Polyzen, Inc. v. Radiadyne, LLC, No. 5:11-CV-662-D

• Court: United States District Courts. 4th Circuit. Eastern District of North Carolina
• Writing for the Court: JAMES C. DEVER III Chief United States District Judge
• Decision Date: 18 February 2015
• Parties: POLYZEN, INC., Plaintiff, v. RADIADYNE, LLC, Defendant.
• Docket Number: No. 5:11-CV-662-D

POLYZEN, INC., Plaintiff,
v.
RADIADYNE, LLC, Defendant.

No. 5:11-CV-662-D

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

February 18, 2015

ORDER

On November 21, 2011, Polyzen, Inc. ("Polyzen" or "defendant"), filed suit in this court against RadiaDyne, LLC ("RadiaDyne"), alleging patent infringement [D.E. 1]. On December 13, 2011, RadiaDyne filed a motion to dismiss for lack of jurisdiction and to correct ownership of the patent-in-suit [D.E. 10]. On December 23, 2011, RadiaDyne sued Polyzen in the United States District Court for the Southern District of Texas, alleging breach of contract and other claims. See Complaint at 9-13. RadiaDyne LLC v. Polyzen, Inc., No. 5:12-CV-102-D (E.D.N.C. Dec. 23, 2011), [D.E. 1]. On February 24,2012, the Southern District of Texas transferred RadiaDyne's case to this court. See Order, RadiaDyne LLC v. Polyzen, Inc., No. 5:12-CV-102-D (E.D.N.C. Feb. 24, 2012), [D.E. 10]. On July 2, 2012, the court consolidated the two cases [D.E. 26]. On September 13, 2012, the court denied RadiaDyne's motion to dismiss for lack of jurisdiction and to correct ownership [D.E.30].

On June4, 2013, RadiaDyne moved for partial summary judgment on inventorship [D.E. 65]. On June 28, 2013, Polyzen filed a motion for summary judgment on inventorship [D.E. 72]. On October 31, 2013, the court denied both motions for summary judgment on inventorship [D.E. 88].

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On November 4, 2013, Polyzen filed an amended complaint, alleging patent infringement, breach of contract, and misappropriation of trade secrets [D.E. 89]. On November 18, 2013, RadiaDyne answered and added an additional counterclaim of bad faith trade secret litigation [D.E. 91]. On December 19, 2013, Polyzen answered [D.E. 97].

On May 23, 2014, both parties filed multiple motions for summary judgment. Polyzen moved for summary judgment on the validity of the patent-in-suit [D.E. 107] and on its patent infringement claim [D.E. 116]. RadiaDyne moved for partial summary judgment on Polyzen's trade secret misappropriation claim [D.E. 108] and on its own breach of contract counterclaim [D.E. 112]. On December 12, 2014, the court denied Polyzen's motion for summary judgment on the validity of its patent [D.E. 141]. As explained below, the court grants RadiaDyne's motion for partial summary judgment on its breach of contract counterclaim and grants in part RadiaDyne's motion for partial summary judgment on Polyzen's trade secret misappropriation claim.

I.

In early 2007, John Isham, founder and president of RadiaDyne, learned of Polyzen when searching the Internet for "medical balloons" and "medical devices." Isham Dep. [D.E. 109-2] 106. Isham then contacted Polyzen. Id. On February 12, 2007, RadiaDyne and Polyzen began working together to develop a medical balloon device design and the technology and process necessary to produce it. See Development & Commercialization Agreement ("2008 DCA") [D.E. 109-16] ¶ 3.d. On March 26, 2007, Rubin Shah, a Polyzen employee, sent Isham a quote for a project to "Design & Thermoform/RF Weld PU Balloon-Phase I." See [D.E. 109-3] 3-4. The quote totaled $23,500, and it included a price of $4,500 for "design" and a price of $19,000 for prototype production. Id. Tilak Shah, Polyzen's founder, created the quote. Id. 4; Tilak Shah 30(b)(6) Dep. [D.E. 132-1] 24, Feb. 26, 2014. On March 28, 2007, RadiaDyne issued a purchase order to Polyzen for a total of

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$23,500. See [D.E. 109-4] RD 1132. On March 29, 2007, Polyzen sent RadiaDyne its first invoice and RadiaDyne paid a deposit of $4,500. See [D.E. 109-5] RD 1131; [D.E. 109-6] RD 1136.

On July 27, 2007, Polyzen sent a balloon design to Isham, which he approved. See [D.E. 109-7] P 219. On July 31, 2007, Isham sent Rubin Shah an email and told Shah that he wanted to launch the product at the October 2007 ASTRO trade show. See [D.E. 109-8] RD 2649. Rubin Shah responded the same day and told Isham that he could meet the deadline despite it being "a very aggressive timeline." Id. Isham replied later in the day and asked for information on the manufacturing process so he could "submit [a] FDA Registration letter." Id.

On September 25, 2007, Polyzen filed a provisional patent application. See Tilak Shah 30(b)(6) Dep. 192. Polyzen did not inform RadiaDyne of the patent application. Cf. id. 192-92; Tilak ShahDep. [D.E. 113-11] 89-90, Mar. 15,2013. Polyzen intended to get the patent application filed before the balloon was publicly displayed at the October 2007 ASTRO trade show. See Tilak Shah 30(b)(6) Dep. 228.

On September 26, 2007, Tilak Shah sent Isham quotes for two new phases: Phase II, which consisted of the production of 100 samples "for testing and trials," and Phase III, which consisted of full-scale production of the medical balloons. See [D.E. 109-9] 2-7. RadiaDyne completed purchase orders for both phases. See [D.E. 109-10, 109-11].

On October 9, 2007, Polyzen and RadiaDyne entered into a "Development and Commercialization Agreement" that assigned different rights and obligations to the two parties. See 2007 DCA [D.E. 122-3]. On February 8, 2008, the parties entered into a new and almost identical agreement. See 2008 DCA 2. Polyzen drafted the 2008 DCA with the assistance of Willy Manfroy, an intellectual property licensing specialist. See Tilak Shah 30(b)(6) Dep. 191, 262-64. In the 2008 DCA, "the parties agree[d] that RADIADYNE TECHNOLOGY and RADIADYNE PRODUCT will

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remain the properties of RADIADYNE and POLYZEN TECHNOLOGY, DEVICE PROCESS TECHNOLOGY and BALLOON PROCESS TECHNOLOGY will remain the property of POLYZEN." 2008 DCA ¶ 6.a. The 2008 DCA defines "RadiaDyne Product" as "[s]pecific design of rectal balloon catheter for locating/supporting prostate during radiation therapy with Polyzen's Balloon Process Technology." Id. ¶ 2.e (emphasis omitted). The 2008 DCA defines Polyzen's Balloon Process Technology as "Polyzen's PU film welded balloon technology, including film formulation, thickness and multi-layer film welded, designed to articulate desired shape and profile of balloons for various applications." Id. ¶ 2.d. The definition and assignment of intellectual property survive any termination of the 2008 DCA. Id. ¶ 7.b.

On March 12, 2008, Isham forwarded to Dielectrics, Inc. ("Dialectrics"), another manufacturer, the "product specification drawings" for the balloon, which Polyzen had previously sent to Isham. See [D.E. 109-17] DIE 117-19.

On September 25, 2008, Polyzen filed another patent application for a "Multi-Layer Film Welded Articulated Balloon." See '497 Patent [D.E. 1-3] 2.

On September 10, 2009, Isham forwarded to Dielectrics another email from Polyzen, which contained an attachment with an updated balloon design. See [D.E. 109-20] DIE 278-79. In November 2009, RadiaDyne terminated the 2008 DCA with Polyzen. See Def.'s Answer Am. Compl. [D.E. 91] ¶ 43.

On July 12, 2011, the United States Patent & Trademark Office ("PTO") issued Patent No. 7,976,497 ("the '497 patent"). See '497 Patent 2. The '497 patent listed Tilak Shah and Christopher Strom as inventors and Polyzen as the assignee. Id. The '497 patent issued with five claims, all directed to "a medical balloon device." Id. 10.

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II.

Summary judgment is appropriate if the moving party demonstrates that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The party seeking summary judgment must initially show an absence of genuine dispute of material facts or the absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If a moving party meets its burden, the nonmoving party must "come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quotation and emphasis omitted). A genuine issue for trial exists if there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). "The mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient." Id. at 252; see Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985) ("The nonmoving party, however, cannot create a genuine issue of material fact through mere speculation or the building of one inference upon another."). Only factual disputes that might affect the outcome under substantive law properly preclude summary judgment. Anderson, 477 U.S. at 248. In reviewing the factual record, the court views the facts in the light most favorable to the nonmoving party and draws reasonable inferences in that party's favor. Matsushita, 475 U.S. at 587-88.

A.

The court first addresses RadiaDyne's motion for summary judgment on its breach of contract counterclaim. In the contract, the parties agreed to apply North Carolina law. See 2008 DCA ¶ 8.a. Under North Carolina law, a party alleging breach of contract must prove the existence of a valid contract and breach of the contract's terms. See McLamb v. T.P. Inc., 173 N.C. App. 586, 588, 619 S.E.2d 577, 580 (2005), disc. rev. denied, 360 N.C. 290, 627 S.E.2d 621 (2006); Poor v.

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Hill, 138 N.C. App. 19, 26, 530 S.E.2d 838, 843 (2000); Jackson v. Carolina Hardwood Co., 120 N.C. App. 870, 871, 463 S.E.2d 571, 572 (1995). The parties do not dispute the validity of the 2008 DCA. Rather, they dispute whether Polyzen breached the 2008 DCA.

In interpreting the 2008 DCA, the court "examine[s] the language of the contract itself for indications of the parties' intent at the moment of execution." State v. Philip Morris USA Inc., 359 N.C. 763, 773, 618 S.E.2d 219, 225 (2005); Briggs v. Am. & Efird Mills, Inc., 251 N.C. 642, 644, 111 S.E.2d 841, 843 (1960). "If the plain language of a contract is clear, the intention of the parties is inferred from the words of the contract." Phillip Morris USA, 251 N.C. at 773,...