Boston Scientific Corp. v. Mirowski Family Ventures, LLC, Cause No. 1:11-cv-736-WTL-DKL

• Decision Date: 30 November 2012
• Docket Number: Cause No. 1:11-cv-736-WTL-DKL
• Parties: BOSTON SCIENTIFIC CORPORATION, et al., Plaintiffs, v. MIROWSKI FAMILY VENTURES, LLC, Defendant.
• Court: U.S. District Court — Southern District of Indiana

BOSTON SCIENTIFIC CORPORATION, et al., Plaintiffs,

v.MIROWSKI FAMILY VENTURES, LLC, Defendant.

Cause No. 1:11-cv-736-WTL-DKL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

SO ORDERED: November 30, 2012

ENTRY ON MOTIONS FOR SUMMARY JUDGMENT

Before the Court are the parties' cross-motions for summary judgment (dkt. nos. 123, 126). The motions are fully briefed, and the Court, being duly advised, now rules as follows.¹

I. STANDARD

Federal Rule of Civil Procedure 56(a) provides that summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." In ruling on a motion for summary judgment, the Court accepts as true the admissible evidence presented by the non-moving party and draws all reasonable inferences in the non-movant's favor. Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487, 490 (7th Cir. 2007); Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009) ("We view the record in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor."). However, "[a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact that requires trial." Id. Finally, the non-moving partybears the burden of specifically identifying the relevant evidence of record, and "the court is not required to scour the record in search of evidence to defeat a motion for summary judgment." Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir. 2001).

The fact that the parties have filed cross-motions for summary judgment does not alter the standard set forth in Federal Rule of Civil Procedure 56. When evaluating each side's motion, the Court simply "construe[s] all inferences in favor of the party against whom the motion under consideration is made." Metro Life. Ins. Co. v. Johnson, 297 F.3d 558, 561-62 (7th Cir. 2002) (quoting Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).

II. BACKGROUND

At the heart of this unwieldy dispute lies a lifesaving medical device that is smaller than a deck of cards - an "implantable cardioverter defibrillator" or ICD.² The first successful ICDs were developed and patented in the late 1960s and early 1970s by a team led by Dr. Mieczyslaw Mirowski, a cardiologist. Dr. Mirowski and his team later obtained a number of additional patents for improvements on the basic device. Defendant Mirowski Family Ventures, LLC, (hereinafter "Mirowski") is now owner of the patents at issue.³

Context is best given to the dispute by a quick overview. Mirowski and its exclusive licensee Plaintiff Boston Scientific Corporation sued St. Jude Medical, Inc., for infringement ofcertain ICD patents.⁴ Things did not go smoothly. Now, Mirowski asserts claims against Boston Scientific for actions it took during and after the St. Jude litigation that it argues breached certain of its agreements with Boston Scientific. First, Mirowski argues that Boston Scientific has breached its agreement to pay royalties on ICD products it sold. Second, Mirowski argues that Boston Scientific breached another of the parties' agreements when it settled portions of its claims with St. Jude without Mirowski's knowledge and approval.

Now for the details. In 1973, Dr. Mirowski granted an exclusive license of patents relating to the ICD to Medrad, Inc. The 1973 License required the licensee to pay Dr. Mirowski, among other things: "Three percent (3%) of the net sales, rental and lease by [the licensee] of Implantable Defibrillators, their parts and components covered under patent rights." The 1973 License defines "net sales, rental or lease" as "the total aggregate selling price received by [the licensee] for the initial sale of a device, its parts or components, and the total aggregate rental or lease price received by [the licensee] for a device, its parts or components after the deduction of all discounts, sales, use and similar taxes, and delivery costs." In addition, with respect to infringement actions, the 1973 License Agreement provided:

MEDRAD shall have the right to bring and conduct suit or actions in its name against others for infringement of any patent subject to this Exclusive License Agreement, the same as if such patent were the exclusive property of MEDRAD; and MEDRAD shall have the obligation, subject to mutual agreement between MEDRAD and MIROWSKI [sic] to bring and conduct suit or actions against any infringer whose annual sales, rentals and leases of infringing devices exceed $75,000. MIROWSKI agrees to join as a party plaintiff in any infringement suit or action brought by MEDRAD under the terms of this Exclusive License Agreement; and MIROWSKI shall have the right to participate in any infringement suit or action brought by MEDRAD under the terms of this Exclusive License Agreement. MEDRAD shall pay all costs and expenses of suchsuit or action, and shall be entitled to the proceeds thereof. However, the proceeds of such suit or action, less all costs and expenses incurred by MEDRAD in connection therewith, shall be divided equally between MEDRAD and MIROWSKI.

Guidant eventually acquired the license from Medrad. In 1996, pursuant to the 1973 License, Mirowski and Guidant (and later Boston Scientific) sued St. Jude Medical, Inc., ("St. Jude") for infringement of two Mirowski patents - the '288 patent and the '472 patent⁵ - in Indiana ("the Indiana Litigation"). In 2001, a jury found that St. Jude infringed the '472 patent and jointly awarded Guidant and Mirowski $140 million in damages, including a $110 million up-front payment for entry into the ICD market and ongoing royalties of $30 million. In addition, the jury found no infringement of the two claims of the '288 patent at issue and declined to award lost profits on the '472 patent. However, on February 13, 2002, the court entered judgment as a matter of law for St. Jude on both patents and conditionally granted a new trial for St. Jude as to most issues on which it did not prevail at trial. Among other things, the court found the '288 and '472 patents invalid, the '472 not infringed, ordered Guidant to pay St. Jude a sanction of $300,000 for misconduct related to a Guidant expert witness, and ordered Guidant to pay St. Jude's costs, including attorneys' fees, if a retrial became necessary.

Following this ruling, in April 2002, Guidant attorneys advised Mirowski that they were ceasing payment of royalties to Mirowski, citing Article III, Section 3 of the 1973 License, which provided that royalties were "payable only on devices which are covered . . . by one or more valid claims of a patent application or of an unexpired patent included in the PatentRights." Because the relevant claims of the '288 patent had been declared invalid by the court, Guidant took the position that it was no longer required to pay royalties. Mirowski disagreed with Guidant's interpretation and a dispute arose between the parties as to whether Guidant was still required to pay royalties. As discussed below, that dispute would be formally addressed by the parties in 2004.

In the meantime, Mirowski and Guidant appealed the district court's invalidity decision as to the'288 patent, which consisted of a method claim (claim 4) and an apparatus claim (claim 13); the '472 rulings were not appealed. However, Mirowski and Guidant jointly made the strategic decision to appeal only the district court's claim construction of method claim 4 of the '288 patent. In the event that the Federal Circuit reversed the district court's invalidity ruling, this decision left the jury's underlying verdict as to noninfringement of apparatus claim 13 of the '288 patent untouched. Thus, as of November 2002, when Guidant and Mirowski filed their appellate brief, Guidant and Mirowski knew that only a method claim remained at issue.

In January 2004, while the appeal regarding method claim 4 of the '288 patent was pending, Mirowski and Guidant met to negotiate a new license and resolve existing disputes between Mirowski and Guidant. On January 28, 2004, Guidant and Mirowski entered into a two-page agreement (the "2004 Agreement"). Guidant promised to pay Mirowski royalties under the following conditions:

In the event there is in the [Indiana Litigation] a final non-appealable judgment that St. Jude infringes a valid claim of the '288 Patent and that the '288 Patent is properly subject to the previously granted patent term extension, GUIDANT will pay to MIROWSKI a sum equal to all royalties that accrued pursuant to the License Agreement⁶ on products covered by any such claims of the '288 Patent from the date such royalty payments were suspended to the date of expiration of the '288 Patent together with interest at the prime rate as published in the Wall Street Journal as compounded quarterly from the date payment is due to the dateof payment. Such payment will be made by GUIDANT within ninety (90) days after such decision becomes final and not subject to further appeal.

The 2004 Agreement further specified that if Guidant and Mirowski did not prevail on appeal, Guidant would pay Mirowski $15 million:

In the event that there is in the Litigation a final non-appealable judgment that St. Jude does not infringe the '288 Patent (whether by non-infringement or because an invalid claim cannot be infringed), GUIDANT will pay to MIROWSKI fifteen million dollars ($15,000,000) within ninety (90) days after such decision becomes final and not subject to further appeal.

This $15 million payment was consideration for Mirowski executing a release that provided:

MIROWSKI . . . releases and forever discharges GUIDANT, its present subsidiaries, directors, officers, employees, successors, assigns, and transferees (collectively, the "Guidant Parties") from any and all causes of action, claims and demands whatsoever in law or in

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