Fischell v. Cordis Corp.

          MEMORANDUM AND ORDER

          PETER G. SHERIDAN, U.S.D.J.

         This matter is before the Court on a Motion by plaintiffs to strike defendant's and intervener's affirmative defenses of patent invalidity and unenforceability, (ECF No. 206).

         I

         In 1999, Tim A. Fischell, Robert E. Fischell, and David R. Fischell (hereinafter "plaintiffs") entered into a patent royalty agreement with defendant Cordis Corporation (hereinafter "Cordis"). (Third Am. Compl. ("TAC"), ECF No. 160, at ¶ 5). Pursuant to the assignment agreement, plaintiffs provided Cordis with the ownership rights to use and sell certain coronary stent patents. (Id. at ¶ 5). In exchange, Cordis agreed to protect plaintiffs' intellectual property rights and to pay plaintiffs royalties from the products made, sub-licensed, or sold by Cordis. (Id. at ¶ 5). Under the 1999 agreement, Cordis promised to pay a 1% royalty on the Royalty Bearing Products, "so long as a court of competent jurisdiction has not held such claim invalid or unenforceable in an unappealed or unappealable decision." (1999 Agreement, ECF No. 160-1 at §§ 1.2, 1.6). Cordis also gained the right to sub-license the Fischell patents, "as long as the appropriate (1%) percent ROYALTY is paid to the FISCHELLS in accordance with the terms of the AGREEMENT." (Id. at § 2.13). Finally, Cordis gained the right to initiate legal action against any potential infringer of any of the Royalty Bearing Patents that had been assigned or licensed to it by plaintiffs. (TAC at ¶ 28). In 2001, the Fischells and Cordis entered into an agreement that modified the royalty rates, but otherwise left the 1999 patent royalty agreement in full effect. (TAC at ¶ 26).

         In late 2002 or early 2003, plaintiffs informed Cordis that certain stents manufactured by Guidant infringed Fischell patents that had been assigned or licensed to Cordis. (Id. at ¶ 31). In 2004, Cordis and Guidant entered into a Settlement and Release agreement, which resolved a pending arbitration, wherein Guidant claimed Cordis had infringed on Lam/Lau patents, and Cordis claimed that Guidant had infringed on Fischell patents. (2004 Guidant Settlement Agreement, ECF No. 160-3, at 2-3). As a result of the 2004 Guidant Settlement Agreement, Cordis was to receive a royalty-free license to the Lam/Lau patents, and Guidant was to receive a license to the Fischell patents, though it was required to pay a royalty on these patents to Cordis, who then sent these payments to the Fischells. (Id. at 3, 4 ¶ 2(c), (d)). In 2006, Guidant sold its cardiology division to Abbott. (TAC at ¶46). Accordingly, "Abbott sent royalties to Cordis for 'passthrough' payment to the Fischells for a portion of Abbott's manufacture and sale of various stents, including Abbott's Vision, Xience (the drug-eluting variant of the Vision stent), and Zeta stents, among others." (Id.) During this time, Abbott manufactured and sold certain stents to Boston Scientific Corporation ("BSC"), who then re-sold the stents under its own label. (Id. at 148).

         In 2010, Cordis sued BSC in the U.S. District Court for the District of Delaware for selling a certain stent, identified as the Promus stent, that it alleged infringed on the Fischells' stent patents that plaintiffs had assigned to Cordis. (Id. at ¶ 53). In that litigation, Cordis asserted three Fischell patents: U.S. Patent No. 6, 086, 604 ("the "604 patent"), U.S. Patent No. 6, 716, 240 ("the '240 patent"), and U.S. Patent No. 6, 547, 817 ("the "817 patent"). (Id. at ¶ 54). In response, BSC asserted numerous defenses, including invalidity and noninfringement of the asserted claims. Cordis Corp. v. Bos. Sci. Corp., 868 F.Supp.2d 342, 344 (D. Del. 2012). There, the court granted summary judgment in part, and denied summary judgment in part to BSC. In denying summary judgment based on invalidity, the court, with respect to the '817 patent, nullified (or invalidated) dependent claims 14-16. Id. at 357. Additionally, the court granted summary judgment in favor of BSC by determining that Cordis could not show that the Promus patent infringes. Id. at 358. On appeal, the Federal Circuit affirmed in part and vacated in part the judgment of the district court, without opinion. Cordis Corp. v. Bos. Sci. Corp., 504 Fed.Appx. 922, 922 (Fed. Cir. 2013). The court affirmed the district court's conclusion that Cordis could not show BSC's Promus patent infringes, but "vacate[d], however, the portion of the district court's decision 'nullifying' (invalidating) dependent claims 14-16 of U.S. Patent No. 6, 547, 817." Id.

         The '817 patent shares the same specifications as the '856 and '452 patents, as the Promus stent "share[s] the same metal stent architecture" as the Xience and Vision stents. (PL reply br. at 12, Abbott br. at 20). Based on the 2012 Delaware ruling, Abbott stopped paying Cordis royalties for pass-through to the Fischells in 2012 for the Vision and Xience and bare metal stents. (TAC at ¶ 57; see also ECF No. 160-5, at 2). On December 21, 2012, a representative from Cordis wrote to Abbott, and confirmed that the Vision and Xience stents were considered "royalty-bearing" pass-through patents pursuant to the Guidant License, and that failure to pay plaintiffs royalties for the sales of these stents amounted to non-compliance with the Guidant License. (TAC at ¶ 59). However, according to the complaint, Abbott has failed pay royalties for sales of the royalty-bearing stents, and Cordis has done little else to compel Abbott to pay. (Id. at ¶¶ 62-63). Plaintiffs brought the present case against Cordis in 2015, and in 2016, Abbott moved to intervene, asserting patent-law defenses to the breach of contract claims plaintiffs are asserting against Cordis. (ECF No. 66). On May 30, 2017, to streamline the case, plaintiffs, Cordis, and Abbott entered into a Stipulation, wherein they agreed to limit plaintiffs' asserted patent claims to three U.S. patents from three distinct patent families, the 8, 157, 856 (the^m856 patent"), the U.S. Patent No. 8, 747, 452 (the '"452 patent") and U.S. Patent No. 6, 699, 278 (the^m278 patent"). (Order, ECF No. 111). The Stipulation sets forth the issues that were to be determined and resolved, including patent infringement, validity, and enforceability. (Id.)

         Plaintiffs filed the present motion to strike defendant's and intervenor's affirmative defenses of patent invalidity and unenforceability on May 23, 2018. (ECF 207). Plaintiff argues that Cordis and Abbott should be estopped from challenging the validity of the Fischell patents under the doctrine of "assignee estoppel" because Cordis has owned the patents at issue since 2001, and thus is the assignee of the Fischell patents. (PI. Br. at 9, ECF No. 207). Plaintiff further argues that Abbott waived and released the defenses of invalidity and unenforceability in the 2004 Settlement. (PI. Br. at 13). In response, Cordis and Abbott argue that the parties expressly stipulated that Abbott and Cordis could challenge the patents' validity and enforceability, and have been litigating those issues for a year. Cordis and Abbott also argue that "assignee estoppel" does not bar them from challenging patent validity and enforceability, as Abbott is a licensee, and not an assignee, and Cordis is no longer assignee of the asserted patents. Additionally, Cordis and Abbott argue that the entire doctrine of assignee estoppel is in "serious doubt," and the instances that courts have applied it are dissimilar to the dispute here, and as such, this Court should decline to apply it in the present situation. (Def. Br. at 16-17; Abbott Br. at 16-18). Finally, Cordis and Abbott argue that the 2004 Settlement does not bar the Abbott from challenging the validity and enforceability of the asserted patents, as plaintiffs were not a party to that agreement. (Def. Br. at 25-27; Abbott Br. at 21-24).

         II

         Under Rule 12(f) of the Federal Rules of Civil Procedure, "[t]he Court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). The Court may act either "on its own" or on a motion by a party. Id. at 12(f)(1)-(2). "The purpose of a motion to strike is to simplify the pleadings and save time and expense by excising from a plaintiffs complaint any redundant, immaterial, impertinent, or scandalous matter which will not have any possible bearing on the outcome of the litigation." Corradetti v. Sanitary Landfill, Inc., 912 F.Supp.2d 156 (D.N.J 2012) (quoting Garlanger v. Verbeke, 223 F.Supp.2d 596, 609 (D.N.J. 2002)). "[M]otions to strike are usually Viewed with disfavor' and will generally 'be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties, or if the allegations confuse the issues.*" Gray v. Bayer Corp., 2010 U.S. Dist. LEXIS 33040, at *2 (D.N.J. Mar. 31, 2010) (citing Garlanger, 223 F.Supp.2d at 609). In fact, "Rule 12(f) should be construed strictly against striking portions of the pleading on grounds of immateriality and if the motion is granted at all, the complaint should be pruned with care." Morgan Home Fashions, Inc. v. UTI, U.S. Inc., 2004 U.S. Dist. LEXIS 13412, at *8 (D.N.J. Feb. 9, 2004).

         Motions to strike challenge "the legal sufficiency of the pleading" and are governed by "the same standards as a motion to dismiss filed pursuant to Fed.R.Civ.P. 12(b)(6)." In re Gabapentin Patent Litig, 648 F.Supp.2d 641, 647-48 (D.N.J. 2009). In determining "whether Defendants' affirmative defenses are insufficient, the Court must accept all factual allegations in the Answers as true, construe the Answers in the light most favorable to Defendants, and determine whether, under any reasonable reading of the pleadings, Defendants may be entitled to relief." Id. (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).

         III

         Plaintiffs argue that Cordis and Abbott must be estopped from challenging the validity of the Fischell's patents because Cordis has owned the patents at issue since 2001. (PI. br. at 9). Plaintiffs also argue Abbott, as licensee of Cordis, is precluded from asserting these defenses because Abbott is only asserting affirmative defenses to the Fischells' claims against Cordis in this case by standing in Cordis's shoes, and the same assignee estoppel that bars Cordis from bringing these defenses also bars Abbott. (Id. at 11). In response, both Cordis and Abbott argue that plaintiffs stipulated that Cordis and Abbott may present invalidity and unenforceability defenses, and thus the Stipulation governs, as the parties have been litigating these issues for a year. Further, Cordis argues that assignee estoppel is inapplicable because Cordis is no longer the owner of the asserted patents, and the validity of the doctrine of assignee estoppel is "in serious doubt." (Def. br. at 16, n.2). Abbott argues that Cordis is a licensee, not an assignee of the patents, and thus the doctrine of assignee estoppel is inapplicable. (See Def. br. at 16, Intervenor br. at 16).

         "Assignee estoppel is an equitable doctrine which, under appropriate circumstances, bars the assignee of a patent from contesting the validity of the assigned patent." Slip Track Sys. v. Metal Lite, Inc.,113 Fed.Appx. 930, 933 (Fed. Cir. 2004); see also Macom Tech. Sols. Holdings, Inc. v. Infineon Techs. AG, No. 2:16-02859, 2017 U.S. Dist. LEXIS 121806, at *6 (CD. Cal. Aug. 2, 2017) (“ Macom"). "For example, circumstance may warrant application of the doctrine to prevent an assignee from avoiding royalty payments otherwise due under an assignment contract by challenging the validity of the assigned patent." Id. (first citing Baladevon ...