Affymetrix, Inc. v. Pe Corp. (N.Y.)

• Decision Date: 24 May 2002
• Docket Number: No. 01 Civ. 0634(NRB).,01 Civ. 0634(NRB).
• Citation: 219 F.Supp.2d 390
• Parties: AFFYMETRIX, INC., Plaintiff, v. PE CORPORATION (N.Y.); Competitive Technologies, Inc.; Applera Corporation; Perseptive Biosystems, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

219 F.Supp.2d 390

AFFYMETRIX, INC., Plaintiff, v. PE CORPORATION (N.Y.); Competitive Technologies, Inc.; Applera Corporation; Perseptive Biosystems, Inc., Defendants.

No. 01 Civ. 0634(NRB).

United States District Court, S.D. New York.

May 24, 2002.

Ralph C. Dawson, Fulbright & Jaworski, L.L.P., New York City, for plaintiff.

David A. Kalow, David S. Brafman, Kalow & Springut, L.L.P., New york City, for defendants.

MEMORANDUM AND ORDER

BUCHWALD, District Judge.

Plaintiff, Affymetrix, Inc. ("Affymetrix"), brings this action for declaratory, injunctive, and monetary relief against defendants PE Corp. (N.Y.) ("PE (N.Y.)"), Competitive Technologies, Inc. ("Competitive Technologies"), Applera Corp. ("Applera"), and PerSeptive Biosystems, Inc. ("PerSeptive"). Affymetrix seeks a declaration that it has not infringed certain patents here at issue and/or that these patents are invalid and unenforceable. Further, Affymetrix asserts claims for breach of contract, attempt and conspiracy to monopolize, and unfair competition. Presently before the Court is defendants' motion to dismiss certain of plaintiff's patent unenforceability claims and contract claims, and to sever and stay the remaining contract-related claims. Further, defendants move to bifurcate and stay the antitrust-related claims pending resolution of the patent claims. For the following reasons, defendants' motion to dismiss is denied and defendants' motion to bifurcate and stay the antitrust-related claims is granted in part and denied in part.

BACKGROUND

As described in Affymetrix's Amended Complaint, the facts are as follows. In September of 1997, Affymetrix entered into a written Purchase Agreement ("the Agreement") with PerSeptive, in which PerSeptive agreed to sell a certain amount of custom amidite products to Affymetrix during each year of the Agreement until December 31, 2005. By its terms, the Agreement is fully assignable, is governed and interpreted under California law, and provides that with the exception of disputes relating to intellectual property rights, all disputes are to be resolved by arbitration. Under the Agreement, PerSeptive represented that at the time of contracting, PerSeptive knew of no reason that Affymetrix could not use the delivered amidite products to manufacture oligonucleotides using any method contained in Patent No. RE 34,069 ("the '069 patent" or "the Koster patent"). The Agreement further provided that "[i]f for any reason PerSeptive is not able to make or have made the amidites" for a period exceeding 60 days, PerSeptive was to negotiate in good faith with Affymetrix for licensing rights to the '069 patent. Further, PerSeptive represented that at the time of the sale, it knew of no violations of any patents or other intellectual property rights that would prevent Affymetrix from so using the amidite products. PerSeptive was also obligated under the Agreement to indemnify and defend Affymetrix from infringement claims based on use of the amidite products in accordance with the '069 patent.

Shortly before the Agreement was entered, in August of 1997, the Perkin-Elmer Corp., which was later renamed PE Corporation (N.Y.), acquired PerSeptive. Affymetrix received shipments of amidite products from Perseptive until April 15, 1998. Then, PerSeptive failed to deliver the amidite products in response to purchase orders placed in May and June. On one occasion, PerSeptive allegedly shipped the amidite products with improper packaging, which constituted nonconforming goods under the Agreement. This failure to provide conforming goods was never cured. Affymetrix was notified by representatives of PerSeptive that PerSeptive did not intend to fill the orders. Later, in August of 1999, a PE (N.Y.) representative indicated that a PE (N.Y.) affiliate intended to assert a claim that Affymetrix's use of the amidite products to synthesize DNA infringed PE (N.Y.)'s process patents. Affymetrix notified PerSeptive of PE (N.Y.)'s patent infringement allegations in September of 1999 pursuant to the indemnification provisions of the Agreement. However, when Applera, of which PE (N.Y.) is a wholly owned subsidiary, sued Affymetrix for infringement including the use of amidite products sold to Affymetrix by PerSeptive, Perseptive and PE (N.Y.) failed to take up the defense of Affymetrix. Applera, along with Competitive Technologies, sued Affymetrix in early July of 2000 in the District Court of Delaware alleging infringement of five patents: U.S. Patent Nos. 4,458,066 ("the '066 patent"); 4,500,707 ("the '707 patent"); 5,132,418 ("the '418 patent"); 5,153,319 ("the '319 patent"); and 4,973,679 ("the '679 patent") (collectively, "patents in suit" or "Carruthers patents"). According to Affymetrix's Amended Complaint, PE (N.Y.) purports to have sole and exclusive rights to enforce the patents in suit and Competitive Technologies purports to hold title to each of the patents in suit. When the Delaware action was dismissed in September for lack of subject matter jurisdiction, the parties determined to proceed here with this case, which was filed in January of 2001.

In its Amended Complaint, Affymetrix asserts five causes of action. In Count One, against PE (N.Y.) and Competitive Technologies only, Affymetrix seeks a declaratory judgment that (1) it has not infringed the patents in suit; (2) the patents in suit are invalid for failing to satisfy the requirements set forth in 35 U.S.C. §§ 101, 102, 103 and/or 112 and/or under the doctrine of obviousness-type double patenting; and (3) the patents in suit are unenforceable. In Count Two of the Amended Complaint, Affymetrix asserts a breach of contract claim against PerSeptive and PE (N.Y.) based on breach of warranty, PerSeptive's failure to defend and indemnify Affymetrix from claims resulting from use of the amidite products, and PerSeptive's failure to negotiate in good faith for licensing rights to the '069 patent as required by the Agreement if PerSeptive became unable to deliver amidite products for a period exceeding 60 days. In Count Three, asserted against PE (N.Y.) and Applera, Affymetrix alleges that past legal action taken by these companies against Affymetrix and the fraudulent obtaining and licensing of patents constitute attempts to monopolize by preventing Affymetrix from competing with PE (N.Y.) in the manufacture and sale of DNA probes and other products involving the synthesis of oligonucleotides in violation of the Sherman Act, 15 U.S.C. § 2. Further, in Count Four, Affymetrix asserts that PE (N.Y.), Applera, and Competitive Technologies have conspired to engage in such illegal and exclusionary conduct, in violation of the Sherman Act, 15 U.S.C. § 2, Cal. Bus. & Prof.Code §§ 16722 and 16726, and N.Y. Gen. Bus. Law § 340. Finally, Count Five asserts a cause of action against PE (N.Y.), Applera, and Competitive Technologies pursuant to Cal. Bus. & Prof.Code § 17200 for unfair competition.

Since the patent unenforceability allegations contained in Count One are directly challenged in defendants' motion to dismiss, we describe them in some detail. Affymetrix alleges that PE (N.Y.) and Competitive Technologies intentionally failed to disclose prior art to the Patent and Trademark Office ("PTO"), namely a 1980 article entitled "The Synthesis of Oli-godeoxypyrimidines on a Polymer Support" ("the Article") that was material to the examination of the '066 and '679 patents. Further, Affymetrix alleges that defendants enforced and licensed the '679 patent beyond the date of its expiration while failing to inform the PTO of its error in failing to print a terminal disclaimer notice on the face of the '679 patent.¹ With respect to the '066 patent application, Affymetrix charges that the applicants intentionally concealed the best mode of practicing their invention, as evidenced by the filing of another patent application shortly thereafter in which applicants disclose the use of a saturated secondary amino group as the preferred embodiment. Affymetrix further points to an article published by applicants just prior to filing the '066 application that describes the actual best mode. With respect to the '707,-'418, and '319 patents, Affymetrix alleges that these as well are unenforceable for inequitable conduct in failing to inform the PTO of the best mode. Finally, Affymetrix asserts that the failure to disclose the Article and/or best mode during the '066 patent prosecution also renders the '707,-'418, and '319 patents unenforceable because the '707 patent is a continuation-in-part of the '066 patent, and the '418 and '319 patents are continuations of the '066 patent.

DISCUSSION

Defendants move pursuant to Fed. R.Civ.P. 12(b)(6) to dismiss certain of Affymetrix's claims. First, defendants argue that several of Affymetrix's contract-based claims are not legally cognizable and should be dismissed, and that the remainder of Affymetrix's contract claims should be severed, stayed, and submitted to arbitration pursuant to the mandatory arbitration clause. With respect to Affymetrix's allegations that the patents in suit are unenforceable, defendants argue that plaintiff's allegations that defendants failed to disclose prior art and best mode to the PTO do not support a claim for inequitable conduct, and are therefore insufficient as a matter of law. Finally, defendants move to bifurcate and stay discovery and trial of the antitrust-related claims pending resolution of the patent issues raised in this case.

A. Legal Standard

In considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), we accept as true all material factual allegations in the complaint, Atlantic Mutual Ins. Co. v. Balfour Maclaine Int'l, Ltd., 968 F.2d 196, 198 (2d Cir.1992), and may grant the motion only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Still v. DeBuono, 101 F.3d 888, 891 (2d Cir.1996); see Conley v. Gibson, ...