CardiAQ Valve Technologies, Inc. v. Neovasc Inc. et al

Filing 50

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: Accordingly, defendants' motion to dismiss (Docket No. 38 ) is, with respect to plaintiff's claim for correction of inventorship, ALLOWED, but is, with respect to plaintiff's claims for fraud and unfair and deceptive trade practices, DENIED. So ordered."(Moore, Kellyann)

United States District Court
District of Massachusetts
)
CARDIAQ VALVE TECHNOLOGIES, INC.,
)
)
Plaintiff,
)
)
v.
)
)
NEOVASC, INC. and
)
NEOVASC TIARA, INC.,
)
)
Defendants.
)
)

Civil Action No.
14-12405-NMG

MEMORANDUM & ORDER
GORTON, J.
This case arises out of an alleged misuse of confidential
information belonging to plaintiff CardiAQ Valve Technologies,
Inc. (“CardiAQ”) with respect to a prosthetic heart mitral
valve.

CardiAQ’s First Amended Complaint (“FAC”) asserts claims

for relief against defendants Neovasc, Inc. (“Neovasc”) and its
wholly-owned subsidiary, Neovasc Tiara, Inc. (“Neovasc Tiara”),
for 1) correction of inventorship, 2) breach of contract, 3)
breach of implied covenant of good faith and fair dealing, 4)
fraud, 5) misappropriation of trade secrets and 6) unfair and
deceptive trade practices.
Pending before the Court is defendants’ motion to dismiss
the claims for correction of inventorship, fraud and unfair and
deceptive trade practices from the FAC.

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For the reasons that

follow, the motion will be allowed, in part, and denied, in
part.
III. Background
CardiAQ is a medical device company founded by Dr. Arshad
Quadri (“Dr. Quadri”) that aims to develop and commercialize
cost-effective catheter-based heart valve replacement systems.
Its platform technology is a Transcatheter Mitral Valve
Implantation (“TMVI”) system designed to be an alternative to
open-chest surgery for treating mitral regurgitation in the
human heart.
As of 2005, prior to working on mitral valve replacements,
Dr. Quadri worked extensively on developing an aortic valve
replacement, or Transcatheter Aortic Valve Implantation (“TAVI”)
system.

He continued to work on numerous iterations of the TAVI

system after founding CardiAQ and establishing its principal
place of business in Winchester, Massachusetts.
Building on the research in developing the TAVI system,
plaintiff initiated its work on the TMVI system in August, 2008.
By April, 2009, CardiAQ began to file patent applications to
protect the intellectual property that it developed, and was
developing, concerning certain aspects of the TMVI technology.
Plaintiff alleges that, among other inventions, Dr. Quadri
and J. Brent Ratz (“Mr. Ratz”), CardiAQ’s President and Chief
Operations Officer,
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conceived of atrial and ventricular anchoring suitable
for a mitral valve prosthetic to engage a portion of
the mitral valve from an atrial side of the valve
annulus and to engage a portion of the valve from a
ventricular side of the valve annulus, as well as a
deployment method for such anchoring.
Dr.

Quadri

and

Mr.

Ratz

each

assigned

their

respective

ownership interests in these inventions to CardiAQ.
In June, 2009, CardiAQ received an unsolicited email from
Brian McPherson (“Mr. McPherson”), the Vice President of
Operations and President of the Surgical Products division at
Neovasc, offering Neovasc’s biologic tissue materials and
associated development and manufacturing services to CardiAQ.
The email and the company introduction presentation attached to
it represented that Neovasc viewed its customers as industry
partners.

They also represented that Neovasc’s core products

were “implantable pericardial tissue technologies” and the
“ReducerTM stent for refractory angina.”
Neovasc and CardiAQ executed a Non-Disclosure Agreement
(“NDA”) later that month and in July, 2009, CardiAQ signed a
Purchase Order for Neovasc to perform certain services involving
the assembly of heart valves in accordance with CardiAQ’s TMVI
technology.

CardiAQ then began disclosing various aspects of

its confidential and proprietary TAVI and TMVI technology to its
primary points of contact at Neovasc, Mr. McPherson and Randy
Matthew Lane (“Mr. Lane”).

The disclosures included the

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inventions by Dr. Quadri and Mr. Ratz described above as well as
designs, drawings, frames and specifications for successful and
unsuccessful devices that CardiAQ developed through its own
research.
In February, 2010, CardiAQ transferred its principal place
of business to Irvine, California.

It notified Neovasc that

soon it would no longer need an outside valve manufacturer.
From July, 2009 through April, 2010, Neovasc assembled more than
ten valves for CardiAQ pursuant to the parties’ written Purchase
Order contract and under the confidentiality restrictions of the
NDA.
At no point during the parties’ business relationship did
Neovasc disclose that it intended to develop its own TMVI
technology or any form of competing mitral valve product.

In

May, 2010, Neovasc filed its first U.S. patent application
covering TMVI technology, listing only Neovasc personnel as
inventors.

CardiAQ was unaware of the patent application until

January, 2012.

On November 12, 2013, the United States Patent

and Trademark Office issued U.S. Patent No. 8,579,964 (“the ’964
Patent”) to Neovasc.

The ’964 Patent allegedly discloses

various aspects of CardiAQ’s TMVI technology, including the
inventions by Dr. Quadri and Mr. Ratz.

In February, 2014,

CardiAQ learned through a public statement by Neovasc that

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Neovasc had begun developing its transcatheter mitral valve in
2009.
IV.

Procedural history
Plaintiff filed its complaint in June, 2014.

The following

month, Neovasc moved to transfer the case and to dismiss
CardiAQ’s claims for correction of inventorship, fraud and
unfair and deceptive trade practices.

In August, 2014, CardiAQ

filed an amended complaint and defendants subsequently moved to
dismiss the same three claims.

This Court denied defendants’

motion to transfer venue in October, 2014.

It heard oral

argument on defendants’ motion to dismiss the following month.
V.

Defendants’ motion to dismiss
A.

Legal standard

To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim
to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).

The Court must accept all

factual allegations in the complaint as true and draw all
reasonable inferences in the plaintiff’s favor. Langadinos v.
Am. Airlines, Inc., 199 F.3d 68, 69 (1st Cir. 2000).

The Court,

however, need not accept legal conclusions as true. Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949 (2009).

Threadbare recitals of the

legal elements, supported by mere conclusory statements, do not
suffice to state a cause of action. Id.
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Accordingly, a

complaint does not state a claim for relief where the well-pled
facts fail to warrant an inference of any more than the mere
possibility of misconduct. Id. at 1950.
B.

Application
1.

Correction of inventorship

Plaintiff alleges that Dr. Quadri and Mr. Ratz were
wrongfully omitted as inventors of the ‘964 Patent because,
among other reasons, Claim 1 of the patent discloses “inventions
conceived and/or jointly invented” by them.

The only named

inventors of the ‘964 Patent, however, are Mr. Lane and Colin A.
Nyuli of Neovasc.
Although the named inventors in an issued patent are
presumed to be true, correction of inventorship is allowed
whenever “through error an inventor is not named in an issued
patent.” 35 U.S.C. § 256(a); Hess v. Adv. Cardiovascular Sys.,
Inc., 106 F.3d 976, 980 (Fed. Cir. 1997).

Under Section 256,

[t]he court before which such matter is called in
question may order correction of the patent on notice
and hearing of all parties concerned and the Director
shall issue a certificate accordingly.
35 U.S.C. § 256(b).
The Court held a hearing on the defendants’ motion to
dismiss on November 5, 2014 and took the matter under
advisement.

It now concludes that the plaintiff has failed to

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plead sufficient facts to survive the motion to dismiss its
claim for the correction of inventorship.
i.

Sole inventorship

The assignment of inventorship requires “nothing more than
determining who conceived the subject matter at issue.” Sewall
v. Walters, 21 F.3d 411, 415 (Fed. Cir. 1994).

Conception is

therefore “the touchstone of inventorship.” Burroughs Wellcome
Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227 (Fed. Cir. 1994).
It exists only when
a definite and permanent idea of an operative
invention, including every feature of the subject
matter sought to be patented,” is formed in the mind
of the inventor.
Sewall 21 F.3d at 415.
To the extent that CardiAQ is alleging that Dr. Quadri and
Mr. Ratz should be the only named inventors of the ‘964 Patent,
plaintiff must ultimately prove that they conceived every
element of every claim in the patent. Ethicon, Inc. v. U.S.
Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998).

CardiAQ

has not, however, made an allegation that Dr. Quadri and Mr.
Ratz conceived every element of every claim and therefore it has
not sufficiently pled that they should hold sole inventorship of
the ’964 Patent.

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ii.

Joint inventorship

In order to qualify as a joint inventor, “[a] person must
contribute to the conception of the claimed invention.” Eli
Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1359 (Fed. Cir.
2004).

Furthermore,

there must be some element of joint behavior, such as
collaboration or working under common direction, one
inventor seeing a relevant report and building upon it
or hearing another’s suggestion at a meeting.
Kimberly-Clark Corp. v. Procter & Gamble Distrib. Co., 973 F.2d
911, 917 (Fed. Cir. 1992).
Collaboration and joint behavior has always been a “primary
focus” of joint inventorship. Vanderbilt Univ. v. ICOS Corp.,
601 F.3d 1297, 1303 (Fed. Cir. 2010).

While neither contributor

has to conceive the entire invention, “[t]he interplay between
conception and collaboration requires that each co-inventor
engage with the other co-inventors to contribute to a joint
conception.” Id.

Joint inventors need not, however, physically

work together or at the same time, make the same type or amount
of contribution or make a contribution to the subject matter of
every claim in the patent. 35 U.S.C § 116(a).
Defendants contend that the correction of inventorship
claim should be dismissed because plaintiff has failed to plead
specific facts supporting its alleged contribution to the
conception of the invention.

In particular, they assert that

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CardiAQ has not identified the subject matter allegedly
conceived jointly, who was involved or how the alleged
inventions by Dr. Quadri and Mr. Ratz relate to the claims of
the ’964 Patent.
CardiAQ responds that its joint inventorship claim should
survive the motion to dismiss because its allegations of the
disclosure of the inventions by Dr. Quadri and Mr. Ratz and the
subsequent appearance of those inventions in the ’964 Patent are
sufficient to demonstrate joint inventorship.
Even accepting CardiAQ’s assertions as true, the Court
concludes that plaintiff has not pled the required elements for
a claim for joint inventorship because it has not alleged any
collaboration or joint efforts toward the development of the
invention published in the ‘946 Patent.

Defendants’ motion to

dismiss the claim for correction of inventorship will therefore
be allowed.
2.

Fraud

CardiAQ alleges that defendants committed fraud by making
false representations that caused harm to the plaintiff.

The

elements common law fraud in Massachusetts are 1) a false
representation of a material fact, 2) made with knowledge of its
falsity, 3) for the purpose of inducing a party to act thereon
and 4) that the party relied upon the representation as true and

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acted upon it to its detriment. Slaney v. Westwood Auto, Inc.,
366 Mass. 688, 703 (1975).
A party making an allegation of fraud “must state with
particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b).

To satisfy this requirement for

particularity
the pleader usually is expected to specify the who,
what, where and when of the allegedly false or
fraudulent representation.
Alternative Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23,
29 (1st Cir. 2004).

In other words, Rule 9(b) requires the

pleader 1) to specify the allegedly fraudulent statements, 2) to
identify the speaker, 3) to plead when and where the statements
were made and 4) to explain what made the statements fraudulent.
Republic Bank & Trust Co. v. Bear Stearns & Co., 683 F.3d 239,
247 (6th Cir. 2012).
Defendants contend that CardiAQ has failed to plead with
particularity because the FAC doesn’t specify the “who,” “where”
or “when” of the fraud allegation.

The Court disagrees.

CardiAQ’s FAC alleges that, in the email and attachment sent by
Mr. McPherson in June, 2009, Neovasc falsely represented its
products and that it would treat CardiAQ as a partner.
Plaintiff also alleges that Neovasc falsely represented that it
would protect the confidentiality of CardiAQ’s technology in the
NDA executed by the parties later that month.
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CardiAQ maintains

that those representations were fraudulent because Neovasc
intended to induce the disclosure of CardiAQ’s confidential
information and to use that information to develop its own
competing mitral valve product.

Those allegations satisfy the

requirement for pleading with particularity.
Defendants also contend that CardiAQ has failed to plead
two of the elements of the fraud claim.

In particular, they

aver that CardiAQ has not alleged facts showing that the
purported fraudulent statements were false when made or that
Neovasc had knowledge of their falsity.
Taking all factual allegations in the FAC as true, the
Court concludes that CardiAQ has sufficiently pled the elements
of the claim to survive the motion to dismiss.

The FAC alleges

that Neovasc knew “at all times” that it intended to compete
with CardiAQ by developing its own mitral valve product.

While

such an allegation does not necessarily undermine the
truthfulness of Neovasc’s product representations, it suggests
that Neovasc knew that it was falsely claiming that it would
treat CardiAQ as a partner and that it would maintain the
confidentiality of CardiAQ’s disclosures.

Fact discovery will

either bolster or undermine these allegations.
Accordingly, defendants’ motion to dismiss the fraud claim
in the FAC will be denied.

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3.

M.G.L. c. 93A

Chapter 93A prohibits those engaged in trade or commerce
from employing “unfair methods of competition and unfair or
deceptive acts or practices.” M.G.L. c. 93A, § 2.

The statute

provides a territorial limitation such that actions brought
under Chapter 93A can be maintained only if the alleged unfair
and/or deceptive acts “occurred primarily and substantially
within the commonwealth.” M.G.L. c. 93A, § 11.
The “primarily and substantially” inquiry under Chapter 93A
is “fact intensive and unique to each case” and cannot be “based
on a test identified by any particular factor or factors.”
Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438 Mass.
459, 472-73 (2003).

Courts have therefore frequently held that

challenges to the “primarily and substantially” requirement are
not ripe for adjudication at the motion to dismiss stage. See,
e.g., Berklee Coll. of Music, Inc. v. Music Indus. Educators,
Inc., 733 F. Supp. 2d 204, 213 (D. Mass. 2010) (“Due to the
fact-finding process necessarily involved in evaluating the
[primarily and substantially] issue, this particular ground for
challenging a c. 93A claim—absent some extraordinary pleading
concession by a claimant—cannot be resolved on Rule 12 motions”)
(citation and internal quotations omitted); Workgroup Tech.
Corp. v. MGM Grand Hotel, LLC, 246 F. Supp. 2d 102, 118 (D.
Mass. 2003) (“Since a Court does not make [factual] findings
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when ruling on a motion to dismiss, it would seem that a motion
to dismiss is no longer an appropriate vehicle for raising the
[primarily and substantially] issue”).
Moreover, CardiAQ has sufficiently pled its Chapter 93A
claim to survive a “primarily and substantially” challenge
because it alleges that the conduct giving rise to the Chapter
93A claim and the resulting injury occurred while its principals
were located in Massachusetts.

The FAC alleges that Neovasc

breached the NDA, misappropriated trade secrets and fraudulently
induced CardiAQ to share confidential and proprietary
information beginning in 2009.

CardiAQ did not relocate its

principal place of business from Massachusetts to California
until February, 2010.

Whether those allegedly unfair and/or

deceptive acts meet the standard of having occurred “primarily
and substantially” within Massachusetts is a question to be
addressed after discovery.
Defendants’ motion to dismiss plaintiff’s claim under
M.G.L. c. 93A will therefore be denied.

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ORDER
Accordingly, defendants’ motion to dismiss (Docket No. 38)
is, with respect to plaintiff’s claim for correction of
inventorship, ALLOWED, but is, with respect to plaintiff’s
claims for fraud and unfair and deceptive trade practices,
DENIED.

So ordered.
/s/ Nathaniel M. Gorton __
Nathaniel M. Gorton
United States District Judge
Dated November 6, 2014

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