Braun v. Medtronic Sofamor Danek, Inc.
| Decision Date | 01 May 2013 |
| Docket Number | Case No. 2:10-cv-1283 |
| Parties | JOHN T. BRAUN, M.D., Plaintiff, v. MEDTRONIC SOFAMOR DANEK, INC., Defendant. |
| Court | U.S. District Court — District of Utah |
On September 20, 2012, Defendant Medtronic Sofamor Danek, Inc. (Medtronic) filed a Motion to Amend or Correct its Answer in the above-captioned matter (Dkt. No. 66). Medtronic sought leave to add two affirmative defenses and three counterclaims, the gravamen of which was an allegation that Plaintiff John T. Braun, M.D., does not own the rights to the invention that he disclosed and licensed to Medtronic. On January 2, 2013, the Honorable Dustin B. Pead issued an Order denying Medtronic's Motion as untimely (Dkt. No. 152). Medtronic objected to the Magistrate Judge's ruling and the court took up the matter at a hearing on January 30, 2013. The court also heard argument on a number of additional objections filed by both parties to other aspects of Judge Pead's Order.
The court overruled every objection to Judge Pead's decision except for Medtronic's Objection to the denial of its Motion to Amend, which the court took under advisement. The court ordered the parties to submit further briefing on a number of issues related to this matter, including the proper standard of review that the court should apply, the facts in the record thatsupport the parties' respective positions, and any arguments the parties wished to make about whether Medtronic's additional counterclaims and defenses would be futile.
The court has carefully considered this additional briefing, as well as the record before Judge Pead. Based on these materials, and for the reasons stated below, the court SUSTAINS Medtronic's Objection to Judge Pead's decision and GRANTS Medtronic leave to amend its Complaint to add the requested defenses and counterclaims.
This lawsuit involves a dispute between Dr. Braun and Medtronic over a licensing agreement that the parties entered into concerning Dr. Braun's concepts for the fusionless treatment of scoliosis.1 Dr. Braun recorded his ideas at 12:01 a.m. on October 1, 1999, which was the day after his discharge from the Air Force on September 30, 1999. Medtronic seeks leave to amend its Answer to include two new defenses and three new counterclaims that address the question of ownership of Dr. Braun's inventions. Medtronic's position is that Dr. Braun did not correctly represent to Medtronic that he was the sole owner of "all right, title and interest in and to the Licensed Patents" because he developed his inventions while working for the Air Force. Medtronic's thirty-eighth defense would assert that Dr. Braun's claims are barred because of a breach of express warranties with Medtronic; the thirty-ninth defense would assert that Dr. Braun did not own the rights to the concepts he disclosed to Medtronic. The three new counterclaims include: (1) breach of express warranties because the Air Force, and not Dr.Braun, owned the inventions at the time Dr. Braun licensed them to Medtronic; (2) declaratory judgment holding that the Air Force, and not Dr. Braun, is the lawful owner of the inventions; and (3) declaratory judgment finding that there has been a failure of consideration under the parties' license agreement since Dr. Braun did not own the inventions.
Judge Pead denied Medtronic's Motion on the grounds that the amendment was untimely because it was filed over six months after the deadline to amend pleadings had passed. (Order, Jan. 2, 2013, at 17, Dkt. No. 152.) Judge Pead reached his decision after finding that Medtronic knew or should have known about Dr. Braun's work in the Air Force. The Magistrate Judge cited a deposition of Troy Drewry, who was the Senior Product Development Engineer at Medtronic. Judge Pead found that, in both his deposition and in letters to Dr. Braun, Mr. Drewry demonstrated knowledge that Dr. Braun was working for the Air Force when Medtronic contacted him to discuss his work. As a result, Judge Pead found that Medtronic "knew or at least should have known as of September 1999 of Dr. Braun's work in the Air Force." (Id.) While Medtronic argued that it filed its Motion shortly after receiving a number of handwritten notes from Dr. Braun in discovery, Judge Pead was not persuaded by Medtronic's stated reason for the delay because he found that there was "no demonstrable link between Dr. Braun's undated notes and his time in the Air Force." (Id.) Judge Pead did note some concern about the timing of Dr. Braun's documentation of his invention, but concluded that Medtronic still should have known about the possible ownership issues: "While the court shares some wariness regarding Dr. Braun's 12:01 a.m. epiphany the morning after his discharge, the inferences stemming therefrom should have at that time prompted Medtronic's awareness of the ownership issues." (Id.)
The parties submitted briefing on the facts present in the record that provide evidence concerning what Medtronic knew in September 1999 about Dr. Braun's work at the Air Force. These facts include the letters and deposition testimony from Troy Drewry that Judge Pead discussed in his Order. In addition, Dr. Braun cites the deposition of Hugh Shaum, Medtronic's area sales manager for Utah in 1999, who testified that he believed that Dr. Braun began work at the University of Utah "when his tour was up" in the Air Force. (Shaum Dep. 80:24-81:16, Ex. D to Dkt. No. 188.) And Mike Sherman, Medtronic's former head of technology development, testified that Medtronic had a due diligence process in place to "vet whether or not the [intellectual property] was available for acquisition and whether there were other encumbrances on it." (Sherman Dep. 24:10-18, Ex. C to Dkt. No. 188.)
Medtronic emphasizes that it did not know the precise end date of Dr. Braun's employment with the Air Force until it received Dr. Braun's answers to discovery. Medtronic alleges that Dr. Braun disclosed his discharge date in response to the interrogatories that he was served on June 11, 2012. In addition, Medtronic cites portions of Dr. Braun's deposition that discuss his motivation to write down his ideas before he began work at the University of Utah. (Braun Dep. 80:25-81:23, Ex. C to Dkt. No. 197.)
The parties provided a summary of the content of the undated handwritten notes that Medtronic alleges were created during Dr. Braun's time in the Air Force. The court will discuss these notes in its analysis below. Finally, Dr. Braun submitted a Declaration from Michael Camara, the Chief of the Reserve Service Programs for the United States Air Force Reserves,who stated that "Dr. Braun did not have any further obligation to the Air Force of any kind after September 30, 1999." (Camara Decl. ¶ 4, Ex. C to Dkt. No. 148.)
Under Rule 72 of the Federal Rules of Civil Procedure, a district judge, upon receiving an objection to a non-dispositive pretrial ruling, must "modify or set aside any part of that order that is clearly erroneous or is contrary to law." Fed. R. Civ. P. 72(a). In contrast, when considering an objection to a dispositive pretrial ruling, the district court must review the ruling using a de novo standard of review. Fed. R. Civ. 72(b). The parties agree that many motions to amend a complaint are not dispositive. See Doe v. Nevada Crossing, 920 F. Supp. 164, 165-66 (D. Utah 1996). But the parties also agree that the Tenth Circuit has not directly addressed whether this specific type of motion, namely a motion to amend an answer to add an affirmative defense or a counterclaim, is "dispositive" under Rule 72. Dr. Braun argues that the court should review Judge Pead's decision for abuse of discretion. But Medtronic asserts that Judge Pead's ruling is dispositive because it would have the effect of permanently barring Medtronic's proposed counterclaims. As a result, Medtronic contends that the court must review Judge Pead's Order de novo.
Both parties point to cases supporting their position that were decided by district courts in other circuits. In Credit Suisse First Boston, LLC v. Coeur D'Alene Mines Corp., 2005 WL 323714 (S.D.N.Y. Feb. 10, 2005), the United States District Court for the Southern District of New York applied a clearly erroneous standard to a magistrate judge's decision on a defendant's motion for leave to amend its answer to assert an additional affirmative defense and fivecounterclaims. In contrast, the United States District Court for the Southern District of Mississippi applied a less deferential standard of review2 to a magistrate judge's decision and concluded that the magistrate judge had not appropriately considered the requirement that a party be allowed to amend when justice so requires. Hunt Energy Corp. v. Crosby-Mississippi Resources, Ltd., 732 F. Supp. 1378 (S.D. Miss. 1989). Accordingly, the Mississippi District Court reversed the magistrate judge's decision.
Recognizing that the law is somewhat unclear on this question, both parties have attempted to draw meaningful distinctions between cases with conflicting outcomes. Dr. Braun argues that, when courts have found that denial of leave to amend is dispositive, they have done so only when the magistrate judge's ruling is based on futility. Courts applying this reasoning state that "by declaring a proposed amendment futile, the magistrate judge has effectively engaged in the Rule 12(b)(6) analysis and has decided the amendment fails to state a claim, thus making the decision dispositive." Hall v. Norfolk Southern Railway Co., 469 F.3d 590, 595 (7th Cir. 2006) (). Dr. Braun contends that because Judge Pead based his decision on the timeliness and not the futility of Dr. Braun's amendment, the court should find...
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