Verinata Health, Inc. v. Ariosa Diagnostics, Inc.

• Decision Date: 19 July 2018
• Docket Number: Case No. 12-cv-05501-SI
• Parties: VERINATA HEALTH, INC., et al., Plaintiffs, v. ARIOSA DIAGNOSTICS, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of California

329 F.Supp.3d 1070

VERINATA HEALTH, INC., et al., Plaintiffs,

v.ARIOSA DIAGNOSTICS, INC., et al., Defendants.

Case No. 12-cv-05501-SI

United States District Court, N.D. California.

Signed July 19, 2018

Derek C. Walter, Edward Robert Reines, Aaron Y. Huang, Christopher J. Cox, Christopher S. Lavin, Hannah L. Jones, Weil, Gotshal & Manges LLP, Redwood Shores, CA, Jonathan E. Bachand, Knobbe Martens, Robert T. Vlasis, Weil, Gotshal and Manges LLP, Washington, DC, Jared Christian Bunker, Knobbe Martens Olson and Bear, LLP, Irvine, CA, for Plaintiffs.

David Isaac Gindler, Alan J. Heinrich, Casey May Curran, Molly Jean Russell, Sara Adina Stohl, Irell & Manella LLP Aaron Shawn Thompson, Elaine Zhong, Wilmer Cutler Pickering Hale and Dorr LLP, Los Angeles, CA, Lisa Sharrock Glasser, Sandra Linette Haberny, Irell & Manella LLP, Newport Beach, CA, Keith Leonard Slenkovich, Wilmer Cutler Pickering Hale & Dorr LLP, Palo Alto, CA, Robert J. Gunther, Jr., Omar Khan, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, for Defendants.

ORDER RE POST-TRIAL MOTIONS, PLAINTIFF'S MOTION FOR A PERMANENT INJUNCTION, AND ADMINISTRATIVE MOTIONS TO SEAL

Re: Dkt. Nos. 648, 649, 650, 660, 661, 662, 666, 684, 697

SUSAN ILLSTON, United States District Judge

Before the Court are the parties' post-trial motions (Dkt. Nos. 648, 649, 650, 661, 662, 666), plaintiffs' motion for a permanent injunction (Dkt. Nos. 660, 666), and two administrative motions to seal (Dkt. Nos. 684, 697). After hearing argument and considering the parties' materials, the Court rules as follows.

LEGAL STANDARD

I. Motion for judgment as a matter of law

"A renewed motion for judgment as a matter of law is properly granted only if the evidence, construed in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and that conclusion is contrary to the jury's verdict." Castro v. Cty. of Los Angeles , 833 F.3d 1060, 1066 (9th Cir. 2016) (en banc) (quoting Pavao v. Pagay , 307 F.3d 915, 918 (9th Cir. 2002) ) (internal quotation marks omitted), cert. denied sub nom. Los Angeles Cty., Cal. v. Castro , ––– U.S. ––––, 137 S.Ct. 831, 197 L.Ed.2d 69 (2017) (Mem.). "A jury's verdict must be upheld if it is supported by substantial evidence, which is evidence adequate to support the jury's conclusion, even if it is also possible to draw a contrary conclusion." Id. (quoting Pavao , 307 F.3d at 918 ). In ruling on such a motion, the trial court may not weigh the evidence or assess the credibility of witnesses in determining whether substantial evidence exists to support the verdict. William Inglis & Sons Baking Co. v. ITT Cont'l Baking Co. , 668 F.2d 1014, 1026 (9th Cir. 1981) ; see also Mosesian v. Peat, Marwick, Mitchell & Co. , 727 F.2d 873, 877 (9th Cir. 1984). "Substantial evidence is more than a mere scintilla." Consol. Edison Co. v. NLRB , 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938) ; Chisholm Bros. Farm Equip. Co. v. Int'l Harvester Co. , 498 F.2d 1137, 1140 (9th Cir. 1974). Judgment as a matter of law is appropriate "when the jury could have relied only on speculation to reach its verdict." Lakeside-Scott v. Multnomah Cty. , 556 F.3d 797, 803 (9th Cir. 2009).

II. Motion for new trial

Federal Rule of Civil Procedure 59(a)(1) states, "[t]he court may, on motion, grant a new trial on all or some of the issues—and to any party—as follows: (A) after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court...." Fed. R. Civ. P. 59(a)(1). As the Ninth Circuit has noted, " Rule 59 does not specify the grounds on which a motion for a new trial may be granted...." Zhang v. Am. Gem Seafoods, Inc. , 339 F.3d 1020, 1035 (9th Cir. 2003). Instead, the court is "bound by those grounds that have been historically recognized." Id. "Historically recognized grounds include, but are not limited to, claims ‘that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving.’ " Molski v. M.J. Cable, Inc. , 481 F.3d 724, 729 (9th Cir. 2007) (quoting Montgomery Ward & Co. v. Duncan , 311 U.S. 243, 251, 61 S.Ct. 189, 85 L.Ed. 147 (1940) ). The Ninth Circuit has held that "[t]he trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice." Passantino v. Johnson & Johnson Consumer Prods., Inc. , 212 F.3d 493, 510 n.15 (9th Cir. 2000).

DISCUSSION

I. Ariosa's renewed motion for judgment as a matter of law and motion for a new trial on issues for which Ariosa bore the burden of proof (Dkt. No. 648)

Defendant Ariosa Diagnostics, Inc.¹ renews its motion for judgment as a matter of law ("JMOL") under Rule 50(b), and for a new trial under Rule 59, based on Ariosa's express license defense and the alleged invalidity of plaintiffs Illumina, Inc. and Verinata Health, Inc.'s patents. The background and procedural history of this case are described in the Court's Summary Judgment Order (Dkt. No. 517). As such, only portions of the record relevant to this motion are recounted here.

Plaintiff Verinata developed and offered non-invasive tests (such as the verifi® prenatal test) for the early identification of fetal chromosomal abnormalities

. Dkt. No. 1 ¶ 11. Plaintiff Illumina develops, manufactures, and markets life science tools and integrated systems for large-scale analysis of DNA. Case No. 15-cv-2216, Dkt. No. 1 ¶ 4. Defendant Ariosa is a molecular diagnostics company that researches, evaluates, and develops non-invasive prenatal tests for chromosomal abnormalities in a fetus. Dkt. No. 283 ¶ 10.

This consolidated patent infringement action concerns the following patents: U.S. Patent Nos. 8,318,430 ("the '430 patent") and 7,955,794 ("the '794 patent"). Verinata owns the '430 patent, which is directed to methods for non-invasive prenatal screening of fetal chromosomal abnormalities

. See '430 Patent. Illumina owns the '794 patent, which issued in June 2011 and is directed to methods for simultaneously detecting multiple target nucleic acids in a sample. See '794 Patent.

In January 2012, Ariosa and Illumina entered into a three-year Sale and Supply Agreement ("SSA"), under which Illumina agreed to supply specific consumables, hardware, and software to Ariosa. Dkt. No. 402-6. The SSA provided Ariosa with a non-exclusive license to Illumina's "Core IP Rights in Goods" in the "Customer Field of Use." Id. §§ 1, 3. "Core IP Rights in Goods" included "Illumina Intellectual Property Rights that pertain to the Goods (and use thereof in accordance with their Documentation) other than Secondary Illumina IP Rights in Goods[.]" Id. § 1. "Secondary IP Rights in Goods" was defined as "secondary Illumina Intellectual Property Rights that pertain to the Goods (and use thereof) only with regard to particular field(s) or application(s), and are not common to the Goods in all applications and fields." Id. "Customer Field of Use" was defined as "(a) commercial services for the cell-free detection of fetal chromosomal abnormalities

having a length greater than one megabase by pre-natal screening using DNA sequencing, ... and (b) internal, non-commercial experimental research[.]" Id.

Starting late 2012, plaintiffs filed a number of lawsuits accusing Ariosa's Harmony™ Prenatal Test of infringing the patents-in-suit. Dkt. No. 22; Dkt. No. 517 at 8-9. Two versions of the Harmony™ Prenatal Test were at issue—"Harmony V1" and "Harmony V2." Dkt. No. 517 at 6. Harmony V1 was made commercially available in 2012 and relied on sequencing (using Illumina sequencers) to obtain genetic data, while Harmony V2 was released in 2015 and relied on a microarray platform instead of sequencing. Id. ; Dkt. No. 283 ¶ 12. The two versions used different protocols for processing the samples. Dkt. No. 416 at 3-7; Dkt. No. 517 at 6-7, 37. Verinata alleged Harmony V1 infringed the '430 patent, and Illumina alleged both Harmony versions infringed the '794 patent. Dkt. No. 349; Case Nos. 14-cv-1921, 15-cv-2216. Ariosa argued that the patents-in-suit were invalid and that it had an express license to the '794 patent. Dkt. No. 352; Case No. 14-cv-1921, Dkt. No. 68. Ariosa also asserted a counterclaim for breach of contract. Case No. 14-cv-1921, Dkt. No. 68.

The Court held a jury trial from January 8 to 25, 2018. On January 22, 2018, Ariosa filed a motion for JMOL under Rule 50(a) on Ariosa's defenses and affirmative counterclaims. Dkt. No. 618. Ariosa argued, inter alia , that no reasonable juror could find: that the '794 and '430 patents were not invalid; that the SSA did not grant Ariosa an express license to the '794 patent ; or that Illumina did not breach the SSA by suing Ariosa. Id. The motions were denied without prejudice. On January 25, 2018, the jury returned a verdict, which found the '794 and '430 patents valid and infringed by Ariosa; found that Ariosa did not have an express license to the '794 patent under the SSA; and found that Illumina did not breach the SSA by suing Ariosa. Dkt. No. 633. The jury awarded plaintiffs approximately $27 million in damages. Id. The Court entered judgment on January 29, 2018. Dkt. No. 642.

Ariosa moves for JMOL under Rule 50(b) and for a new trial under Rule 59 based on Ariosa's defenses and affirmative counterclaims. Dkt. No. 648. Ariosa argues that the jury's verdict on its licensing defense, affirmative counterclaims, and invalidity defenses is not supported by substantial evidence or is against the clear weight of evidence. Id.

A. Express license and breach of the SSA

The parties dispute whether the license to Illumina IP granted in the SSA encompassed the '794 patent. Ariosa contends that the Court should interpret the terms "Core IP Rights in Goods" and "Secondary IP Rights in Goods" in the SSA as a matter of law and argues that the '794 patent is not "Secondary IP," but rather is "Core IP," to which the...