Polyzen, Inc. v. Radiadyne, LLC

Filing 165

ORDER - the court GRANTS Polyzen's motion for reconsideration [D.E. 146] and denies RadiaDyne's earlier motion for partial summary judgment on RadiaDyne's breach of contract claim [D.E.112]. The court DENIES RadiaDyne's motion for judgment on the pleadings [D.E. 160]. The court GRANTS RadiaDyne's motions to seal [D.E. 149, 153, 156]. Signed by Chief Judge James C. Dever III on 8/7/2015. (Jenkins, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:11-CV-662-D

POLYZEN, INC.,
Plaintiff,
v.
RADIADYNE, LLC,
Defendant

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ORDER

On February 18, 2015, the court granted in part and denied in part RadiaDyne's motion for
partial summary judgment on Polyzen's trade secret misappropriation claim, granted RadiaDyne's
motion for partial summary judgment on RadiaDyne's breach of contract claim, and requested
supplemental briefing on the question of remedy for Polyzen's breach of contract. See [D.E. 142].
On March 6, 2015, Polyzen moved for the court to reconsider its order granting summary judgment
to RadiaDyne on RadiaDyne's breach of contract claim [D.E. 146]. On March 6 and 16, 2015,
Polyzen and RadiaDyne also submitted their respective memoranda and replies on the question of
remedy [D.E. 147-48, 151-52]. On March 30, 2015, RadiaDyne responded in opposition to
Polyzen' s motion for reconsideration [D.E. 155]. On April 7, 2015, RadiaDyne moved for judgment
on the pleadings on Polyzen's patent infringement claim [D.E. 160] and filed a supporting
memorandum [D.E. 161]. On April 14, 2015, Polyzen replied in support of its motion for
reconsideration and requested a hearing [D.E. 162]. On May 1, 2015, Polyzen responded in
opposition to RadiaDyne' s motion for judgment on the pleadings and requested a hearing [D.E. 163].
As explained below, the court grants Polyzen' s motion for reconsideration and denies RadiaDyne' s
motion for judgment on the pleadings.

I.
"[A]n order of partial summary judgment is interlocutory in nature." Am. Canoe Ass'n v.
Murphy Farms. Inc., 326F.3d 505,514 (4thCir. 2003); see Fed. R. Civ. P. 54(b). "[A] district court
retains the power to reconsider and modify its interlocutory judgments, including partial summary
judgments, at any time prior to final judgment when such is warranted." Am. Canoe Ass 'n, 326 F .3d
at 514-15. This power is "committed to the discretion of the district court." Id. at 515. In the
exercise of that discretion, the court generally follows its previous orders unless these "exceptional
circumstances" are present: "(1) a subsequent trial produces substantially different evidence, (2)
controlling authority has since made a contrary decision of law applicable to the issue, or (3) the
prior decision was clearly erroneous and would work manifest injustice." Id. at 515-16; Sejman v.
Warner-Lambert Co., 845 F.2d 66, 69 (4th Cir. 1988) (quotation omitted); see also Pharmanetics.
Inc. v. Aventis Pharm.. Inc., No. 5:03-CV-817-FL(2), 2005 WL 6000369, at *3-4 (E.D.N.C. May
4, 2005) (unpublished). "Law of the case is just that however, it does not and cannot limit the power
of a court to reconsider an earlier ruling." Am. Canoe Ass'n, 326 F.3d at 515. "The ultimate
responsibility of the federal courts, at all levels, is to reach the correct judgment under law." Id.
Polyzen argues that the court's February 18, 2015 order ''would work a manifest injustice."
Pl.'s Mot. Reconsideration [D.E. 146] 1. In support, Polyzen makes three main arguments: (1)
Polyzen's ownership of the '497 patent does not conflict with RadiaDyne's rights under the 2008
DCA; (2) the DCA explicitly acknowledges patent ownership by Polyzen; and (3) the intellectual
property rights that the DCA granted to RadiaDyne are different in scope from the '497 patent. ld.
3-12. The court addressed the flrst two arguments in its order, and Polyzen' s arguments do not merit
reconsideration. See [D.E. 142] 7-12, 8 n.2. Polyzen's third argument, which it makes (at least
clearly) for the fust time, presents a more interesting question.

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A patentee may assign, grant, and convey "(1) the whole patent, comprising the exclusive
right to make, use, and vend the invention throughout the United States; or (2) an undivided part or
share of that exclusive right; or (3) the exclusive right under the patent within and throughout a
specified part of the United States." Waterman v. Mackenzie, 138 U.S. 252,255 (1891); see Enzo
APA & Son. Inc. v. Geapag A.G., 134 F.3d 1090, 1093 (Fed. Cir. 1998); Rite-Hite Corp. v. Kelley
Co., 56 F.3d 1538, 1551 (Fed. Cir. 1995) (en bane). "Any assignment or transfer, short of one of
these, is a mere license, giving the licensee no title in the patent .... " Watermmt,138 U.S. at 255;
Rite-Hite, 56 F.3d at 1551-52.
Polyzen argues that the scope of the '497 patent is broader than the definition ofRadiaDyne
Product in the 2008 DCA. Pl.'s Mot. Reconsideration [D.E. 146] 6-11. First, Polyzen argues that
claim 1 "does not define any particular shape nor any particular medical purpose" and is broader than
the design of the rectal balloon catheter. Id. 10. Polyzen then argues that claims 2, 3, and 5 add a
shape to the medical balloon device that is used not only in the RadiaDyne rectal balloon catheter
but also may be used in other medical devices to form different shapes, all with the "distal bulge"
referenced in those claims. Id.; see '497 Patent [D.E. 116-1] 9. Polyzen's final (and perhaps most
cogent) argument is that claim 4 of the '497 patent includes characteristics that are not included in
the design of the rectal balloon catheter that the 2008 DCA assigns to RadiaDyne. See Pl.'s Mot.
Reconsideration [D.E. 146] 10 ("Claim 4 adds: 'to form an arcuate shape' which is one of the many
specifically non-prostate embodiments of Figure 5."). Tilak Shah testified that an embodiment of
this "arcuate shape" was designed for "open heart massage." [D.E. 146-3] ~ 8. Christopher Strom
testified that the "arcuate shape" in claim 4 was narrower in definition than a distal bulge and that
Isham did not request this shape. [D.E. 155-1] 21-22 ("An arcuate shape ... could be a bulge, but
a bulge isn't necessarily an arcuate shape.").

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This last argument and testimony suggest that there is a genuine issue of material fact
regarding whether the scope of the '497 patent is broader than the definition ofRadiaDyne Product,
with specific reference to claim 4. If the '497 patent's scope is broader, then, because ownership of
a portion of a patent cannot be assigned, see Waterman, 138 U.S. at 255, the 2008 DCA did not
require Polyzen to transfer ownership of the entire patent to RadiaDyne. Instead, as Polyzen
concedes, the 2008 DCA called for Polyzen to grant an exclusive license to RadiaDyne to some
portion of the '497 patent. Pl.'s Mot. Reconsideration [D.E. 146] 14. 1
This conclusion does not resolve the motion for reconsideration, which turns instead on
whether Polyzen breached the 2008 DCA when it filed the '497 patent and failed to explicitly grant
an exclusive license to RadiaDyne for the RadiaDyne Product. Specifically, did the 2008 DCA, by
operation oflaw, create an exclusive license for RadiaDyne when the '497 patent issued? If so, then
Polyzen did not breach the 2008 DCA when it assigned the '497 patent to itself. If the 2008 DCA
did not automatically create an exclusive license for RadiaDyne, then Polyzen's failure to explicitly
grant a license to RadiaDyne may constitute a breach of the 2008 DCA.
"[T]he question of whether a patent assignment clause creates an automatic assignment or
merely an obligation to assign" is a question of federal law. Bd. of Trs. of Leland Stanford Junior
Univ. v. Roche Molecular Sys.. Inc., 583 F.3d 832, 841 (Fed. Cir. 2009). Contractual language that
"'agree[s] to assign' reflects a mere promise to assign rights in the future, not an immediate transfer
of expectant interests." Id. Conversely, contractual language that expressly grants an interest in a
patent may, by operation of law, effect transfer of title without further action. See, ~' FilmTec

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An exclusive license carries with it not only the right of the licensee to be free from suit but
also the right to sue patent infringers. See Rite-Hite, 56 F.3d at 1552 (noting that an "exclusive
licensee" "may possess sufficient interest in the patent to have standing to sue as a co-plaintiff with
the patentee").
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Corp. v.Allied-Signallnc., 939F.2d 1568,1573 (Fed. Cir.1991). For example, "[i]fanassignment
of rights in an invention is made prior to the existence of the invention, this may be viewed as an
assignment of an expectant interest. . . . Once the invention is made and an application for patent
is filed, however, legal title to the rights accruing thereunder would be in the assignee .... " ld. at
1572; seeFilmTec Corp. v. Hydranautics, 982F.2d 1546, 1553 (Fed. Cir. 1992) (finding that, where
an employment contract expressly granted the government the rights to an employee's inventions,
''when the invention was conceived by [the employee], title to that invention immediately vested in
the United States by operation of law").
In Roche, the Federal Circuit compared two contracts with different results. In the first
contract, Holodniy, a Stanford employee, recited that "I agree to assign or confirm in writing to
Stanford" that the inventions would be assigned to Stanford or the government, as required. Roche,
583 F.3d at 841 (emphasis omitted). The court held that"[w ]hile Stanford might have gained certain
equitable rights against Holodniy, Stanford did not immediately gain title to Holodniy's inventions
as a result of the [contract], nor at the time the inventions were created." ld. at 841-42 (internal
quotation omitted). The second contract that Holodniy entered into stated that Holodniy ''will assign
and do[es] hereby assign to [employer] my right, title, and interest in each of the ideas, inventions
and improvements." Id. at 842 (emphasis omitted). The Roche court held that the language of"do
hereby assign" "effected a present assignment ofHolodniy' s future inventions." ld.; see Speedplay.
Inc. v. Bebop. Inc., 211 F.3d 1245, 1253 (Fed. Cir. 2000)(holdingthatcontractuallanguageof"shall
belong" and "hereby conveys, transfers and assigns" created a present assignment); Arachnid. Inc.
v. Merit Indus .. Inc., 939 F.2d 1574, 1576, 1580-81 (Fed. Cir. 1991) (holding that contractual
language of ''will be assigned" did "not rise to the level of a present assignment of an existing
invention, effective to transfer all legal and equitable rights therein"); Allied-Signal, 939 F .2d at
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1570, 1573 (holding that contractual language of"agrees to grant and does hereby grant" created a
present assignment). Although these cases deal specifically with assignments of patents, the
principle of conveyances by operation of law is analogous to the creation of licenses.
The relevant contractual language in the 2008 DCA states that "RadiaDyne Product will
remain the propert[y] ofRadiaDyne." 2008 DCA [D.E. 109-16] 4 (paragraph 6.a). "Remain" means
''to continue unchanged in form, condition, status, or quantity" or "continue to be." Webster's Third
New International Dictionazy 1919 (1993). "Will remain" arguably falls into a grey zone between
the strong operative language of "does hereby grant," which unambiguously creates a present
interest, and the future-focused language of ''will be assigned," which creates only an equitable
interest and not legal title. Cf. Roche, 583 F .3d at 841 (noting that a promisee "might have gained
certain equitable rights" against the inventor where the contract contained an agreement to assign);
Arachnid, 939 F.2d at 1581 ("Although an agreement to assign in the future inventions not yet
developed may vest the promisee with equitable rights in those inventions once made, such an
agreement does not by itself vest legal title to patents on the inventions in the promisee."). The most
natural reading, however, creates a present legal interest in RadiaDyne in an exclusive license. "Will
remain" suggests that the RadiaDyne Product always has been and continues to be the property of
RadiaDyne; there was no additional right that needed to be assigned when the '497 patent application
was filed and when the '497 patent issued. Thus, the 2008 DCA created by operation of law an
exclusive license for RadiaDyne to the claims of the '497 patent covered by the definition of
RadiaDyne Product. See Roche, 583 F.3d at 842 (noting that a present assignment creates a legal
title in the patent "no later than the parent application's filing date"); Tilak Shah 30(b)(6) Dep. [D.E.
132-1] 192 (Polyzen filed its provisional patent application on September 25, 2007). With the
automatic issuance of an exclusive license, Polyzen did not breach the terms of the 2008 DCA

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because it transferred to RadiaDyne, to the extent legally possible, the patent rights that the 2008
DCA created in RadiaDyne.
Here, there is a genuine issue of material fact as to the scope of the '497 patent and whether
the 2008 DCA required Polyzen to assign the '497 patent to RadiaDyne or grant an exclusive license
to specific claims of that patent. If the 2008 DCA required Polyzen to grant an exclusive license,
the 2008 DCA also created that license by operation oflaw, thereby avoiding the breach of contract
that the court previously determined occurred. Thus, the court grants Polyzen' s motion for
reconsideration [D.E. 146] and denies RadiaDyne's motion for partial summary judgment on its
breach of contract claim [D.E. 112].

II.
RadiaDyne has moved under Ru1e 12(c) for judgment on the pleadings with respect to
Polyzen'spatentinfringementclaim. SeePed. R. Civ. P. 12(c); [D.E. 160]. Acourtru1ingonaRu1e
12(c) motion for judgment on the pleadings applies the same standard as a Ru1e 12(b)(6) motion to
dismiss. See Mayfield v. Nat'l Ass'n for Stock Car Auto Racing. Inc., 674 F.3d 369, 375 (4th Cir.
2012); Burbach Broad. Co. of Del. v. Elkins Radio Cor,p., 278 F.3d 401,405--06 (4th Cir. 2002).
In opposition to RadiaDyne's motion, Polyzen argues that, whatever the scope of
RadiaDyne's exclusive license to the '497 patent, the authority to make the rectal balloon catheter
was not included. See Pl.'s Mem. Opp'n Mot. J. Pleadings [D.E. 163] 2; see also 35 U.S.C. § 271
(noting that a party may infringe a patent if that party "makes, uses, offers to sell, or sells any
patented invention" without authority (emphasis added)). If the 2008 DCA creates an exclusive
license in the '497 patent and does not require an assignment of that patent, there is a genuine issue
of material fact as to the scope of the exclusive license. In paragraph 6.b of the 2008 DCA, Polyzen
granted to RadiaDyne the "non-exclusive rights to use, sale [sic] and have sold ... Device Process

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Technology for RadiaDyne Product application." [D.E. 109-16] 4 (paragraph 6.b). Device Process
Technology, in turn, is defined in part as the "fabrication processes ... to manufacture specific
product for RadiaDyne." ld 2 (paragraph 2.c). Polyzen also granted to RadiaDyne the "exclusive
rights to use, sale [sic] and have sold ... Balloon Process Technology for RadiaDyne Product
application." Id. 4 (paragraph 6.c). Finally, paragraph 6.d, which relates to a manufacturing and
supply agreement, notes that under certain conditions Polyzen would agree to "grant non-exclusive
license to make and have made to RadiaDyne" for Polyzen' s intellectual property. ld. (paragraph
6.d).
Assuming that the 2008 DCA created an exclusive license in the '497 patent for RadiaDyne
and did not require an assignment of the patent, a genuine issue of material fact exists concerning
whether the exclusive license granted to RadiaDyne with respect to some claims of the '497 patent
includes the authority to make the device in question. Judgment on the pleadings is inappropriate.
Accordingly, the motion for judgment on the pleadings is denied.

III.
In sum, the court GRANTS Polyzen's motion for reconsideration [D.E. 146] and denies
RadiaDyne' s earlier motion for partial summary judgment on RadiaDyne' s breach of contract claim
[D.E.112]. ThecourtDENIESRadiaDyne'smotionforjudgmentonthepleadings [D.E. 160]. The
court GRANTS RadiaDyne's motions to seal [D.E. 149, 153, 156].
SO ORDERED. This _1_ day of August 2015.

Chief United States District Judge

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