Bos. Scientific Corp. v. Mirowski Family Ventures, LLC

• Decision Date: 29 January 2016
• Docket Number: No. 1988, Sept. Term, 2014.,1988, Sept. Term, 2014.
• Parties: BOSTON SCIENTIFIC CORPORATION, et al. v. MIROWSKI FAMILY VENTURES, LLC.
• Court: Court of Special Appeals of Maryland

227 Md.App. 177

133 A.3d 1176

BOSTON SCIENTIFIC CORPORATION, et al.

v.MIROWSKI FAMILY VENTURES, LLC.

No. 1988, Sept. Term, 2014.

Court of Special Appeals of Maryland.

Jan. 29, 2016.

Reconsideration Denied May 4, 2016.

Matthew Wolf (Edward Han, John E. Nilsson, Marc A. Cohn, Amy L. DeWitt, Arnold & Porter, LLP, Washington, D.C. Stanley J. Reed, J. Bradford McCullough, Caitlin C. Grant, Lerch, Early & Brewer, Chrtd., Bethesda, MD), all on the brief, for Appellant.

Edward J. Bennett (David C. Kiernan, Steven M. Pyser, Liam J. Montgomery, Tanya M. Abrams, Williams & Connolly, LLP, Washington, D.C. Jeffrey M. Schwaber, Deanna L. Peters, Judith G. Cornwell, Stein, Sperling, Bennett, DeJong Driscoll, PC, Rockville, MD.), all on the brief, for Appellee.

Panel: WRIGHT, NAZARIAN, JAMES R. EYLER (Retired, Specially Assigned), JJ.

WRIGHT

, J.

This appeal rises from the judgment of the Circuit Court for Montgomery County in favor of the appellee-plaintiff, Mirowski Family Ventures, LLC ("MFV"),¹ against appellant-defendant, Boston Scientific Corporation ("BSC"), in the amount of $86,536,857.00 for royalties owed for 2002 and 2003, $142,612,000.00 for damages in an Indiana lawsuit, and $80,200,000.00 for damages in a Delaware lawsuit. BSC presents these questions for review:

1. Whether the circuit court erred in granting summary judgment that BSC had breached the "right to participate" provision of the 2004 License Agreement despite genuine dispute of material facts.

2. Whether the circuit court erred in its interpretation of the "mutual agreement" provision of the 2004 License Agreement and in arriving at such an interpretation despite determining that the provision was ambiguous.

3. Whether the circuit court erred in allowing the unsubstantiated testimony of Roderick McKelvie in support of MFV's Improper Agreement claim and in denying BSC's JMOL and JNOV motions as to that claim, which were made on the ground that the claim depended on Mr. McKelvie's unsubstantiated testimony.

4. Whether the circuit court erred in excluding evidence of St. Jude's invalidity defenses in the St. Jude Delaware litigation and whether, as result, the jury's verdict in damages award on the Delaware component of MFV's Improper Agreement claim should be vacated.

5. Whether the circuit court erred in allowing the "reasonable settlement" damages opinion of Dr. Mohan Rao, which failed to take into account St. Jude's settlement positions in the St. Jude Indiana and St. Jude Delaware Litigations; and whether, as a result, the jury's damages awards for the Improper Agreement claim should be vacated.

6. Whether the jury's damages award for the Improper Agreement claim should be vacated because they relied on premises that contradicted the historical record of the St. Jude Indiana and St. Jude Delaware Litigations.

7. Whether judgment should be entered in BSC's favor with respect to MFV's Accrued Royalties claim because the primary theory on which MFV relied was legally erroneous.

8. Whether the jury's verdict with respect to MFV's Accrued Royalties claim should be vacated because of the circuit court's erroneous rulings on the patent law issues on which MFV's alternative theories depended, including the circuit court's refusal to instruct the jury on issues of patent law.

9. Whether the circuit court erred in deciding as a matter of law prior to trial that MFV was entitled to "accrued royalties" for overseas sales of ICDs in contravention of Federal Circuit precedent.

For the reasons discussed below, we affirm the circuit court.

FACTS AND PROCEDURAL HISTORY

I. Patent origins and the BSC license agreements

Dr. Michel Mirowski developed an implantable cardiac defibrillator

("ICD"), a device that is implanted in the body and capable of preventing sudden cardiac death. Since the first patient received the ICD in 1980, millions of others have had the device implanted. Later on, cardiac resynchronization therapy ("CRT"), building on the ICD technology, was invented to treat congestive heart failure

. Dr. Mirowski, and through what later became MFV, owned the patents to both inventions: the ICD² is covered by patent 4,407,288 ("the ‘288 patent"), and the CRT technology is covered by patent RE38,119 ("the ‘119 patent").

MFV originally licensed the two patents exclusively to Guidant, a corporate entity later acquired by BSC, in 1973 ("1973 License Agreement"). The licenses were then restated in 2004 ("2004 License Agreement"). The licenses gave Guidant (and subsequently BSC) the rights to sublicense any or all of the MFV patents on its own terms, as long as MFV received a 3% royalty on the initial sale as well as the sale of covered products. Guidant also received "the right to bring and conduct suit or actions in its name against others for infringement of any [licensed] patent ..., the same as if such patent were the exclusive property of GUIDANT." Importantly, the license agreement reserved for MFV certain litigation rights:³ (1) BSC must obtain MFV's "mutual agreement" to " bring or conduct" litigation;⁴ (2) MFV has the "right to participate" in litigation; and (3) MFV and BSC must "divide [ ] equally" any proceeds of infringement litigation.

II. Lawsuits against St. Jude

a. St. Jude litigation in Indiana regarding the ‘288 patent

In 1996, Guidant⁵ and MFV, as joint plaintiffs, through mutual agreement, sued St. Jude in Indiana federal court for selling ICD devices without a sublicense for the patents ("St. Jude Indiana Litigation"). The jury returned a verdict in favor of Guidant and MFV for the sum of $140 million, finding that St. Jude had infringed the ‘288 patent

. The trial judge reversed the jury verdict on motion for judgment notwithstanding the verdict ("JNOV"), ruling that the patent was invalid.

Guidant and MFV mutually agreed to appeal the court's decision as to a key "method claim"⁶ of the ‘288 patent

("Claim 4").⁷ While the St. Jude Indiana Litigation

was on appeal, Guidant and MFV entered into an agreement ("the 2004 Royalty Agreement") in which Guidant "suspended payment of royalties on products covered by the ‘288 Patent

pending the outcome of the appeal." The agreement then outlined: (1) if there is a "final non-appealable judgment" that the ‘288 patent was valid and St. Jude did infringe upon it, Guidant would pay MFV "a sum equal to all royalties that accrued pursuant to the License Agreement on products covered by any such claims" from the date the royalties were suspended until they became reinstated, along with interest at the prime rate;⁸ and (2) if the Federal Circuit found that St. Jude did not infringe the ‘288 patent

, Guidant would pay MFV a flat sum of $15 million. In August 2004, the appellate court remanded the St. Jude Indiana case, holding that the ‘288 patent was not invalid. On remand, the district court found that at least some St. Jude devices were used according to the patented method, but limited damages to only those devices that were proved to have infringed on the patented method, not on every device capable of performing the patented method.

b. St. Jude Litigation in Delaware Regarding the ‘119 Patent

Guidant and MFV brought a second suit against St. Jude in the U.S. District Court for the District of Delaware for allegedly infringing the ‘119 patent

("the St. Jude Delaware case") in 2004. After two years, the parties completed fact discovery but the issues in dispute had not been considered by the court.

III. BSC acquires Guidant and Settles with St. Jude

In April 2006, BSC completed its purchase of Guidant and became the exclusive licensee to the MFV patents. BSC then began discussing a settlement with St. Jude ("the BSC–St. Jude Settlement") that included not only unresolved issues from the St. Jude Delaware case and the St. Jude Indiana Litigation, but also "a number of other cases in which BSC was adverse to St. Jude." MFV asserts that these were cases "that presented a serious risk to BSC and had nothing to do with Mirowski." The parties disagree as to whether MFV was given sufficient notice of the BSC–St. Jude Settlement discussions.⁹

Although MFV claims the BSC–St. Jude Settlement discussions were held in secret, MFV also met with St. Jude to discuss the Indiana and Delaware cases, but a settlement was never reached between the two parties. MFV maintains that as a result of its failed negotiations with St. Jude, it "believed settlement with St. Jude was off the table," and was thus surprised to hear of the BSC–St. Jude Settlement.

The BSC–St. Jude Settlement dismissed four pending litigations by St. Jude against BSC in exchange for the value of the Indiana and Delaware cases.¹⁰ MFV claims that a BSC expert valued the damages in the St. Jude Delaware case at at least $131 million before the BSC–St. Jude Settlement, and then after the settlement at only $16.8 million. MFV asserts that the "87% drop in damages [ ] was directly attributable to the BSC–STJ Settlement."

MFV continued with the Delaware and Indiana cases against St. Jude. In July 2007, MFV and St. Jude settled the Delaware case for $35 million dollars. The Indiana case continued until 2009, when the Federal Circuit again concluded that the ‘288 patent

was not invalid and that St. Jude had infringed it, and MFV settled the remnants for $1.9 million.

IV. Litigation between BSC and MFV

After learning of the BSC–St. Jude Settlement, MFV informed BSC that BSC had breached the 2004 License Agreement because (1) the separate negotiations deprived MFV of the "right to participate" in the St. Jude litigations and caused damages, and (2) BSC failed to obtain MFV's "mutual agreement" before entering into the BSC–St. Jude settlement. Further, BSC did not pay MFV the amount of royalties agreed upon in the 2004 Royalty Agreement that determined what BSC owed MFV at the end of the St. Jude Indiana Litigation. Because the ‘288 patent

was deemed valid and St. Jude found to have infringed upon it, BSC owed MFV "a sum equal to all royalties that accrued" between 2002–2003, plus interest. While both p...