Cardiovascular Diagnostics v. Boehringer Mannheim

• Decision Date: 10 November 1997
• Docket Number: No. 5:97-CV-174-BR(3).,5:97-CV-174-BR(3).
• Citation: 985 F.Supp. 615
• Parties: CARDIOVASCULAR DIAGNOSTICS INC., Plaintiff, v. BOEHRINGER MANNHEIM CORPORATION, Defendant. BOEHRINGER MANNHEIM CORPORATION, Counterclaim Plaintiff, v. CARDIOVASCULAR DIAGNOSTICS INC. and Dade International, Inc., Counterclaim Defendants.
• Court: U.S. District Court — Eastern District of North Carolina

985 F.Supp. 615

CARDIOVASCULAR DIAGNOSTICS INC., Plaintiff, v. BOEHRINGER MANNHEIM CORPORATION, Defendant.

BOEHRINGER MANNHEIM CORPORATION, Counterclaim Plaintiff, v. CARDIOVASCULAR DIAGNOSTICS INC. and Dade International, Inc., Counterclaim Defendants.

No. 5:97-CV-174-BR(3).

United States District Court, E.D. North Carolina, Western Division.

November 10, 1997.

J. Anthony Penry, William Sam Byassee, Smith, Helms, Mulliss & Moore, Raleigh, NC, for Cardiovascular Diagnostics Inc. and Dade Intern., Inc.

David Dreifus, Cecil W. Harrison, Jr., Poyner & Spruill, Raleigh, NC, for Boehringer Mannheim Corp.

ORDER

BRITT, District Judge.

This matter is before the court on the following motions: (1) defendant's motion for judgment on the pleadings on counts II through VI of the complaint; (2) plaintiff's motion for judgment on the pleadings on count I of the complaint and defendant's counterclaim; (3) defendant's motion to file an amended counterclaim; and (4) defendant's motion for partial summary judgment on the issue of implied license.

I. Background

Plaintiff Cardiovascular Diagnostics Inc. ("CDI") is a North Carolina-based company involved in developing medical technology to aid in diagnosing human cardiovascular problems. Boehringer Mannheim Corporation ("BMC") is an Indiana company also engaged in the medical diagnostics business. The technology at issue in this dispute involves processes to measure blood coagulation. At some point after its founding in 1986, CDI created a system of assays to evaluate blood coagulation time. Specifically, CDI developed tests to evaluate prothrombin time (PT) and activated partial thromboplastin time (aPTT). Seeking access to the methodology and equipment developed by CDI, BMC pursued a license agreement with the company.

Effective 21 June 1989, the two companies consummated a License Agreement ("Agreement") authorizing BMC to serve as the exclusive licensee of CDI technology involving PT and aPTT assay systems. (Agreement, ¶ 2.1.) The Agreement also gives BMC a ninety-day exclusive right to evaluate new CDI technology and thirty additional days to engage in negotiations to license such technology. (Id. ¶ 6.2.) If BMC declined to license new technology involving a thrombolytic assay and CDI paid a $1,000 fee to BMC, CDI could then use its technology in the field of PT and aPTT assay systems "in connection with and as a part of such thrombolytic assays." (Id. ¶ 6.2.1.) Section VII of the Agreement contains a confidentiality provision mandating secrecy with regard to certain information and materials exchanged during the relationship. (Id. § VII.) The terms of the Agreement are to "remain in full force and effect for 10 years." (Id. ¶ 8.1.)

Several years later, disputes arose regarding the operation of the Agreement. In particular, the parties disagreed about CDI's right to use the licensed technology. After considerable negotiation, in September 1995, the parties executed a "First Amendment to License Agreement" ("Amendment"). The Amendment provides that, pursuant to the original Agreement, BMC did not license thrombolytic assays submitted to it by CDI and received a $1,000 payment from CDI. (Amendment, ¶ 6.2.2.) BMC and CDI then agreed that CDI could use this technology with

no limitation on the manufacture, use, sale or rights of others to manufacture, use or sell PT and aPTT tests and systems as long as such tests and systems are sold to customers using analyzers which are capable of analyzing, among other things, each of (i) a PT or aPTT test, and (ii) a thrombolytic test.

(Id. ¶ 2.) The Amendment also contains the following language:

Each of BMC and CDI do hereby release the other party, its officers, agents, employees, successors and assigns from any claims, demands, actions, suits, damages, liabilities, losses or expenses of whatever sort, relating to or in connection with the License Agreement for acts or omissions by either BMC or CDI prior to the date of this First Amendment to the License Agreement.

(Id. ¶ 5.)

Prior to the Amendment, BMC had acquired the rights in two patents ("'779 patent and '598 patent") apparently dealing with coagulation assays from Biotrack, Inc. in 1994. BMC has informed CDI that it believes that CDI's products infringe both the '779 patent and the '598 patent. CDI now brings suit seeking, in count I, a declaration of noninfringement, invalidity, or unenforceability concerning two patents owned by BMC. CDI also alleges that BMC breached the confidentiality agreement when it disclosed CDI's trade secrets in two United States patents and six international patent applications published in March 1995. Throughout this process, CDI maintains that BMC actively and intentionally misappropriated CDI's technology in direct violation of their Agreement. This conduct serves as the basis for counts II-VI alleging breach of contract, breach of fiduciary duty, constructive fraud, trade secrets, and unfair and deceptive trade practices. BMC counterclaimed that a device manufactured and sold by CDI, the Thrombolytic Assay System, infringes BMC's '598 and '779 patents.

The court now turns to the motions at hand.

II. Standard

Rule 12(c) of the Federal Rules of Civil Procedure provides that a motion for judgment on the pleadings shall be treated as one for summary judgment if matters outside of the pleadings are offered and considered by the court. Fed.R.Civ.P. 12(c). In this instance, because of the relevant defenses to a release provision, the court finds it both necessary and proper to consider matters outside of the pleadings with respect to BMC's motion for judgment on the pleadings. At the same time, supporting documents have accompanied the respective briefs regarding CDI's motions for judgment on the pleadings and it also should be converted. Therefore, pursuant to Federal Rule of Civil Procedure 56(c), summary judgment is appropriate where there are no genuine issues as to any material facts and the moving party is entitled to judgment as a matter of law. Fed R.Civ.P. 56(c). The Fourth Circuit has articulated the summary judgment standard as follows:

A genuine issue exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In considering a motion for summary judgment, the court is required to view the facts and draw reasonable inferences in a light most favorable to the nonmoving party. Id. at 255, 106 S.Ct. at 2514. The plaintiff is entitled to have the credibility of all his evidence presumed. Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir.1990), cert. denied, 498 U.S. 1109, 111 S.Ct. 1018, 112 L.Ed.2d 1100 (1991). The party seeking summary judgment has the initial burden to show absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). The opposing party must demonstrate that a triable issue of fact exists; he may not rest on mere allegations or denials. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. A mere scintilla of evidence supporting the case is insufficient. Id.

Patterson v. McLean Credit Union, 39 F.3d 515, 518 (4th Cir.1994) (quoting Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.) cert. denied, 513 U.S. 813, 115 S.Ct. 67, 130 L.Ed.2d 24 (1994), 513 U.S. 814, 115 S.Ct. 68, 130 L.Ed.2d 24 (1994)).

III. BMC's Motion for Judgment on the Pleadings

It appears the parties agree that the conduct underlying counts II through VI arose prior to the signing of the Amendment in September 1995. Thus, invoking the plain language of the release provision contained in the Amendment, BMC contends that CDI relinquished the very claims it now seeks to assert. As noted above, the release provision states that "BMC and CDI do hereby release the other party ... from any claims ... of whatever sort, relating to or in connection with the License Agreement." (Amendment, ¶ 5.) In response, CDI raises two broad defenses: (1) the release language is ambiguous on its face and, looking to the intent of the parties, the scope was clearly limited to the issues in dispute at the time, and (2) the release was procured by fraud.

As to the first claim, CDI asserts that the release clause did not contemplate any matters other than those issues in dispute at the time of the Amendment. In support, CDI offers the affidavits of its CEO and attorney involved in the Amendment negotiations. Both aver that they intended the release to apply exclusively to the disputed matters at the heart of the Amendment and not to claims of which CDI was unaware. (See Funkhouser Aff.; Robbins Aff.) At the time of the Amendment, CDI alleges that it did not have any knowledge about BMC's patent applications or misappropriation of CDI technology.

Although CDI insists that it did not intend to relinquish claims about unknown improprieties, CDI cannot escape the plain language of the release. North Carolina law clearly provides that "[w]hen the language of the contract is clear and unambiguous, construction of the agreement is a matter of law for the court .... and the court cannot look beyond the terms of the contract to determine the intentions of the parties." Hartman v. Hartman, 80 N.C.App. 452, 343 S.E.2d 11, 13 (1986) (quoting Piedmont Bank & Trust Co. v. Stevenson, 79 N.C.App. 236, 339 S.E.2d 49, 52, aff'd, 317 N.C. 330, 344 S.E.2d 788 (1986)); see also Broussard v. Meineke Discount Muffler Shops, Inc., 958 F.Supp. 1087, 1094 (W.D.N.C.1997) (commenting that "where [the release] language is unambiguous, the written agreement controls"). The North Carolina Supreme Court has further explained that "[i]t must be presumed the parties intended what the language used clearly expresses, ... and the contract must be construed to mean what on its face it purports to mean." Hartford Acc. & Indem. Co. v. Hood, 226 N.C. 706, 40 S.E.2d 198, 201 (1946).

Although...