Trudell Medical International v. D R Burton Healthcare, LLC
Filing
192
ORDER denying 153 Motion to Dismiss for Lack of Jurisdiction. Counter defendant Monaghan's motion to dismiss for lack of jurisdiction is DENIED WITHOUT PREJUDICE. [DE 153]. Judge Swank's order denying defendant's motion to compel is AFFIRMED. [DE 159]. Signed by District Judge Terrence W. Boyle on 2/21/2021. (Stouch, L.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
No . 4:18-CV-9-BO
TRUDELL MEDICAL INTERNATIONAL,)
)
Plaintiff,
)
)
V.
)
DR BURTON HEALTHCARE, LLC,
Defendant.
DR BURTON HEALTHCARE, LLC,
Counterclaim Plaintiff,
V.
ORDER
)
)
)
)
)
)
)
)
)
)
TRUDELL MEDICAL INTERNATIONAL )
and MONAGHAN MEDICAL CORP.
)
)
Counterclaim Defendants.
)
This cause comes before the Court on defendant' s appeal of Magistrate Judge Kimberly A.
Swan.k' s denial of its motion to compel the production of documents and counterclaim defendant
Monaghan Medical ' s motion to dismiss for lack of personal jurisdiction and improper venue. For
the following reasons, defendant ' s appeal is denied and counterclaim defendant Monaghan' s
motion to dismiss is denied without prejudice.
BACKGROUND
Trudell Medical International (Trudell) is a partnership organized and existing under the
laws of Canada, with its principal place of business in Ontario, Canada. Trudell is a medical
device company that designs, develops, and sells an oscillating positive expiratory pressure
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 1 of 10
(OPEP) device called the Aerobika. Trudell manufacturers the Aerobika device in Canada, which
it then sells to its affi liate, Monaghan Medical Corp. (Monaghan). Monaghan, a New York
corporation, markets and sells the Aerobika device throughout the United States, including in
North Carolina.DR Burton Healthcare, LLC (DRB), is a medical device company based in
Farmville, North Carolina, which designs, develops, manufactures, and sells various respiratory
devices, included the vPEP, which is an OPEP device. The Aerobika competes directly with
DRB ' s devices for sales in the OPEP product market.
On January 29, 20 18, Trudell sued DRB, asserting claims for infringement of U.S . Patent
No . 9,808,588, entitled "Oscillating Positive Respiratory Pressure Device." Trudell filed a First
Amended Complaint on June 20, 2018 and a Second Amended Complaint on May 9, 2019. On
May 23 , 2019, DRB filed its answer and affirmative defenses and counterclaims to the Second
Amended Complaint, as well as moved to join Monaghan as a counterclaim defendant. Trudell
fi led its opposition to DRB ' s motion fo r leave to add Monaghan and moved to dismiss the
counterclaims on June 13, 2019, but Magistrate Judge Kimberly A. Swank subsequently denied
Trudell ' s motion to dismiss and granted DRB ' s motion to join Monaghan.
On June 15, 2020, Monaghan moved to dismiss the counterclaims against it for lack of
personal jurisdiction and improper venue. The counterclaims directed at both Trudell and
Monaghan, and which are therefore at issue here, are counterclaims three through five, for
Lanham Act false advertising under 15 U.S .C. § 1125(a), civil conspiracy, and unfa'ir and
deceptive trade practices. In its counterclaims, DRB claims that Trudell and Monaghan, acting in
concert, published false or misleading representations concerns DRB ' s vPEP to influence the
purchasing decisions of target customers to DRB ' s detriment. On July 13, 2020, DRB moved for
jurisdictional discovery related to an issue presented in Monaghan ' s motion to dismiss . On
2
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 2 of 10
February 8, 2021, Judge Swank granted the motion for jurisdictional discovery in part and denied
it in part.
During discovery, DRB requested all documents related to the settlement in the patent
infringement lawsuit captioned Monaghan Medical Corp. v. Smiths Medical ASD, Inc. , (DEDl 7-cv-00712) (Smiths Case) . In that case, Monaghan filed a complaint for a declaratory
judgment that the Aerobika, the alleged patented device in this case before the Court, does not
infringe U.S. Patent No . 7,059,324, owned by Smiths Medicals ASD, Inc. (Smiths). DRB made
an oral motion to compel production of documents relating to the Smiths Case , and both parties
fi led briefs. On June 30, 2020, Judge Swank denied DRB ' s motion to compel. On June 15 , 2020,
DRB filed an order appealing Judge Swank ' s decision in that case.
DISCUSSION
Motion to Dismiss
Monaghan seeks dismissal of the counterclaims for lack of personal jurisdiction. Fed R.
Civ. P. 12(b)(2). Where a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff
has the burden of showing that jurisdiction exists. See New Wellington Fin. Corp. v. Flagship
Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir. 2005); Young v. FD.IC, 103 F.3d 1180, 1191 (4th
Cir. 1997). When a court considers a challenge to personal jurisdiction without an evidentiary
hearing and on the papers alone, it must construe the relevant pleadings in the light most favorab le
to the p laintiff. Combs v. Bakker, 886 F.2d 673 , 676 (4th Cir. 1989).
"A federal district court may exercise personal jurisdiction over a foreign corporation only
if: (1 ) such jurisdiction is authorized by the long-arm statute of the state in which the district court
sits and (2) app lication of the relevant long-arm statute is consistent with the Due Process Clause
of the Fourteenth Amendment. " Universal Leather, LLC v. Karo AR, SA ., 773 F.3d 553 , 558 (4th
3
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 3 of 10
Cir. 2014). The North Carolina long-arm statute "permits the exercise of personal jurisdiction to
the outer limits allowable under federal due process," so the determinative question is whether a
plaintiff has made a showing that a defendant " had sufficient contacts with North Carolina to
satisfy constitutional due process." Id. at 558- 59. In order to determine whether there is specific
jurisdiction over a defendant, the Court applies a three-part test: " (1) whether and to what extent
the defendant ' purposely availed ' itself of the privileges of conducting activities in the forum state,
and thus invoked the benefits and protections of its laws, (2) whether the plaintiffs claim arises
out of those forum-re lated activities, and (3) whether the exercise of jurisdiction is constitutionally
' reasonable."' Ricks v. Armstrong Int '!, Inc., No. 4:14-CV-37-BO, 2014 U.S. Dist. LEXIS 86600,
at *7 (E.D.N.C. June 23 , 2014) (quoting Christian Sci. Bd. of Dirs. Of the First Church of Christ,
Sci. v. Nolan, 259 F.3d 209, 215- 16 (4th Cir. 2001)).
Rule 12(b)(3) of the Federal Rules of Civil Procedure provides for dismissal of a complaint
that is fi led in an improper venue. Venue is proper in "a judicial district in which a substantial part
of the events or omissions giving rise to the claim occurred;" a judicial district in which any
defendant resides, if all defendants are residents of the state in which the district located; or any
judicial district in which any defendant is subject the court's personal jurisdiction in the action, if
there is no other district in which the action may be brought. 28 U.S.C . § 1391(b). The standards
for deciding a motion to dismiss for lack of personal jurisdiction and a motion to dismiss for lack
of venue are the same. lHFC Properties, LLC v. APA Marketing, Inc., 850 F. Supp. 2d 604,615
(M.D.N .C. 2012). If a case is filed "in the wrong division or district," the district court in which it
is filed "shall dismiss, or if it be in the interest of justice, transfer such case to any district or
division in which it could have been brought." 28 U.S .C. § 1406(a). If venue is proper, a motion
to change venue must be brought under 28 U.S.C . § 1404.
4
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 4 of 10
On February 8, 2021 , Judge Swank granted DRB 's motion for jurisdictional discovery,
requiring Monaghan to respond to interrogatories and document production requests proposed by
DRB. As Judge Swank noted, DRB alleged that emails obtained in discovery showed that
Monaghan delivered allegedl y false advertising documents to its sales representatives/territory
managers and district managers for distribution. DRB further argued that jurisdictional discovery
would allow DRB to show that Monaghan distributed the false advertising documents in North
Carolina. As DRB itself notes, DRB ' s claim of personal jurisdiction is based on the allegation that
Monaghan purposefully directed wrongful conduct to North Carolina by sending the false
advertising documents to recipients in North Carolina. As a result, the information produced during
jurisdictional discovery wil lbe determinative in reso lving the motion to dismiss. The Court denies
Monaghan's motion to dismiss for lack of jurisdiction and improper venue without prejudice, to
be refiled if appropriate based on the outcome of jurisdictional discovery .
Appeal of Order Denying Motion to Compel
Title 28 U.S.C. § 636, Rule 72 of the Federal Rules of Civil Procedure, and this Court's
local rules authorize magistrate judges to decide certain non-dispositive pretrial measures,
including motions related to discovery disputes. 28 U.S.C. § 636(b)(l)(A); Fed. R. Civ. P. 72(a);
Local Civil Rule 72.3(b). Upon timely appeal by an objecting party, a district judge must
"modify or set aside any part of the order that is clearly erroneous or contrary to law." Fed. R.
Civ. P. 72(a), 28 U.S.C. § 636(b)(l)(A) . "A factual finding is clearly erroneous when [a court is]
' left with the definite and firm conviction that a mistake has been committed."' TFWS, Inc. v.
Franchot, 572 F.3d 186, 196 (4th Cir. 2009) (quoting Anderson v. Bessemer City, 4 70 U.S. 564,
573 (19 85)); see also United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). A
ruling that is contrary to law is one where "the magistrate judge has misinterpreted or misapplied
5
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 5 of 10
applicable law." Kounelis v. Sherrer, 529 F. Supp. 2d 503, 518 (D.N.J. 2008). "Although the
' contrary to law' standard permits plenary review oflegal conclusions, decisions related to
discovery disputes and scheduling are accorded greater deference. Johnson v. City of
Fayetteville , No. 5:12-CV-456-F, 2013 U.S. Dist. LEXIS 111289, at *8 (E.D.N.C. Aug. 5, 2013)
(quoting PowerShare, Inc. v. Syntel, Inc. , 597 F.3d 10, 15 (1st Cir. 2010) (citing In re
Outsidewall Tire Lit., 267 F.R.D. 466,470 (E. D. Va. 2010)).
Rule 26 of the Federal Rules of Civil Procedure provides that parties "may obtain
discovery regarding any nonprivileged matter that is relevant to any party ' s claim or defense and
proportional to the needs of the case .... " Fed. R. Civ. P. 26(b)(l). "Information within this
scope of discovery need not be admissi bl e in evidence to be discoverable. " Id. Relevance has
been "broadly construed to encompass ' any possibility' that the information sought may be
relevant to the claim or defense of any party." Johnson , 20 13 U.S . Dist. LEXIS 111289, at *8
(quoting EEOC v. Sheffield Fin. LLC, No. 1:06CV889, 2007 U.S . Dist. 43070, at *9-10
(M.D .N.C. June 12, 2007); Merrill v. Waffle House, Inc., 227 F.R.D. 467,473 (N.D. Tex. 2005)).
The Court has substantial discretion to manage discovery. Lone Star Steakhouse & Saloon, Inc.
v. Alpha of Va., Inc., 43 F.3 d 922, 929 (4th Cir. 1995). Rule 37 all ows a party to move to compel
discovery if "a party fails to answer an interrogatory submitted under Rule 33 " or fai ls to
produce or make available for inspection documents requested pursuant to Rule 34. Fed. R. Civ.
P. 37(a)(3)(B)(iii), (iv). Federal Circuit precedent applies to discovery di sputes in patent cases
when relevance is at issue, including disputes relating to settlement agreements. See Volumetrics
Med. Imaging, LLC v. Toshiba Am. Med. Sys., Inc. , No 1:05CV955, 20 11 U.S . Dist. LEXIS
65422, at * 16- 18 (M.D.N.C. June 20, 2011) (citations omitted).
6
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 6 of 10
A common approach to calculating the alleged damages in a patent-infringement case is
to determine a reasonable royalty rate. See 35 U.S .C. § 284 ("Upon finding for the claimant the
court shall award the claimant damages adequate to compensate for the infringement, but in no
event less than a reasonable royalty for the use made of the invention by the infringer."); Lucent
Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 , 1324-25 (Fed. Cir. 2009). A reasonable royalty is
the amount a person desiring to manufacture, import, use, or sell a produce covered by a patent
would be willing to pay as a royalty. Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750
F.2d 1552, 1568 (Fed. Cir. 1984). To calculate the reasonable royalty rate, courts consider fifteen
factors set out in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116,
11120 (S.D .N .Y. 1970). These factors include the royalties received by the patentee for the
licensing of the patent in suit, the rates paid by the license for the use of other parents
comparable to the patent in suit, the portion of the profit or of the selling price that may be
customary in the particular business or in comparable businesses to allow for the use of the
invention or analogous invention, and the amount that a licensor and a licensee would have
agreed upon at the time the alleged infringement began if both had been reasonably and
vo luntarily trying to reach an agreement. Id.
Here, the order denying the motion to compel is not contrary to law and should therefore
be affirmed. There is a "longstanding disapproval of relying on settlement agreements to
establish reasonable royalty damages," and such reliance is only permitted "under certain limited
circumstances." LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 77 (Fed. Cir. 2012)
(citation omitted). These agreements are not necessarily probative because "the hypothetical
reasonable royalty calculation occurs before litigation and that litigation itself can skew the
results of the hypothetical negotiation. " ResQNet.com, Inc. v. Lansa, Inc. , 594 F.3d 860, 872
7
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 7 of 10
(Fed. Cir. 2010) (citation omitted). Courts have allowed settlement licenses, however, when they
were "the most reliable license in [the] record." See id. at 870-72 (allowing a settlement license
to the patents-in-suit in a running royalty form when it was "the most reliable license in [the]
record" when compared to other licenses that did not "even mention[] the patents in suit or
show[] any other discernible link to the claimed technology"); Stragent, LLC v. Intel Corp., No.
6: 11-cv-421 , 2014 U.S. Dist. LEXIS 106167 (E.D. Tex. Mar. 6, 2014) (allowing licenses
reflecting litigation settlements whether they were the "only licenses in the record and cover[ ed]
the patents-in-suit" (emphasis in original)). However, these limited circumstances do not apply
here. DRB produced documents evidencing its own May 20 15 licensing discussions with a
potential distributor, Teleflex, Inc., for its intellectual property covering the device in this case,
as well as a distribution agreement with Vyaire Medical , Inc. Contrary to DRB 's argument that
comparing a licensing agreement to a distribution agreement is an apples-to-orange comparison,
other courts have found distribution agreements to be "sufficiently ' comparable' to be probative
of the hypothetical negotiation." SSL Servs., LLC v. Citrix Sys. , 940 F. Supp. 2d 480, 489-90
(E.D. Tex. 2013).
Furthermore, this particular settlement agreement is irrelevant to the reasonable royalty
calculation. Volum etrics Med. Imaging, 2011 U.S . Dist. LEXIS at 65422 , at *54-55 (finding a
" blanket assertion that licenses rising from settlement agreements generally lack any relevance to
a reasonable royalty determination" insufficient to prevent discovery of settlement agreements
when plaintiff has "offered no argument that anything about the particular licensing agreements
contained in its settlement agreements . .. render[ ed] them irrelevant to the reasonably royalty
calculation"). As Judge Swank noted in her order, the settlement agreement does not contain
enough information to reliably estimate, or that would reasonably lead to information from
8
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 8 of 10
which one could reliably estimate, "the economic demand for the claimed technology. "
Laser Dynamics, 694 F.3d at 77 (quoting ResQNet, 594 F.3d at 872). An in camera review of the
settlement agreement confirmed that the settlement agreement does not contain a particular
royalty rate for the use of the patents at issue in the Monaghan case, and an attempt to parse such
an economic valuation of the patents at issue in Monaghan from the settlement agreement's total
economic valuation would be pure speculation and , therefore, improper. See ResQNet, 594 F.3d
at 869 (" [A] reasonable royalty analysis requires a court to hypothesize, not to speculate .").
Additionally, the Monaghan case involved claims and a case posture that are radically different
than the claims and posture in this case, making that settlement agreement irrelevant to
determining the economic link between infringement and the patents. Id. (" At all times, the
damages inquiry must concentrate on compensation for the economic harm caused by the
infringement of the claimed invention."). The Court's responsibility is to determine a reasonably
royalty rate based upon a hypothetical negotiation, and a settlement agreement that does not
contain information about economic valuation is irrelevant. Dow Chem. Co. v. United States, 36
Fed. Cl. 15, 22 (1996) ("The negotiation does not include . . . settlement agreements or other
evidence not relevant to value.").
CONCLUSION
For the foregoing reasons, counter defendant Monaghan ' s motion to dismiss for lack of
jurisdiction is DENIED WITHOUT PREJUDICE. [DE 153]. Judge Swan.k's order denying
defendant' s motion to compel is AFFIRMED. [DE 159].
9
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 9 of 10
SO ORDERED, this
d/
day of February, 2021.
~MiJ'Jf!T
RRENCEW.B0YLE
UNITED STATES DISTRICT JU~
10
Case 4:18-cv-00009-BO-KS Document 192 Filed 02/22/21 Page 10 of 10
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?