MEMORANDUM-DECISION AND ORDER*fn1
Currently before the Court is a Motion to dismiss, filed on April 11, 2008 by Plaintiff AngioDynamics, Inc. ("AngioDynamics") seeking to dismiss Defendant Biolitec Inc.'s ("Biolitec") First, Second, Fourth, and part of Third Counterclaims under Fed. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief can be granted. Dkt. No. 15. For the reasons set forth below, the Motion is granted in part and denied in part.
AngioDynamics is a Delaware corporation in the business of developing, manufacturing, and selling medical devices for use by medical professionals to facilitate their treatment of patients. Compl. ¶¶ 1-2 (Dkt. No. 1). Biolitec is a New Jersey corporation involved in the development and production of photosensitisers for use in photodynamic therapy, as well as a developer and manufacturer of diode lasers, optical fibers, and accessories for application in a wide range of medical specialties. Answer ¶ 4 (Dkt. No. 11).
On April 1, 2002, AngioDynamics and Biolitec entered into a Supply and Distribution Agreement ("SDA") in which Biolitec named AngioDynamics the exclusive distributor of certain products, as defined in the SDA, within a specified territory. Compl. ¶¶ 10-11; Answer ¶ 46. Pursuant to Section 2.1(c) of the SDA, AngioDynamics was obligated to actively market, sell and distribute the products. Compl. ¶ 12; Answer ¶ 46. Further, pursuant to Section 7.1 of the SDA, Biolitec retained all the rights, title, and interest in and to all Biolitec technology. Compl. ¶ 13; Answer ¶ 10. Under Section 7.2 of the SDA, Biolitec represented that, to the best of its knowledge, the manufacture, marketing, sale, distribution, and use of the Products would not infringe any United States or foreign patent or other proprietary rights held by any third party. Compl. ¶ 14; Answer ¶ 49. Section 7.2 of the SDA further states:
If a third party asserts that a patent . . . is infringed by the manufacture, marketing, sale, distribution, or use of a Product, . . . BIOLITEC agrees to undertake the sole and complete defense, at its sole cost and expense, of any such claim through counsel of its choice . . . .
AngioDynamics did not re-sell the Products purchased from Biolitec in the condition in which they were purchased from Biolitec, but rather modified them and incorporated them into separate AngioDynamics products. Answer ¶ 53. In the latter part of 1993, a third party, Diomed, Inc. ("Diomed") began communicating with AngioDynamics about alleged infringement by AngioDynamics on Diomed's patent. Answer ¶ 54. As a result of threats by Diomed regarding the alleged infringement, Biolitec and AngioDynamics entered into a Joint Defense Agreement ("JDA") on or about November 24, 2003, with a reservation of rights regarding Biolitec's alleged indemnity obligation. Answer ¶ 56.
On January 6, 2004, Diomed sued AngioDynamics ("Diomed Action"), alleging patent infringement and seeking a permanent injunction prohibiting AngioDynamics from distributing the alleged infringing products. Compl. ¶ 19; Answer ¶ 57. AngioDynamics demanded that Biolitec defend it pursuant to Sections 7.2 and 9.1 of the SDA. Answer ¶ 58. With a reservation of rights and in accordance with the JDA, Biolitec expended $1.6 million in attorney fees and expenses in defense of AngioDynamics in the Diomed Action. Answer ¶ 59. During the course of the Diomed litigation, however, the District Court for the District of Massachusetts issued a Memorandum and Order on Claims Construction, which held that the patent infringement claim in the Diomed litigation was not against the patent held by Biolitec; rather, it was against the processes, procedures, and techniques employed by AngioDynamics that were developed independently by AngioDynamics. Answer ¶ 65. Despite Biolitec's defense efforts, judgment was rendered against AngioDynamics, and Diomed was awarded damages for AngioDynamics' patent infringement of Diomed in the amount of $9,170,000, including prejudgment interest. Answer ¶ 67.
Biolitec subsequently notified AngioDynamics that they terminated any further litigation defense of AngioDynamics in connection with the Diomed Action. Answer ¶ 68, Exh. B. Biolitec maintains that they never instructed or directed AngioDynamics as to what process or procedures should be used in connection with AngioDynamics' sale of its products, nor did Biolitec manufacture those products or develop the instructions for their use. Answer ¶ 64. Further, Biolitec maintains that the claims asserted against AngioDynamics in the Diomed Action are not subject to the defense obligation of Biolitec under Section 7.2 of the SDA because the claims do not relate to the Products sold by Biolitec to AngioDynamics pursuant to the SDA; rather, the claims relate solely to the processes, procedures, and techniques developed independently by AngioDynamics with no input from Biolitec. Answer ¶ 61, 65. As a result, Biolitec demanded that AngioDynamics reimburse Biolitec for the total amount of the defense costs paid by Biolitec in connection with the Diomed litigation in the amount of $1.6 million. Answer ¶ 69, Exh. C.
On July 21, 2005, another third party suit was brought against AngioDynamics by VNUS Medical Technologies, Inc. ("VNUS") alleging patent infringement. Answer ¶ 70. Biolitec refused to undertake a defense in this litigation and continued to assert that the patent infringement claims against AngioDynamics were not subject to Section 7.2 of the SDA for the same reasons as in the Diomed Action. Answer ¶ 72.
On January 2, 2008, AngioDynamics filed this action against Biolitec seeking specific performance and/or money damages for breach of the SDA.*fn2 Complaint (Dkt. No. 1). Bioletic subsequently filed four counterclaims seeking, inter alia, damages in the amount of $1,614,246.04, the amount expended in defending AngioDynamics in the Diomed litigation. Answer (Dkt. No. 11). This Motion to dismiss the First, Second, Fourth, and part of the Third Counterclaims followed.