Key Points:

• In a patent declaratory judgment action, the District of New Jersey vacated a clerk's entry of default. It found good cause under Federal Rule of Civil Procedure 55(c) and denied the plaintiffs' motion for entry of default judgment as moot.
• Good cause factors favored setting aside the default. Having to litigate on the merits was not prejudicial to the plaintiffs. A proposed answer with plausible defenses was enough to show a meritorious defense.
• The decision reinforces the Third Circuit's strong preference for deciding cases on the merits. Defaulting defendants who act promptly may still have a real chance to defend.

A recent order from U.S. Magistrate Judge Jessica S. Allen vacating an entry of default is a timely reminder of the Third Circuit’s “strong preference” for cases to be decided on the merits, rather than on procedural technicalities. The Court’s analysis of how a defendant may overcome an entry of default is relevant to both defendants and plaintiffs alike.

Procedural Background

Plaintiff Lvliang Lishi Linglong Electric Trade Co. Ltd. (and affiliated entities and individuals) filed a declaratory judgment that their products do not infringe United States Patent No. 11,925,592 (the ’592 patent) on May 15, 2025. Plaintiffs were granted a renewed motion for alternative service on March 9, 2026 against foreign defendant Junpeng Wu; successful alternative service was confirmed on April 30, 2026.

Plaintiffs subsequently moved for entry of default on June 10, 2026 after defendant failed to timely respond, which the clerk granted on June 16, 2026. Plaintiffs subsequently moved for default judgment on June 18, 2026; defendant opposed and cross-moved to vacate the entry of default, including a proposed answer.

Defendant’s cross-motion included an affidavit from his attorney that said he had contacted plaintiffs’ counsel multiple times, including on May 26, 2026, requesting an extension of time to respond to the complaint, as well as asking plaintiffs on June 16, 2026 whether they intended to seek default judgment, and if so, would they instead enter into a stipulation instead to avoid motion practice.

Although plaintiffs challenged the sufficiency of defendant’s declarations, the Court found that “on their face they comply with the spirit if not the letter of 28 U.S.C. § 1746 and Local Civil Rule 7.2(a),” and that any purported deficiencies were “at best technical in nature.”

The ‘Good Cause’ Standard

The Court began its analysis by noting where a plaintiff “seeks the entry of default judgment and the party in default files a cross-motion to vacate default, courts generally resolve the cross-motion to vacate first.” The Court explained that Federal Rule of Civil Procedure 55(a) dictates that when a party “has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party’s default.” However, the Court may “set aside an entry of default for good cause.” Fed. R. Civ. P. 55(c).

The Court considers several factors when assessing “good cause.”

• Whether lifting the default would prejudice the plaintiff.
• Whether the defendant has a prima facie meritorious defense.
• Whether the defaulting defendant’s conduct is excusable or culpable.
• The effectiveness of alternative sanctions.

The Court noted its discretion in this analysis but emphasized the Third Circuit’s admonition that “there is a strong presumption in favor of resolving cases on the merits.”

The Court’s Analysis

Prejudice to Plaintiffs
The Court began its analysis of potential prejudice to the plaintiffs by reminding the parties of Third Circuit precedent indicating “[p]rejudice will be found only where there has been a loss of available evidence, increased potential for fraud or collusion, or substantial reliance upon the judgment.” The Court noted that plaintiffs had not indicated any “loss of evidence,” nor did they articulate “any basis to find that their ability to pursue their claim would be diminished if the default is vacated.”

The Court noted the defendant had submitted a proposed answer, crediting a holding from the Eastern District of Pennsylvania that the “fact that a plaintiff will have to litigate an action on the merits rather than proceed by default does not constitute prejudice.” The Court acknowledged but did not find dispositive plaintiffs’ assertion that the defendant had “engaged in a pattern of conduct to delay the action for over a year,” holding “this purported conduct alone does not amount to prejudice.” In light of the Third Circuit’s “strong preference” for case adjudication “on the merits,” the Court found the prejudice factor “weighs in favor of vacating entry of default.”

Meritorious Defense
The Court’s analysis next considered that “[t]he showing of a meritorious defense is accomplished when allegations of defendant’s answer, if established at trial, would constitute a complete defense to the action.” The Court discussed that a “meritorious defense” could be “a defense of any variety—whether a dispute of material fact[;] an affirmative defense; the contention of failure to state a claim; or lack of subject matter jurisdiction.” The Court further noted that only a “minimal showing is required,” and “it is sufficient that the proffered defense is not facially unmeritorious.”

The Court considered that plaintiffs sought a declaratory judgment that their products do not infringe the ’592 patent; the defendant’s proposed answer “sets forth colorable defenses,” including that “each limitation of independent Claim 14 is embodied, either literally or in an equivalent form, in the GAME, Maiden, and Martino Products,” and that “the rotating handles in Maiden and Martino also satisfy Claim 15.”

Defendant’s proposed answer, the Court noted, included 12 separate affirmative defenses, among them, failure to state a claim under FRCP 12(b)(6). The Court emphasized that “[c]ontesting Plaintiffs’ allegations and supplying a proposed pleading containing facially plausible affirmative defenses meets Wu’s minimal burden of showing a plausibly meritorious defense.” Accordingly, this factor also weighed in favor of vacating the entry of default.

Culpable Conduct
The Court held that defendant’s conduct “does not amount to culpable conduct” on the available record and defendant’s explanations. The Court emphasized Third Circuit precedent holding culpable conduct in this context to be “willful or bad faith conduct or deliberate trial strategy.”

The Court noted that “mere negligence is insufficient to establish culpable conduct.” The Court observed that it “appears undisputed that Wu’s answer was due on May 19, 2026, and that he filed his proposed answer as part of his motion filed on July 7, 2026.” But the Court noted “Defendant argues that he was in fact diligent as demonstrated by his attorney’s outreach to Plaintiff’s then-counsel on May 26, 2026, requesting an extension of time.” The Court further credited defendant’s assertion that “he was further delayed by his need to find New Jersey Counsel” which the Court found “do[es] not amount to culpable conduct.” The Court held that defendant’s six-week delay here, “even if not excusable, does not constitute the level of bad faith required to deny a motion to vacate default.”

Finally, the Court noted that no party “meaningfully brief[ed]” the effectiveness of alternative sanctions factor under FRCP 55(c). But the Court affirmatively cited DNJ precedent holding “[b]ecause the first three factors warrant setting aside the entry of default, this Court need not consider the imposition of alternative sanctions.”

Accordingly, the Court granted defendant’s cross-motion to vacate the entry of default and dismissed plaintiffs’ motion for entry of default judgment as moot.

Paul W. Kalish and Jonathan J. Madara are members of the IP Litigation team in Fox Rothschild’s Princeton, NJ office and write about patent litigation decisions in the District of New Jersey. Contact Paul at pkalish@foxrothschild.com or 609.895.6751 and Jonathan at jmadara@foxrothschild.com or 609.844.7428.

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