Pulse Health LLC v. Akers Biosciences, Inc.
| Decision Date | 14 April 2017 |
| Docket Number | No. 3:16-cv-01919-HZ,3:16-cv-01919-HZ |
| Parties | PULSE HEALTH LLC, Plaintiff, v. AKERS BIOSCIENCES, INC., Defendant. |
| Court | U.S. District Court — District of Oregon |
David H. Angeli
Kristen L. Tranetzki
ANGELI LAW GROUP LLC
121 SW Morrison Street, Suite 400
Portland, OR 97205
Michael Rounds
BROWNSTEIN HYATT FARBER SCHRECK, LLP
5371 Kietzke Lane
Reno, NV 89511
Attorneys for Plaintiff
Anthony J. DiMarino, III
Emmett S. Collazo
A.J. DIMARINO, P.C.
41 Grove Street
Haddonfield, NJ 08033
Jennifer Wagner
STOLL STOLL BERNE LOKTING & SCHLACHTER
209 SW Oak Street, Suite 500
Portland, OR 97204
Attorneys for Defendant
Plaintiff brings three claims against Defendant: (1) false advertising under the Lanham Act, 15 U.S.C. § 1125(a); (2) unlawful trade practices in violation of Oregon Revised Statute § (O.R.S.) 646.608; and (3) breach of contract. Defendant moves to dismiss Plaintiff's claims. The Court held oral argument on March 10, 2017.
The Court grants Defendant's motion to dismiss Plaintiff's Claims 1 and 2 for failure to state a claim. The Court denies Defendant's motion to dismiss Plaintiff's Claim 3 for lack of personal jurisdiction. The Court also denies Defendant's alternative motion to transfer venue. In sum, Plaintiff's third claim for breach of contract can proceed in this Court.
Defendant Akers Biosciences, Inc. ("Defendant") is a New Jersey corporation with its principal place of business in West Deptford, New Jersey. Akers Decl. Supp. Def.'s Mot. Dismiss ("Akers Decl.") ¶ 8, ECF 19. According to Defendant, it develops and sells diagnostic products and devices designed to deliver various health information test results with laboratory-level accuracy, but with cheaper and faster results. Id. at ¶ 5. Defendant is publicly held, with common stock traded on the NASDAQ Exchange and London Stock Exchange. Id. at ¶ 9.
Defendant has no place of business in Oregon and has no employees in Oregon. Id. at ¶¶ 7, 10, 11. However, on October 4, 2016, Defendant engaged an independent sales representative in Oregon for marketing and selling the OxiChek product at issue in this case. Id. at ¶ 15. Defendant also engages independent sales distributors that have made sales to a hospital in Corvallis, Oregon, totaling less than $15,000 since 2013. Id. at ¶ 14.
Plaintiff Pulse Health LLC ("Plaintiff") is an Oregon limited liability company with its principal place of business in Lake Oswego, Oregon. Compl. ¶ 1, ECF 1. Plaintiff formed in 2006 for the purpose of developing a product that can measure aldehyde molecules in human breath via a non-invasive hand-held device. Marsh Decl. ¶ 3, ECF 28. In pursuit of that goal, Plaintiff invented a hand-held computer system that could be used to measure certain health markers, such as aldehyde molecules, via a breath test. Compl. ¶ 9. Plaintiff had initially called this product the "Free Radical Enzymatic Device" or "FRED," but later changed the name of the device to "Revelar." Id. at ¶¶ 9, 18. Plaintiff currently employs fourteen people at its Portland, Oregon facility. Id. at ¶ 3.
Beginning in September of 2007, Plaintiff and Defendant entered into a number of contracts for the development and manufacture of a breath tube containing a chemical reagent that could accurately measure aldehyde molecules in human breath, to be used in conjunction with Plaintiff's FRED/Revelar device. Id. at ¶¶ 8-15; Marsh Decl. ¶ 9. Defendant had previously invented a test kit for a Blood Alcohol Test which took the form of a tube containing chemical reagents into which the test-taker would blow air. Compl. ¶ 10. The chemical reagents would react and change color based upon their interaction with alcohol present in the breath. Id. Defendant also invented another tube-and-reagent test that it claimed could detect the product of "free radical metabolism, such as aldehydes, MDA or peroxides, and react such substances witha compound producing a color." Id. The parties entered into a Technology and Development Agreement ("TD Agreement") pursuant to which Defendant would design "New Versions" of its free radical test product in order for it to be used in combination with Plaintiff's hand-held FRED product. Id. at ¶ 11.
In addition to the TD Agreement, the parties simultaneously entered into a Supply and Manufacturing Agreement ("Supply Agreement"). The Supply Agreement provided that Defendant would manufacture the New Versions for Plaintiff to sell with its FRED/Revelar product if Defendant successfully developed and tested the New Versions of the free radical test tubes. Id.
The relationship between the parties and the circumstances surrounding the development of the New Versions changed in the following year. In December 2008, the TD Agreement and Supply Agreement were terminated in a Technology Transfer Agreement ("TT Agreement"). Id. at ¶ 12. Under the TT Agreement, Defendant assigned all intellectual property rights in the "Assigned Technology" to Plaintiff. Id. at ¶ 13. The "Assigned Technology" included all technology related to non-invasive exhaled breath testing. Id. The TT agreement provided Defendant with a license to use the Assigned Technology in the "ABI Field" which was limited to a handful of breath-test products related to diabetes, lung cancer, and alcohol detection. Id. at ¶ 14.
Under the TT agreement, Defendant agreed to complete research, development, and testing for the "Free Radical Technology" and Plaintiff agreed to pay a transfer fee of $3,000,000 in periodic payments through June of 2010. Id. The TT Agreement included an amended version of the previous Supply Agreement and provided for Defendant's potential manufacture and saleof the "FRED Aldehyde Assay Tubes" (apparently the new moniker for the New Versions of Defendant's aldehyde test tubes). Id.
Defendant's development of the test tubes failed, according to Plaintiff. Id. at ¶ 16. Plaintiff determined in its testing laboratory that the chemical reagents developed by Defendant did not work. Id. According to Plaintiff, when the reagents in the tube changed color in reaction to a user's breath, the reagents were not detecting aldehydes, as they were supposed to. Id. Instead, the change in color in the tube (which the hand-held device reads to determine the amount of aldehyde molecules in the breath) was actually a result of the reagents reacting with humidified air (i.e. water) in the breath. Id. After Plaintiff determined that Defendant could not develop Free Radical Technology that successfully tested for accurate measurement of aldehydes in breath condensate, Plaintiff requested to part ways with Defendant. Id. The parties subsequently terminated all prior agreements between each other and entered into the April 8, 2011 Assignment, License, and Settlement Agreement ("Settlement Agreement") at issue in this action. Id. at ¶ 15.
The Settlement Agreement provided that Plaintiff assigned and transferred the Assigned Technology back to Defendant, and Defendant waived the remainder of Plaintiff's $3,000,000 payment. Id. at ¶ 17. The Settlement Agreement also provided that Defendant granted Plaintiff an exclusive and perpetual license to use the Assigned Technology in the field of Aldehyde Tests, which included any testing for oxidative stress, but excluded the "Defendant Field" of tests relating to diabetes, cancer, and alcohol. Id. The Settlement Agreement further provided that Defendant had no rights with respect to Plaintiff's Technology for its hand-held FRED/Revelar device. Id. at ¶ 18.
In approximately May of 2012, Plaintiff became aware that Defendant was selling a hand-held "Vivo" product that Defendant claimed measured oxidative stress and free radical damage through disposable tubes, which Plaintiff determined was a copy of Plaintiff's FRED/Revelar product in several respects. Compl. ¶ 19; Marsh Decl. ¶ 17. One of the former sales agents of Plaintiff was attempting to sell the Vivo product to Plaintiff's Oregon-based customers, and Plaintiff's law firm sent that former agent a cease-and-desist letter. Marsh Decl. ¶ 17. Both Defendant and the former sales agent thereafter stopped selling the Vivo product. Id.
In December 2015, Plaintiff became aware that Defendant was offering an "OxiChek" product for sale at a trade show in Las Vegas. Id. at ¶ 21. The Oxi-Check device uses a hand-held reader device in which a chemical reagent tube (the OxiChek product) is inserted after a person has exhaled breath into it. Compl. ¶ 21. The OxiChek device is supposed to measure free radicals such as superoxides, hydrogen peroxide, and aldehydes, and then send the results to a software application downloaded on a person's mobile phone or computer. Id. The software then displays oxidative stress and free radical results. Id.
After reviewing Defendant's OxiChek advertising materials, Plaintiff sent Defendant a cease-and-desist letter on March 1, 2016, complaining that Defendant may be using the Assigned Technology and Plaintiff's technology in breach of the parties' Settlement Agreement. Id. at ¶ 22. Plaintiff requested Defendant's technical materials showing the composition of its chemical reagents. Id. Defendant refused to remove its product from the market or provide any information concerning its OxiChek product. Id. at ¶ 23.
In July of 2016, Plaintiff obtained a sample of the OxiChek product by purchasing it from one of Defendant's distributors. Id. at ¶ 24. After analyzing the device, Plaintiff determined that the OxiChek product is a copy of the Assigned Technology and Pulse Technology. Id. Thechemistry for the OxiChek and the Assigned Technology reagents are the same, and the circuit boards for the OxiChek product have a similar layout and the same optical chamber, LED, diodes, switches and gates as the original FRED/Revelar device developed by Plaintiff. Id. at ¶¶ 24-25.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the claims. Navarro v. Bloc...
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