IP Law Daily $20 million award to AngioScore for usurpation of business opportunity vacated
Thursday, July 21, 2016

$20 million award to AngioScore for usurpation of business opportunity vacated

By Cheryl Beise, J.D.

The federal district court in Oakland lacked supplemental jurisdiction over state law claims asserted by balloon catheter manufacture AngioScore in its patent infringement suit against competitor TriReme Medical, the U.S. Court of Appeals for the Federal Circuit has held. Because the federal and state law claims did not share a common nucleus of operative fact, the district court’s award of over $20 million in lost profits to AngioScore based on TriReme’s usurpation of business opportunity was vacated. The appeals court, however, upheld the court’s denial of attorney fees to TriReme after a jury found AngioScore’s asserted patent claims were invalid and not infringed (AngioScore, Inc. v. TriReme Medical, LLC, July 21, 2015, Hughes, T.).

In 2003, Eitan Konstantino co-founded AngioScore to market a new angioplasty balloon catheter he had co-invented, called AngioSculpt. Konstantino agreed to assign AngioScore his rights in any inventions that he conceived of or developed during his employment. AngioScore terminated Konstantino’s employment in April 2007. In 2009, Konstantino and another inventor filed a patent application for an angioplasty balloon catheter device called Chocolate. In June 2010, Konstantino and his co-inventor assigned their rights in Chocolate Quattro Vascuar PTE Ltd., an affiliate of TriReme Medical, LLC, a company co-founded by Konstantino.

On June 29, 2012, AngioScore sued TriReme, Konstantino, and Quattro Vascular (collectively "defendants") for infringement of U.S. Patent No. 7,691,119 (the ’119 patent) by making and selling Chocolate. AngioScore later added state-law claims for breach of fiduciary duty, aiding and abetting, and unfair competition. Konstantino allegedly violated Delaware’s corporate opportunity doctrine by "fail[ing] to disclose and offer to AngioScore the business opportunity relating to the Chocolate device." The district court declined to dismiss the state-law claims, concluding that subject matter jurisdiction was proper under 28 U.S.C. §1367 because "the core of this case" concerned the Chocolate device.

Following a bench trial on the state-law claims, the court held that Konstantino breached his fiduciary duty by failing to offer Chocolate to AngioScore. AngioScore was awarded $20,034,000 in lost profits. In a separate trial, a jury found that Chocolate did not infringe any asserted claim of the ’119 patent and that all of AngioScore’s asserted claims were invalid. The district court subsequently denied TriReme’s request for attorney fees under 35 U.S.C. §285, finding that the case was not exceptional.

The defendants appealed the district court’s exercise of jurisdiction over the state-law claims and the denial of attorneys’ fees under Section 285.

Jurisdiction over state law claims. In cases where diversity jurisdiction is lacking, a district court may exercise supplemental jurisdiction over state-law claims under 28 U.S.C. §1367(a) only if the federal and state law claims "derive from a common nucleus of operative fact." Generally, claims arise out of a common nucleus of operative fact when they "involve the same witnesses, presentation of the same evidence, and determination of the same, or very similar, facts."

No common nucleus of operative fact existed in this case, according to the Federal Circuit. The patent infringement claim depended on whether the Chocolate device satisfied the ’119 patent’s claim limitations, while the state-law claims related solely to whether the Chocolate device was a "corporate opportunity." The two claims relied on different facts and evidentiary proof. The fact that the manner in which Chocolate operated was relevant to both causes of action and that same experts calculated or opined on damages relating to the patent and state-law claims was not an "operative fact" sufficient to confer jurisdiction, the court said.

Concluding that the district court erred in exercising supplemental jurisdiction over the state-law claims, the Federal Circuit vacated the court’s damage award and remanded the case with instructions to dismiss the state law claims.

Patent Act attorney fees. The Federal Circuit found that the district court did not abuse its discretion in rejecting the defendants’ request for attorney fees under 35 U.S.C. §285. An "exceptional case" under Section 285 is "one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014).

The district court disagreed with the defendants’ assertion that AngioScore’s patent claim was "exceptionally weak," in part because it had survived summary judgment. On appeal, the defendants argued that they were entitled to summary judgment because claim vitiation defeated the application of the doctrine of equivalents. The defendants, however, did not argue claim vitiation in their initial motion for summary judgment. Although the defendants sought leave to file a second motion for summary judgment to make the claim vitiation argument, the district court denied the request because it violated the court’s standing order in civil cases. "The district court’s failure to grant summary judgment on an argument that was never properly presented does not constitute a legal error," the Federal Circuit said. The district court’s denial of attorneys’ fees was upheld.

The case is No. 2016-1126 and 2016-1142.

Attorneys: Robert Paul Feldman (Quinn Emanuel Urquhart & Sullivan, LLP) for AngioScore, Inc. Lisa Schiavo Batt (Arnold & Porter LLP) for TriReme Medical, LLC, Quattro Vascular PTE Ltd., QT Vascular Ltd., and Eitan Konstantino.

Companies: AngioScore, Inc.; TriReme Medical, LLC; Quattro Vascular PTE Ltd.; QT Vascular Ltd.

MainStory: TopStory Patent FedCirNews

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