XY, LLC v. Trans Ova Genetics, LC
Filing
120
ORDER Granting in Part and Denying in Part 31 Trans Ova's Motion to Dismiss. XY's Motion for Leave to file a Surreply to Trans Ova's 12(b)(6) Motion to Dismiss (ECF No. 43 ) is DENIED AS MOOT. ORDERED by Judge William J. Martinez on 1/11/2018. (angar, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 17-cv-0944-WJM-NYW
XY, LLC,
BECKMAN COULTER, INC., and
INGURAN, LLC d/b/a STGENETICS,
Plaintiffs,
v.
TRANS OVA GENETICS, LC,
Defendant.
ORDER GRANTING IN PART AND DENYING IN PART
TRANS OVA’S MOTION TO DISMISS
In this lawsuit, Plaintiffs XY, LLC, Beckman Coulter, Inc., and Inguran, LLC
(together, “XY”) bring patent infringement claims, as well as certain non-patent claims,
against defendant Trans Ova Genetics, LC (“Trans Ova”). Currently before the Court is
Trans Ova’s Motion to Dismiss Plaintiffs’ Second Amended Complaint. (ECF No. 31.)
Since this motion’s filing, XY has filed two additional amended complaints, and the
Fourth Amended Complaint (ECF No. 74) is the currently operative complaint.
However, the parties filed a Joint Status Report stating that Trans Ova’s motion may be
decided as if directed at the Fourth Amended Complaint (see ECF No. 83), which the
Court will refer to below simply as the “Complaint.”
For the reasons stated below, the Court will grant Trans Ova’s motion as to XY’s
Counts II and IV–XI, but will otherwise deny the motion. The upshot of this order is that
this case will proceed on XY’s Counts I, III, and XII.
I. BACKGROUND
Broadly speaking, this case centers around technology developed by XY that
attempts to sort, and usually succeeds in sorting, non-human mammalian semen based
on whether a sperm cell carries an X chromosome or a Y chromosome. Such “sexed
semen” is useful in artificial insemination to ensure the gender of the offspring.
A.
The 2012 Lawsuit
Trans Ova provides semen-sorting services through XY’s technology. Many XY
patents related to this technology, as well as a patent license agreement (“License
Agreement”) between XY and Trans Ova, were already litigated before the undersigned
in XY, LLC v. Trans Ova Genetics, LC, Case No. 13-cv-876-WJM-NYW. The Court will
refer to this as the “2012 Lawsuit” because, although it bears a 2013 Case number, it
was originally filed in 2012 in the Eastern District of Texas, and was later transferred
here.
The 2012 Lawsuit was tried to a jury in January and February 2016, resulting in a
verdict mostly in XY’s favor. (See 2012 Lawsuit, ECF No. 461.) In particular, the jury
found that XY had breached the parties’ License Agreement sometime before April
2009, but that Trans Ova had also breached the Agreement before that date, and so the
License Agreement terminated by then and deprived Trans Ova of its right to practice
XY’s patents. (Id. at 1–2.) The jury also found that XY’s patents had been infringed,
and that most of Trans Ova’s defenses and counterclaims failed (including assertions of
invalidity, and antitrust violations). (Id. at 3–9.) The lone defense with which the jury
agreed was Trans Ova’s assertion of unclean hands, thus barring any claims by XY for
unjust enrichment or injunctive relief. (Id. at 9.) The jury ultimately awarded $4.585
2
million to XY as patent infringement damages and $1.481 million as contractual
damages, but the latter sum was subsequently offset by $528,000 that the jury awarded
to Trans Ova as contractual damages against XY. (Id. at 2, 9.)
On April 8, 2016, the Court entered an Order on Post-Trial Motions upholding the
jury verdict (except as to ancillary matters not relevant here), denying enhanced
damages and attorneys’ fees to XY, awarding XY prejudgment interest, and also
awarding XY an ongoing royalty in lieu of an injunction. (2012 Lawsuit, ECF No. 500.)
XY subsequently filed a Rule 59(e) motion to amend the judgment, arguing that the
ongoing royalty was set at an unlawfully low rate. (Id., ECF No. 505.) By order dated
November 10, 2016, the Court denied that motion. (Id., ECF No. 555 at 1–6.)
The 2012 Lawsuit is now on appeal to the Federal Circuit. (Id., ECF Nos. 556,
557.)
B.
The 2016 Lawsuit
On December 6, 2016—just short of four weeks after the Court’s order on XY’s
motion to amend the judgment—XY filed a new lawsuit against Trans Ova in the
Eastern District of Texas, which the Court will refer to as the “2016 Lawsuit.” (ECF No.
1-1.) 1 That case was transferred to this District on April 18, 2017. (ECF No. 1.) The
2016 Lawsuit—i.e., this lawsuit—again focuses largely on whether Trans Ova has
breached various XY patents regarding semen-sorting technology. XY’s specific
causes of action are currently as follows:
•
1
Count I: infringement of U.S. Patent No. 9,145,590 (“590 Patent”), issued
All ECF citations, if not preceded by “2012 Lawsuit,” are citations to the docket in this
lawsuit.
3
on September 29, 2015;
•
Count II: infringement of U.S. Patent No. 7,723,116 (“116 Patent”), issued
on May 25, 2010;
•
Count III: infringement of U.S. Patent No. 9,365,822 (“822 Patent”), issued
on June 14, 2016;
•
Count IV: infringement of U.S. Patent No. 7,208,265 (“265 Patent”), issued
on April 14, 2007;
•
Count V: infringement of U.S. Patent No. 6,372,422 (“422 Patent”), issued
on April 16, 2002;
•
Count VI: infringement of U.S. Patent No. 8,652,769 (“769 Patent”), issued
on February 18, 2014;
•
Count VII: trade secret misappropriation under the Defend Trade Secrets
Act, based on a former XY employee teaching certain techniques to Trans
Ova;
•
Count VIII: common-law trade secret misappropriation, based on the same
conduct;
•
Count IX: common-law unfair competition, based on the same conduct;
•
Count X: quantum meruit, based on the same conduct;
•
Count XI: unjust enrichment, based on the same conduct;
•
Count XII: infringement of U.S. Patent No. RE46,559 (“559 Patent”),
reissued on September 26, 2017, and originally derived from United
States Patent No. 9,134,220 (“220 Patent”), which issued on September
15, 2015.
4
(ECF No. 74 at 8–36.)
II. ANALYSIS
Trans Ova asserts—and XY nowhere denies—that this lawsuit is XY’s second
attempt to do what it failed to do in the 2012 Lawsuit, namely, shut down Trans Ova,
thus eliminating a competitor. (ECF No. 31 at 2, 14–15; see also ECF No. 41 at 1–2, 3
n.3, 5, 8.) Trans Ova, however, makes no argument that such intentions are
themselves the basis for dismissal. Rather, Trans Ova’s Motion to Dismiss argues that
the ongoing royalty this Court awarded in the 2012 Lawsuit equates to a perpetual
license to practice all of XY’s patents, including all of those asserted in this lawsuit.
Trans Ova further argues that the causes of action asserted in Counts II–XI are barred
by claim preclusion. The Court addresses these arguments in turn.
A.
Scope of the Ongoing Royalty Awarded in the 2012 Lawsuit
Trans Ova’s first argument turns on language used by the Court in its Order on
Post-Trial Motions in the 2012 Lawsuit. Specifically, when awarding an ongoing royalty,
the Court ordered that “Trans Ova shall pay a rate of 12.5% of all gross receipts for the
licensed products set forth in the parties’ prior License Agreement, with an additional
2% royalty for reverse sorting services.” (2012 Lawsuit, ECF No. 500 at 36, ¶ 4.) Trans
Ova notes that “licensed products” under the License Agreement included “the
Technology,” which the License Agreement further defined to include all intellectual
property that XY “now or hereafter, owns, controls, licenses, or has an interest in.”
(ECF No. 31 at 6–7 (internal quotation marks omitted; emphasis removed).) Thus, says
Trans Ova, it “has a perpetual, paid-up license” to all of XY’s intellectual property,
including all of the patents and trade secrets at issue in this lawsuit. (Id. at 7.)
5
XY counters, correctly, that this consideration was never before the Court in the
2012 Lawsuit. Rather, the Court was resolving XY’s motion specifically for an ongoing
royalty relating to the 2012 Lawsuit’s patents-in-suit. (ECF No. 39 at 2–3.) The Court
never intended to grant, and never was informed (until now) that its language might be
construed to grant, a perpetual license to all of XY’s intellectual property, existing or yet
to be acquired. Accordingly, the Court rejects this basis for dismissal of XY’s new
lawsuit.
B.
Claim Preclusion: Patent Infringement Claims (Counts II–VI)
1.
Legal Standard & General Points of Contention
Claim preclusion (res judicata) can apply to patent infringement causes of action,
but the extent to which a prior suit precludes such a cause of action is a question
“particular to patent law, [and therefore analyzed] under applicable Federal Circuit law,”
rather than regional circuit law. Hallco Mfg. Co. v. Foster, 256 F.3d 1290, 1294 (Fed.
Cir. 2001).
“The general concept of claim preclusion is that when a final judgment is
rendered on the merits, another action may not be maintained between the parties on
the same ‘claim,’ and defenses that were raised or could have been raised in that action
are extinguished.” Id. In approaching this analysis, the Federal Circuit has endorsed
the “pragmatic,” “transactional” Restatement approach:
(1) When a valid and final judgment rendered in an action
extinguishes the plaintiff’s claim pursuant to the rules of
merger or bar . . . , the claim extinguished includes all rights
of the plaintiff to remedies against the defendant with respect
to all or any part of the transaction, or series of connected
transactions, out of which the action arose.
(2) What factual grouping constitutes a “transaction”, and
6
what groupings constitute a “series”, are to be determined
pragmatically, giving weight to such considerations as
whether the facts are related in time, space, origin, or
motivation, whether they form a convenient trial unit, and
whether their treatment as a unit conforms to the parties’
expectations or business understanding or usage.
Acumed LLC v. Stryker Corp., 525 F.3d 1319, 1324 (Fed. Cir. 2008) (quoting
Restatement (Second) of Judgments § 24 (1982)) (ellipses as in original). That said,
many Federal Circuit cases do not explicitly engage in a pragmatic evaluation, but
instead focus on the similarities between the patents asserted in the earlier and later
lawsuits; and the similarities between the devices or processes accused in the earlier
and later lawsuits. See Senju Pharm. Co. v. Apotex Inc., 746 F.3d 1344, 1349 (Fed.
Cir. 2014).
As for similarity of the accused devices, Trans Ova argues—and XY does not
dispute—that this 2016 Lawsuit attacks “the same sex-selection technology” examined
in the 2012 Lawsuit. (ECF No. 31 at 4.) Thus, the questions primarily argued in the
parties’ briefs are: (1) whether XY was fairly in a position to assert, in the 2012 Lawsuit,
causes of action for infringement of the patents asserted in this lawsuit; and (2) whether
the patent claims asserted in this lawsuit are the same (or “materially” the same, or in
some other sense “the same”) as those asserted in the 2012 Lawsuit. The Court finds
that these two questions are, under the circumstances, analytically distinct, and so the
Court will address them separately.
2.
“Could Have Been Brought” (Counts II, IV, V, VI)
Trans Ova argues XY could have brought infringement claims in the 2012
Lawsuit based on the 422 Patent (Count V), the 265 Patent (Count IV), and the 116
Patent (Count II), because those patents issued before the 2012 Lawsuit began. (ECF
7
No. 31 at 9.) Trans Ova further argues that XY could have brought an infringement
claim in the 2012 Lawsuit based on the 769 Patent (Count VI) because, “although [it]
issued after the case started, it could have been added by amendment (just as XY
added [to the 2012 Lawsuit, through an unopposed motion to amend, a particular patent
that] issued only three months earlier [than the 769 Patent]).” (Id.)
XY, however, invokes the Federal Circuit’s “general rule” set forth in Kearns v.
General Motors Corp., 94 F.3d 1553 (Fed. Cir. 1996), which is supposedly that there
can be there “no claim preclusion with regard to ‘patents that had not been included in
the [prior] suit, were not before the [prior] court, and were not part of the [prior]
judgment’ because ‘[e]ach patent asserted raises an independent and distinct cause of
action.’” (ECF No. 39 at 5–6 (quoting Kearns, 94 F.3d at 1555).) To the extent XY
means to say that Kearns essentially obviates any “could have been brought” analysis,
XY is incorrect. Kearns itself acknowledges the argument that “the causes of action
should have been litigated together” is “[a] possible basis for barring the [later] suit.”
94 F.3d at 1556.
XY also claims that “the Federal Circuit has cautioned against” could-have or
should-have arguments, “noting that some cases have ‘used language that, standing
alone, could be misread as providing that the application of claim preclusion turns solely
on whether a claim could have been brought in an earlier action.’” (ECF No. 39 at 12
(quoting Acumed, 525 F.3d at 1325).) XY is correct that the Federal Circuit has steered
courts away from any claim preclusion analysis that turns “solely” or “merely” on
whether a cause of action could have been brought in a previous lawsuit. See Acumed,
525 F.3d at 1325–26. But XY is incorrect to characterize the Federal Circuit as
8
“caution[ing] against” any could-have inquiry. Rather, Acumed makes clear that “could
have been brought” is—except in certain circumstances described below (Part II.B.3)—
a necessary but not sufficient condition for claim preclusion. In other words, if the new
cause of action could not have been brought in the prior lawsuit, then claim preclusion
usually fails, but the inverse is not always true. Once it has been established that the
new cause of action could have been brought in the prior lawsuit, the application of
claim preclusion turns on whether the new cause of action “arises from the same
transactional facts as a prior action.” Id. at 1326. 2
Accordingly, the Court must first answer the threshold question of whether XY
could have sued for infringement of the 422, 265, 116, and/or 769 Patents in the 2012
Lawsuit. And the first step is to set forth the relevant events in chronological order:
•
April 16, 2002: 422 Patent issues.
•
April 14, 2007: 265 Patent issues.
•
May 25, 2010: 116 Patent issues.
•
March 5, 2012: 2012 Lawsuit filed in the Western District of Texas (see
2012 Lawsuit, ECF No. 1-1).
•
August 20, 2012: Deadline passes to amend pleadings in the 2012
Lawsuit, subject to the qualification “that the Parties may seek leave to
amend the pleadings pursuant to Fed. R. Civ. P. 15” (id., ECF No. 24
at 6).
•
April 4, 2013: 2012 Lawsuit transferred to this District (id., ECF No. 1).
2
Acumed twice states that the “structure” of the accused device(s) is an “essential
transactional fact[].” Id. at 1324, 1326. But, as noted, no party has argued that XY's current
infringement claims are directed at devices different from those accused in the 2012 Lawsuit.
9
•
November 21, 2013: Court grants XY’s unopposed motion to amend the
complaint to add a claim for infringement of a patent that issued on
October 9, 2013 (id., ECF No. 112).
•
February 18, 2014: 769 Patent issues.
•
June 13, 2014: Fact discovery closes in the 2012 Lawsuit (see 2012
Lawsuit, ECF No. 22 at 6).
Without question, in a basic literal sense, XY could have sued on at least the
422, 265, and 116 Patents in the 2012 Lawsuit because they preexisted that lawsuit.
XY responds that
it did not obtain evidence of infringement of these three
patents until long after the deadline for amending pleadings
had passed.[3] As both the Court and Trans Ova are aware,
Fed. R. Civ. P. Rule 11 requires XY to diligently investigate
potential infringements and develop a good-faith belief of
infringement before asserting a patent infringement claim.
Nowhere in its Motion does Trans Ova even attempt to show
that XY had a sufficient Rule 11 basis to bring any of the
claims at issue in this lawsuit.
(ECF No. 39 at 14 (citation omitted).) Trans Ova does not challenge this assertion, but
instead counters that “XY had ample time to conduct discovery and determine whether
it had sufficient evidence to amend its complaint,” and that “Trans Ova had already
shown that it was amenable to amending the pleadings in order to avoid piecemeal
3
This is a factual assertion not contained in XY’s Complaint. Normally a party cannot
supplement its complaint through a response to a motion to dismiss. However, as will become
clear shortly, Trans Ova does not object on this basis. In addition, claim preclusion is an
affirmative defense for which Trans Ova bears the burden. See Pelt v. Utah, 539 F.3d 1271,
1283–84 (10th Cir. 2008). Generally speaking, a plaintiff need not preemptively plead facts
sufficient to overcome an affirmative defense. See, e.g., Miller v. Shell Oil Co., 345 F.2d 891,
893 (10th Cir.1965) (reversing district court’s grant of a motion to dismiss on res judicata
grounds because the facts that would support the defense were not contained in the complaint).
Consequently, in these circumstances the Court will accept this assertion as undisputed for
present purposes.
10
litigation,” referring to the unopposed amendment in November 2013. (ECF No. 41 at
6.) Trans Ova directs these same arguments at the 769 Patent, which issued after the
case commenced. (See id.; see also ECF No. 31 at 9–11.)
In one decision, however, the Federal Circuit appears to have already rejected
this sort of reasoning, even as to claims arising from the same nucleus of operative
facts:
“The res judicata doctrine does not apply to new rights
acquired during the action which might have been, but which
were not, litigated.” Computer Assocs. Int’l, Inc. v. Altai, Inc.,
126 F.3d 365, 370 (2d Cir. 1997). A plaintiff may seek leave
to file a supplemental pleading to assert those claims, but
“the doctrine of res judicata does not punish a plaintiff for
exercising the option not to supplement the pleadings with
an after-acquired claim.” Fla. Power & Light Co. v. United
States, 198 F.3d 1358, 1360 (Fed. Cir. 1999) (quoting
Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1357
(11th Cir. 1998)) (quotation marks omitted); see also Baker
Group, L.C. v. Burlington N. & Santa Fe Ry. Co., 228 F.3d
883, 886 (8th Cir. 2000); L.A. Branch NAACP v. L.A. Unified
Sch. Dist., 750 F.2d 731, 739–40 (9th Cir. 1984). [The
defendant’s] effort to distinguish these cases as involving
claims arising from different nuclei of operative facts is
unavailing. That was not the basis for those decisions.
Gillig v. Nike, Inc., 602 F.3d 1354, 1363 (Fed. Cir. 2010). Taking this language at face
value, it appears that if a party acquires a patent infringement cause of action during the
course of litigation, the party need not attempt to add that cause of action to the ongoing
litigation or risk claim preclusion—even if the new infringement claim arises from the
same transactional facts that prompted the ongoing litigation.
Despite the seemingly unequivocal nature of this language, the Court is confident
that the Federal Circuit did not intend to draw a non-rebuttable line on the date that a
party files its lawsuit, particularly where a later lawsuit attacks the same product or
11
process at issue in an earlier lawsuit—as is the case here. The Court reaches this
conclusion for three reasons.
First, a hard, bright line would run contrary to the explicitly “pragmatic”
Restatement approach endorsed by the Federal Circuit for decades. See, e.g.,
Acumed, 525 F.3d at 1324; Foster v. Hallco Mfg. Co., 947 F.2d 469, 478–79 (Fed. Cir.
1991); Young Eng’rs, Inc. v. U.S. Int’l Trade Comm’n, 721 F.2d 1305, 1314 (Fed. Cir.
1983).
Second, even the Federal Circuit itself has had difficulty remaining consistent
with its language in Gillig. Specifically, the Federal Circuit later avoided the rule of
Gillig, as derived from the Florida Power & Light decision that Gillig quoted, precisely
because it found that Florida Power & Light was addressing claims arising from a
different nucleus of operative facts. Aptus Co. v. United States, 189 F. App’x 946, 949
(Fed. Cir. 2006). In other words, Aptus appears to directly contradict Gillig’s assertion
that Florida Power & Light’s outcome was independent of whether the allegedly
precluded cause of action arose from a different nucleus of operative facts.
Third, if Gillig truly draws a bright line at the filing of the complaint, it raises
serious policy concerns that the Court believes the Federal Circuit would not
countenance if faced with them directly. No matter how “related in time, space, origin,
or motivation”; no matter whether after-acquired claims would “form a convenient trial
unit” with those already in the lawsuit; and no matter “the parties’ expectations or
business understanding or usage,” a hard-and-fast rule that the filing of the original
complaint ends the availability of claim preclusion could lead to significant, costly, and
potentially unmanageable mischief. A plaintiff with, say, ten patents regarding the same
12
subject matter4 could remain willfully ignorant as to five of them while conducting a prefiling investigation of the competitor’s products or processes, knowing all along that it
probably could develop a reasonable Rule 11 basis as to all ten patents. Then the
plaintiff files a complaint asserting only five patents, knowing that the discovery it
receives will likely demonstrate claims under the other five patents, but also knowing
that it can “stockpile” those after-acquired claims and bring a second lawsuit if the first
lawsuit does not turn out to the plaintiff’s liking.
In this way, a plaintiff could bring multiple successive time-consuming, resourcedraining attacks against the same defendant and the same product or process, simply
by ensuring that it does not obtain a reasonable Rule 11 basis to sue on all of its
potentially relevant patents at once. Especially when directed at a smaller competitor, it
can readily be foreseen that such an approach could result in the wearing down of a
patent defendant to the point of financial and legal exhaustion. This surely cannot be
the result the Federal Circuit believes best achieves the fair and just administration and
adjudication of the patent laws of the United States. 5
Worries such as the foregoing are particularly acute in the patent context
because there exists no traditional statute of limitations for a patent infringement cause
of action, nor is laches an available defense. See SCA Hygiene Prod. Aktiebolag v.
First Quality Baby Prod., LLC, 137 S. Ct. 954, 961 (2017). Rather, patent holders are
4
The Court uses “subject matter” in this context to refer to the problem the inventor
seeks to solve. XY’s patents, for example, seek to solve the problem of how to ensure the
gender of non-human mammalian offspring.
5
Concerning patents that issue after the complaint is filed, the potential for mischief is
not substantially lessened if there can be no consideration whatsoever for when, precisely, that
patent issues.
13
constrained by 35 U.S.C. § 286, which establishes, among other things, that “no
recovery shall be had for any [patent] infringement committed more than six years prior
to the filing of the complaint or counterclaim for infringement in the action.” Thus, there
is no “discovery rule” that might put a patent holder on inquiry notice, causing an
infringement claim to accrue and requiring that the patent holder file a lawsuit within a
certain amount of time. See SCA Hygiene, 137 S. Ct. at 962. By waiting to file a
lawsuit, the patent holder sacrifices only the damages that fall outside of the six-year
lookback period.
Given all this, the Court holds that after-acquired claims, at least when they
address the same, or substantially the same, subject matter as previously filed claims
and when directed at a previously accused product or process, may be subject to claim
preclusion under the Restatement’s pragmatic approach endorsed by the Federal
Circuit.
Here, the various Restatement considerations lean heavily toward treating XY’s
infringement claims based on the 422, 265, and 116 Patents as part of the same
transaction that prompted the 2012 Lawsuit. In particular, these causes of action are
related in time, origin, and motivation as the patents asserted in the 2012 Lawsuit, and
they certainly would have been part of a convenient trial unit. As for the 769 Patent,
which issued after the 2012 Lawsuit started, the Court agrees under the circumstances
that XY had a duty to move to amend (as it had already moved to amend to add an
after-acquired claim) given that it would be accusing the same Trans Ova products and
processes, and that the 769 Patent was a continuation of a patent already in suit. See
769 Patent, col. 1, ll. 6–16 (announcing that the patent is a continuation of U.S. Patent
14
Nos. 7,771,921 and 7,713,687; both of these patents were litigated in the 2012
Lawsuit). 6
For these reasons, Trans Ova’s Motion to Dismiss will be granted as to XY’s
Counts II, IV, V, and VI.
3.
“Not Materially Different” (Counts III)
There is another approach to claim preclusion that could apply even to patent
infringement causes of action that could never have been brought during a previous
lawsuit because the patent issued too late to be added to the case. Before explaining
this approach, the Court emphasizes a problem of terminology. Generally in American
litigation, “claim” is a one-word substitute for the more precise term “cause of action.”
This is what “claim” means in the context of “claim preclusion”—it is a doctrine that can
preclude a cause of action because that cause of action should have been asserted in
an earlier lawsuit. However, in the patent context, “claim” often has a technical
meaning, referring to the enumerated paragraphs at the end of a published patent that
describe and define the invention, typically preceded by the phrase “we claim” or “what
is claimed is.” In truth, it is these sorts of claims that can be infringed, and not usually
an entire patent (unless the defendant happens to infringe every claim within the
patent). In this Part II.B.3, the Court uses the term “patent claim” to refer to the
technical meaning of “claim” under patent law.
Claim preclusion can bar an infringement cause of action if the patent claims
allegedly infringed in the earlier and later lawsuits are “not materially different.” Aspex
6
Federal Rule of Civil Procedure 15(d) would have given this Court discretion as to
whether to allow such an amendment, and had this Court denied amendment, the “could have
been brought” variety of claim preclusion would not apply.
15
Eyewear, Inc. v. Marchon Eyewear, Inc., 672 F.3d 1335, 1341 (Fed. Cir. 2012). In such
a situation, the later-asserted patent claims “do not create a new cause of action that
was not previously available.” Id.
Trans Ova argues that the 822 Patent, which issued after judgment entered, is
“materially indistinguishable from those already litigated [in the 2012 Lawsuit].” (ECF
No. 31 at 11.) Trans Ova specifically refers to U.S. Patent No. 7,771,920 (“920
Patent”). (See 2012 Lawsuit, ECF No. 113 ¶¶ 61–65.) Claim 1 of the 920 Patent reads
as follows:
A method of sorting cells comprising the steps of:
a. establishing a cell source which supplies viable sperm
cells to be sorted;
b. establishing a sheath fluid to create a sheath fluid
environment for said viable sperm cells;
c. sensing a property of said viable sperm cells;
d. discriminating between said viable sperm cells having a
desired sex characteristic at a rate of at least about 1200
sorts per second; and
e. collecting said viable sperm cells having the desired sex
characteristic comprising the step of cushioning said cells
from impact with a collection container.
Claim 11 of the 822 Patent, 7 in turn, reads as follows:
A method of producing at least one sexed embryo
comprising:
producing a stream containing sperm cells, wherein the
stream comprises sperm cells from a cell source surrounded
by sheath fluid, wherein the sheath fluid surrounding the
sperm cells includes a citric acid;
7
XY asserts in this lawsuit that Trans Ova “has infringed, and continues to infringe, at
least claim 11 of the ’822 Patent.” (ECF No. 74 ¶ 37.)
16
identifying X-chromosome bearing sperm cells and/or Ychromosome bearing sperm cells in the stream;
collecting X-chromosome bearing sperm cells and/or Ychromosome bearing sperm cells in at least one collector
having a collector fluid which includes a citric acid; and
fertilizing at least one egg with the collected sperm cells to
form at least one sexed embryo.
Trans Ova asserts that the only true difference between these patent claims is
found in limitation “d” of the 920 Patent, which specifies “a rate of at least about 1200
sorts per second”; but, says Trans Ova, “determination of sort speed was conventional
in the art” and is therefore “immaterial and fails to patentably distinguish the inventions.”
(ECF No. 31 at 13.) XY responds that there are actually two differences worth
considering:
The ’822 patent claims “[a] method of producing at least one
sexed embryo” and includes an egg fertilization step
whereas the ’920 patent claims “a method of sorting cells”
with no fertilization step. Also, the ’822 patent omits the
“1200 sorts per second” requirement of the ’920 patent.
These are material differences. For example, if Trans Ova
tried to avoid infringing the ’920 patent by using a machine
that sorts slower than 1200 sorts/second, Trans Ova can
nevertheless infringe the ’822 patent, which has no sort
speed requirement.
(ECF No. 39 at 11.) Trans Ova replies that neither of these distinctions is material.
(ECF No. 41 at 8–9.)
The record before the Court does not permit it to make a ruling at this stage
whether the 822 Patent materially differs from the 920 Patent. Accordingly, Trans Ova’s
claim preclusion challenge to XY’s Count III is denied without prejudice to Trans Ova
reasserting this argument at a later stage of the case (presumably through a summary
judgment motion).
17
4.
Counts I & XII
Trans Ova makes no preclusion argument against XY’s 590 Patent (Count I) or
the 559 Patent (Count XII). Accordingly, Counts I and XII remain for adjudication on the
merits.
C.
Claim Preclusion: Non-Patent Claims (Counts VII–XI)
XY’s Counts VII–XI all focus on Trans Ova’s alleged theft of certain XY trade
secrets. Specifically, during the 2012 Lawsuit, XY learned that Trans Ova had “hired a
former XY employee named Todd Cox, first as a consultant and later as an employee,
to obtain non-sperm sorting flow cytometers and convert them into MoFlo SX sperm
sorting flow cytometers using XY trade secret information.” (ECF No. 74 ¶ 14.) Cox
began teaching this process of conversion to Trans Ova employees “[a]fter April, 2009.”
(Id. ¶ 18.) XY therefore asserts claims for trade secret misappropriation, unfair
competition, quantum meruit, and unjust enrichment. (Id. at 25–34.)
Trans Ova challenges these claims as precluded by attaching the transcript of
Cox’s deposition, taken as part of the 2012 Lawsuit on April 9, 2014, in which Cox
admits having learned the MoFlo SX conversion process from XY and having taught it
to Trans Ova. (ECF No. 31-10.)8 Trans Ova notes that April 9, 2014 was almost
twenty-two months before trial and three months before the close of fact discovery.
(ECF No. 31 at 14.)
Because the causes of action asserted in Counts VII–XI are not patent-specific,
8
It is not clear that this portion of the Cox deposition would normally be a document the
Court could consider in the Rule 12(b)(6) posture. But XY does not object on this basis. (See
ECF No. 39 at 14–15.) The Court will therefore consider the Cox deposition transcript as part of
its analysis.
18
regional circuit law applies. See, e.g., Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344,
1348 (Fed. Cir. 2003) (trade secret misappropriation claims “do not present questions
that are intimately involved with the substance of the patent laws”; applying regional
circuit law to the question of whether there was personal jurisdiction for a trade secret
misappropriation claim). In the Tenth Circuit
if the plaintiff discovers facts during the litigation that stem
from the same underlying transaction, it must supplement its
complaint with any new theories those facts support. A
subsequent lawsuit will be allowed only if the facts
discovered mid-litigation give rise to new and independent
claims, not part of the previous transaction. Put differently, a
plaintiff cannot avoid supplementing his complaint with facts
that are part of the same transaction asserted in the
complaint, in the hope of bringing a new action arising out of
the same transaction on some later occasion.
Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 847 F.3d 1221, 1244–45 (10th Cir.
2017) (citations and internal quotation marks omitted; alterations incorporated;
emphasis in original). The Tenth Circuit (like the Federal Circuit) endorses the
Restatement approach of determining the scope of the prior transaction “pragmatically,
giving weight to such considerations as whether the facts are related in time, space,
origin, or motivation, whether they form a convenient trial unit, and whether their
treatment as a unit conforms to the parties’ expectations or business understanding or
usage.” Petromanagement Corp. v. Acme-Thomas Joint Venture, 835 F.2d 1329, 1335
(10th Cir. 1988) (quoting Restatement (Second) of Judgments § 24) (internal quotation
marks omitted). 9
9
State preclusion law may apply to Trans Ova’s common-law causes of action, but it is
not clear which state’s law should govern, and XY makes no argument that any particular state’s
law would lead to a different outcome than the Tenth Circuit’s test. The Court will accordingly
analyze all non-patent causes of action under the Tenth Circuit test.
19
XY asserts that its trade-secret-related claims in this 2016 Lawsuit arise from “a
different nucleus of operative facts.” (ECF No. 39 at 15.) XY notes that the 2012
Lawsuit centered around the parties’ License Agreement, its expiration, and the effect of
that expiration both from a contractual and patent-infringement standpoint. (Id.) XY
says that this 2016 Lawsuit is different because “Trans Ova did not obtain or use the
misappropriated trade secrets from XY under the License—it obtained and used the
knowledge from a third party after the License expired.” (Id.)
These distinctions do not address the proper considerations under the
transactional approach. One of XY’s main arguments in the 2012 Lawsuit (which the
jury accepted) was that the License Agreement expired in April 2009—the very same
month “[a]fter” which Cox allegedly began teaching the MoFlo SX conversion process to
Trans Ova. It is difficult to see how these events were not related in “time, space,
origin, or motivation.” Petromanagement, 835 F.2d at 1335. Moreover, they certainly
would have formed “a convenient trial unit.” Id. Accordingly, the Court finds that Counts
VII–XI in this 2016 Lawsuit arose from the same transaction that prompted the 2012
Lawsuit. Because XY failed to seek to amend in the 2012 Lawsuit to add the claims
described in Counts VII–XI, those claims are now precluded and will be dismissed.
Lenox, 847 F.3d at 1244–45.
III. CONCLUSION
For the reasons set forth above the Court ORDERS as follows:
1.
Trans Ova’s Motion to Dismiss Plaintiffs’ Second Amended Complaint (ECF No.
31), construed as a challenge to the Fourth Amended Complaint (ECF No. 74), is
GRANTED IN PART and DENIED IN PART to the following extent:
20
a.
XY’s Counts II, IV, V, VI, VII, VIII, IX, X, and XI are DISMISSED WITH
PREJUDICE, and
b.
2.
The motion is otherwise DENIED;
XY’s Motion for Leave to file a Surreply to Trans Ova’s 12(b)(6) Motion to
Dismiss (ECF No. 43) is DENIED AS MOOT;
3.
Given this disposition, claim construction proceedings will no longer embrace the
116, 265, 422, or 769 Patents. If any party wishes to withdraw or amend any
deposition designations in light of this narrowed scope (see ECF Nos. 112–14),
the party may do so no later than February 2, 2018. Withdrawing or amending
deposition designations is in no way a waiver of any objection a party may have
to this Order.
Dated this 11th day of January, 2018.
BY THE COURT:
______________________
William J. Martinez
United States District Judge
21
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