Boston Scientific Corp. v. Mirowski Family Ventures, LLC

Decision Date17 August 2012
Docket NumberCause No. 1:11-cv-00736-WTL-DKL
PartiesBOSTON SCIENTIFIC CORPORATION, et al., Plaintiffs/Counterdefendants, v. MIROWSKI FAMILY VENTURES, LLC, Defendant/Counterclaimant.
CourtUnited States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
ENTRY ON COUNTERDEFENDANTS'
MOTION FOR JUDGMENT ON THE PLEADINGS

Before the Court is the Counterdefendants' Motion for Judgment on the Pleadings (dkt. no. 65). While this motion was filed before the Counterclaimant's amended Answer and Counterclaims, the Court indicated by separate order that it will consider arguments raised in the Counterdefendants' motion as if they were directed toward the amended Answer and Counterclaims. The Court, being duly advised, now rules as follows.

I. STANDARD

In reviewing a motion for judgment on the pleadings, the court must apply the same standard that applies to a motion to dismiss under Rule 12(b)(6) and therefore must take the facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff. The complaint must contain only "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), and there is no need for detailed factual allegations. However, the statement must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests" and the "[f]actual allegations must be enough to raise a right torelief above the speculative level." Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)).

II. BACKGROUND

This case concerns the tangled relationship between a patent owner and its exclusive licensee. Once a profitable working relationship, things have since gone awry. The alleged facts are as follow.

Many years ago, Dr. Mieczyslaw Mirowski invented the implantable cardioverter defibrillator ("ICD") and obtained several patents for his invention. In 1973, the Plaintiffs (through predecessor entities, hereinafter "Boston Scientific") acquired from Dr. Mirowski an exclusive license to several of those patents and future inventions. After Dr. Mirowski's death, the patents at issue in this case were transferred to his wife and, ultimately, to the Defendant, Mirowski Family Ventures, LLC (hereinafter "Mirowski").

Pursuant to the license agreements, Boston Scientific was required to obtain Mirowski's mutual agreement regarding the initiation and strategy of actions against any infringer with sales over $75,000. The licenses also provided Mirowski a "right to participate" in any such action against an infringer. In addition, if a lawsuit were successful, the proceeds, net of costs and expenses, were to be divided equally between Boston Scientific and Mirowski.

In late 1996, Mirowski and Boston Scientific's predecessor entities filed suit against St. Jude Medical Corporation, alleging infringement of certain of the Mirowski patents (the "Indiana Litigation"). While the suit initially yielded a hundred-million-dollar jury verdict in Boston Scientific's and Mirowski's favor, the victory was short-lived. After it was discovered that one of Boston Scientific's expert witnesses had given false testimony at trial and that Boston Scientific had knowledge of its falsity, the court entered judgment as a matter of law againstBoston Scientific and Mirowski, found the patents at issue invalid and un-infringed, and awarded monetary sanctions against Boston Scientific.

Shortly thereafter, Boston Scientific's counsel advised Mirowski that because the court had declared the patents invalid, Boston Scientific was going to stop paying royalties to Mirowski on its ICD sales. Boston Scientific's counsel also opined that an appeal of the court's ruling was not worth pursuing. Mirowski then obtained independent counsel, who later successfully appealed the court's invalidity ruling.

While the appeal of the district court's decision was pending, Boston Scientific initiated a separate action in 2004 against St. Jude in Delaware, alleging infringement of another Mirowski patents (the "Delaware Litigation").

In the meantime, Mirowski and Boston Scientific reached an agreement to settle claims between them arising from the Indiana Litigation and entered into a new license with provisions similar to the previous license. With respect to royalties related to the Indiana Litigation, the parties agreed that, if there were ultimately a final non-appealable judgment that St. Jude infringed a valid claim of the contested patent, Boston Scientific would pay Mirowski a sum equal to all royalties that had accrued pursuant to the license with interest.

With respect to the Indiana Litigation, the Federal Circuit ultimately reinstated the jury's finding regarding the validity of one method claim of a patent, denied St. Jude's challenge to the patent term extension of the same patent, and remanded for a new trial on infringement and a reassessment of damages. On remand, the district court limited St. Jude's infringement liability to those devices that actually performed a form of therapy used in ICDs called cardioversion, and the Federal Circuit affirmed this ruling.

In early 2006, the district court in the Indiana Litigation ruled that, in any new trial following remand, St. Jude would be allowed to introduce evidence of Boston Scientific's misconduct in offering perjured testimony in the first trial. As a result, on July 29, 2006, Boston Scientific, without consulting or seeking the mutual agreement of Mirowski, entered into a settlement with St. Jude of six cases then pending between Boston Scientific and St. Jude. In entering this "Secret Settlement," Boston Scientific gave up over $600 million worth of potential claims that Boston Scientific and Mirowski were jointly pursuing against St. Jude in Indiana and Delaware. In exchange for Boston Scientific giving up these claims, St. Jude agreed not to pursue any claims against Boston Scientific based on the false testimony of its witness in the first trial.

In May 2011, Boston Scientific filed the instant action, seeking a declaration as to the scope of the products on which it must pay royalties to Mirowski. Mirowski asserts the following counterclaims against Boston Scientific:

1. breach of contract for accrued royalties;

2. breach of contract for improper settlement;

3. breach of implied covenant of good faith and fair dealing for improper settlement;

4. breach of fiduciary duty for improper settlement;

5. unjust enrichment;

6. constructive fraud;

7. negligence; and

8. breach of contract for attorneys' fees and costs relating to a suit in Delaware.

Boston Scientific moved for judgment on the pleadings as to Mirowski's Third, Fourth, Fifth, and Seventh Counterclaims. In response, Mirowski filed a motion to amend itscounterclaims, which motion the Court granted by separate order. As the issues raised in Boston Scientific's motion can be read to address alleged deficiencies in the amended Answer and Counterclaims, the Court now addresses Boston Scientific's motion for judgment on the pleadings as if it were directed toward the amended Answer and Counterclaims.

III. DISCUSSION
A. Breach of Fiduciary Duty and Breach of Implied Covenant of Good Faith(Amended Fourth and Fifth Counterclaims)

Boston Scientific asserts that Mirowski's Counterclaims Four and Five fail because they are barred by Indiana's two-year statute of limitations for actions for injury to personal property. Ind. Code 34-11-2-4. Mirowski contends that these counterclaims are subject rather to Indiana's ten-year statute of limitations for an action on a contract in writing. Ind. Code 34-11-2-11. As a preliminary matter, Boston Scientific is correct that if the substance of Mirowski's claims sound in tort,1 its recent amendments will not convert them into contract claims, saving them from the two-year statute of limitations. In other words, the relevant analysis is the same as to both Mirowski's counterclaims as originally pled and as amended. This analysis turns on (1) when Mirowski's claims accrued, and (2) which statute of limitations applies.

1. Claim Accrual

Mirowski argues that, even if its claims are subject to the shorter statute of limitations, its claims are timely for two reasons. First, Mirowski argues by way of analogy to Indiana partnership law that any statute of limitations did not begin to run until the joint venture between it and Boston Scientific was dissolved. Second, Mirowski asserts that it did not sufferascertainable damage until Boston Scientific refused to satisfy its royalty obligations to Mirowski in September 2010 and August 2011. The Court addresses these arguments in reverse order.

When a cause of action accrues is a question of law. Cooper Indus., LLC v. City of South Bend, 899 N.E.2d 1274, 1280 (Ind. 2009). A cause of action accrues when the plaintiff knew, or in the exercise of ordinary intelligence should have known, of an injury. Id. "[I]t is not necessary that the full extent of the damage be known or even ascertainable, but only that some ascertainable damage has occurred." Id.

Mirowski and Boston Scientific agree that the relevant legal wrong with regard to Mirowski's claims for breach of fiduciary duty and duty of good faith and fair dealing is the "Secret Settlement" of July 29, 2006, between Boston Scientific and St. Jude, but they disagree over when ascertainable damage occurred as a result of that settlement. According to Mirowski, no damage occurred until Boston Scientific purported to make its "final" royalty payment under the licenses in an amount Mirowski contends is much less than it is due. Boston Scientific, by contrast, argues that the royalty payments allegedly due under the license agreements "have no relationship at all" to the accrual of Counterclaims Four and Five. The Court agrees with Boston Scientific.

While the failure to pay royalties allegedly due certainly constitutes damage, it is not damage that flowed from...

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