Advanced Cardiovascular Systems, Inc. v. Scimed Life Systems, Inc., 92-1157

• Decision Date: 09 March 1993
• Docket Number: No. 92-1157,92-1157
• Citation: 988 F.2d 1157,26 USPQ2d 1038
• Parties: ADVANCED CARDIOVASCULAR SYSTEMS, INC., Plaintiff/Cross-Complaint Defendant/Appellee, v. SCIMED LIFE SYSTEMS, INC., Defendant, and Robert L. Hess, Cross-Complainant/Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1157

988 F.2d 1157

26 U.S.P.Q.2d 1038

ADVANCED CARDIOVASCULAR SYSTEMS, INC. Plaintiff/Cross-Complaint Defendant/Appellee, v. SCIMED LIFE SYSTEMS, INC., Defendant and Robert L. Hess, Cross-Complainant/Appellant.

No. 92-1157.

United States Court of Appeals Federal Circuit.

March 9, 1993.

Rehearing Denied; Suggestion for Rehearing In Banc Declined

May 13, 1993.

Richard A. Bardin, Fulwider, Patton, Lee & Utecht, Los Angeles, CA, argued, for plaintiff/cross-complaint defendant/appellee. With him on the brief were Craig B. Bailey and Stephen J. Strauss.

Keith V. Rockey, Rockey & Rifkin, Chicago, IL, argued, for cross-complainant/appellant. With him on the brief was Kathleen A. Lyons. Also on the brief was Michael R. Cunningham, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, MN.

Before NEWMAN, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and MICHEL, Circuit Judge.

PAULINE NEWMAN, Circuit Judge.

Robert L. Hess appeals the judgment of the United States District Court for the District of Minnesota, ¹ entered upon motion made under Rule 12(b)(6) of the Federal Rules of Civil Procedure, dismissing his cross-complaint with prejudice, on the ground of laches. We vacate the dismissal.

BACKGROUND

The underlying litigation between Advanced Cardiovascular Systems ("ACS") and SciMed Life Systems ("SciMed"), relating to a patented balloon dilation catheter for use in the treatment of cardiovascular disease, began on March 27, 1987. ACS sued SciMed for infringement of United States Patent No. 4,323,071 ("the '071 patent"), issue date April 6, 1982, inventors John B. Simpson and Edward W. Robert. SciMed moved for summary judgment of non-infringement, and on September 30, 1988 the district court granted the motion. On appeal the Federal Circuit held that summary adjudication was inappropriate in view of disputed material facts relevant to claim construction, and remanded the case for trial. Advanced Cardiovascular Systems, Inc. v. SciMed Life Systems, Inc., 887 F.2d 1070, 12 USPQ2d 1539 (Fed.Cir.1989).

During the course of discovery SciMed had learned of and contacted Robert L. Hess, an engineer, who stated, in outline, that he assisted the named inventors, Dr. Simpson and Dr. Robert, both physicians by providing ideas and expertise on the structure and materials of construction of the catheter. Drs. Simpson and Robert had applied for a patent on the catheter without informing Mr. Hess, who stated that he did not know of the existence of the '071 patent and the fact that he was not named as a co-inventor until he was contacted by SciMed in December 1987. SciMed raised the defense of patent invalidity in the ACS/SciMed litigation, based on Mr. Hess' statements about inventorship.

In August 1990 Mr. Hess moved to intervene as a cross-complainant in the ACS/SciMed action, which had not yet been tried. He sought a declaration that he was a joint inventor of the invention claimed in the '071 patent, and corresponding correction of the patent document. The motion to intervene was granted in December 1990. On ACS' motion under Fed.R.Civ.P. 12(b)(6), in May 1991 the district court dismissed Mr. Hess' cross-complaint for failure to state a claim upon which relief can be granted. ²

The district court observed that the '071 patent issued in 1982, and that Mr. Hess first acted to establish his legal rights when he moved to intervene in August 1990. Drawing an analogy to the six year limit to recovery of damages for past infringement, 35 U.S.C. § 286, and the six year statute of limitations applying to conversion of personal property under Minnesota law, the district court held that Mr. Hess' delay for more than eight years after patent issuance was unreasonable. The court found that ACS was prejudiced by the delay because Mr. Hess' intervention was made on the eve of the trial between ACS and SciMed, and would have delayed resolution of that case. The court dismissed Mr. Hess' claim with prejudice, on the ground of laches.

ACS and SciMed settled their lawsuit on December 27, 1991. Final judgment on Mr. Hess' claim was entered on December 30, 1991, and this appeal followed.

FED.R.CIV.P. 12(b)(6)

Rule 12(b)(6) authorizes the defendant to move, before filing a responsive pleading, for dismissal of the complaint. A motion made under Rule 12(b)(6) challenges the legal theory of the complaint, not the sufficiency of any evidence that might be adduced. The purpose of the rule is to allow the court to eliminate actions that are fatally flawed in their legal premises and destined to fail, and thus to spare litigants the burdens of unnecessary pretrial and trial activity. Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 1832, 104 L.Ed.2d 338 (1989). Such a motion, which cuts off a claimant at the threshold, must be denied "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). See also Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

Whether a complaint states a claim upon which relief can be granted is a determination of law, and receives de novo appellate review; no deference is owed to the holding of the trial court. See Eades v. Thompson, 823 F.2d 1055, 1060 (7th Cir.1987). A dismissal under Rule 12(b)(6), to be sustained, must be correct as a matter of law when the allegations of the complaint are taken as true. Air Products and Chemicals, Inc. v. Reichhold Chemicals, Inc., 755 F.2d 1559, 1562 n. 4, 225 USPQ 121, 123 n. 4 (Fed.Cir.), cert. dismissed, 473 U.S. 929, 106 S.Ct. 22, 87 L.Ed.2d 700 (1985). Disputed issues are construed favorably to the complainant, United States v. Mississippi, 380 U.S. 128, 143, 85 S.Ct. 808, 816, 13 L.Ed.2d 717 (1965), and all reasonable inferences are drawn in favor of the complainant. Thus, to the extent that factual questions are raised and are material to the result, dismissal is improper unless there is no reasonable view of the facts which could support the claim.

The issue is whether Mr. Hess' claim was correctly barred on the ground of laches, within the constraints of Rule 12(b)(6).

LACHES

Dismissal of a claim on the ground of laches requires that there be (1) unreasonable and unexcused delay in bringing the claim, and (2) material prejudice to the defendant as a result of the delay. A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020, 1028, 22 USPQ2d 1321, 1324 (Fed.Cir.1992) (en banc ). Both of these factual premises must be met, predicate to the weighing of the facts of delay and prejudice to determine whether justice requires that the claim be barred. The mere passage of time does not constitute laches. When a limitation on the period for bringing suit has been set by statute, laches will generally not be invoked to shorten the statutory period. Cornetta v. United States, 851 F.2d 1372, 1377-78 (Fed.Cir.1988) (en banc ). The burden of proof is on the party that raises the affirmative defense. Although the burden of coming forward with exculpatory evidence may shift to the claimant, as explained in Aukerman, the ultimate burden of proof does not change.

The strictures of Rule 12(b)(6), wherein dismissal of the claim is based solely on the complainant's pleading, are not readily applicable to a determination of laches. Although a Rule 12(b)(6) motion may be grounded on an affirmative defense, the defense of laches usually requires factual development beyond the content of the complaint. The facts evidencing unreasonableness of the delay, lack of excuse, and material prejudice to the defendant, are seldom set forth in the complaint, and at this stage of the proceedings can not be decided against the complainant based solely on presumptions. In the words of the Eighth Circuit:

So far as laches is concerned, it has been repeatedly held that mere lapse of time does not constitute laches. "It is to be determined by consideration of justice, and that is dependent upon the circumstances of each particular case." Des Moines Terminal Co. v. Des Moines Union Ry. Co., 8 Cir., 52 F.2d 616, 630 [1931]. In order to determine whether the plaintiff's claim was barred by laches, we would have to know more than is disclosed by her amended complaint.

Leimer v. State Mutual Life Assurance Co., 108 F.2d 302, 305 (8th Cir.1940) (other citations omitted).

The district court held that Mr. Hess' claim was barred by laches, on the following premises and presumptions:

A. The Period of Delay

The district court measured Mr. Hess' delay in bringing suit from the issuance of the '071 Patent in 1982, until he sought to intervene in the ACS/SciMed suit in 1990. The court held that the date of patent issuance started the period by which laches is measured, whether or not Mr. Hess knew of the issuance.

When applying the equitable doctrine of laches in order to bar a claim, the period of delay is measured from when the claimant had actual notice of the claim or would have reasonably been expected to inquire about the subject matter. We draw analogy to suit for patent infringement, wherein the period of delay is measured from the time when the patent owner knew or should have known of the infringement. Aukerman, 960 F.2d at 1032, 22 USPQ2d at 1328. The district court did not apply these criteria, but referred to Sontag Chain Stores Co. v. National Nut Co., 310 U.S. 281, 295, 60 S.Ct. 961, 967, 84 L.Ed. 1204 (1940), wherein the Court stated that upon issuance of a patent and its recordation in the Patent Office "constructive notice of [its] existence goes thus to all the world". However, Sontag Chain Stores did not relate to laches. In Sontag constructive notice was invoked so that the accused infringer, who did not have actual knowledge of either the existence of the patent or its reissue by the...