SITE MICROSURGICAL SYSTEMS v. COOPER COMPANIES

• Decision Date: 09 June 1992
• Docket Number: Civ.A. No. 90-660-JLL.
• Citation: 797 F. Supp. 333
• Parties: SITE MICROSURGICAL SYSTEMS, INC., Plaintiff, v. The COOPER COMPANIES, INC., Defendant.
• Court: U.S. District Court — District of Delaware

797 F. Supp. 333

SITE MICROSURGICAL SYSTEMS, INC., Plaintiff, v. The COOPER COMPANIES, INC., Defendant.

Civ.A. No. 90-660-JLL.

United States District Court, D. Delaware.

June 9, 1992.

James M. Mulligan, Jr., of Connolly, Bove, Lodge & Hutz, Wilmington, Del., and Harman Avery Grossman and Richard Savage of Patterson, Belknap, Webb & Tyler, New York City, of counsel, for plaintiff.

Donald F. Parsons, Jr., of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., and Thomas R. Boland and Ellen A. Efros of Vorys, Sater, Seymour & Pease, Washington, D.C., of counsel, for defendant.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

The plaintiff, Site Microsurgical Systems, Inc. ("Site"), filed suit against the defendant, The Cooper Companies, Inc. ("Cooper") alleging patent infringement. Before the Court is plaintiff's motion to join its parent corporation, the Iolab Corporation ("Iolab"), as a party plaintiff under Rule 15. (Docket Item "D.I." 69; 70.) Site contends that the alleged infringement of its patent "also deprived Iolab of sales of collateral products which are dependent on the sales of Site's patented products." (D.I. 69 ¶ 14.)

The defendant opposes the amendment, contending that the motion is untimely, futile, and that it was filed for the purpose of delay. (D.I. 75; 84.) Moreover, the defendant asserts that the proposed amendment would significantly increase the complexity of the case, and, thereby, prejudice its interests. For the reasons stated below, the Court will deny plaintiff's motion to amend the complaint to join Iolab as an additional party plaintiff who seeks to recover damages for infringement of Site's patent.

I. RELEVANT BACKGROUND FACTS

Site Microsurgical Systems, Inc. ("Site" or "patentee")¹ owns two patents by assignment:² (1) U.S. Patent No. 4,493,695 "Opthalmic Microsurgical System Cassette Assembly," and (2) U.S. Patent No. 4,627,833 "Microsurgical System Cassette Assembly." (D.I. 1 ¶ 6, Exs. A, B; 69 ¶ 7; 84 at 2.) Site manufactures the TXR Modular Microsurgical System, an operating room equipment system used in ophthalmological microsurgery, using this patented technology. (D.I. ¶¶ 7, 9, 13; 69 ¶¶ 8-13, 15, Exs. A, B, C,; 70 at 3; 71 Rockley Decl. ¶ 7, Exs. A, B, C.) The TXR System includes a hand-held instrument, a cassette assembly that attaches to the hand-held instrument, a machine module³ containing control components for the hand-held instrument, and a console which houses and supplies services and interconnections for the module. (D.I. 1 ¶ 7; 69 ¶ 8.)

Surgery requiring the use of Site's TXR System also involves the insertion of artificial intraocular lenses. (D.I. 69 Ex. 4 ¶ 13; 71 ¶ 13.) Iolab, the sole stockholder of Site and a wholly owned subsidiary of Johnson & Johnson, makes and sells artificial intraocular lenses which are used to replace damaged human lenses. (D.I. 69 Ex. 4 ¶ 12; 70 at 3; 71 ¶ 12.) Purchasers can, but are not required to, purchase both the Site ophthalmological surgical equipment and the Iolab intraocular lenses. (D.I. 71 Rockley Decl. at ¶¶ 19, 20; 70 at 6; 75 Ex. 4; 76 at 9-10, 81 at 7-11.) However, Site and Iolab argue that consumers routinely purchase both the Site equipment and the Iolab lenses as a package and that the markets are highly dependent on one another.⁴ (D.I. 69 ¶ 14; 71 Rockley Decl. at ¶¶ 17, 21-22; 70 at 6-7, 76 at 9, 81 at 4.)

Furthermore, Site and Iolab contend that they offer financing plans, which are customary in the medical supply industry, to ease the burden of the high cost of surgical equipment; amortizing the expensive purchase of a console against periodic purchases of relatively inexpensive lenses. (D.I. 69 Ex. 4 ¶ 20; 70 at 5; 71 ¶¶ 15, 21-22; 76 at 10, Ex. A at 53; 81 at 4-6.) Iolab contends that, were it not for being able to provide customers with Site consoles and cassettes, Iolab could not sell a large portion of its lenses. (D.I. 71 Rockley Decl. ¶ 18; 70 at 6; 89 at 4.) Therefore, Iolab argues that it has also been injured by Cooper's alleged patent infringement and that it should be fully compensated for the lost sales of its collateral products. (D.I. 69 Ex. 4 ¶ 16; 70 at 7.)

II. DISCUSSION

Rule 15 of the Federal Rules of Civil Procedure favors amendment. Adams v. Gould, Inc., 739 F.2d 858, 864 (3d Cir.1984), cert. denied, 469 U.S. 1122, 105 S.Ct. 806, 83 L.Ed.2d 799 (1985).⁵ It provides, in pertinent part, that leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). "If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits." Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). However, this liberal policy of granting leave to amend must not be interpreted to permit amendment without restraint. Adams v. Gould, Inc., 739 F.2d at 864; Strawhecker v. Laurel School District, 100 F.R.D. 7, 10 (W.D.Pa.1983). An amendment should not be permitted if countervailing considerations exist such as undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, undue prejudice, or futility. Foman v. Davis, 371 U.S. at 182, 83 S.Ct. at 230.

Under Rule 15,⁶ an amendment will be considered "futile" if it cannot withstand a motion to dismiss. Jablonski v. Pan American World Airways, Inc., 863 F.2d 289, 292 (3d Cir.1988); Azarbal v. Medical Center of Delaware, Inc., 724 F.Supp. 279 (D.Del.1989). The standard for deciding a motion to dismiss is whether, taking all factual allegations as true, it is beyond doubt that the plaintiff can prove no set of facts to support his claim which would entitle him to relief. Fed.R.Civ.P. 12(b)(6); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Procter & Gamble Co. v. Nabisco Brands, Inc., 125 F.R.D. at 412 (citing D.P. Enterprises v. Bucks County Community College, 725 F.2d 943 (3d Cir.1984)). The facts alleged in the proposed amended complaint, and all reasonable factual inferences drawn from those facts, are construed in the plaintiff's favor. Procter & Gamble Co. v. Nabisco Brands, Inc., 125 F.R.D. at 412.

A claim is not "futile" merely because it will be difficult to prove. In other words, the claim must be futile as a matter of law rather than merely unlikely as a matter of fact. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Outboard Marine Corp. v. Pezetel, 535 F.Supp. 248, 252 (D.Del.1982). The issue involved in a motion to dismiss is not whether the plaintiff will ultimately prevail but whether he is entitled to present evidence in support of his claims. Scheuer v. Rhodes, 416 U.S. at 236, 94 S.Ct. at 1686. Here, the defendant argues that the proposed amendment would be futile and the Court agrees on two grounds. Iolab lacks standing to recover for patent infringement and the "Entire Market Value Rule" does not create standing for non-patent owners. Each ground is discussed separately infra.

A. Standing

A patent is a creature of statute and it gives the legal title owner the right to exclude others from making, using or selling a patented invention. 35 U.S.C. §§ 101, 102, 151 (1984); Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d at 1578; Crown Co. v. Nye Tool Works, 261 U.S. 24, 35, 43 S.Ct. 254, 256, 67 L.Ed. 516 (1923). A patentee's statutory remedy for patent infringement is a civil action against the infringer brought on the patent. 35 U.S.C. § 281; Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d at 1578-79; Calgon Corp. v. Nalco Chemical Co., 726 F.Supp. at 985 (patent owner or owner's assignee is real party in interest in action for patent infringement). In addition to the patentee, an exclusive licensee generally has standing to sue for infringement for the unauthorized use within the area of exclusivity. Rite-Hite Corp. v. Kelley Co., 774 F.Supp. 1514, 1518, 1523-25 (E.D.Wis.1991); D. Chisum, Patents at § 21.032C.⁷ Parties who do not hold legal title to the patent during the time of infringement are not permitted to recover for patent infringement. Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d at 1579 (quoting III Robinson on Patents § 937 1890).⁸

Site is the owner by assignment of both patents at issue and the record does not reflect injury to Site as a result of any lost sales of intraocular lenses. (D.I. 1 ¶ 6.) Although Iolab is not an owner, assignee, or licensee of the patents at issue, it argues that it is closely related to the patented technology, that it anticipated sales of its intraocular lenses from the patented technology, and that it was directly injured from the alleged infringement. Based upon these alleged facts, Iolab argues that its direct interest in the litigation should be the touchstone of standing. (D.I. 85 at 12; 89.) The Court disagrees. While Iolab may have an interest at stake in the suit, Iolab does not claim to hold legal title to the patents at issue and, thus, it has no standing to sue for patent infringement. (D.I. 70 at 3; 89 at 5, 15.)

Iolab argues that "because Iolab wholly owns Site, Iolab effectively has the rights of all three of the classes of plaintiffs (owners, assignees and licensees)" and, therefore, it must have standing to sue directly for patent infringement. (D.I. 85 at 13.) The Court is not convinced, and the plaintiff offers no authority, that a parent corporation effectively has the patent rights of owners, assignees, and licensees by virtue of its ownership of a subsidiary holding a patent. The Court is not convinced, and the plaintiff offers no authority, that mere ownership of corporate stock gives a non-patent owner standing to sue for patent infringement.

Iolab asserts that an assignment of rights between the parties would have been a mere formality and, in reality, "it is Iolab who effectively controls the patents and who ultimately suffers the loss from Cooper's infringement." (D.I. 85 at 13; 89.) In effect, Iolab argues that it is the "rea...