Igen Intern., Inc. v. Roche Diagnostics Gmbh

• Decision Date: 09 July 2003
• Docket Number: No. 02-1537.,02-1537.
• Citation: 335 F.3d 303
• Parties: IGEN INTERNATIONAL, INCORPORATED, a Delaware corporation, Plaintiff-Appellee, v. ROCHE DIAGNOSTICS GMBH, Defendant-Appellant, and Boehringer Mannheim Corporation, a German Limited Liability Company, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

335 F.3d 303

IGEN INTERNATIONAL, INCORPORATED, a Delaware corporation, Plaintiff-Appellee, v. ROCHE DIAGNOSTICS GMBH, Defendant-Appellant, and Boehringer Mannheim Corporation, a German Limited Liability Company, Defendant.

No. 02-1537.

United States Court of Appeals, Fourth Circuit.

Argued: February 24, 2003.

Decided: July 9, 2003.

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ARGUED:

Carter G. Phillips, Sidley, Austin, Brown & Wood, L.L.P., Washington, D.C., for Appellant. Howard M. Shapiro, Wilmer, Cutler & Pickering, Washington, D.C., for Appellee.

ON BRIEF:

Joseph R. Guerra, Jonathan F. Cohn, Eric A. Shumsky, Sidley, Austin, Brown & Wood, L.L.P., Washington, D.C.; John R. Dawson, Nancy J. Sennett, James T. McKeown, Michael J. Aprahamian, Foley & Lardner, Milwaukee, Wisconsin, for Appellant. Louis R. Cohen, A. Stephen Hut, Jr., Wilmer, Cutler & Pickering, Washington, D.C., for Appellee.

Before TRAXLER and SHEDD, Circuit Judges, and BEAM, Senior Circuit Judge of the United States Court of Appeals for the Eighth Circuit, sitting by designation.

Affirmed in part, reversed in part, and remanded by published opinion. Senior Judge BEAM wrote the opinion, in which Judge TRAXLER and Judge SHEDD joined.

OPINION

BEAM, Senior Circuit Judge:

BEAM, Senior Circuit Judge: Following a ten-week jury trial, the District Court for the District of Maryland entered judgment in favor of IGEN International (IGEN) and against Roche Diagnostics GmbH (Roche) in the amount of $105.4 million in compensatory damages and $400 million in punitive damages. The district court also terminated a contract upon which Roche had expended more than $350 million in developmental expenses. Roche appeals and we affirm in part, reverse in part and remand.

I.

In 1992, IGEN entered a License and Technology Development Agreement with Boehringer Mannheim GmbH (BM), which entity was acquired in 1998 by Roche Holding, Ltd. (Roche Holding), a Swiss corporation, and renamed Roche Diagnostics GmbH. The purpose of the agreement was to facilitate the development, manufacture and marketing of medical diagnostic products that employ IGEN's patented electrochemiluminescence, or ECL, technology.¹ In exchange for various exclusive and semi-exclusive licenses to develop and distribute ECL-based products, Roche agreed to pay royalties to IGEN, to share any improvements it acquired or developed to enhance the technology, and to market its ECL products within a specified field. Roche invested more than $350 million in the ECL project over the next several years and launched two ECL-based diagnostic instruments in 1996 and 1997. Its menu of test kits or "assays" rapidly expanded from eleven to more than fifty, and its market share increased from zero percent in 1996 to the number four position in the American market, number two in Europe, and number two worldwide by 2001.

But in 1997, a disagreement arose between Roche and IGEN over the calculation and reporting of royalties. IGEN brought this lawsuit ("this case" or "the Maryland case") in September 1997, alleging that Roche incorrectly calculated and paid royalties under the contract, failed to use its "best efforts" in developing ECL-based products, and breached its duty of good faith and fair dealing.

Matters got even more complicated in 1998 when a Swiss company, Laboratoires Serono S.A. (Serono), sued both IGEN and Roche in federal district court in Delaware ("the Serono litigation" or "the Delaware case"), alleging that ECL-based instruments infringed a Serono patent. Although both Roche and IGEN knew of the Serono patent at the outset of their relationship, they initially determined that it did not pose a threat of infringement liability. Faced with the infringement suit, however, Roche reevaluated the patents and determined that Serono's claims had some possibility of success. When Roche and IGEN could not agree on who had primary contractual responsibility for defense of the Serono action, one of Roche's corporate affiliates, F. Hoffmann-La Roche Ltd. (HLR), acquired Serono's patent for $15 million on July 12, 1999.

Having purchased the subject matter of the Serono action, HLR formally became the plaintiff in the Delaware case on October 26, 1999, and then offered each of the defendants—including Roche, IGEN, and IGEN's licensees—a dismissal without prejudice. Roche accepted but IGEN refused the offer. It wanted either a dismissal with prejudice or a final judgment. HLR, likewise, was unwilling to waive the right to protect its newly acquired interest in the Serono patent, particularly in light of IGEN's stormy relationship with Roche. So the Serono lawsuit proceeded to a week-long bench trial in February 2001.

Meanwhile, on September 22, 2000, IGEN filed an amended complaint in this case, which complaint included, among others, new allegations concerning the handling of the Serono matter. Twelve of IGEN's fourteen causes of action proceeded to trial, and six of them are before us on appeal. IGEN alleged that HLR's continuation of the Serono lawsuit amounted to tortious unfair competition by Roche. It claimed that Roche breached an implied duty of good faith and fair dealing when Roche discontinued plans to develop an ECL-based DNA probe without returning to IGEN Roche's semi-exclusive license to do so. IGEN also alleged that Roche breached express provisions of the contract by (1) failing to pay royalties; (2) failing to share ECL improvements with IGEN; (3) settling the Serono lawsuit, using HLR, without IGEN's consent; and (4) selling ECL-based products outside the contractually limited field.

The jury returned a special verdict in IGEN's favor on each of these claims. It awarded $4.8 million in compensatory damages and a landmark $400 million in punitive damages for the unfair competition claim; $82 million for breach of the implied duty of good faith and fair dealing; and a total of $18.6 million for the other breach-of-contract claims. Additionally, the jury found that Roche had materially breached its agreement with IGEN. The district court entered judgment in the amounts determined by the jury and declared that IGEN was entitled to terminate the agreement as a result of Roche's material breach. The court also denied Roche's post-trial motions for judgment as a matter of law, for a new trial, and for reduction of the punitive damages. This appeal followed.

II.

We turn first to the issues in this case arising out of the Serono litigation, which issues merit some additional procedural discussion. In its amended complaint, IGEN sought to hold Roche liable for the role that its corporate relative, HLR, played in the Serono lawsuit. In Count Twelve, the contract claim, IGEN alleged that HLR's purchase of the Serono patent constituted an unauthorized settlement by Roche in violation of section 13.1 of the agreement. In Count Fourteen, IGEN claimed that HLR's continuation of the Serono lawsuit amounted to unfair competition.

IGEN moved for partial summary judgment on Count Twelve. Roche opposed the motion by arguing, in part, that it could not be held liable for HLR's conduct because IGEN had failed to establish that Roche and HLR were the same legal entity. The district court disagreed and ruled that, "in the Serono litigation, for all purposes, whatever was accomplished by Hoffmann-La Roche was accomplished by Boehringer Mannheim, by Roche, whomever the parties were." In other words, the district court determined that Hoffmann-La Roche was Roche's second self or alter ego.² It also agreed with IGEN's interpretation of the contract and, thus, granted summary judgment in IGEN's favor.

We are inclined to believe that, under the facts of this case, the district court's decision to pierce the corporate veil between Roche and HLR was error. But, we need not decide that question because Roche has not challenged the district court's alter ego ruling on appeal. Failure to present or argue assignments of error in opening appellate briefs constitutes a waiver of those issues. See Edwards v. City of Goldsboro, 178 F.3d 231, 241 n. 6 (4th Cir.1999); Fed.R.App.P. 28(a)(9)(A). Although Roche appeals the grant of summary judgment on Count Twelve, its argument addresses only the district court's interpretation of the contract and ignores the alter ego determination entirely.³ Had Roche raised this issue on appeal, we may have been able to more narrowly resolve the Serono-based claims at issue in this case. If HLR and Roche are separate entities for tort liability purposes, as the record seems to indicate,⁴ it is doubtful that Roche could have been found responsible for damages, if any, arising from continuation of the Serono litigation.⁵ However, with alter ego not an issue on appeal, we turn to the merits of Counts Twelve and Fourteen.

A.

Section 13.1 of the parties' agreement states that "[n]either party shall enter into any settlement that affects the other party's rights or interests without such other party's written consent." IGEN argues, and the district court found, that HLR's purchase of the Serono patent for $15 million constituted an unauthorized settlement by Roche that affected IGEN's rights and interests. Roche counters that, with or without HLR's purchase, the Serono patent would still exist and would remain a threat to IGEN's patent rights. The mere substitution of parties did not, according to Roche, impact IGEN's rights or interests at all, and summary judgment on Count Twelve was therefore improper. We disagree.

Reviewing the grant of summary judgment de novo, Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 722 (4th Cir.2000), we find that Roche's view of what "affects the other party's rights or interests" is too narrow. The plain meaning of section 13.1 supports the district court's conclusion that the loss of Roche as a co-defendant in the Serono litigation affected IGEN's interests. As co-defendants IGEN and Roche undoubtedly could have shared trial strategy and...