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United States District Court, S.D. New York

January 14, 2004.

QUICKIE, LLC, Plaintiff, -v- MEDTRONIC, INC., Defendant

The opinion of the court was delivered by: GERARD E. LYNCH, District Judge


On May 23, 2000, the Patent and Trademark Office issued to Quickie, LLC ("Quickie"), as assignee of the inventors, United States Letters Patent No. 6,066,160 ("`160 Patent"), entitled "Passive Knotless Suture Terminator For Use in Minimally Invasive Surgery and to Facilitate Standard Tissue Suturing." Quickie filed this patent infringement action on February 13, 2002, claiming that Medtronic, Inc. ("Medtronic"), with whom it had previously entered into an agreement for the "mutual exchange of confidential information . . . regarding the development, manufacture, and marketing of technologies in the field of heart valve surgery and repair" (Def Mem. at 2), infringed the `160 Patent by selling a device for retaining sutures. The case is scheduled for trial on May 3, 2004. Page 2

Medtronic now moves separately (1) to dismiss "all claims for relief, express or implied, under the parties' license agreement," and (2) for partial summary judgment "on damage claims for non-accused, non-infringing products." The motions will be denied.


 I. Motion to Dismiss

  Medtronic moves to "dismiss" "implied" claims that both parties agree have not been made. The complaint contains no claims for breach of contract, and Quickie represents to the Court that it has no intention of trying such a claim, or of offering testimony that Medtronic breached the parties' now terminated agreement. (Pl. Opp. 13.)

  The motion, in reality, is a motion in limine that asks the Court to exclude evidence at trial. Exactly what evidence Medtronic would like excluded, however, is far from clear. Its initial memorandum, couched as a motion to dismiss the phantom "contract" claim, pointed to only one potentially prejudicial evidentiary submission: arguing that Quickie sought "to implicitly present a breach of contract claim or theory to the jury . . . in order to evoke in the jury sympathy, or a sense of wrong to be righted" (Def. Mem. 1), Medtronic asserted that "Quickie's [e]xperts [may] not [t]estify [t]hat Medtronic [b]reached [t]he [l]icense [a]greement." (Def. Mem. 7.) After Quickie disclaimed any intention of offering such testimony, Medtronic advised in its reply brief that Quickie should be prevented "from arguing the scope and status of the Agreement at trial." (Def. R. Mem. 1; emphasis in original.) Though Medtronic helpfully italicizes these words, it completely fails to indicate what it means by them. Medtronic concedes that "the parties are free to point to the Agreement . . . as an example of a comparable license covering medical technology between the parties, and opine on the royalty rate in the Agreement Page 3 and its import (if any) on a royalty calculation in this case." (Def. R. Mem. 3.) How the parties can debate the comparability of the Agreement to a hypothetical license for the allegedly infringing device without discussing the scope of the Agreement is left unexplained. Nor does Medtronic explain how a jury is to understand the relevance or irrelevance of the Agreement without knowing its status, to wit, terminated.

  Moreover, contrary to Medtronic's argument, the fact that the parties had a prior relationship that arguably involved the very technology at issue in this case is plainly relevant to the issue of willful infringement. Medtronic is correct that it cannot have willfully infringed Quickie's patent before the patent was issued. (Def. R. Mem. 5, citing State Industries, Inc. v. A. 0. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985).) But evidence that Medtronic had access to plaintiff's claimed invention even before the patent was obtained, and was aware of the patent or the plan to obtain it, is clearly relevant to assessing the willfulness of Medtronic's behavior after the patent was issued. To see why, one need only hypothesize a comparable action against an alleged infringer who claimed never to have heard of Quickie or its technology. A claim of willful infringement against such a defendant would be impossible, and evidence that the defendant had in fact had access to the technology and was aware of the intention to seek a patent would significantly bolster plaintiff's case.

  The Court neither has nor expresses any opinion about whether the device in question was in fact within the scope of the Agreement or whether the accused product in fact infringes plaintiff's patent, let alone whether any infringement was willful. These are issues of fact for trial. Nor is this the time for definitive resolution of the scope of any evidence that will be permitted on this subject, or the fairness of any argument that might be drawn from such Page 4 evidence. All that the Court holds is that Medtronic's motion to dismiss a non-existent contract count is denied; that plaintiff has authoritatively disavowed any intention to assert that the Agreement was breached, and will be held to that disavowal; and that Medtronic's vague and premature effort to preclude any testimony about the "scope and status" of the Agreement is denied.

 II. Motion for Partial Summary Judgment

  The accused infringing device (whether styled as a "suture guide," as defendant would have it, or as a "suture holding insert," as plaintiff insists, see Pl. Mem. 2 n. 6) is intended to be used in connection with other medical instruments manufactured by Medtronic in certain forms of cardiac surgery. It is undisputed that these other instruments were developed and marketed by Medtronic before either Quickie obtained its patent or Medtronic developed the allegedly infringing device. It is evident that these instruments perform different functions than Quickie's patented idea, and Quickie does not contend that these instruments in themselves infringe the patent.

  Nevertheless, Quickie argues both (a) that it should be entitled to royalties on Medtronic's sales of various of these instruments on the "entire market value" theory; and (b) that the utility of its device in enhancing the value of Medtronic's other instruments is relevant to calculating the hypothetical royalty rate that would be the measure of recovery here, Medtronic does not appear to dispute the latter point, but argues vigorously, citing Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (en banc), that as a matter of law, even if Quickie can establish that the allegedly offending device infringed its patents, it may not recover royalties on the sale of the separate non-infringing instruments with which the suture guide/insert is sold Page 5 (Def. Mem. 20 ff.)

  Under the "entire market value rule," a patentee may seek damages on unpatented components sold with a patented apparatus, if the patented apparatus "was of such paramount importance that it substantially created the value of the component part." Marconi Wireless Telegraph Co. v. United States, 53 USPQ 246, 250 (Ct. Cl. 1942), aff'd in part and vacated in part, 320 U.S. 1 (1943). In Rite-Hite, the en banc Federal Circuit noted that the rule "has typically been applied to include in the compensation base unpatented components of a device when the unpatented and patented components are physically part of the same machine." 56 F.3d at 1549. The rule may be applied to include "physically separate unpatented components normally sold with the patented components," but only where "the unpatented and patented components together were considered to be components of a single assembly or parts of a complete machine," or "together constituted a functional unit." Id. at 1550.

  Medtronic argues that Quickie will be unable to meet this test as to the various instruments at issue on this motion. Medtronic argues that there is no functional relationship between the unchallenged instruments and the accused suture guide/insert, since the former can be sold and used without the allegedly infringing device. (Def. Mem. 20.) Supporting its position with elaborate descriptions, color schematic drawings, and digital video of beating heart surgery using the devices, Medtronic points out that several of its instruments (the Octopus, Starfish and Urchin) are essentially designed to stabilize and hold in position portions of the heart during surgery, permitting operations to be conducted on a beating heart (rather than with the heart stopped and its functions taken over by artificial heart and lung machines). Another Medtronic device (marketed under the brand name OctoBase) is a "sternal retractor." used to Page 6 spread the breastbone apart to permit freer access to the heart during surgery. The Octopus instrument is then mounted on the OctoBase, as the name of the latter implies.

  The accused product is designed to work with the OctoBase "to secure deep retraction sutures" used to position the heart during the surgery. (Def. Mem. 15.) The suture guide is separately sold (albeit frequently "bundled" with other products in package deals), and designed to be inserted into the OctoBase, replacing the parts that are sold as part of that instrument. The challenged device cannot be used with a non-Medtronic sternal retractor, but the Octopus and related products can be mounted on a non-Medtronic retractor. (Id. at 14-15.) Medtronic argues that the Octopus is intended to be used to immobilize small areas of the heart, and the Urchin/Starfish devices to position the heart in a desired direction, and that these functions can be performed regardless of what model of sternal retractor is used. Similarly, the OctoBase product can be used to open the chest with or without the challenged suture guide product. (Def. Mem. 22 and exhibits there cited.) Thus, Medtronic claims, the accused product cannot be treated as part of a "functional unit" with the other instruments, as required by Rite-Hite.

  The functionality of the various products, however, is irreducibly a question of fact. Medtronic essentially asks that the Court, without having heard expert testimony or hearing the claims subjected to cross-examination, decide that no reasonable jury could determine that the challenged product acts as part of an integrated system or a system "analogous to a single functioning unit." Rite-Hite, 56 F.3d at 1550. Quickie points out that the components of the entire "Octopus System" have been designed to work together and are sold as a system. While the Octopus was developed earlier and the Starfish/Urchin instruments later, the OctoBase was introduced along with the accused suture guide device, and is described by Medtronic itself as "a Page 7 reusable stainless steel sternal retractor configured with removable, single use inserts designed for securing deep pericardial sutures during beating heart surgical procedures."(Decl. of Lara A. Johnson, executed Nov. 25, 2003, Ex. 28 at MEDQ 02231.) In other words, the suture guide/insert is described in Medtronic's own literature as a disposable insert for the OctoBase, specifically designed to be used with that instrument as a single unit; a reasonable fact-finder-could conclude that the OctoBase and the suture guide act as a single unit, with the latter component sold separately and not integrated as a single machine in large part because of its disposable "single use" quality.

  The Octopus and Starfish/Urchin instruments appear less integrally connected to the suture guide/insert. They can apparently be used with other sternal retractors, for example, and the suture guide/insert is not integrated directly into those instruments, as it is into the OctoBase. Quickie argues, however, that the entire "Octopus System" is designed to work together as a functional unit to achieve a particular desired result — optimal beating heart surgery — in a way that is a desirable advance on previous products via a complete system. Cf. Bose Corp. v. JBL, Inc., 274 F.3d 1354, 1361 (Fed. Cir. 2001) ("entire market value rule" applies because the accused device operated "with other components of loudspeakers as a single functioning unit to provide the desired audible performance") (emphasis added). In effect, they argue that while the various parts could be used separately, Medtronic designed and markets the "system" as an integrated unit, such that only by using the entire device can a heart surgeon achieve the desired optimal performance. Quickie supplements this showing by presenting expert testimony from surgeons who testify variously that they would never use Medtronic's other products without the OctoBase and its challenged suture guide/inserts; that they have never seen the OctoBase used Page 8 without the challenged devices; and that there is "no good way" of performing certain surgeries without the complete system. Quickie also offers evidence that the vast majority of sales of all the instruments in question (especially the OctoBase) were made to customers who also purchased the accused device. (See evidence cited at PL Mem. 23-25.)

  Rite-Hite suggests caution about the interpretation of some of this evidence. The "entire market value rule" does not apply to products that are sold together for "marketing reasons, not because they essentially function[] together." 56 F.3d at 1551. Medtronic argues that its various instruments work separately, to perform separate functions, and that it merely markets these devices together in various custom packages for surgeons who can pick and choose among the various components. Good salesmanship and the preference of users to construct systems from components offered by the same manufacturer could account for the sales statistics. Were the Court sitting as a factfinder based on the cold record before it, Medtronic's argument might seem fairly persuasive as to the Octopus and Starfish/Urchin products, rather less so as to the OctoBase.

  But the Court is not in the position of factfinder. Its role here is to decide whether, on the limited summary judgment record presented, Medtronic has shown as to any of the instruments that no reasonable factfinder could conclude that its "Octopus System" is a single functional unit, or a set of components "analogous to" such a single unit, that function together to achieve a desired result in such a way that its entire market value derives from the use of the device that Quickie claims infringes its patent. While Quickie's proposition seems dubious as to at least some of the instruments in question, the Court cannot say at this stage that Quickie may not present its evidence to the factfinder in a full trial. Page 9


  Because plaintiff makes no claim of breach of contract, defendant's motion to dismiss such claim is denied. Because there are issues of fact for trial with respect to the integrated functionality of the various products at issue, defendant's motion for partial summary judgment is denied.

  SO ORDERED. Page 1


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