Milliman, Inc. et al. v. Gradient AI Corp. et al. (D. Mass. 21-cv-10865).

Milliman sued Gradient AI and its founders in 2021, asserting that the founders misappropriated Milliman trade secrets when they left Milliman’s employ to form Gradient AI and that Gradient AI infringes Milliman patents.  With trial approaching, the Defendants moved to amend their answer and counterclaims to include inequitable conduct counterclaims, six months after the deadline for doing so had passed.  They asserted that good cause existed in that the proposed amendments were based on information not actually discovered until the fall of 2023.

Judge Gorton denied this motion.  He found that in August 2022, the Defendants had requested a stay of discovery because they planned to move for summary judgment on the trade secret claims.  Magistrate Judge Kelley granted the requested stay with respect to trade secret discovery but permitted the patent-related discovery to continue, noting that the plaintiffs would be prejudiced by a stay of all discovery.  Following denial of the summary judgment motion, the parties began exchanging documents on the trade secret claims, and in mid-April they jointly sought to extend the discovery deadlines without seeking a similar extension on the deadline to amend the pleadings.  The defendants contend they learned of the facts supporting the proposed additional counterclaim during depositions that occurred in September and October 2023, and assert that there would be no prejudice to the plaintiffs because this information was always within the custody and control.  Judge Gorton determined that this did not demonstrate good cause, as the late discovery occurred primarily due to the defendants’ own motion to stay discovery.  He further noted that defendants had 14 of the 17 documents cited in the proposed counterclaim by the April 2023 deadline to amend, and received the other three more than five months prior to seeking to amend, showing a lack of diligence.  He disregarded the fact that most of the depositions taken in the case took place in September and October 2023, noting that the defendants’ motion failed to proffer any reasons why the depositions were delayed for so long.  Finally, he found that the plaintiffs would be prejudiced by having to respond to inequitable conduct allegations raised after both fact and expert discovery were closed and just four months before the scheduled trial, hindering their ability to prepare for trial.