June 1, 2010, the bankruptcy court approved an agreement between WorldSpace, Fraunhofer, and Yazmi, a potential buyer of WorldSpace's assets, providing for the final disposition of Workspace's rights under three agreements and unambiguously rejecting the MCM License. (D.I. 1 at ¶ 27; 8/15/17 Tr. at 11:2-14) Because Fraunhofer and Yazmi never entered into a new agreement regarding the MCM License, the MCM License remained rejected. (D.I. 1 at ¶ 27 n.l; 8/15/17 Tr. at 11:15-12:2)

         On June 12, 2012, the chapter 11 bankruptcy proceeding was converted to a chapter 7 proceeding, following which the Trustee had sixty days to assume executory contracts and unexpired leases. (D.I. 1 at ¶ 28) The Trustee did not assume the MCM License. As a result, the MCM License was rejected as of August 12, 2012. (Id.)

         Fraunhofer initiated the present litigation against SXM on February 22, 2017, asserting causes of action for infringement of the patents-in-suit. (D.I. 1) A Rule 16 scheduling conference was held on May 16, 2017, and a scheduling order was entered on May 23, 2017. (D.I. 26) Pursuant to the scheduling order, the deadline for amended pleadings was December 14, 2017. (Id. at ¶ 2) The deadline for substantial completion of document production was January 31, 2018, and the discovery deadline will expire on July 31, 2018. (Id. at ¶ 3(b))

         On April 17, 2017, SXM filed a Rule 12(b)(6) motion to dismiss for failure to state a claim, alleging that SXM maintains a sublicense to the patents-in-suit and therefore cannot be found to infringe. (D.I. 10) The court held oral argument on the motion to dismiss on August 15, 2017. (8/15/17 Tr.) On March 29, 2018, the undersigned judicial officer issued a Report and Recommendation recommending dismissal of the action. (D.I. 146) Fraunhofer's objections to the Report and Recommendation are currently pending before the assigned District Judge. (D.I. 154)

         On April 16, 2018, Fraunhofer filed the present motion to amend the complaint in an effort to cure the deficiencies highlighted in the March 29, 2018 Report and Recommendation. (D.I. 156)

         III. LEGAL STANDARD

         Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that after a responsive pleading has been filed, a party may amend its pleading "only with the opposing party's written consent or the court's leave," and "[t]he court should freely give leave when justice so requires." Fed.R.Civ.P. 15(a)(2). The decision to grant or deny leave to amend lies within the discretion of the court. See Foman v. Davis,371 U.S. 178, 182 (1962); In re Burlington Coat Factory Sees. Litig, 114 F.3d 1410, 1434 (3d Cir. 1997). The Third Circuit has adopted a liberal approach to the amendment of pleadings. See Dole v. Arco,921 F.2d 484, 487 (3d Cir. 1990). In the absence of undue delay, bad faith, or dilatory motives on the part of the moving ...


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