Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Apple granted leave to assert counterclaims in patent infringement suit, (Dec 9, 2013)

By Jody Coultas, J.D.

Apple Inc. was granted leave to amend its answer and counterclaims by the federal district court in San Francisco in a patent infringement action over touch-based, user-interface technology included in Apple products, such as the iPhone and iPad. Apple was permitted to assert a California Unfair Competition Law (UCL) claim (FlatWorld Interactives LLC v. Apple Inc., December 6, 2013, Orrick, W.).

Leave to amend should be freely given absent (1) bad faith on the part of the plaintiffs; (2) undue delay; (3) prejudice to the opposing party; and (4) futility of the proposed amendment. The consideration of prejudice to the opposing party carries the greatest weight.

Granting Apple leave to amend its answer and counterclaims would not unduly prejudice FlatWorld, according to the court. Apple argued that FlatWorld could not show undue prejudice because the counterclaims were closely related to the defenses in its initial answer and involved the same basic facts. A pre-trial scheduling order had not been set, discovery remained open, and much of the discovery had already been conducted or was relevant to issues for which discovery must be conducted in any case.

Apple did not unduly delay in seeking leave to amend, according to the court. Apple argued that it served discovery upon third parties within a week after learning of potential improprieties concerning FlatWorld. The motion to amend its answer and counterclaims was filed two months after the court issued its order, and discovery was ongoing.

Because Apple sufficiently pleaded tortious interference with contract and aiding and abetting liability, the court concluded that Apple’s UCL unlawful prong claim was not futile. A proposed amendment is futile only if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim. Intentional interference with a contract is sufficient to establish a UCL claim. FlatWorld argued that Apple failed to state a UCL claim because FlatWorld and Apple were not direct competitors. However, UCL claims under the unlawful prong do not require the parties to be competitors. Rather, a UCL unlawful prong may be premised on any violation of law.

There was no evidence that Apple sought leave to amend its pleadings based on bad faith, and FlatWorld provided no argument or evidence to the contrary, according to the court.

The case is No. 12-cv-01956-WHO.

Attorneys: Jeff D Friedman (Hagens Berman Sobol Shapiro LLP) for Flatworld Interactives LLC. Kenneth Howard Bridges (Bridges & Mavrakakis LLP) for Apple Inc.

Companies: FlatWorld Interactives LLC; Apple Inc.

Cases: StateUnfairTradePractices CaliforniaNews