Neonatal Product Group, Inc. v. Shields et al

Filing 212

MEMORANDUM AND ORDER granting in part and denying in part 185 Motion for Summary Judgment; denying 188 Motion for Partial Summary Judgment. Signed by District Judge Daniel D. Crabtree on 02/28/2018. (mig)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NEONATAL PRODUCT GROUP, INC.,
Plaintiff/Counterclaim
Defendant,
v.
Case No. 13-2601-DDC-KGS
JANICE M. SHIELDS,
PAUL W. SHIELDS, and ANGELE
INNOVATIONS, LLC,
Defendants/Counterclaimants,
v.
CRECHE INNOVATIONS, LLC,
MILLENNIUM MARKETING
GROUP, LTD., and
SCOTT A. NORMAN,
Counterclaim Defendants.
________________________________________
MEMORANDUM AND ORDER
This matter comes before the court on cross motions for summary judgment filed by each
party to this patent infringement dispute. Plaintiff Neonatal Product Group, Inc. (“Neonatal”),
doing business as Creche Innovations, LLC (“Creche”), initiated this lawsuit against Janice M.
Shields and Paul W. Shields, individually and as trustees of the Shields Family Trust, and Angele
Innovations, LLC (collectively, “the Shields”), by filing a Complaint asserting two claims: (1) a
declaratory judgment that Neonatal has not infringed U.S. Patent No. 6,417,498 (“the ’498
Patent”); and (2) a declaratory judgment that the Asserted Claims of the ’498 Patent are invalid.
Doc. 49 (Amended Complaint ¶¶ 36–41); Doc. 143 at 19 (Pretrial Order ¶ 4.a.).

The Shields responded to the lawsuit by filing an Answer and Counterclaim (Doc. 30).
It asserted eight counterclaims against four counterclaim defendants: Neonatal, Creche,
Millennium Marketing Group, Ltd., and Scott Norman (collectively, “the Counterclaim
Defendants”). The eight counterclaims asserted against the Counterclaim Defendants include:
(1) patent infringement; (2) inducement of patent infringement; (3) breach of an Exclusive
License Agreement; (4) breach of a Patent Marketing Agreement; (5) tortious interference with
contract; (6) breach of fiduciary duty; (7) intentionally causing or assisting an agent to violate the
duty of loyalty; and (8) unjust enrichment. Doc. 143 at 20 (Pretrial Order ¶ 4.c.).
On August 24, 2017, the court granted Neonatal and the Counterclaim Defendants’1
Motion for Partial Summary Judgment. Doc. 180. In its Memorandum and Order, the court
granted summary judgment for Neonatal on its declaratory judgment claim and entered a
declaratory judgment that Neonatal has not infringed the ’498 Patent. Id. at 27–34, 45.
Naturally, the court also granted summary judgment against the Shields’ counterclaims for patent
infringement (Count I) and inducement of patent infringement (Count II). And the court granted
summary judgment against the Shields’ counterclaims for breach of an Exclusive License
Agreement (Count III), tortious interference with contract (Count V), and unjust enrichment
(Count VIII). Id. at 45–46.
Nonetheless, the Shields now have filed a Motion for Partial Summary Judgment (Doc.
188) requesting two things that directly contradict the rulings in the earlier Order on summary
judgment. First, the Shields seek summary judgment against Neonatal’s declaratory judgment
claim seeking a declaration that Neonatal did not infringe the ’498 Patent. And second, they
seek summary judgment in their favor on their counterclaim for patent infringement (Count I).

1
Going forward, the court refers to the four Counterclaim Defendants collectively as Neonatal.

2

Id. The Shields seek summary judgment on these claims even though the court already has
ruled, as a matter of law, in Neonatal’s favor on both claims. See generally Doc. 180.
Neonatal also has filed a summary judgment motion. It is a Motion for Summary
Judgment on the Remaining Counterclaims (Doc. 185). It seeks summary judgment against all
of the Shields’ undecided counterclaims, i.e., (1) breach of a Patent Marketing Agreement
(Count IV); (2) breach of fiduciary duty (Count VI); and (3) intentionally causing or assisting an
agent to violate the duty of loyalty (Count VII).
For reasons explained below, the court denies the Shields’ Motion for Partial Summary
Judgment (Doc. 188). And the court grants Neonatal’s Motion for Summary Judgment on the
Remaining Counterclaims (Doc. 185) in part and denies it in part.
I.

Uncontroverted Facts

The following facts are either stipulated facts taken from the Pretrial Order (Doc. 143),
uncontroverted, or, where controverted, stated in the light most favorable to the parties opposing
summary judgment. Scott v. Harris, 550 U.S. 372, 378 (2007).
The ’498 Patent
Defendants Janice M. Shields and Paul W. Shields are the named inventors of the ’498
Patent that issued on July 9, 2002. The device disclosed in the ’498 Patent is called the
“Neonatal Substrate Warmer.” The device automatically warms and vibrates baby bottles
containing frozen or refrigerated breast milk so that the milk thaws, warms, and mixes quickly
and efficiently. The Shields owned the ’498 Patent until August 2010, when they transferred the
patent’s ownership to the Shields Family Trust dated August 19, 2010 (“Shields Family Trust”).
Mr. and Ms. Shields serve as trustees of the Shields Family Trust.

3

The Shields Contract to Commercialize the ’498 Patent
In 2004, Counterclaim Defendant Millennium Marketing Group, Ltd. (“MMG”)
contacted the Shields to assist them with commercializing the ’498 Patent. MMG was a patent
marketing company familiar with patents and intellectual property license agreements.2 Through
this communication, the Shields first became acquainted with Counterclaim Defendant Scott
Norman—an owner and President of MMG. In 2006, Mr. Norman created another company—
plaintiff Neonatal—who sought to license the ’498 Patent. Mr. Norman is Neonatal’s Chief
Executive Officer. When Mr. Norman introduced the Shields to Neonatal, through his patent
marketing company MMG, he owned both companies.
On April 27, 2004, Mr. and Ms. Shields entered into a Patent Marketing Agreement with
MMG. MMG and the Shields twice amended the Patent Marketing Agreement. The parties first
amended the Patent Marketing Agreement on October 13, 2005—extending its term to October
13, 2006. The parties amended the Patent Marketing Agreement again on June 9, 2006.
On June 1, 2006, Mr. and Ms. Shields—together with MMG—entered an Exclusive
License Agreement with Neonatal. The Exclusive License Agreement granted an exclusive
license to Neonatal to manufacture and sell products covered by the ’498 Patent. The Shields, as
individuals, entered the Exclusive License Agreement with Neonatal.
The Patent Marketing Agreement
The Patent Marketing Agreement defines Mr. and Ms. Shields as the “Client” and the
’498 Patent as the “Product.” The Patent Marketing Agreement imposed several obligations on
MMG during its term. At least 14 of these obligations appear in Section 3 of the Patent Market
Agreement. Section 3’s obligations include:

2
MMG was a Kansas corporation with its offices and principal place of business in Overland Park,
Kansas. On December 30, 2014, MMG was dissolved under Kan. Stat. Ann. § 17-6804.

4

(a)

Promote the “Client” and the “Product” and to develop a proprietary
database of qualified Licensees that are commensurate with the potential
for the “Product”.

(b)

Communicate with potential Licensees and negotiate the most favorable
license terms for the “Product” and with all Licensees. “Client” shall have
final approval of all terms agreed to with Licensees.

(c)

Abide by the “Client’s” policies as communicated to “MMG” at any time
during the Licensing process.

(d)

“MMG” shall act as an independent contractor and be solely responsible
for and bear all expenses incurred as a result of “MMG’s” office facilities
and business activities generally.

(e)

Keep “Client” informed on progress of the marketing efforts and provide a
written report of this progress on a quarterly basis (minimum of four
written reports).

(f)

Not make any written or oral promises to any Licensee or potential
Licensee without the prior knowledge and approval of the “Client”.

(g)

Notify “Client” of any products that appear to infringe on the patent or
trademark protection of the “Product”.

(h)

Prepare a comprehensive Product Prospectus that is written exclusively for
the “Product” and obtain “Client’s” written approval prior to submission
to potential Licensees.

(i)

Prepare a financial Pro Forma; including costs to manufacture, sales
projections and other balance sheet items that match the licensees and
Obtain “Client’s” written approval prior to submission to potential
Licensees.

(j)

Produce a media kit designed exclusively for the “Product” containing the
above Product Prospectus and financial Pro Forma to be used in
presentations with each potential Licensee and obtain “Client’s” written
approval prior to submission to potential Licensees.

(k)

Develop a web page for the “Product” and provide World Wide Internet
presence during the term of this agreement.

(l)

During the term of this agreement “MMG” shall represent the “Product” at
a minimum of two (2) applicable trade shows.

5

Doc. 24-1 at 1–3 (Patent Marketing Agreement). Ms. Shields testified that the purpose of
MMG’s obligations in paragraphs 3(a) through 3(l) was to secure a license for the ’498 Patent.
Ms. Shields also testified that she was not sure if these obligations applied to MMG after the
parties executed the Exclusive License Agreement because she thought the Exclusive License
Agreement effectively “replaced” the obligations listed in sections 3(a) through 3(l) of the Patent
Marketing Agreement.
The Patent Marketing Agreement imposed two more obligations on MMG in sections
3(m) and 3(n):
(m)

After a licensing agreement has been executed “MMG” shall provide
account management with each Licensee and act as “Client[’]s” liaison for
the entire term of the license agreements.

(n)

“MMG” shall be responsible for collection and distribution to “Client” of
all royalties due. “MMG” shall distribute “Client’s” portion of these
royalties within three (3) business days of receipt from Licensee.

Doc. 24-1 at 3 (Patent Marketing Agreement).
Under paragraph 3(m), Ms. Shields testified that that MMG acted as a liaison—"more or
less”—between the Shields and Neonatal during the term of the Exclusive License Agreement.
Doc. 186-4 at 5 (Janice M. Shields Dep. 120:24–121:1). In reference to paragraph 3(n), Ms.
Shields testified that MMG collected and distributed royalties from Neonatal, passing those
royalties on to Ms. Shields.
The parties also agreed in the Patent Marketing Agreement that MMG would receive
50% of all royalties paid to the Shields for the first five years of any license agreement the
parties entered during the Patent Marketing Agreement’s term.

6

MMG Hires Drake Koch to Design a Milk Warmer Based on the ’498 Patent
In 2006, MMG hired a product developer named Drake Koch to design a milk warmer
based on the ’498 Patent. Mr. Koch ultimately designed for MMG what became known as the
PENGUIN® Single Well Warmer and the PENGUIN® Four Well Warmer. Mr. Koch also is
responsible for the commercial design of THERMA-LINER™ bags.
While Mr. Koch was designing the PENGUIN® warmers, Ms. Shields talked extensively
with him to make sure that he “didn’t mess it up.” Doc. 186-4 at 3 (Janice M. Shields Dep.
74:9–16). Ms. Shields also testified that she worked with Mr. Koch “a lot” and made a long list
of things for him to do and not do as he designed the PENGUIN® warmers and THERMALINER™ bags. Id. (Janice M. Shields Dep. 74:17–22).
The Exclusive License Agreement
Before the parties entered the Exclusive License Agreement, Scott Norman disclosed to
Mr. and Ms. Shields that he would be involved in Neonatal’s management, in addition to his role
with MMG. When the parties entered the Exclusive License Agreement, Neonatal believed that
the ’498 Patent covered the PENGUIN® milk-warming machines and THERMA-LINER™ bags
it manufactured and sold under the Exclusive License Agreement.
The parties to the Exclusive License Agreement acknowledged and agreed that they were
independent contractors and that they would not “be considered representative, master or servant
of the other party for any purpose whatsoever,” that “neither party has any authority to enter into
an Agreement to assume any obligation or to give warranties or representations on behalf of the
other party,” and that nothing in their relationship would “be construed to create a relationship of
joint venture, partnership fiduciary, or other similar relationship between the parties.” Doc. 1221 at 8 (Exclusive License Agreement § 10.10.01).

7

The Exclusive License Agreement required Neonatal to pay a 10% royalty on all sales of
technology covered by the ’498 Patent. Doc. 122-1 at 2 (Exclusive License Agreement §
6.01.0). The royalty was payable to MMG, which was “designated as agent [of Mr. and Ms.
Shields] to receive all royalty payments, consulting fees, commitment fees, and reports” on their
behalf. Id. at 3 (Patent Marketing Agreement §§ 7.03.0, 7.01.0).
Under the Patent Marketing Agreement and its amendments, MMG kept between 40%
and 60% of the royalties received from sales under the Exclusive License Agreement and
distributed the rest to Mr. and Ms. Shields. Doc. 194-2 at 3–4 (Patent Marketing Agreement §
6); id. at 6 (Amendment to Patent Marketing Agreement § 1); id. at 7 (Amendment to Patent
Marketing Agreement § 1).
Mr. Norman signed the Patent Marketing Agreement, both of its amendments, and the
Exclusive License Agreement on MMG’s behalf as its president. Mr. Norman was not a party—
individually—to any of the agreements or amendments.
The Parties’ Performance Under the Agreements
Neonatal initially paid royalties to the Shields for sales of the PENGUIN® warmers
consistent with the Exclusive License Agreement. Then, in early 2013, Neonatal stopped
making royalty payments. Neonatal continued to sell PENGUIN® warmers. By mid-2013,
Neonatal had concluded that the ’498 Patent did not actually cover its PENGUIN® machines.
Neonatal marked its PENGUIN® warmers with “US Patent #6,417,498” during the term
of the Exclusive License Agreement. This marking denotes the ’498 Patent. Neonatal also
advertised that its PENGUIN® warmers used patented technology.

8

Termination of the Agreements
On May 23, 2013, Mr. and Ms. Shields terminated the Exclusive License Agreement and
the Patent Marketing Agreement. After Mr. and Ms. Shields gave Neonatal notice of the
termination, Neonatal stopped marking its PENGUIN® warmers with the ’498 Patent’s number.
Ms. Shields asserts that MMG failed to perform its obligations under the Patent
Marketing Agreement in several ways: (1) it failed to develop a database of qualified licensees
as section 3(a) requires; (2) it never prepared a product prospectus as section 3(h) requires; (3) it
never prepared a financial pro forma as section 3(i) requires; (4) it never produced a media kit as
section 3(j) requires; and (5) it never developed a webpage for the products as section 3(k)
requires.
Ms. Shields calculates that the Shields received $358,413.40 in payments during the term
of the Exclusive License Agreement. After an audit of royalty payments for 2010 through 2012
revealed that Neonatal had underpaid Mr. and Ms. Shields by $703.42 over that three-year
period, Neonatal reimbursed Mr. and Ms. Shields for the underpayment. Ms. Shields contends
that this underpayment constitutes a violation of section 3(n) of the Patent Marketing Agreement
which required MMG to collect and distribute all of the royalties due within three days.
In this lawsuit, the Shields seek as damages for their counterclaim asserting breach of the
Patent Marketing Agreement a royalty of 10% of the gross sales of Neonatal’s PENGUIN®
products since the Exclusive License Agreement’s termination. The Shields contend that 10% of
Neonatal’s gross sales from June 2013 through July 2016 is $755,100. The Shields intend to
update the total using post-July 2016 sales information. Doc. 143 at 25 (Pretrial Order ¶
5.b.A.i.).

9

For their counterclaims asserting breach of fiduciary duty and intentionally causing and
assisting in the breach of fiduciary duty and duty of loyalty, the Shields seek as damages
Neonatal’s profits on its sales of the PENGUIN® products since the Exclusive License
Agreement’s termination and Neonatal’s profits on its sale of the PENGUIN® product line. The
Shields contend that Neonatal’s profits between June 2013 and July 2016 are $7,550,999 and
intend to update the total using post-July 2016 sales information.
The Shields also seek recovery of punitive damages for breach of fiduciary duty and
intentionally causing and assisting in the breach of fiduciary duty and duty of loyalty. The
Shields contend that three times Neonatal’s profits from June 2013 through July 2016 is
$22,652,997. The Shields intend to update the total using post-July 2016 sales information.
Finally, the Shields seek their attorneys’ fees and costs, appropriate injunctive or other equitable
relief, and pre- and post-judgment interest.
II.

Summary Judgment Standard

Summary judgment is appropriate if the moving party demonstrates that “no genuine
dispute” exists about “any material fact” and that it is “entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c). When it applies this standard, the court views the evidence and draws
inferences in the light most favorable to the non-moving party. Nahno-Lopez v. Houser, 625
F.3d 1279, 1283 (10th Cir. 2010). “An issue of fact is ‘genuine’ ‘if the evidence is such that a
reasonable jury could return a verdict for the non-moving party’ on the issue.” Id. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “An issue of fact is ‘material’ ‘if
under the substantive law it is essential to the proper disposition of the claim’ or defense.” Id.
(quoting Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)).

10

The moving party bears “both the initial burden of production on a motion for summary
judgment and the burden of establishing that summary judgment is appropriate as a matter of
law.” Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir. 2010) (citing Trainor v. Apollo
Metal Specialties, Inc., 318 F.3d 976, 979 (10th Cir. 2002)). To meet this burden, the moving
party “need not negate the non-movant’s claim, but need only point to an absence of evidence to
support the non-movant’s claim.” Id. (citing Sigmon v. CommunityCare HMO, Inc., 234 F.3d
1121, 1125 (10th Cir. 2000)).
If the moving party satisfies its initial burden, the non-moving party “may not rest on its
pleadings, but must bring forward specific facts showing a genuine issue for trial [on] those
dispositive matters for which it carries the burden of proof.” Id. (quoting Jenkins v. Wood, 81
F.3d 988, 990 (10th Cir. 1996)); accord Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986);
Anderson, 477 U.S. at 248–49. “To accomplish this, the facts must be identified by reference to
affidavits, deposition transcripts, or specific exhibits incorporated therein.” Adler, 144 F.3d at
670 (citing Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992)).
The court applies this same standard to cross motions for summary judgment. Each party
bears the burden of establishing that no genuine issue of material fact exists and that it is entitled,
as a matter of law, to the judgment sought by its motion. Atl. Richfield Co. v. Farm Credit Bank
of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000). Cross motions for summary judgment “are to
be treated separately; the denial of one does not require the grant of another.” Buell Cabinet Co.
v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979). But where the cross motions overlap, the court
may address the legal arguments together. Berges v. Standard Ins. Co., 704 F. Supp. 2d 1149,
1155 (D. Kan. 2010) (citation omitted).

11

Summary judgment is not a “disfavored procedural shortcut.” Celotex, 477 U.S. at 327.
Instead, it is an important procedure “designed ‘to secure the just, speedy and inexpensive
determination of every action.’” Id. (quoting Fed. R. Civ. P. 1).
III.

The Shields’ Motion for Partial Summary Judgment

The Shields ask the court to grant summary judgment in their favor on their counterclaim
for patent infringement (Count I). Doc. 188 at 1. The Shields also ask the court to grant
summary judgment against Neonatal on its claim seeking a declaratory judgment that Neonatal
has not infringed the ’498 Patent. Id. at 1–2. In moving for summary judgment on these two
claims, the Shields concede that the court already has decided these claims in its ruling on
Neonatal’s Motion for Partial Summary Judgment. Namely, on August 24, 2017, the court
granted Neonatal’s Motion for Partial Summary Judgment. Doc. 180. This Order granted
summary judgment for Neonatal on its declaratory judgment claim and entered a declaratory
judgment that Neonatal has not infringed the ’498 Patent. Id. at 45. The court also granted
summary judgment against the Shields’ counterclaims for patent infringement (Count I). Id.
Despite this ruling, the Shields assert that the court has broad discretion to reconsider a
summary judgment ruling. And they urge the court to revisit its summary judgment ruling
finding that Neonatal has not infringed the ’498 Patent. As support, the Shields make an
argument they never presented when the parties briefed Neonatal’s Motion for Partial Summary
Judgment. The Shields assert that the doctrine of estoppel precludes Neonatal from asserting
that its PENGUIN® milk warmers are not covered by the ’498 Patent because Neonatal marked
its products with the patent’s number. By marking its product in this fashion, the Shields argue,
Neonatal deterred competition and enticed customers to purchase its PENGUIN® products.
Thus, the Shields contend, the interests of equity require the court to revisit its ruling of non-

12

infringement and conclude, instead, that the doctrine of patent marking estoppel precludes
Neonatal from arguing that the ’498 Patent does not cover the accused devices.
Neonatal responds with two arguments. First, Neonatal asserts that the Shields’ estoppel
argument is improper procedurally. It asserts that the Shields never made this argument in their
response to Neonatal’s Motion for Partial Summary Judgment on the infringement claims. And
so, Neonatal contends, the Shields cannot raise the argument now by labelling it a motion for
summary judgment because, in effect, it asks the court to reconsider its earlier summary
judgment ruling. Second, Neonatal argues that even if the court considers the Shields’ patent
marking estoppel argument on its merits, summary judgment against the Shields’ infringement
claim still is the right result. The court agrees with both of Neonatal’s arguments. It explains
why in the next two sections.
A. The Shields’ Estoppel Argument is Improper Procedurally.
Neonatal asserts that it is aware of no authority permitting a party to move for summary
judgment on an issue after the court already has entered summary judgment against the party on
the same issue. The court doesn’t know of any such authority either. Nevertheless, even if the
Shields’ position makes a unique argument, the court recognizes that “it is well within the court’s
discretion to revise an interlocutory order at any time prior to the entry of final judgment.”
Ferluga v. Eickoff, 236 F.R.D. 546, 549 (D. Kan. 2006) (citations omitted). Thus, our court
treats motions that ask it to revise dispositive orders decided before the court has entered
judgment as motions for reconsideration under D. Kan. Rule 7.3. Id. (treating a motion to alter
or amend a dispositive but non-final order as a motion for reconsideration under D. Kan. Rule
7.3).

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D. Kan. Rule 7.3 requires a movant to file a motion seeking reconsideration within 14
days after the order is filed. D. Kan. Rule 7.3(b). The court issued its earlier summary judgment
ruling on August 24, 2017. Doc. 180. But the Shields didn’t file their Motion for Partial
Summary Judgment—one that, in essence, seeks reconsideration of the earlier summary
judgment ruling—until October 6, 2017.3 Thus, their request for reconsideration is untimely
under the court’s local rule.
Also, D. Kan. Rule 7.3 requires a movant to base a motion for reconsideration on: “(1)
an intervening change in controlling law; (2) the availability of new evidence; or (3) the need to
correct clear error to prevent manifest injustice.” D. Kan. Rule 7.3(b); see also Ferluga, 236
F.R.D. at 549 (applying D. Kan. Rule 7.3(b) to a dispositive order and noting that the rule’s
requirements “are essentially identical” to Fed. R. Civ. P. 59(e) (citing Servants of Paraclete v.
Does, 204 F.3d 1005, 1012 (10th Cir. 2000)). So, “a motion for reconsideration is appropriate
[only] where the court has misapprehended the facts, a party’s position, or the controlling law.”
Ferluga, 236 F.R.D. at 549 (citing Servants of Paraclete, 204 F.3d at 1012). Such a motion “is
not [an] appropriate [device] to revisit issues already addressed or advance arguments that could
have been raised in prior briefing.” Id. (citing Servants of Paraclete, 204 F.3d at 1012).
The Shields satisfy none of the three prerequisites reconsidering an earlier summary
judgment ruling. First, they never cite an intervening change in controlling law. To the contrary,
the Shields’ Memorandum in Support of their Motion for Partial Summary Judgment cites cases

3
The Shields assert that the court cannot convert their Motion for Partial Summary Judgment into
a Motion for Reconsideration. And they criticize Neonatal for citing no legal authority supporting such a
conversion. The court’s own research likewise has revealed no cases where a court has treated a
summary judgment motion as a motion for reconsideration. But the procedural facts here are unique or—
as Neonatal suggests—at least unorthodox. The Shields have moved for summary judgment on an issue
that the court already has decided. Although styled as a Motion for Partial Summary Judgment, the
motion asks the court to reconsider its earlier summary judgment ruling. The court thus treats the motion
as a Motion for Reconsideration. And the court applies D. Kan. Rule 7.3(b) to this motion consistent with
our court’s precedent.

14

decided years before the court issued its August 24, 2017 Memorandum and Order. Second, the
Shields never assert that new evidence is available now to support their summary judgment
arguments. To the contrary, Neonatal demonstrates that the Shields knew about the facts
supporting their motion—namely, that Neonatal marked its PENGUIN® machines with the ’498
Patent’s number—before the court issued its August 24, 2017 Memorandum and Order deciding
Neonatal’s Motion for Partial Summary Judgment. Doc. 195 at 12. Finally, the Shields never
argue that a need to correct clear error or prevent manifest injustice requires the court to
reconsider its earlier ruling.
Also, the Shields never explain why they didn’t raise their patent marking estoppel
argument in their earlier, timely response to Neonatal’s Motion for Partial Summary Judgment.
They also never explain why they didn’t file their current motion at the same time Neonatal filed
its Motion for Partial Summary Judgment. The Shields’ arguments are ones that “could have
been raised in prior briefing,” and “[i]t is not appropriate to revisit issues already addressed or
advance arguments that could have been raised in prior briefing” in a motion for reconsideration.
Ferluga, 236 F.R.D. at 549 (citing Servants of Paraclete, 204 F.3d at 1012). Indeed, the Shields’
Reply specifically recites that they “do not deny that their motion asks the Court to revisit a
previous issue.” Doc. 203 at 4. It is not appropriate for the Shields to ask the court to revisit an
issue to address arguments that they could have made in a timely and more efficient manner.
The court thus rejects the Shields’ efforts to seek reconsideration of the court’s earlier summary
judgment ruling. It is improper.
For all these reasons, the Shields have failed to show that reconsideration of the court’s
earlier summary judgment ruling is timely or warranted under D. Kan. Rule 7.3. The court thus

15

declines to reconsider its summary judgment ruling from its August 24, 2017 Memorandum and
Order (Doc. 180).
B. The Court Need Not Revise its Earlier Summary Judgment Ruling Based
on the Patent Marking Estoppel Doctrine.
Even if the Shields timely presented their argument, it provides no reason for the court to
revise its earlier summary judgment ruling. This court reaches this conclusion for two basic
reasons.
First, the Federal Circuit explicitly refused to adopt the doctrine of patent marking
estoppel in Frolow v. Wilson Sporting Goods Co., 710 F.3d 1303, 1309 (Fed. Cir. 2013). The
Federal Circuit began by recognizing that some circuits have endorsed “the doctrine of ‘marking
estoppel’” where “‘a party that marks its product with a patent number is estopped from asserting
that the product is not covered by the patent.’” Id. at 1308–09 (quoting SmithKline Diagnostics,
Inc. v. Helena Labs. Corp., 859 F.2d 878, 890 n.9 (Fed. Cir. 1988)). But the Federal Circuit
noted that “the Supreme Court has never adopted or approved the doctrine.” Id. at 1308. And it
recognized that Congress has enacted legislation that provides a remedy for false marking. Id.
(citing False Marking Statute, 35 U.S.C. § 292). The Federal Circuit thus “declin[ed] to create a
separate, equitable doctrine unique to patent law, where Congress has spoken and standard
evidentiary practices provide adequate remedy.” Id. The Federal Circuit reasoned that “[e]quity
should not rush in where an adequate remedy at law exists.” Id. In sum, the Federal Circuit’s
holding in Frolow means that the Shields cannot prevail on an argument that Neonatal is
estopped from asserting non-infringement, as a matter of law, because it marked its PENGUIN®
products with the ’498 Patent’s number.
Second, the fact that Neonatal marked its PENGUIN® products with the ’498 Patent’s
number does create a genuine issue requiring the court to revisit its summary judgment ruling of
16

noninfringement. While Frolow refused to adopt the patent marking estoppel doctrine, it also
concluded that “evidence of marking is circumstantial evidence that the marked product falls
within the patent claims and can preclude summary judgment in appropriate cases.” Id. at 1310.
The Federal Circuit explained that “[t]he practice of marking a product with a patent number is a
form of extrajudicial admission that the product falls within the patent claims.” Id. at 1309.
“Generally, extrajudicial admissions of facts, such as patent marking, are simply evidence that
may be countered by the party that made the admission.” Id. “These admissions are not
‘binding,’ and ‘may be controverted or explained by the party’ that made the statement.” Id.
(citations omitted). So, “[a] defendant, of course, is free to introduce counter evidence or
explanation.” Id. at 1310. And, “whether a party’s marking, in view of the record as a whole,
raises a genuine issue of material fact, will depend on the facts of each case.” Id. In short, patent
marking does not preclude summary judgment against an infringement claim.
Specifically, in Frolow, the Federal Circuit reversed the district court’s order granting
summary judgment ruling that certain tennis rackets did not fall within the scope of a patent. Id.
at 1310–11. The Federal Circuit held that the district court had erred by concluding that the
defendant’s patent marking “had no bearing” on the question whether the accused devices fell
within a patent’s scope. Id. at 1310. Instead, and as already discussed, the Federal Circuit held
that evidence of marking “is circumstantial evidence that the marked product falls within the
patent claims.” Id. The Federal Circuit found that the summary judgment evidence “point[ed] in
both directions”—the expert reports tended to show that the tennis rackets did not fall within the
patent’s scope while the marking evidence tended to show that the tennis rackets came within the
patent claims. Id. at 1310–11. The Federal Circuit thus concluded that it was “the job of the

17

fact-finder—not the court at summary judgment—to weigh that evidence and render a decision.”
Id. at 1310.
The facts here differ from Frolow in many respects. First, unlike the district court in
Frolow, the court’s ruling here did not refuse to consider marking evidence on summary
judgment. Instead, the Shields never presented that evidence for the court to consider.
Second, and in response to the marking evidence now presented, Neonatal has come
forward with an explanation for the patent marking to address the Shields’ contention that this
evidence serves as an admission to preclude summary judgment against the Shields’
infringement claim. After MMG hired Drake Koch to design the PENGUIN® milk warmers,
Ms. Shields talked extensively with him and worked with him “a lot.” She testified that she did
not want Mr. Koch to mess up the design. And she made a long list of things for him to do and
not do as he designed the PENGUIN® warmers and THERMA-LINER™ bags. Because the
inventor of the ’498 Patent was involved in designing the PENGUIN® warmers, Neonatal
asserts, it was reasonable for all parties to assume that the warmers fell within the scope of the
’498 Patent. Neonatal asserts that it believed this was so for nearly six years—until three
significant things happened: By mid-2013, Neonatal had determined that the ’498 Patent did not
cover its products, Mr. and Ms. Shields terminated the Exclusive License Agreement, and
Neonatal stopped marking its products with the ’498 Patent’s number.
Neonatal asserts that these facts differ from Frolow, a case where the licensee of tennis
rackets argued that it owed the patentee nothing for its sales of tennis rackets that were marked
with the patent number at issue. In contrast here, it is undisputed that the Shields received
royalty payments for the products sold before the Shields terminated the Exclusive License
Agreement. Those products were marked with the ’498 Patent’s number. After the Shields

18

terminated the Exclusive License Agreement, Neonatal stopped marking the products with the
patent’s number because it had concluded that the ’498 Patent did not cover its products. Cf. id.
at 1310 (“[I]f it is beyond dispute that the accused product was mis-marked, summary judgment
will be appropriate.”). So, unlike Frolow, the patent holder here received royalty payments for
all products marked with the ’498 Patent’s number.
Finally, the evidence in Frolow “point[ed] in both directions,” and thus, the Federal
Circuit held, precluded summary judgment. Id. at 1310–11. The Federal Circuit recognized that
a fact finder must weigh the marking evidence against expert testimony that the accused products
did not come within the patent’s scope. Id. In contrast here, the court already has concluded, as
a matter of law, that the accused products do not meet three required limitations of each disputed
claim: (1) “heater block,” (2) “removable reservoir,” and (3) the “void” or “well” formed in the
heater block. Doc. 180 at 27–34. Applying the’498 Patent’s claims to the structures of the
accused device, the court concluded that no reasonable jury could find that every limitation
recited in the’498 Patent is found in the PENGUIN® warmers. Id. Viewing the record as a
whole, the circumstantial evidence of patent marking is insufficient to raise a genuine issue of
fact of infringement when the court already has determined that the accused products do not
meet three required limitations of each disputed claim of the ’498 Patent. See, e.g., High
Frequency Prods., Inc. v. Wynn’s Climate Sys., Inc., 91 F.3d 167, 1996 WL 217840, at *2 (Fed.
Cir. Apr. 30, 1996) (unpublished table opinion) (affirming summary judgment against an
infringement claim because, even though the seller mistakenly had marked the products with the
patent number on them, it was undisputed that the patent claims did not cover the accused device
and thus no actual infringement had occurred). Cf. SmithKline Diagnostics, Inc. v. Helena Labs.
Corp., 859 F.2d 878, 890 (Fed. Cir. 1988) (where the patentee had admitted that the product did

19

not infringe the patent, the court did “not accept the proposition that an admittedly noninfringing product can be converted by [marking] estoppel to an infringing product”).
The Shields have presented no substantial reason for the court to revisit its August 24,
2017 Memorandum and Order granting: (1) summary judgment for Neonatal on its declaratory
judgment claim that Neonatal has not infringed the ’498 Patent; and (2) summary judgment
against the Shields’ Counterclaim for patent infringement (Count I). The court thus denies the
Shields’ Motion for Partial Summary Judgment (Doc. 188).
IV.

Neonatal’s Motion for Summary Judgment on Remaining Counterclaims

This ruling leaves Neonatal’s Motion for Summary Judgment on Remaining
Counterclaims. Doc. 185. Neonatal seeks summary judgment against the Shields’ three
remaining counterclaims: (1) breach of a Patent Marketing Agreement (Count IV); (2) breach of
fiduciary duty (Count VI); and (3) intentionally causing or assisting an agent to violate the duty
of loyalty (Count VII). The court addresses each claim, in turn, below.
A. Breach of the Patent Marketing Agreement (Count IV)
The Shields accuse defendants MMG and Scott Norman of breaching of the Patent
Marketing Agreement. Doc. 143 at 18, 20, 23 (Pretrial Order ¶¶ 3.b.29., 4.c.4., 5.b.18–19.).
Neonatal asserts that the court should grant summary judgment against the Shields’ counterclaim
for breach of the Patent Marketing Agreement for two reasons. First, Neonatal contends, the
summary judgment facts establish that MMG and Mr. Norman never committed any material
breaches of the Patent Marketing Agreement. Instead, Neonatal argues, MMG and Mr. Norman
substantially performed their obligations under the Patent Marketing Agreement. And thus,
Neonatal asserts, no reasonable jury could find against them on a claim for breaching that
Agreement. Second, even if the undisputed facts create a genuine issue whether a material

20

breach occurred, Neonatal argues that the Shields’ claim still fails as a matter of law because
they never incurred damages from that breach. The court considers these two arguments, in
separate sections, below.
1. Do the Summary Judgment Facts Create a Genuine Issue
Whether MMG and Mr. Norman Breached the Patent Marketing
Agreement?
In Kansas,4 a breach of contract claim requires: “(1) the existence of a contract between
the parties; (2) sufficient consideration to support the contract; (3) the plaintiff’s performance or
willingness to perform in compliance with the contract; (4) the defendant’s breach of the
contract; and (5) damages to the plaintiff caused by the breach.” Stechschulte v. Jennings, 298
P.3d 1083, 1098 (Kan. 2013) (citations omitted).
Neonatal asserts that no reasonable jury could conclude from the summary judgment
facts that the Shields could establish the fourth element of a breach of contract claim—that
MMG and Mr. Norman breached the Patent Marketing Agreement. A breach of contract is a
“material failure to perform a duty arising under or imposed by agreement . . . .” David v. Hett,
270 P.3d 1102, 1109 (Kan. 2011); see also Pancake House, Inc. v. Redmond By & Through
Redmond, 716 P.2d 575, 578 (Kan. 1986); Dexter v. Brake, 269 P.3d 846, 856 (Kan. Ct. App.
2012) (“A material breach is one in which the promisee receives something substantially less or
different than he or she bargained for.”).
Kansas recognizes and applies the rule of “substantial performance” to contract disputes.
Howarth v. Olivier, 52 P.3d 911, 914 (Kan. 2002) (citing Almena State Bank v. Enfield, 954 P.2d
724, 727 (Kan. Ct. App. 1998)). Under this doctrine, a party need not perform “in exact
correspondence with the contracted obligation.” Almena State Bank, 954 P.2d at 727 (citation

4
The Shields’ counterclaim for breach of the Patent Marketing Agreement is governed by Kansas
law under the doctrine of lex loci contractus. Doc. 143 at 2 (Pretrial Order ¶ 1.d.).

21

and internal quotation marks omitted). Instead, in Kansas, “the doctrine of substantial
performance” considers a party’s performance as complete when “the essential purpose of the
contract is accomplished and that party has made a good-faith attempt to comply with the terms
of the agreement, even though he or she fails to meet the precise terms of the agreement.”
Dexter, 269 P.3d at 856. The doctrine’s purpose is “‘intended to protect the right to
compensation of those who have performed in all material and substantive particulars . . . .’” Id.
(quoting 15 Williston on Contracts § 44:52, at 220–21 (4th ed. 2000)).
“Substantial performance is the antithesis of material breach. If it is determined that a
breach is material, it follows that substantial performance has not been rendered.” Almena State
Bank, 954 P.2d at 727 (citation and internal quotation marks omitted). “Substantial performance
is shown when the following circumstances are established by the evidence: (1) The party made
an honest endeavor in good faith to perform its part of the contract; (2) the results of the
endeavor are beneficial to the other party; and (3) such benefits are retained by the other party.”
Howarth, 52 P.3d at 914 (citing Almena State Bank, 954 P.2d at 727).
Here, Neonatal argues that the Shields assert only technical breaches of the Patent
Marketing Agreement—not material breaches—and thus their breach of contract claim fails as a
matter of law. Specifically, Neonatal contends that the “essential purposes” of the Patent
Marketing Agreement were: (1) to procure a license of the ’498 Patent for the Shields, and (2) to
collect and distribute royalty payments after the Shields entered a license agreement. Neonatal
asserts that the parties accomplished these two purposes. First, it is undisputed that MMG found
the Shields a licensee—Neonatal. This purpose was accomplished when the parties executed the
Exclusive License Agreement. And second, it is undisputed that MMG received and distributed
royalties it received from Neonatal to the Shields.

22

The Shields disagree with Neonatal’s characterization of the Patent Marketing
Agreement’s essential purposes. They contend that MMG and Mr. Norman committed material
breaches of the Patent Marketing Agreement because they never performed certain marketing
consulting services that the contract required them to perform “throughout the term of the
agreement”—not just until the Exclusive License Agreement was signed. See Doc. 194-2 at 1
(Patent Marketing Agreement § 3 (“‘MMG’ Obligations. Throughout the term of this
Agreement, ‘MMG’ shall . . . .”)). Ms. Shields testified that MMG breached the Patent
Marketing Agreement by: (1) failing to develop a database of qualified licensees as the Patent
Marketing Agreement’s section 3(a) requires; (2) never preparing a product prospectus as section
3(h) requires; (3) failing to prepare a financial pro forma as section 3(i) requires; (4) never
producing a media kit as section 3(j) requires; and (5) never developing a webpage for the
products as section 3(k) requires. Ms. Shields also testified that MMG breached section 3(n) of
the Patent Marketing Agreement. That section required MMG to collect and distribute royalties
due within 3 days. But, because an audit revealed that Neonatal had underpaid Mr. and Ms.
Shields by $703.42 between 2010 and 2012, the Shields contend that MMG failed its obligation
to collect royalties due to them.
Viewing the facts in the light most favorable to the Shields, the court cannot conclude
that these alleged breaches of the Patent Marketing Agreement are merely technical or
inadvertent ones. Thus, summary judgment against the breach of contract claim is unwarranted.
Indeed, Kansas defines “substantial performance” as “a relative term, and whether it exists is a
question to be determined in each case with reference to the existing facts and circumstances.”
Howarth, 52 P.3d at 914. And “the question whether substantial performance has taken place is
a question of fact.” Almena State Bank, 954 P.2d at 727.

23

Here, the parties dispute the Patent Marketing Agreement’s essential purposes. Neonatal
asserts that the purpose was to find a licensee and collect royalties—two purposes that the
contract accomplished. The Shields assert that the Patent Marketing Agreement required MMG
to render certain marketing consulting services that it never completed. They have come forward
with admissible evidence to support the existence of these obligations, i.e., the Patent Marketing
Agreement itself. Given this conclusion, the court cannot find, as a matter of law, that MMG
accomplished all the essential purposes of the parties’ Agreement. Instead, the jury must decide
the factual question whether the alleged breaches of the Patent Marketing Agreement were
material ones. See id. at 728 (concluding that “the trial court should not have resolved [whether
substantial performance had occurred] on a motion for summary judgment” because, although
the summary judgment facts showed some performance under the contract, “[w]hether this was
substantial performance is a disputed question of fact not determinable on a motion for summary
judgment.”); see also Firestone v. Hawker Beechcraft Int’l Serv. Co., No. 10-1404-JWL, 2012
WL 683286, at *12 (D. Kan. Mar. 2, 2012) (concluding that a jury must “determine whether the
alleged breaches are material.” (first citing E. Allan Farnsworth, Contracts § 8.16, at 638 (2d ed.
1990); then citing Almena State Bank, 954 P.2d at 727)).
The court thus rejects Neonatal’s first argument supporting its summary judgment
motion. Because the summary judgment facts present a triable issue whether MMG and Mr.
Norman committed material breaches of the Patent Marketing Agreement, the court denies
summary judgment against this claim on this basis.

24

2. Do the Summary Judgment Facts Create a Genuine Issue
Whether the Shields Sustained Damage from a Breach of the
Patent Marketing Agreement?
The court also rejects the second basis advanced by Neonatal to support its summary
judgment motion. Neonatal asserts that the Shields have no admissible evidence showing that
they sustained damage from any alleged breach of the Patent Marketing Agreement. Neonatal
contends that the only damages that the Shields could recover from a breach of the Patent
Marketing Agreement is unpaid royalty payments. But the summary judgment facts establish
that the Shields have received all royalty payments owed to them—including the $703.42 that
Neonatal underpaid the Shields between 2010 and 2012. Neonatal asserts that the Shields were
paid all royalty payments owed, and thus they can recover no other damages for breach of the
Patent Marketing Agreement.
The Shields respond that Kansas law entitles them to recover at least nominal damages
for a breach of contract. The court agrees. See Freeto Constr. Co. v. Am. Hoist & Derrick Co.,
457 P.2d 1, 5–6 (Kan. 1969) (explaining that a claimant asserting a breach of contract is entitled
to recover nominal damages even if no actual damage resulted from the breach); see also Wolfert
Landscaping Co., L.L.C. v. LRM Indus., Inc., 287 P.3d 300, 2012 WL 5392143, at *5 (Kan. Ct.
App. Nov. 2, 2012) (unpublished table opinion) (“As a general rule, when a party establishes a
material breach of contract it is entitled to nominal damages at a minimum.”). So, even if the
Shields cannot prove actual damages from a breach of the Patent Marketing Agreement, Kansas
law still permits their contract claim to survive summary judgment because they could recover a
nominal damage award if they establish a material breach.5

5
The court recognizes that the Shields may not wish to incur the cost of trying a claim where, at
most, they could recover nominal damages. But Kansas law does not allow the court to consider that
pragmatic dynamic when deciding a summary judgment motion.

25

The court thus denies summary judgment against the Shields’ counterclaim for breach of
the Patent Marketing Agreement.
B. Breach of Fiduciary Duty (Count VI) and Intentionally Causing or
Assisting an Agent to Violate the Duty of Loyalty (Count VII)
Neonatal also seeks summary judgment against the Shields’ counterclaims for breach of
fiduciary duty and for intentionally causing or assisting an agent to violate the agent’s duty of
loyalty. Neonatal asserts that the Shields have adduced no admissible evidence that it breached
its fiduciary duty or the duty of loyalty.6 The court agrees with Neonatal.
The Shields accuse MMG and Mr. Norman of breaching fiduciary duties owed to them
under the parties’ contracts. Doc. 143 at 24 (Pretrial Order ¶ 5.b.23–25.). The Shields also
accuse Neonatal and Mr. Norman of causing or assisting MMG to breach its fiduciary duty
arising from the contracts. Doc. 143 at 24 (Pretrial Order ¶ 5.b.26–29.). But the undisputed
summary judgment facts, even when viewed in the Shields’ favor, establish no genuine issue
whether either MMG or Mr. Norman breached any fiduciary duty owed to the Shields.
To survive summary judgment against a breach of fiduciary duty claim under Kansas
law, the summary judgment facts must present a triable issue that: (1) a fiduciary relationship
existed between MMG or Mr. Norman and the Shields; (2) MMG and Mr. Norman owed a duty
to the Shields based on the fiduciary relationship; and (3) MMG or Mr. Norman breached that
duty. Cargill Meat Sols. Corp. v. Premium Beef Feeders, LLC, 168 F. Supp. 3d 1334, 1339 (D.
Kan. 2016) (citing Peterson ex rel. Peterson v. Cmty. Living Opportunities, Inc., 197 P.3d 905,
2008 WL 5401456, at *3 (Kan. Ct. App. Dec. 19, 2008) (unpublished table opinion)).
The Shields contend that MMG and Mr. Norman breached the fiduciary duties owed to
them by: (1) knowingly participating in the breach of the Exclusive License Agreement as

6
These two counterclaims are governed by Kansas law under the doctrine of lex loci delecti. Doc.
143 at 2 (Pretrial Order ¶ 1.d.).

26

agents for the Shields; and (2) knowingly participating in the breach of the Patent Marketing
Agreement. Doc. 143 at 18 (Pretrial Order ¶ 3.b.29.).7 Both the Patent Marketing Agreement
and the Exclusive License Agreement provided that MMG was an “independent contractor.”
Doc. 24-1 at 2 (Patent Marketing Agreement § 3(d) (“‘MMG’ shall act as an independent
contractor and be solely responsible and bear all expenses incurred as a result of ‘MMG’s’ office
facilities and business activities generally.”)); Doc. 122-1 at 8 (Exclusive License Agreement §
10.10.01 (“The parties hereby acknowledge and agree that each is an independent contractor and
that neither party shall be considered representative, master or servant of the other party for any
purpose whatsoever . . . Nothing in this relationship shall be construed to create a relationship of
joint venture, partnership fiduciary, or other similar relationship between the parties.”). But the
Exclusive License Agreement also designated MMG as “agent of [Mr. and Ms. Shields] to
receive all royalty payments, consulting fees, commitment fees, and reports” on the Shields’
behalf. Doc. 122-1 at 3 (Exclusive License Agreement § 7.01.0).
Kansas recognizes two types of fiduciary relationships: “those created by contract and
those implied in law from the surrounding facts and the relationship of the parties.” Daniels v.
Army Nat’l Bank, 822 P.2d 39, 42 (Kan. 1991). Here, Neonatal asserts that the only fiduciary
relationship between the parties arose from a contract—the agency relationship created by the
Exclusive License Agreement. The Shields never challenge this assertion. Also, they never

7
Section 3.b.29. of the Pretrial Order also asserts that MMG and Mr. Norman breached their
fiduciary duties when they knowingly participated in infringing the ’498 Patent and knowingly
misappropriated assets in the form of royalty payments owed to the Shields under the Exclusive License
Agreement. The court already has concluded, as a matter of law, that Neonatal never infringed the ’498
Patent. So, MMG and Mr. Norman never participated in the purported infringement that the Shields rely
on for their fiduciary duty claim. Also, the Shields have adduced no admissible evidence to support their
contention that MMG and Mr. Norman knowingly misappropriated assets in the form of royalty
payments. To the contrary, the summary judgment facts establish that Neonatal—not MMG or Mr.
Norman—underpaid the Shields by $703.42 for royalty payments. The summary judgment facts also
establish that Neonatal reimbursed the Shields by that amount after a royalty audit revealed this
underpayment.

27

argue that a fiduciary relationship arose in some other fashion—whether from some other
contract or set of surrounding facts. And the Shields provide no facts from which the court could
imply that a fiduciary duty existed based on the relationship of the parties.
So, on this record, the court considers whether MMG breached fiduciary duties created
by the Exclusive License Agreement—which made MMG an “agent of [Mr. and Ms. Shields] to
receive all royalty payments, consulting fees, commitment fees, and reports” on the Shields’
behalf. Doc. 122-1 at 3 (Exclusive License Agreement § 7.01.0). An agent owes a fiduciary
duty to its principal—one that “demand[s] trust and confidence” and imposes an “obligation of
individual service and loyalty.” Henderson v. Hassur, 594 P.2d 650, 658 (Kan. 1979) (citation
omitted). So, “[i]n all business transactions affecting the subject matter of an agency, it is the
duty of the agent to act in good faith and with loyalty to further advance the interests of the
principal.” Id. (citations omitted). In other words, an agent is “a fiduciary with respect to
matters within the scope of [the] agency.” Arst v. Stifel, Nicolaus & Co. Inc., 86 F.3d 973, 978
(10th Cir. 1996) (applying Kansas law and citing Restatement (Second) of Agency § 13 (1958)
(further citations omitted)).
Applying these rules, the Kansas Supreme Court has concluded that one who has agreed
to collect money for another acts as an agent and thus owes a fiduciary duty to the other party to
pay it the full amount owed. See Gillespie v. Martin, Pringle, Oliver, Wallace & Swartz, 899
P.2d 478, 480, 482 (Kan. 1995) (concluding that the uncontroverted facts established a defendant
law firm owed a fiduciary duty to the plaintiff which the district court described as a “duty . . . to
pay to plaintiff the full amount of his proceeds to which he was entitled.”).
Here, the summary judgment facts present no genuine dispute whether MMG failed to
receive a royalty payment, consulting fee, commitment fee, or report on the Shields’ behalf as

28

the Exclusive License Agreement required MMG to do as the Shields’ agent. In contrast, the
summary judgment facts establish that an audit of royalty payments for 2010 through 2012
revealed that Neonatal had underpaid Mr. and Ms. Shields by $703.42 over that three-year
period. But nothing in the summary judgment record suggests that Neonatal had attempted to
pay that amount to MMG but that MMG failed to receive the royalty payment. Likewise, the
summary judgment facts establish that Neonatal reimbursed Mr. and Ms. Shields for the
underpayment, thus fully compensating the Shields. None of the summary judgment facts show
that MMG breached a fiduciary obligation it owed the Shields as their agent.
The Shields respond, asserting that “MMG breached its fiduciary duties to the Shields
when it steered them towards a licensee that was affiliated with MMG and then convinced the
Shields to enter into a one-sided license agreement.”8 Doc. 207 at 17. But the Shields never
explain how this alleged conduct could breach a fiduciary duty owed by MMG. Instead, MMG’s
fiduciary duty arises from its agreement to serve as an agent for the Shields under the Exclusive
License Agreement. And, as explained, the summary judgment facts never establish that MMG
breached any duties imposed by that Agreement, i.e., to receive royalty payments, consulting
fees, commitment fees, and reports on the Shields’ behalf.

8
The Shields never argue that MMG and Mr. Norman breached their fiduciary duties by
knowingly participating in a breach of certain provisions of the Patent Marketing Agreement—e.g. the
obligations to develop a database of qualified licensees, prepare a product prospectus, prepare a financial
pro forma, produce a media kit, or develop a webpage. Even if they had made such an argument, the
duties would have arisen from a contract. In other words, this duty would represent a contract duty not
capable of supporting a separate claim for breach of fiduciary duty. See Underground Vaults & Storage,
Inc. v. Cintas Corp., 632 F. App’x 917, 924 (10th Cir. 2015) (recognizing that Kansas law does not allow
a party to recover tort remedies on contract-based claims unless “an independent tort—something
separate from the breach of contract” caused the harm); see also Pipeline Prods., Inc. v. Horsepower
Entm’t, No. 15-4890-KHV, 2017 WL 4536420, at *3 (D. Kan. Oct. 11, 2017) (explaining that the
viability of a breach of fiduciary duty claim turns on whether the plaintiffs alleged the breach of a duty
“independent from defendants’ contractual obligations”). Cf. Burcham v. Unison Bancorp. Inc., 77 P.3d
130, 146 (Kan. 2003) (holding that the plaintiffs could plead both a contract claim and an independent tort
claim for breach of fiduciary duty because “the duties and liabilities [the] plaintiffs attempt[ed] to impose
were not those bargained for in the . . . [contract]. Nor were duties, such as a fiduciary duty, negated by
the contract”).

29

Also, the summary judgment facts won’t support the Shields’ conclusory assertion about
steering. Although the Shields contend that MMG “steered” them towards a licensee who was
affiliated with MMG, the undisputed facts show that Neonatal was not formed until 2006—two
years after the Shields and MMG entered the Patent Marketing Agreement. The Shields concede
that Mr. Norman told the Shields that he would be involved in Neonatal’s management in
addition to his role at MMG before the parties signed the Exclusive License Agreement. Thus,
Mr. Norman never violated any duty of disclosure he owed to the Shields. Cf. Arst, 86 F.3d at
979 (holding that the failure to disclose self-dealing constituted a breach of fiduciary duty under
Kansas law).
In sum, the summary judgment facts viewed in the Shields’ favor establish no triable
issue whether MMG or Mr. Norman breached a fiduciary duty owed to the Shields. The court
thus grants summary judgment against the Shields’ counterclaims for breach of fiduciary duty
(Count VI) and for intentionally causing or assisting an agent to violate the duty of loyalty
(Count VII).
V.

Conclusion

The court makes a final observation about this case. Although not relevant to the
substantive legal issues addressed above, the Shields have argued that “this dispute reeks of
inequity.” Doc. 189 at 13. Ms. Shields developed a device, secured a patent for the device, and
contracted with Neonatal to license her invention. Neonatal then sold a product marked with her
patent number for several years. The Shields enjoyed royalties from those sales until Neonatal
concluded the ’498 Patent did not cover its product. Neonatal then stopped paying the Shields
royalties and haled them into court to assert a noninfringement claim. The Shields assert that
Neonatal’s actions are unjust, and thus the court should revisit its summary judgment ruling on

30

noninfringement because equitable considerations favor letting a jury decide whether Neonatal’s
product infringes the ’498 Patent.
The Shields’ argument here is too little too late. The Shields never asserted a patent
marking estoppel argument when the court considered Neonatal’s Motion for Summary
Judgment on the infringement claims. And now that the Shields have asserted the estoppel
argument, they provide no explanation why they waited to assert the argument until the court
already has decided that the accused devices do not infringe the ’498 Patent. But, even if the
Shields had presented their estoppel argument timely, the fact that Neonatal marked its products
with the ’498 Patent’s number does not require the court to give the Shields the relief sought by
their Motion for Partial Summary Judgment. The Shields ask the court to issue a new summary
judgment ruling that reaches the opposite conclusion that its earlier Order reached, i.e., a new
ruling granting summary judgment for the Shields on their infringement claim and granting
summary judgment against Neonatal’s noninfringement claims. But the fact that Neonatal
marked its products with the ’498 Patent’s number does not establish that the accused devices
infringed the patent as a matter of law. To the contrary, as the court held in its earlier summary
judgment Order, the undisputed facts in this case establish that the accused products do not meet
three required limitations of each disputed claim of the ’498 Patent. And the Shields’ patent
marking estoppel argument provides no reason to revisit that ruling.
Also, importantly, equitable considerations don’t factor into the court’s summary
judgment decision in this case. The court understands why the Shields view the outcome of their
infringement claim as an inequitable one. Frequently, parties who come out on the short end of
the law feel that equity compels the opposite result. But Federal Rule of Civil Procedure 56 does
not permit the court to set aside the undisputed summary judgment facts or the effect of the

31

governing law under those facts. The court has applied Rule 56’s summary judgment standard
both in this Order and its earlier summary judgment ruling. And the Shields’ equitable
arguments can’t justify a different outcome.
So, for reasons explained above, the court denies the Shields’ Motion for Partial
Summary Judgment. Also, the court grants Neonatal’s Motion for Summary Judgment on
Remaining Counterclaims in part but denies that motion in part as well. Specifically, the court
enters summary judgment against the Shields’ counterclaims for breach of fiduciary duty (Count
VI) and intentionally causing or assisting an agent to violate the duty of loyalty (Count VII). The
court denies summary judgment against the Shields’ counterclaim for breach of a Patent
Marketing Agreement (Count IV).
IT IS THEREFORE ORDERED BY THE COURT THAT Neonatal and the
Counterclaim Defendants’ Motion for Summary Judgment on Remaining Counterclaims (Doc.
185) is granted in part and denied in part.
IT IS FURTHER ORDERED THAT the Shields’ Motion for Partial Summary
Judgment (Doc. 188) is denied.
IT IS SO ORDERED.
Dated this 28th day of February, 2018, at Topeka, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge

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