Russo v. Baxter Healthcare Corp., 97-1824

• Citation: 140 F.3d 6
• Decision Date: 06 January 1998
• Docket Number: No. 97-1824,97-1824
• Parties: Ronald D. RUSSO, Plaintiff--Appellant, v. BAXTER HEALTHCARE CORPORATION, et al., Defendants--Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 6

140 F.3d 6

46 U.S.P.Q.2d 1239

Ronald D. RUSSO, Plaintiff--Appellant, v. BAXTER HEALTHCARE CORPORATION, et al., Defendants--Appellees.

No. 97-1824.

United States Court of Appeals, First Circuit.

Heard Jan. 6, 1998.

Decided March 25, 1998.

Steven E. Snow, with whom Thomas R. Noel, Partridge, Snow & Hahn, Providence, RI, were on brief, for appellant.

John Henry Pelzer, with whom Ruden, McClosky, Smith, Schuster & Russell, P.A., Ft. Lauderdale, FL, Edward L. Gnys, Jr. and Gunning, LaFazia & Gnys, Providence, RI, were on brief, for appellees.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and SHADUR, ^* Senior District Judge.

SHADUR, Senior District Judge.

Ronald Russo ("Russo") brought this diversity-of-citizenship action against Baxter Healthcare Corporation ("Baxter"), claiming that Baxter had violated his rights under the Rhode Island Uniform Trade Secrets Act, had interfered with his prospective business relationships and had negligently injured him by rendering his invention unpatentable in foreign countries. When the case went to trial, Baxter exercised its right under Fed.R.Civ.P. ("Rule") 50(a) to move for judgment as a matter of law when Russo had completed his proofs and rested. That motion was granted, and the action was dismissed. Russo appeals, and we affirm the district court's final judgment in Baxter's favor.

Standard of Review

We review the grant of a Rule 50(a) motion for judgment as a matter of law de novo, using the same standards as the district court (Andrade v. Jamestown Hous. Auth., 82 F.3d 1179, 1186 (1st Cir.1996)). All of the evidence and inferences drawn from the evidence are therefore considered in the light most favorable to nonmovant Russo, and we hereafter apply that principle in the Facts section.

As for the legal standard to be applied to the facts as so considered, Andrade, id. (quoting Murray v. Ross-Dove Co., 5 F.3d 573, 576 (1st Cir.1993), and using the older Rule 50(a) term "directed verdict") teaches:

A verdict may be directed only if the evidence, viewed from this perspective, "would not permit a reasonable jury to find in favor of the plaintiff[ ] on any permissible claim or theory."

But the plaintiff must provide " 'more than a mere scintilla' of evidence and may not rely on conjecture or speculation" to justify the submission of an issue to the jury (Katz v. City Metal Co., 87 F.3d 26, 28 (1st Cir.1996)).

Facts

In 1983 Russo began working with a company then called Superior Plastics Products Corp. and later known as Superior Healthcare Corporation ("Superior") under an agreement calling for him to develop new medical products in return for royalties based upon the success of his inventions. In 1989 Russo developed a new kind of closed-seal tracheal suction catheter, a device that uses an endotracheal tube to clear the airways of patients breathing on a mechanical ventilator. Russo's catheter had unique features, such as a rear irrigation port and a clamp valve, that distinguished it from others on the market.

Russo disclosed his idea for the improved catheter to Superior's President David Brodsky ("Brodsky"). Because Brodsky considered that Superior lacked the ability to market such a product, he sought another company to fill that role. To that end, in April 1990 Brodsky and Baxter discussed an agreement under which Baxter would manufacture and distribute the device. ¹ As part of its evaluation of the product, Baxter sent prototypes of the catheter to two clinicians so they could conduct bench trials. Baxter did not require that either clinician sign a confidentiality agreement before doing so.

In May Brodsky told Russo about his discussions with Baxter (but not about the bench trials). Russo asked that Baxter be required to sign a confidentiality agreement, and Brodsky orally agreed to obtain one. Later in May Russo stopped working with Superior because of a dispute over money and issues unrelated to this action. Nonetheless, Russo retained some access to Superior's offices and observed that Superior continued to develop his catheter. He also learned that in June Baxter and Superior had entered into an Exclusive Distribution Agreement ("Agreement") that granted Baxter an option to obtain rights in the catheter.

Russo acted promptly in response to that discovery, sending two letters to Baxter asserting that he held the rights to the catheter. On June 14 he also filed an application with the United States Patent and Trademark Office ("PTO") for a patent on the catheter, and on June 25 he sued Superior and Baxter in Rhode Island Superior Court, seeking an injunction to prevent both companies from implementing the Agreement. Baxter and Superior promptly countered in July by submitting their own application to the PTO for a United States patent on the catheter. In addition Baxter, without Russo's knowledge, conducted additional field trials on the catheter from June to August. As part of those field trials, Baxter sent out samples of the device to 14 hospitals around the United States to solicit practitioner comments. Again Baxter did not require that the participants in its field trials agree to keep the catheter confidential.

Over a year later, in late October 1991, Russo's patent attorney Robert Doherty ("Doherty") received a Notice of Allowance from the PTO informing him that Russo's United States patent application had been approved. Doherty paid the mandatory issuance fee and expected that the PTO would issue the patent within two or three months. In November 1991 Russo discussed filing patent applications in foreign countries with Doherty. They agreed on a tentative list of target countries, and Doherty sought out a consultant in foreign patent law because he lacked sufficient contacts and knowledge to file patents in most foreign countries.

On December 9, 1991 Baxter displayed Russo's closed suction tracheal catheter at the American Association of Respiratory Care convention in Atlanta. ² Baxter demonstrated the catheter, incorporated it into a sales brochure and took some sales leads on it. Russo did not authorize any of those activities, and he did not discover what Baxter had done until several days after the convention.

Russo immediately told Doherty about Baxter's unauthorized disclosure of his product at the convention (at that point Russo did not know about the earlier bench trials and field tests). Without performing any research or consulting with his foreign patent expert, Doherty advised Russo that Baxter's disclosures at the convention had destroyed the novelty of his invention and thus made it unpatentable in any foreign country other than Canada or possibly Australia. Doherty told Russo that no foreign patent applications should even be filed, because he believed that no patents could issue after Baxter's publication at the Atlanta convention--or alternatively, that any patents that might issue would be invalid and worthless. ³

Doherty's legal advice was dead wrong. Under the European Patent Convention and the law of most industrialized countries, an unauthorized disclosure of an invention does not immediately destroy its novelty (and thus foreclose the inventor's ability to patent the invention). Instead, such an adverse disclosure bars only patent applications made more than six months after the date of the disclosure (Art. 55 of the Convention on the Grant of European Patents, as printed in European Patent Convention (4th ed., Munich: European Patent Office, 1987)). That being so, Doherty should instead have advised Russo that he could still apply for foreign patents, because Baxter's actions at the Atlanta convention would not by themselves have affected Russo's ability to obtain such patents if applied for during the six-month window period after December 9, 1991.

What is critical to this litigation is that Russo relied upon Doherty's flawed advice and decided not to seek patents abroad. As a consequence, Doherty did nothing more to prepare any foreign patent applications.

On January 28, 1992 the PTO issued a patent to Russo on his catheter. That unquestionably barred Russo from obtaining any foreign patents because that publication of the catheter--made under the auspices of Russo himself, rather than by some unauthorized third party--made it a part of the "state of the art," so that it was not a "new" invention for foreign patent purposes. That destroyed the invention's eligibility for such patents (European Patent Convention Art. 54).

Proceedings Below

On October 19, 1994 Russo sued Baxter in the district court alleging injury from Baxter's December 1991 publication of the catheter at the Atlanta convention. During discovery Russo first learned that earlier--in 1990--Baxter had conducted the bench trials and field tests on the catheter without any confidentiality agreements. Russo amended his complaint to encompass those earlier activities and asserted that the initial disclosures (1) had violated his rights under the Rhode Island Uniform Trade Secrets Act, (2) had interfered with his prospective business relationships and (3) had negligently injured him by rendering his device unpatentable in foreign countries.

As stated at the outset of this opinion, when Russo closed his proofs at trial, Baxter sought judgment as a matter of law under Rule 50(a). On May 29, 1997 the district court delivered an oral opinion granting Baxter's motion on all three counts because Russo had failed to establish that Baxter had either caused his injury or disclosed his trade secret. In addition, the district court determined that the statute of limitations had run on the trade secret count, that Russo had no prospective contractual relationships--thus eliminating the second count--and that Russo's claimed damages were purely speculative in any event. This appeal followed.

Causation

All of Russo's claims depend on his ability to establish damages flowing from Baxter's actions--and that in turn depends on the requisite...