SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 19, 2000
-----------------
Date of Report (Date of earliest event reported)
ST. JUDE MEDICAL, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 0-8672 41-1276891
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Lillehei Plaza, St. Paul, MN 55117
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(Address of principal executive offices) (Zip Code)
(651) 483-2000
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Registrant's telephone number including area code
Not applicable
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Former name or former address, if changed since last report
Page 1 of 4
ITEM 5. OTHER EVENTS
RECENT DEVELOPMENT IN GUIDANT LITIGATION
On December 19, 2000, the U.S. District Court in Indianapolis issued a decision
as part of the court's Markman process which further interprets certain
ambiguous terms in one of the patents which are the subject of litigation
between Guidant and St. Jude Medical. (A copy is attached as Exhibit 1). The
Court had previously ruled on the meaning of other ambiguous terms in the
disputed patents on November 29, 2000 as part of the Markman process, but had
asked for further argument on the '191 patent. The Company previously reported
on the court's November 29, 2000 rulings in its Form 8-K dated November 30,
2000.
The Markman process is a procedure in which the court definitively interprets
what the disputed claims in the patents at issue mean. The court does not, as
part of the Markman process, determine whether the patents apply to any of St.
Jude Medical's products or whether the patents are valid.
COMMENTS ON MARKMAN RULING In the ruling, the Court rejected various
interpretations of the '191 patent which had been proposed by Guidant and agreed
with St. Jude Medical's position that there was no structure shown or described
in the patent to support the claimed monitoring function. As a result, the Court
ruled that it cannot provide a lawful interpretation of this essential
monitoring element claimed in the patent.
Given the Court's finding that there is no support in the patent for one of the
essential elements of the claimed invention, the Company expects to file a
motion for summary judgment asking the Court to hold the '191 patent invalid.
The Company may also seek a ruling confirming that none of its products can
infringe a patent for which a legally required element was never shown or
described in the patent.
In a separate ruling on December 19, 2000, the Court denied Guidant's motion to
dismiss certain counterclaims for unfair competition and unjust enrichment
brought by St. Jude Medical, and granted Guidant's motion to dismiss all of its
claims against St. Jude Medical which are based on the '678 patent. (A copy of
this order is attached as Exhibit 2). Guidant originally sued St. Jude on four
patents. The effect of this ruling is to eliminate the possibility of an adverse
judgement against St. Jude on the '678 patent.
Following is a description of the Guidant litigation.
GUIDANT'S CLAIMS AGAINST SJM On November 26, 1996, Guidant Corporation (a
competitor of Pacesetter and Ventritex) ("Guidant") and related parties filed a
lawsuit against St. Jude Medical, Inc. ("St. Jude Medical"), Pacesetter, Inc.
("Pacesetter"), Ventritex, Inc. ("Ventritex") and certain members of the
Telectronics Group in State Superior Court in Marion County, Indiana (the
"Telectronics Action"). The lawsuit alleges, among other things, that, pursuant
to an agreement entered into in 1993, certain Guidant parties granted Ventritex
intellectual property licenses relating to cardiac stimulation devices, and that
such licenses would terminate upon the
Page 2 of 4
consummation of the merger of Ventritex into Pacesetter (the "Merger"). The
lawsuit further alleges that, pursuant to an agreement entered into in 1994 (the
"Telectronics Agreement"), certain Guidant parties granted the Telectronics
Group intellectual property licenses relating to cardiac stimulation devices.
The lawsuit seeks declaratory and injunctive relief, among other things, to
prevent and invalidate the transfer of the Telectronics Agreement to Pacesetter
in connection with Pacesetter's acquisition of Telectronics' assets (the
"Telectronics Acquisition") and the application of license rights granted under
the Telectronics Agreement to the manufacture and sale by Pacesetter of
Ventritex's products following the consummation of the Merger. The court
overseeing this case issued a stay of this matter in July 1998 so that the
issues could be addressed in an arbitration requested by the Telectronics Group
and Pacesetter.
Guidant and related parties also filed suit against St. Jude Medical, Pacesetter
and Ventritex on November 26, 1996 in the United States District Court for the
Southern District of Indiana. This second lawsuit seeks (i) a declaratory
judgment that Pacesetter's manufacture, use or sale of cardiac stimulation
devices of the type or similar to the type which Ventritex manufactured and sold
at the time the Guidant parties filed their complaint would, upon consummation
of the Merger, be unlicensed and constitute an infringement of patent rights
owned by certain Guidant parties, (ii) to enjoin the manufacture, use or sale by
St. Jude Medical, Pacesetter or Ventritex of cardiac stimulation devices of the
type which Ventritex manufactured at the time the Guidant parties filed their
complaint, and (iii) certain damages and costs. This second lawsuit was stayed
by the court in July 1998 given the order to arbitrate as discussed below.
St. Jude Medical believes that the foregoing state and federal court complaints
contain a number of significant factual inaccuracies concerning the Telectronics
Acquisition and the terms and effects of the various intellectual property
license agreements referred to in such complaints. For these reasons and others,
St. Jude Medical believes that the allegations set forth in the complaints are
without merit. St. Jude Medical has vigorously defended its interests in these
cases, and will continue to do so.
ORDER TO ARBITRATE As a result of the state and federal lawsuits brought by
Guidant and related parties, the Telectronics Group and Pacesetter filed a
lawsuit in the United States District Court for the District of Minnesota
seeking (i) a declaratory judgment that the Guidant parties' claims, as
reflected in the Telectronics Action, are subject to arbitration pursuant to the
arbitration provisions of the Telectronics Agreement, (ii) an order that the
defendants arbitrate their claims against the Telectronics Group and Pacesetter
in accordance with the arbitration provisions of the Telectronics Agreement,
(iii) to enjoin the defendants preliminarily and permanently from litigating
their dispute with the Telectronics Group and Pacesetter in any other forum, and
(iv) certain costs. After the Eighth Circuit Court of Appeals ruled on an appeal
in favor of the Telectronics Group and Pacesetter in May 1998, the United States
District Court for the District of Minnesota issued an order on July 8, 1998
directing the arbitration requested by the Telectronics Group and Pacesetter to
proceed.
Page 3 of 4
STATUS OF ARBITRATION The arbitrator selected for the arbitration initially
ruled that Pacesetter and St. Jude Medical should not participate in the
arbitration proceeding which would determine whether the Telectronics Agreement
transferred to Pacesetter. Based on this ruling, the Telectronics Group and the
Guidant parties were the ones participating in the arbitration proceeding. This
proceeding occurred in late April 2000, and, on July 10, 2000, the arbitrator
issued a ruling that the attempted assignment and transfer of patent licenses in
the Telectronics Agreement by the Telectronics Group to Pacesetter was
ineffective. As a result of this decision, the Guidant parties filed papers with
the U.S. District Court for the Southern District of Indiana seeking to lift the
stay of the patent infringement court proceedings in that court which had been
entered in June 1998. The court granted Guidant's request to lift the stay and
this matter is scheduled for trial in June 2001.
BACKGROUND CONCERNING PATENTS INVOLVED IN GUIDANT'S CLAIMS In the patent
infringement case in federal court in Indiana, the Guidant parties asserted
claims against St. Jude Medical and its Pacesetter subsidiary involving four
separate patents. One of these patents expired May 3, 1998. The '472 patent
expires March 7, 2001, the '191 patent expires on February 25, 2003 and the '288
patent expires on December 22, 2003, although St. Jude Medical has claims in the
court action which, if upheld, would cause the patents to expire earlier, if
they apply at all. Although Guidant has requested injunctive relief and damages
as part of the federal court lawsuit in Indiana, the request for an injunction
would be barred for any expired patent. Guidant is seeking damages for the time
period prior to expiration of the patents.
St. Jude Medical continues to believe that the patent infringement claims raised
by the Guidant parties in the patent infringement case are without merit, and
will continue to vigorously defend its interests.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ST. JUDE MEDICAL, INC.
Date: December 21, 2000 By: /s/ John C. Heinmiller
----------------------
John C. Heinmiller
Vice President - Finance
and Chief Financial Officer
Page 4 of 4
EXHIBIT 1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
CARDIAC PACEMAKERS, INC., et al., )
)
Plaintiffs, )
)
v. ) CAUSE NO. IP 96-1718-C H/G
)
ST. JUDE MEDICAL, INC., et al., )
)
Defendants. )
SUPPLEMENTAL ENTRY ON CLAIM CONSTRUCTION ISSUES
Plaintiffs Cardiac Pacemakers, Inc., Guidant Sales Corporation, and Eli
Lilly and Company have sued defendants St. Jude Medical, Inc., Pacesetter, Inc.,
and Ventritex, Inc. for infringement of three patents. The patents concern
devices and methods for electrical therapies to treat irregular heart rhythms.
On November 29, 2000, this court issued an entry construing disputed claim
language in the patents in suit. That entry, familiarity with which is assumed
in the writing of this entry, reserved decision on the "third monitoring means"
element of Claim 1 of U.S. Patent No. 4,572,191 (issued Feb. 25, 1986). The
"third monitoring means" element of Claim 1 is a "means-plus-function" claim
governed by paragraph 6 of 35 U.S.C.ss.112, which requires that the patent
specification disclose the structure in the invention that performs the claimed
function. After a further hearing on December 14, 2000, the court now concludes
that the "third monitoring means" claim element cannot be construed because no
structure in the disclosed embodiments performs the functions as stated in the
claim.
Patent claims are "concise statements of the subject matter for which
the statutory right to exclude is secured by the grant of the patent." MULTIFORM
DESICCANTS, INC. V. MEDZAM, LTD., 133 F.3d 1473, 1476 (Fed. Cir. 1998). Where
the language used in the patent claims is unclear or ambiguous, the court must
construe the terms in the claims as a matter of law. MARKMAN V. WESTVIEW
INSTRUMENTS, INC., 52 F.3d 967, 979 (Fed. Cir. 1995) (EN BANC), AFF'D, 517 U.S.
370 (1996). Claim 1 of the '191 patent reads in its entirety:
1. A cardioverting device comprising:
detecting means for issuing an electrical signal representing the
actual ECG activity of the heart of a wearer of the device;
storage means for storing energy to convert an abnormal cardiac rhythm
to normal sinus rhythm;
delivery electrode means for discharging the stored energy into the
heart of the wearer;
switch means for controlling the discharge of the stored energy into
the heart of the wearer;
charging means for delivering to said storage means said energy to
convert the abnormal cardiac rhythm;
first monitoring means for monitoring the operation of said storage
means and issuing a first signal when said storage means has stored a
predetermined amount of energy;
second monitoring means for monitoring the ECG signal produced by said
detecting means and for detecting a preselected repeatable
characteristic of the ECG signal, said monitoring means further
including means for issuing a second signal each time said second
monitoring means detects said preselected repeatable characteristic of
the ECG signal;
THIRD MONITORING MEANS FOR MONITORING THE ECG SIGNAL PRODUCED BY SAID
DETECTING MEANS FOR ACTIVATING SAID CHARGING MEANS IN THE PRESENCE OF
ABNORMAL CARDIAC RHYTHM IN NEED OF CORRECTION; and
actuating means connected to said first and second monitoring means and
requiring the simultaneous presence of said first and second signals at
the time the stored energy is to be delivered to the heart of the
wearer, said actuating means for actuating said switching means.
-2-
'191 Patent, col. 8, L. 56 to col. 9, L. 22 (emphasis added).
The parties agree that the "third monitoring means" element is a
means-plus-function statement subject to the interpretive rules developed under
paragraph 6 of 35 U.S.C.ss.112 ("ss.112P. 6"). As explained by the Federal
Circuit,ss. 112P. 6 operates to restrict claim limitations drafted in functional
language to the structures or materials disclosed in the specification that
perform the claimed function (plus their equivalents). See PERSONALIZED MEDIA
COMMUNICATIONS, LLC V. INTERNATIONAL TRADE COMM'N, 161 F.3d 696, 703 (Fed. Cir.
1998). Whenss.112P. 6 applies to a claim, a court construing the claim must
first "construe the function recited in that claim," and must then "determine
what structures have been disclosed in the specification that correspond to the
means for performing that function." KEMCO SALES, INC. V. CONTROL PAPERS CO.,
208 F.3d 1352, 1361 (Fed. Cir. 2000).
The "third monitoring means" element of Claim 1 includes two functions.
First, it recites the function of "monitoring the ECG signal produced by said
detecting means." Second, it recites the function of "activating said charging
means in the presence of abnormal cardiac rhythm in need of correction." The
parties have interpreted the claim element to include both of these functions,
and, beyond the plain language of the claim, the prosecution history also
supports a dual function interpretation of the "third monitoring means."(1)
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(1)In an amendment filed to support the original '191 patent
application, the applicants stated
-3-
The heart of the parties' dispute lies in the identification of
structure that performs the claimed functions. Defendants contend that the
specification discloses no SINGLE structure, or group of reasonably related
structures, that is capable of performing the DUAL functions of monitoring the
ECG signal and activating the charging means. Because the duty to link structure
to function is the "statutory quid pro quo" imposed on patentees by ss. 112 P. 6
in exchange for the convenience of stating claims in broad functional language,
see KEMCO, 208 F.3d at 1360, defendants assert that "there is no legally proper
construction of the 'third monitoring means.'" Def. Markman Br. at 40.
Plaintiffs respond by identifying structures in each of the two
disclosed embodiments of the invention that they contend are capable of
performing entirely the monitoring and activating functions. The first
embodiment disclosed in the '191 patent specification is operated by a
physician, who can monitor the patient's heartbeat and then control the
administration of therapeutic charges to the heart. The second embodiment is
operated by the patient, who can detect an irregular heartbeat and then
administer therapy by holding a magnet over his or her chest to turn on the
implanted device.
- --------------------------------------------------------------------------------
that a "third monitoring means, monitors the ECG signal produced by the
detecting means AND activates the charging means in the presence of abnormal
cardiac rhythm in need of correction." Ex. 27, '191 Patent Pros. Hist. at CPI
005989 (emphasis added). The applicants' use of the conjunction "and" between
the two functional clauses indicated their intent to declare a "means" that both
monitors and activates.
-4-
In the physician-operated embodiment, which is diagrammed in Figure 1
and Figure 2 of the '191 patent, plaintiffs contend that the third monitoring
means is associated with structures on the physician's console. See '191 Patent,
Figure 2, element 12. (Figures 1, 2, and 3 of the '191 patent are attached to
this entry.) The physician's console includes an ECG input 24, an ECG display
portion 32, and a load data button 41.(2) According to plaintiffs, the ECG
display "monitors" the ECG signal while the load data button "activates" the
charging process. In the physician-operated embodiment, however, only the
physician's judgment and interpretation link the ECG display and the load data
button. The physician pushes the load data button after interpreting the ECG
display and deciding that a therapeutic charge is needed. In other words, in the
physician-operated device, neither structure identified by the plaintiffs both
monitors the ECG signal AND activates the charging means.
In the patient-operated embodiment, diagrammed in Figure 3 of the '191
patent, plaintiffs describe the associated structure as follows:
[C]ircuit 132 generates a QRS synchronization pulse. This QRS
pulse triggers the discharge switch 84 and is fed back (1) to
adjust the energy for the second shock along line 134 and (2)
to cause activation of the charging at a time when abnormal
cardiac rhythm persists, via timer 116.
Pl. Markman Br. at 46. The QRS pulse is a portion of each cycle of the heart's
beat. By synchronizing the device's therapeutic shocks to come right after the
QRS pulse, the invented device reduces the risk that the electrical therapy may
actually cause harm to the patient.
- -------------------------
(2)The ECG display 32 is incorrectly labeled as a duplicate element
"34" in Figure 2.
-5-
Plaintiffs' quoted interpretation of the "third monitoring means" in
the patient-operated embodiment requires further explanation on two fronts.
First, the QRS pulse generated by circuit 132 using an ECG signal does not feed
back DIRECTLY to the timer 116 along line 134. It is instead the signal produced
by AND gate 82 that DIRECTLY feeds back to the timer 116 and the binary counter
124. The AND gate 82 performs a simple logical operation. It waits until it
receives simultaneously (1) a ready signal indicating that the capacitor is
fully charged, and (2) a QRS synchronization pulse. When both conditions are
satisfied, the AND gate 82 sends a signal to the discharge switch 84 so that the
therapeutic charge is actually delivered to the heart muscle. The same signal
from the AND gate 82 is also directed to timer 116 and binary counter 124. The
signal to the timer and the binary counter tells the device to begin re-cycling
to prepare to deliver another therapeutic charge. Thus, it is more accurate to
say that the discharge signal from AND gate 82, rather than the signal from the
QRS circuit 132, activates the charging cycle.
Second, the "third monitoring means" in the patient-operated device, as
described by plaintiffs, does not evaluate the functioning of the heart to
verify the presence of abnormal cardiac rhythm in need of correction. The
electrical circuits of the device simply verify that the patient's exterior
magnet remains in place before starting another cycle of charging and
discharging. If the patient removes the magnet, a closed circuit switch opens
and the device simply will not function. If the patient keeps the magnet in
place, the device will administer therapeutic charges to the heart muscle
whether the heart actually needs them or not. The critical point here is that
the patient, and not the device, evaluates the condition of the heart to verify
the presence of an arrhythmia in need of correction.
-6-
Plaintiffs' proposed construction of the "third monitoring means"
element relies heavily on the idea that multiple "structures" can be part of a
single "means." Undoubtedly this is true in theory. Multiple subcomponents often
make up some larger component that performs a certain function, or even multiple
functions, in an apparatus. However, it is also true that some components of a
single apparatus perform such distinct functions as part of the apparatus that
it is not reasonable to group them together. Plaintiffs' proposed interpretation
of the "third monitoring means" clearly falls in this latter category.
In the physician-operated embodiment, the only links between the ECG
display portion 32, and the load data button 41 are that they have been put in
the same box (I.E., the physician console) and that the physician presumably
looks at the display portion before pressing the load data button. The ECG
monitor itself has no role in activating the charging process, and the load data
button has no role in monitoring the ECG signal. Although the physician plays a
role in both "monitoring" and "activating," the physician cannot be the
structure that satisfies the patentee's disclosure obligations under ss. 112 P.
6. See, E.G., APPLICATION OF BERNHART, 417 F.2d 1395, 1399 (C.C.P.A. 1969)
("Looking first at the apparatus claims, we see no recitation therein of mental
steps, nor of any element requiring or even permitting the incorporation of
human faculties in the apparatus. . . . Accordingly, we think it clear that
applicants have not defined as their invention anything in which the human mind
could be used as a component."). Cf. DAVIES V. UNITED STATES, 35 U.S.P.Q.2d
1027, 1035 (Fed. Cl. 1994) ("Patent claims do not cover structures in which a
human being substitutes for a part of the claimed structure."), citing BROWN V.
DAVIS, 116 U.S. 237, 249 (1886).
-7-
In the patient-operated embodiment, one skilled in the art would not
associate each signal generated by the QRS synchronization circuit with the
function of activating the charging means. Instead, the activating function
performed by the feedback line 134 is directly tied to each discharge of energy
into the heart - apparently in a one-to-one ratio. The device discharges far
less often than the QRS circuitry monitors, detects, and signals the occurrence
of an R-wave, which occurs with every beat of the heart. In addition,
plaintiffs' theory for the structure "activating said charging means in the
presence of abnormal cardiac rhythm in need of correction" effectively
disregards the phrase "in the presence of abnormal cardiac rhythm in need of
correction." The structure that plaintiffs rely on performs its function
regardless of whether the cardiac rhythm is normal or abnormal, whether it needs
correction or not.
One striking feature of plaintiffs' proposed interpretations of the
"third monitoring means" element is how different the interpretations of the
"activating" function are for the two embodiments of the invented device. For
the physician-operated device, plaintiffs claim the function of activating the
charging means is performed by the structure of the load data button that the
physician pushes when she is ready to administer therapy. The comparable
structure on the patient-operated device appears to be the magnet that the
patient holds over his chest to turn on and continue operation of the device.
For the patient-operated device, though, plaintiffs claim that part of the
structure that "activates" the charging means is something very different - not
the magnet but the QRS synchronization circuitry that ensures (after the device
is turned on) that the therapeutic charge is applied at the right phase of the
heart's own cycle. One skilled in the art would not identify the QRS
synchronization circuitry as structure relevant to the activating function or in
any way comparable
-8-
to the load data button. Plaintiffs do so only because the claim language
establishes a need to account for SOMETHING that monitors the ECG signal.
The claim language clearly calls for a connection between the
monitoring and activating functions that the specification does not support.
Plaintiffs' attempt to establish such a connection by pointing to largely
unrelated structures disclosed in each embodiment succeeds only in emphasizing
the discord between the claim language and the written description.(3)
Plaintiffs rely on Claim 15, added on re-examination, to bolster their
contention that at least the physician's console qualifies as a third monitoring
means. Claim 15 states: "The cardioverting device of claim 1, wherein said third
monitoring means includes a display." Ex. 34, '191 Patent Re-Ex. Hist., at FH
00434. At the time Claim 15 was proposed, the patent owner asserted: "Support
for the new claimed subject matter can be found, for example, at column 4, lines
25-27 and 35-40, of the specification." ID. at FH 00442. The sections in column
4 of the '191 patent specification cited by the patent owner refer to the
"cathode ray tube 42" on the "display portion 32" of the "external console 12."
The new claim was deemed patentable on April 6, 2000. ID. at FH 00346.
- --------------------------
(3)Perhaps the most natural reading of the third monitoring means claim
language is that structure in the apparatus monitors the ECG signal and
AUTOMATICALLY activates the charging process when the monitoring reveals an
abnormal cardiac rhythm. There is certainly no structure that performs this
function, for the interpretation of the condition of the heart is performed by a
person in both embodiments.
-9-
Unlike the written description and the prosecution history for the
original claims, Claim 15 directly identifies structure associated with the
third monitoring means. The language of Claim 15, however, has minimal
significance because it does not touch on the disputed portion of the claim
language (I.E., the clause that begins "for activating"). All that Claim 15
suggests is that a "monitoring means" that monitors an ECG signal could include
a display of the ECG signal. That possibility does not address the need for
structure that performs the dual functions of both monitoring the ECG signal and
activating the charging means.
At the supplemental MARKMAN hearing, plaintiffs suggested that the
court could provisionally identify structure associated with the third
monitoring means and let the jury decide whether the structure adequately
performs the stated functions. Although juries decide questions of equivalence
for means-plus-function claims, the assignment of structure to function for
means-plus-function claims in the first instance is a matter of law for the
court. See KEMCO, 208 F.3d at 1360. Having found that the specification does not
disclose structure associated with the "third monitoring means" element that can
perform the recited dual functions, the court finds that it cannot construe that
element of Claim 1 for the jury.
Date: December 19, 2000
----------------------------------------
DAVID F. HAMILTON, JUDGE
United States District Court
Southern District of Indiana
Copies to:
James Hughes
Sommer & Barnard
111 Monument Circle
4000 Bank One Tower
Indianapolis, IN 46204
-10-
David T. Kasper
Locke Reynolds LLP
201 North Illinois Street
Suite 1000
P.O. Box 44961
Indianapolis, IN 46244-0961
Timothy J. Malloy
McAndrews Held Malloy, Ltd.
Northwest Atrium Center
34th Floor
500 West Madison Street
Chicago, IL 60661
John R. Schaibley, III
Baker & Daniels
300 North Meridian Street
Suite 2700
Indianapolis, IN 46204
-11-
Dennis J. Block
Cadwalader Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Michael Rackman
Gottlieb Rackman & Riesman
270 Madison Avenue
8th Floor
New York, NY 10016
Dennis R. Salmon
Gibson Dunn & Crutcher
1530 Page Mill Road
Palto Alto, CA 94304
Jay G. Taylor
Ice Miller Donadio & Ryan
One American Square
Box 82001
Indianapolis, IN 46282-0002
Jeffrey M. Olson
Lyon & Lyon
633 West Fifth Street, Suite 4700
Los Angeles, California 90071
-12-
EXHIBIT 2
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
CARDIAC PACEMAKERS, INC., et al., )
)
Plaintiffs, )
)
v. ) CAUSE NO. IP 96-1718-C H/G
)
ST. JUDE MEDICAL, INC., et al., )
)
Defendants. )
ENTRY ON PLAINTIFFS' MOTION TO DISMISS COUNTERCLAIMS
When plaintiffs originally filed this action, they alleged that
defendants had infringed four patents held by plaintiffs. The action was dormant
for a time while arbitration ordered by the Eighth Circuit proceeded. At the
conclusion of the arbitration, this court vacated its previous stay and, with
the help of the parties, set the action back on course for a trial scheduled for
June 2001.
Defendants have asserted counterclaims as to all four of the patents in
suit. The first counterclaim seeks declaratory relief that all four patents are
invalid and not infringed by defendants' products. The second counterclaim
alleges "unjust enrichment" against plaintiffs CPI and Lilly, primarily on the
theory that plaintiffs extracted license payments from defendants for patents
that plaintiffs allegedly knew were invalid. The third counterclaim alleges
unfair competition and deceptive trade practices under Minnesota law arising
from activity related to obtaining and
enforcing (or threatening to enforce) the four patents in suit. The fourth
counterclaim alleges "injurious falsehood," also arising from activity related
to the patents in suit.
Plaintiffs have moved to dismiss voluntarily their claims for
infringement of U.S. Patent No. 4,223,678 ("the '678 patent"), and they have
filed what is known as a "SUPER SACK" statement of non-liability with respect to
the '678 patent. See SUPER SACK MFG. CORP. V. CHASE PACKAGING CORP., 57 F.3d
1054, 1058-60 (Fed. Cir. 1995). Defendants do not object to plaintiffs'
dismissal of their own coercive claims for relief under the '678 patent, and the
SUPER SACK statement of non-liability renders moot the defendants' first
counterclaim as applied only to the '678 patent. Both were dismissed in the
hearing on plaintiffs' motion, as reflected in the court's minute entry.
The dispute here concerns the remaining three counterclaims. Plaintiffs
contend that their SUPER SACK statement deprives this court of subject matter
jurisdiction over those counterclaims, at least to the extent they are based on
activity involving the '678 patent. As plaintiffs view the matter, the '678
patent is no longer in their case, and it should not remain in the
counterclaims.
Defendants contend the court has jurisdiction over those counterclaims
because they are deemed to arise under patent law on the theory that their
resolution will require a decision on substantial questions of patent law. See
U.S. VALVES, INC. V. DRAY, 212 F.3d 1368, 1372 (Fed. Cir. 2000) (under 28
U.S.C.ss. 1338(a), district court had original jurisdiction over breach of
license claim because claim required determination of whether licensed patent
was infringed); HUNTER DOUGLAS, INC. V. HARMONIC DESIGN, INC., 153 F.3d 1318,
1321 (Fed. Cir. 1998) ("We understand section 1338(a), as construed by both the
U.S. Supreme Court and this court, to mandate that federal courts
-2-
have exclusive jurisdiction over state law causes of action in which a
substantial question of federal patent law is pleaded as a necessary element" of
the state law claim for injurious falsehood), OVERRULED ON OTHER GROUNDS,
MIDWEST INDUSTRIES, INC. V. KARAVAN TRAILERS, INC., 175 F.3d 1356 (Fed. Cir.
1999); ADDITIVE CONTROLS & MEASUREMENT SYSTEMS, INC. V. FLOWDATA, INC., 986 F.2d
476, 477-78 (Fed. Cir. 1993) (ss.1338(a) provided jurisdiction over claim for
business disparagement involving false accusations of infringement).
Plaintiffs agree that, if the three remaining counterclaims were the
only claims in this lawsuit, this court would have jurisdiction. Dec. 14, 2000,
Transcript at 6. The court agrees that, under the Federal Circuit's reasoning in
U.S. VALVES V. DRAY, HUNTER DOUGLAS, and ADDITIVE CONTROLS, which applied
language in CHRISTIANSON V. COLT INDUSTRIES OPERATING CORP., 486 U.S. 800, 809
(1988) (finding patent jurisdiction where either federal patent law creates the
cause of action or the plaintiff's right to relief "necessarily depends on
resolution of a substantial question of federal patent law"), the court would
have subject matter jurisdiction over such claims pursuant to ss. 1338(a).
Under these circumstances, there is no doubt that this court has
original jurisdiction over the defendants' second, third, and fourth
counterclaims which appear to be compulsory counterclaims under Fed. R. Civ. P.
13(a) in any event. The court's jurisdiction is broad enough to include aspects
of those counterclaims relating to the '678 patent, as well as to the three
patents that remain in plaintiffs' claims for relief.
The parties have addressed in their briefs the doctrine of so-called
"infectious unenforceability." See generally CONSOLIDATED ALUMINUM CORP. V.
FOSECO INTERNATIONAL, LTD., 910
-3-
F.2d 804, 812 (Fed. Cir. 1990); SEMICONDUCTOR ENERGY LABORATORY CO. V. SAMSUNG
ELECTRONICS CO., 4 F. Supp. 2d 477, 492-93 (E.D. Va. 1998), AFF'D, 204 F.3d 1368
(Fed. Cir. 2000). The doctrine does not appear to affect the court's subject
matter jurisdiction over defendants' counterclaims. The doctrine may present
substantive issues as to the scope of relief if and when defendants can prove
that the '678 patent is not enforceable, but the court could only speculate
about such matters at this stage of the case.
Plaintiffs have argued that defendants have waived any right to pursue
any issues relating to the validity of the '678 patent because defendants have
not sought any construction of its claims pursuant to MARKMAN V. WESTVIEW
INSTRUMENTS, INC., 52 F.3d 967 (Fed. Cir. 1995) (EN BANC), AFF'D, 517 U.S. 370
(1996). Plaintiffs have not offered any case support for this waiver theory with
respect to jurisdiction over the counterclaims, nor have they directed the
court's attention to any actual disagreement over the construction of such
claims.
Accordingly, plaintiffs' motion to dismiss defendants' second, third,
and fourth counterclaims for lack of subject matter jurisdiction is hereby
denied.
So ordered.
Date: December 19, 2000
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DAVID F. HAMILTON, JUDGE
United States District Court
Southern District of Indiana
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Copies to:
James Hughes
Sommer & Barnard
111 Monument Circle
4000 Bank One Tower
Indianapolis, IN 46204
David T. Kasper
Locke Reynolds LLP
201 North Illinois Street
Suite 1000
P.O. Box 44961
Indianapolis, IN 46244-0961
Timothy J. Malloy
McAndrews Held Malloy, Ltd.
Northwest Atrium Center
34th Floor
500 West Madison Street
Chicago, IL 60661
John R. Schaibley, III
Baker & Daniels
300 North Meridian Street
Suite 2700
Indianapolis, IN 46204
Dennis J. Block
Cadwalader Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Michael Rackman
Gottlieb Rackman & Riesman
270 Madison Avenue
8th Floor
New York, NY 10016
Dennis R. Salmon
Gibson Dunn & Crutcher
1530 Page Mill Road
Palto Alto, CA 94304
-5-
Jay G. Taylor
Ice Miller Donadio & Ryan
One American Square
Box 82001
Indianapolis, IN 46282-0002
Jeffrey M. Olson
Lyon & Lyon
633 West Fifth Street, Suite 4700
Los Angeles, California 90071
-6-