XY, LLC v. Trans Ova Genetics, LC

Filing 267

ORDER granting in part and denying in part 51 Defendants Early Partial Motion for Summary Judgment ECF No. 51 is GRANTED IN PART and DENIED IN PART; The Motion is GRANTED as to Plaintiffs Breach of Contract Claim to the extent that it accrued before March 6, 2009; and The Motion is DENIED in all other respects., by Judge William J. Martinez on 9/15/2014.(evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 13-cv-0876-WJM-BNB
XY, LLC,
Plaintiff / Counterclaim Defendant,
v.
TRANS OVA GENETICS, LC,
Defendant / Counterclaim Plaintiff,
v.
INGURAN, LLC,
Third Party Defendant.

ORDER GRANTING IN PART DEFENDANT’S EARLY
MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff XY, LLC (“Plaintiff”) brings this action for patent infringement, breach of
contract, and related claims against Defendant Trans Ova Genetics, LC (“Defendant”).
(Second Am. Compl. (“SAC”) (ECF No. 113).) This matter is before the Court on
Defendant’s Early Motion for Partial Summary Judgment (“Motion”) as to Plaintiff’s
claims for breach of contract and a declaratory judgment. (ECF No. 51.) For the
reasons set forth below, the Motion is granted in part and denied in part.
I. BACKGROUND
The relevant undisputed facts are as follows. This case arises out of a
Commercial License Agreement (“Agreement”) that the parties entered into on April 16,
2004, under which Plaintiff licensed its patented sex-selection technology to Defendant

for use in the animal breeding industry, subject to a variety of conditions. (Movant’s
Statement of Material Facts (“MSMF”) (ECF No. 51 at 2-5) ¶ 1; ECF No. 51-1.) Among
other limitations and requirements, the Agreement included limits on the customers to
whom Defendant could sell sex-selected animal semen. (ECF No. 50 at 3-8.) In the
event of certain breaches of these limitations and requirements by Defendant, the
Agreement provided for termination in writing by Plaintiff. (Id. at 10.)
On November 20, 2007, Plaintiff delivered a letter to Defendant asserting that
Defendant had breached the Agreement in various ways and declaring the agreement
terminated (the “Termination Letter”). (MSMF ¶ 6; ECF No. 50-1.) On December 12,
2007, Defendant delivered a letter to Plaintiff indicating that it disagreed with Plaintiff’s
assertion of breach and termination of the Agreement. (MSMF ¶ 8.) Over the course of
multiple years, the parties negotiated but failed to resolve the dispute. (Id. ¶¶ 9-10.)
During this time, Defendant made royalty payments to Plaintiff pursuant to the
Agreement, but Plaintiff has declined all such payments. (Id. ¶ 11.)
Plaintiff filed its original complaint against Defendant in the District Court for the
Western District of Texas on March 5, 2012, bringing claims for patent infringement.
(MSMF ¶ 14; ECF No. 4.) Pursuant to an arbitration provision in the Agreement,
Plaintiff asserted its breach of contract claims in an arbitration proceeding filed on
March 6, 2012, and sought a declaration that the Termination Letter effectively ended
the Agreement. (MSMF ¶ 12.) The parties subsequently agreed to consolidate the
claims in arbitration with those in the District Court case, without waiver of any claim or
defense, and Plaintiff filed an Amended Complaint adding the contract claim and
declaratory judgment claim to the District Court case. (Id. ¶ 15; ECF No. 15.) The
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action was transferred to this Court on April 4, 2013. (ECF No. 1.)
Defendant filed the instant Motion on September 6, 2013, arguing that the
breach of contract and declaratory judgment claims were time-barred. (ECF No. 51.)
Plaintiff filed a Response (ECF No. 75), and Defendant a Reply (ECF No. 88). Plaintiff
subsequently filed a Second Amended Complaint (ECF No. 113), which amended
Plaintiff’s complaint in ways irrelevant to the instant Motion. Thus, the Motion is ripe for
disposition.
II. LEGAL STANDARD
Summary judgment is appropriate only if there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter-Chem
Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994). W hether there is a genuine dispute
as to a material fact depends upon whether the evidence presents a sufficient
disagreement to require submission to a jury or conversely, is so one-sided that one
party must prevail as a matter of law. Anderson v. Liberty Lobby, 477 U.S. 242, 248-49
(1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132 (10th Cir. 2000); Carey v. U.S. Postal
Serv., 812 F.2d 621, 623 (10th Cir. 1987).
A fact is “material” if it pertains to an element of a claim or defense; a factual
dispute is “genuine” if the evidence is so contradictory that if the matter went to trial, a
reasonable party could return a verdict for either party. Anderson, 477 U.S. at 248.
The Court must resolve factual ambiguities against the moving party, thus favoring the
right to a trial. Houston v. Nat’l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).

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III. ANALYSIS
Defendant challenges two of Plaintiff’s claims on statute of limitations grounds,
namely Count XII for a declaratory judgment that the Agreement was terminated (the
“Declaratory Judgment Claim”), and Count XIV for breach of contract (the “Breach of
Contract Claim”). (ECF Nos. 51 & 53.) Defendant argues that both claims are untimely
under Colorado’s three year statute of limitations for a breach of contract, because both
claims accrued on or before November 20, 2007 when Plaintiff sent Defendant the
Termination Letter. (ECF No. 53 at 3-7.) Plaintiff raises distinct arguments as to each
challenged claim. (See ECF No. 75.) Accordingly, the Court will discuss each claim in
turn.
A.

Breach of Contract
Defendant argues in its Motion that Plaintiff’s Breach of Contract Claim is time-

barred because it necessarily accrued at some point prior to the date Plaintiff sent the
Termination Letter, on November 20, 2007. (ECF Nos. 51 & 53.) The parties agree
that Colorado law applies to the challenged claims, and that the Colorado statute of
limitations for breach of contract is three years from the date of accrual. Colo. Rev.
Stat. § 13-80-101(1)(a). The parties also agree that a breach of contract claim in
Colorado “accrues on the date the breach is discovered or should have been
discovered by the exercise of reasonable diligence.” Id. § 13-80-108(6). However,
Plaintiff contends that the three-year statute does not bar its Breach of Contract Claim.
(ECF No. 75 at 5-6.)

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Plaintiff first argues that the limitations period is extended because Defendant
has breached the contract on a repeated, ong oing basis. (Id.) In support of this
argument, Plaintiff relies on a case in the Colorado Court of Appeals which held that the
plaintiffs’ claim for breach of covenants running with the land was not barred by the
statute of limitations, despite the fact that the plaintiffs were aware of the initial breach
many years prior, because the defendants’ continued conduct constituted repeated and
successive breaches. (Id. (citing Barker v. Jeremiasen, 676 P.2d 1259, 1261 (Colo. Ct.
App. 1984).) However, Barker did not extend the statute of limitations to permit the
plaintiffs to recover damages for breaches older than three years; it merely clarified that
the claim was not barred, even if the breaching conduct was first discovered prior to the
three-year statutory limit, because of the continual recurrence of that conduct. Id. at
1262 (holding that breach of contract claim was not time-barred in its entirety, but that
“any damage claim for a breach which occurred before July 2, 1976, three years prior to
the date this action was filed, was barred” by the statute of limitations). Thus, Barker
permits the Court to find in this case that the Breach of Contract Claim is not timebarred to the extent that it is based on successive breaches of contract accruing after
March 6, 2009, even if the claimed breaches of contract resulted from the same
conduct of which Plaintiff complained on November 20, 2007 in the Termination Letter.
However, Barker does not provide a basis for the Court to allow Plaintiff to recover for
breaches accruing prior to March 6, 2009, such as the specific breaches cited in the
Termination Letter.
Next, Plaintiff cites the six-year statute of limitations for an action to recover

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unpaid royalties, arguing that its Breach of Contract Claim is subject to that limitations
period because it seeks, in part, unpaid and underpaid roy alties. (ECF No. 75 at 8-9.)
However, the royalty payments sought are principally the subject of Plaintiff’s Count XV,
for unjust enrichment and constructive trust, not Count XIV, the Breach of Contract
Claim. (See SAC ¶¶ 89, 95-96.) Furthermore, to the extent that an accounting and
payment of royalties are among the damages sought for the alleged breach of contract,
that request for relief does not convert Plaintiff’s Breach of Contract Claim into one for
unpaid royalties, nor does it permit Plaintiff to recover other damages for other alleged
breaches accruing prior to March 6, 2009. Here, the alleged breaches are based on
conduct largely unrelated to any failure to pay royalties; indeed, it is undisputed that
Defendant has attempted to make royalty payments pursuant to the Agreement, and
that Plaintiff has declined those payments since 2007 in accordance with its belief that
the Agreement was properly terminated. (See SAC ¶ 13.) Thus, Plaintiff’s Breach of
Contract Claim is subject to the three-year statute for actions in contract, which bars
recovery for any breaches that accrued prior to March 6, 2009. See Colo. Rev. Stat.
§ 13-80-101(1)(a).
Defendant makes no argument in its Motion as to any specific contractual
breaches after March 6, 2009, relying exclusively on the November 20, 2007 accrual of
the initial alleged breaches to support its argument that the Breach of Contract Claim is
time-barred. (See ECF No. 53 at 7.) The Court agrees with Plaintiff that there are
factual questions as to the accrual dates of the various breaches of contract that
Plaintiff alleges. (See ECF No. 75 at 7-8.) Accordingly, the Court declines to rule on
when those breaches accrued, and concludes only that the statute of limitations does
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not bar Plaintiff’s Breach of Contract Claim as to any specific breach that accrued after
March 6, 2009. Thus, the Motion is denied as to Plaintiff’s contract claim accruing after
March 6, 2009, and is granted as to any contract claim accruing before that date.
B.

Declaratory Judgment
Defendant moves for summary judgment as to Count XII, Plaintiff’s Declaratory

Judgment Claim, on the grounds that it is time-barred. (ECF No. 53 at 5-6.) A claim for
a declaratory judgment has no fixed statute of limitations of its own. See 28 U.S.C. §
2201. “What determines the applicable limitations period is the basic nature of the suit
in which the issues involved would have been litigated if the Declaratory Judgment Act
had not been adopted.” Ace Prop. & Cas. Ins. Co. v. Superior Boiler Works, Inc., 504
F. Supp. 2d 1154, 1159-60 (D. Kan. 2007) (citing 118 E. 60th Owners, Inc. v. Bonner
Props., Inc., 677 F.2d 200, 202 (2nd Cir. 1982)); Luckenbach S.S. Co. v. United States,
312 F.2d 545, 548 (2d Cir. 1963) (“There are no statutes which provide that declaratory
relief will be barred after a certain period of time. Limitations periods are applicable not
to the form of relief but to the claim on which the relief is based.”). When determining
whether a declaratory judgment claim is time-barred, “[t]he nature of the cause of action
determines the applicable statute of limitations.” Bechler v. Kaye, 222 F.2d 216, 220
(10th Cir. 1955), cert. denied, 350 U.S. 837; see also Luckenbach S.S., 312 F.2d at 548
n.2 (“In determining what statute of limitations applies to a claim, it is [the] substance of
the right sued on, and not the remedy invoked, that governs.”).
Defendant points out that Plaintiff’s Declaratory Judgment Claim is, on its face, in
the nature of a contract action, because it asks for a declaration that the Termination

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Letter validly terminated the Agreement on November 20, 2007. (ECF Nos. 51 at 7; 53
at 5-6.) Defendant argues that the question of whether the Agreement was breached is
a necessary predicate to determining whether the Termination Letter was effective, and
thus the action is principally in the nature of contract. (ECF No. 92 at 2.) Because
Plaintiff cannot prove patent infringement without demonstrating that the license was
terminated, Defendant contends that Plaintiff’s suit as a whole depends on proving the
initial contractual breach. (Id.) In response, Plaintiff contends that the Declaratory
Judgment Claim is not subject to any time limitation because it is based on the patent
infringement claims, not the Breach of Contract claim. (ECF No. 75 at 10-12.)
The Court agrees that the Declaratory Judgment Claim asks it to adjudicate a
breach of contract that accrued more than three years before the action was filed, and
that the determination of whether the Agreement was in effect is a necessary
component of determining whether the infringement claims are valid. Nevertheless, the
Court disagrees that the three-year statute for contract claims necessarily applies to the
Declaratory Judgment Claim. Rather, the Court is persuaded by Plaintiff’s argument
that the nature of the Declaratory Judgment Claim is actually patent infringement.
Plaintiff cites a decision by the Federal Circuit, Pixton v. B&B Plastics, Inc., 291
F.3d 1324 (Fed. Cir. 2002), which held that, for the purposes of subject matter
jurisdiction, a case was an infringement action rather than a contract action despite the
existence of contract claims. (ECF No. 75 at 10-11.) The plaintiff’s claims in Pixton
were in the same posture as the instant case: the plaintif f alleged that the defendant
had breached a license agreement and terminated the license, the plaintiff sued for
infringement, and the defendant raised the existence of a valid license as a defense.
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Pixton, 291 F.3d at 1326. The Pixton Court analogized the case to a previous Federal
Circuit decision with similar facts, Air Products and Chemicals, Inc. v. Reichhold
Chemicals, Inc., 755 F.2d 1559 (Fed. Cir. 1985), which held that the necessity to
determine the scope or validity of a license in order to decide an infringement claim did
not turn a patent infringement suit into a contract suit. 755 F.2d at 1564-65 (“T hat
resolution of a question of state law may render federal questions moot does not
deprive a federal court of subject matter jurisdiction where the plaintiff bases his claim
upon, and seeks remedies under, the patent laws, even where the complaint
anticipates a defense of license.”) (citing Luckett v. Delpark, Inc., 270 U.S. 496, 510
(1926)). Accordingly, Pixton followed Air Products in holding that the case was “an
action for patent infringement in which the defendant has asserted the defense of
license.” Pixton, 291 F.3d at 1327.
The cases Plaintiff cites are not precisely on point, because they discussed the
nature of the action for purposes of subject matter jurisdiction, not for purposes of
determining the statute of limitations of a declaratory judgment claim. However, both
analyses require a determination of the “nature of the cause of action” as defined by the
substance of the complaint. See Bechler, 222 F.2d at 220; Air Prods., 755 F.2d at
1564 (“[T]he court must focus on the facts plead, and the relief requested, by the
plaintiff in the complaint.”). As the facts in the instant case parallel those in Pixton and
Air Products, the Court concludes that the nature of the Declaratory Judgment Claim is
infringement, even though it contains a contract issue intended to def eat Defendant’s
defense of license.

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Defendant argues that the Declaratory Judgment Claim is based on breach of
contract because Plaintiff “must establish that Trans Ova breached the license in order
for the patent claims to have any merit.” (ECF No. 92 at 8.) However, the nature of the
case is not determined by the sequence of the analysis required; the infringement issue
remains central to Plaintiff’s complaint despite the fact that “the most expeditious
conduct of the trial would necessitate that the license issue be resolved first”. Air
Prods., 755 F.2d at 1563. This is true “even where the complaint anticipates a defense
of license” and includes an affirmative claim intended to rebut that defense, as here. Id.
at 1564. Thus, the order of the substantive analysis is not dispositive.
Furthermore, the fact that the Court must determine whether the license was
terminated as a prerequisite to the infringement claims actually ties the Declaratory
Judgment Claim more closely to the infringement claims, further emphasizing its
essential nature in infringement. Plaintiff cannot recover damages for the alleged
breaches of contract cited in the Termination Letter, on which the Agreement was
purportedly terminated, because those breaches occurred outside the statute of
limitations. Nor does Plaintiff’s Declaratory Judgment Claim seek damages for such
breaches. Rather, the relief sought in the Declaratory Judgment Claim is termination of
the Agreement, to defeat Defendant’s license defense so that the infringement claims
may be found valid. Thus, focusing on the relief requested and the facts pled, the
Declaratory Judgment Claim is in the nature of infringement. See Air Prods., 755 F.2d
at 1564.
Accordingly, taking guidance from the Federal Circuit, the Court finds that the
nature of the Declaratory Judgment Claim is patent infringement, despite the fact that
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the contractual issue must be determined before the merits of any infringement claim
can be resolved. See Pixton, 291 F.3d at 1327; Air Prods., 755 F.2d at 1563. Thus,
the Declaratory Judgment Claim, which is intended to defeat Defendant’s defense of
license, borrows the relevant limitations period from the patent infringement claims.
See Bechler, 222 F.2d at 220. The statute of limitations for a patent infringement claim
seeking damages is six years, see 35 U.S.C. § 286, but there is no explicit limitations
period for an infringement claim which seeks no damages. Even under the six-year
statute, however, the Court finds that the Declaratory Judgment Claim is not timebarred. Thus, the Motion is denied as to the Declaratory Judgment Claim.
IV. CONCLUSION
For the foregoing reasons, the Court ORDERS as follows:
1.

Defendant’s Early Partial Motion for Summary Judgment (ECF No. 51) is
GRANTED IN PART and DENIED IN PART;

2.

The Motion is GRANTED as to Plaintiff’s Breach of Contract Claim to the extent
that it accrued before March 6, 2009; and

3.

The Motion is DENIED in all other respects.
Dated this 15th day of September, 2014.
BY THE COURT:

William J. Martínez
United States District Judge

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