Medtronic, Inc. v. Boston Scientific Corporation ( 2017 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
MEDTRONIC, INC.,
Plaintiff-Cross-Appellant
v.
MIROWSKI FAMILY VENTURES, LLC,
Defendant-Appellant
v.
BOSTON SCIENTIFIC CORPORATION, GUIDANT
CORPORATION,
Defendants-Cross-Appellants
______________________
2015-1996, 2015-2074, 2015-2075
______________________
Appeals from the United States District Court for the
District of Delaware in No. 1:07-cv-00823-SLR, Judge Sue
L. Robinson.
______________________
Decided: April 4, 2017
______________________
MARTIN RICHARD LUECK, Robins Kaplan LLP, Minne-
apolis, MN, argued for plaintiff-cross-appellant.
2 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
ARTHUR IRWIN NEUSTADT, Oblon, McClelland, Maier
& Neustadt, LLP, Alexandria, VA, argued for defendant-
appellant. Also represented by THOMAS FISHER, JOHN
PRESPER.
J. MICHAEL JAKES, Finnegan, Henderson, Farabow,
Garrett & Dunner, LLP, Washington, DC, argued for
defendants-cross-appellants.
______________________
Before REYNA, LINN, and WALLACH, Circuit Judges.
REYNA, Circuit Judge.
Mirowski Family Ventures, LLC appeals a final deci-
sion of the United States District Court for the District of
Delaware, arguing that the district court erred by holding
Mirowski Family Ventures liable for Medtronic, Inc.’s
attorney fees pursuant to a contractual fee-shifting provi-
sion. Mirowski Family Ventures argues in the alternative
that, if it is liable for Medtronic’s attorney fees, then
Boston Scientific Corporation and Guidant Corporation
must also be liable for those fees. Medtronic cross-
appeals, arguing that if Mirowski Family Ventures is not
liable for the attorney fees, then Boston Scientific and
Guidant must be. Boston Scientific and Guidant cross-
appeal, arguing that only Mirowski Family Ventures is
liable for Medtronic’s fees, and, in the alternative, that
Medtronic failed to timely file a motion for fees.
The district court correctly determined that Medtron-
ic’s claim for attorney fees was timely because its contrac-
tual entitlement to those fees was an element of damages
proven at trial. The district court also correctly deter-
mined that only Mirowski Family Ventures was bound by
the contractual fee-shifting provisions. We therefore
affirm.
MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION 3
BACKGROUND
Throughout the 1980s, Medtronic and Eli Lilly &
Company were avid competitors in the cardiac simulator
field. One of the most important products in that field is
the Implantable Cardioverter Defibrillator (“ICD”), which
was invented by Dr. Mirowski and claimed in several of
Dr. Mirowski’s patents.
In 1973, Dr. Mirowski entered into an exclusive li-
cense with Eli Lilly, providing Eli Lilly the right to subli-
cense the ICD. Dr. Mirowski passed away in 1990, and
Mirowski Family Ventures assumed all of his rights and
obligations under the exclusive licensing agreement with
Eli Lilly. In 2004, one of Eli Lilly’s subsidiaries, Guidant,
assumed all of Eli Lilly’s rights and obligations under the
Mirowski agreement. Boston Scientific acquired Guidant
in 2006, making Guidant a wholly owned subsidiary of
Boston Scientific.
A. The 1991 Agreement
The competition between Eli Lilly and Medtronic gen-
erated considerable patent litigation. To help resolve
these disputes, in 1991, Eli Lilly and Medtronic agreed to
cross-license their patents, including third-party patents
that they had the right to sublicense, such as the
Mirowski ICD patents. Article III of the 1991 Agreement
addresses third-party sublicenses and creates a dispute
resolution procedure that protected the Mirowski family’s
interest with respect to new Medtronic devices that
allegedly infringe the Mirowski patents. The relevant
sublicense dispute resolution provisions from Article III of
the 1991 Agreement state as follows:
With respect to the Mirowski license, and any new
Medtronic devices, if Medtronic is not paying roy-
alties on such new device, and Lilly or the
Mirowski family believes that such device infring-
es one of more of the Mirowski patent(s), Lilly
4 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
shall notify Medtronic of such infringement. Med-
tronic shall have ninety days to cure the non-
payment of royalties. If Medtronic fails to pay
such royalties within the cure period and continue
payment thereunder Lilly shall have the right to
terminate the sublicense as to that Mirowski Pa-
tent(s).
If Medtronic pays the royalty, Medtronic shall,
while maintaining its sublicense under the Li-
cense Agreement, have the right to challenge the
validity and enforceability of any patent under the
Mirowski license, other than [several specified pa-
tent numbers] and shall have the right to chal-
lenge Lilly’s assertion of infringement of any of
the Mirowski patents through a Declaratory
Judgment action. In such action, Lilly and the
Mirowski family shall not make claims for willful
infringement or punitive damages and neither
Lilly nor the Mirowski family shall seek injunctive
relief. In any such litigation, the losing party
shall pay all reasonable attorneys’ fees and court
costs for the winning party and, if Medtronic is
the winning party, all royalties paid from the date
Medtronic files suit shall immediately be refunded
to Medtronic including simple interest at a rate of
nine and on-half percent (9.5%) per annum. In
any such litigation if Medtronic is found not to
have any royalty obligations with respect to the
products in dispute then it shall be considered the
winning party.
J.A. 306−07.
In essence, Article III of the 1991 Agreement provides
that if either the Mirowski family or Eli Lilly believed
that Medtronic was not paying royalties for an infringing
Medtronic device, then Eli Lilly was obligated to notify
Medtronic of infringement, and Medtronic was obligated
MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION 5
to pay such royalties. If Medtronic failed to pay the
royalties, then Eli Lilly had the right to terminate Med-
tronic’s sublicense to the Mirowski patents. If Medtronic
did pay the royalties, Medtronic could seek a declaratory
judgement challenging the validity and enforceability of
the Mirowski patent at issue. If, in any such litigation,
Medtronic was found to not owe any royalty obligations
with respect to the products in dispute, then Medtronic
would be deemed the winning party. As the winning
party, Medtronic would be entitled to all royalties paid
since the date the suit was filed, plus interest. Eli Lilly,
as the losing party, would pay Medtronic’s reasonable
attorney fees.
B. The 2006 Litigation Tolling Agreement
Mirowski Family Ventures and Guidant asserted that
a series of Medtronic cardiac resynchronization products,
referred to collectively as the InSync devices, were in-
fringing Mirowski’s U.S. Patent No. RE38,119 (“’119
patent”). In response, Medtronic maintained that the ’119
patent was invalid and unenforceable. While these dis-
cussions were ongoing, litigation concerning the validity
of the ’119 patent was pending in the District of Dela-
ware. J.A. 701−02.
In 2006, Mirowski Family Ventures, Guidant, and
Medtronic entered into the Litigation Tolling Agreement
to defer Medtronic’s obligation to file a declaratory judg-
ment action until the conclusion of litigation ongoing in
the District of Delaware concerning the validity of the
’119 patent. See J.A. 701−04. Paragraph 7(c) of the 2006
Tolling Agreement provides that, within sixty days after a
decision from the Delaware District Court on the validity
of the ’119 Patent, Guidant or Mirowski Family Ventures
could notify Medtronic of any Medtronic devices that
infringe any claim of the ’119 patent that is not adjudicat-
ed to be invalid or unenforceable during the District of
Delaware litigation. J.A. 705−06. If Mirowski Family
6 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
Ventures or Guidant provided notice of infringement
under ¶ 7(c) of the Tolling Agreement, then Medtronic
could seek a declaratory judgment action in Delaware
District Court challenging the infringement, validity, and
enforceability pursuant to ¶ 8 of the Tolling Agreement.
J.A. 706.
The Tolling Agreement is silent regarding attorney
fees related to actions brought under ¶ 7(c) and ¶ 8. The
only discussion of attorney fees is in ¶ 11. That discus-
sion is undisputedly not applicable to this case, because it
relates only to disputes over royalty disbursements.
J.A. 708. When read in conjunction with the Tolling
Agreement’s definitional section, ¶ 15 of the Tolling
Agreement provides that the 1991 Agreement is amended
as necessary to conform to the Tolling Agreement:
“Medtronic Agreement” means a sublicense to cer-
tain patents owned by Mirowski, including the
’119 Patent pursuant to a License Agreement dat-
ed May 13, 1991, as has been amended from time
to time.
***
15. Except for the August 28, 2003 Settlement
Agreement, the Medtronic Agreement, and the
Amended Original Agreement, this Agreement
constitutes the entire agreement and understand-
ing of the parties with regard to the subject mat-
ter hereof and merges and supersedes all prior
discussions, negotiations, understandings and
agreements among the Parties concerning the
subject matter hereof. The Medtronic Agreement
shall be considered to be amended as necessary to
conform with this Agreement.
J.A. 703, 708. (emphasis added).
MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION 7
C. Current Litigation
In 2007, following results of the pending District of
Delaware litigation, Mirowski Family Ventures notified
Medtronic pursuant to ¶ 7(c) of the Tolling Agreement
that certain InSync devices were infringing the ’119
patent. J.A. 103, 901−03. Subsequently, pursuant to ¶ 8
of the Tolling Agreement, Medtronic filed an action in
Delaware District Court against Mirowski Family Ven-
tures, Boston Scientific, and Guidant seeking declaratory
judgment of non-infringement, invalidity, and unenforce-
ability of the ’119 patent. In 2011, the district court found
in favor of Medtronic on the merits. 1 In 2012, the Federal
Circuit vacated and remanded the district court’s deci-
sion. 2 In January 2014, the Supreme Court reversed and
remanded. 3 On remand, in March 2014, the Federal
Circuit affirmed the district court’s judgement in favor of
Medtronic. 4
Medtronic notified the parties that it would seek at-
torney fees during a July 28, 2014 status report to the
district court. In August 2015, the district court entered a
final order for Medtronic against Mirowski Family Ven-
tures for attorney fees in the amount of $6,028,305.33.
J.A. 1. In doing so, the district court reached four deter-
minations relevant in this appeal.
First, the district court concluded that Medtronic’s
claim for attorney fees was timely even though it was not
1 Medtronic, Inc. v. Bos. Sci. Corp., 777 F. Supp. 2d
750 (D. Del. 2011).
2 Medtronic, Inc. v. Bos. Sci. Corp., 695 F.3d 1266(2012).
3 Medtronic, Inc. v. Mirowski Family Ventures,
LLC, 134 S. Ct. 843 (2014).
4 Medtronic, Inc. v. Bos. Sci. Corp., 558 F. App’x 998
(2014).
8 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
made by motion within fourteen days after entry of judg-
ment as provided by Federal Rule of Civil Proce-
dures 54(d)(2). The district court relied on Advisory
Committee notes to conclude that the timeliness require-
ments of Rule 54(d)(2) did not apply because Medtronic’s
claim for fees was based in contract. J.A. 104−06. There-
fore, Medtronic was entitled to seek such fees as an ele-
ment of damages at trial, instead of by motion.
Second, the district court concluded that the fee shift-
ing provision in Article III of the 1991 Agreement, ex-
cerpted above, applied to the instant litigation triggered
by ¶ 7(c) and ¶ 8 of the 2006 Tolling Agreement. The
court reasoned that the parties made deliberate, explicit
amendments to the 1991 Agreement in the Tolling
Agreement. Therefore, the absence of any reference of
attorney fees in the relevant provisions of the Tolling
Agreement meant that the parties intended to leave
intact the 1991 Agreement’s fee-shifting provision.
JA107−08.
Third, the district court found that the attorney fee
provisions of the 1991 Agreement apply to Mirowski
Family Ventures, despite that Mirowski Family Ventures
is not a signatory to the 1991 Agreement. The district
court reasoned that when Mirowski Family Ventures
reserved for itself the right to notify Medtronic of in-
fringement, a right that previously belonged only to Eli
Lilly, Mirowski Family Ventures effectively put itself in
Eli Lilly’s shoes and was thus bound by the attorney fee-
shifting provision. JA108−09.
Finally, the district court found that only Mirowski
Family Ventures, and neither Guidant nor Boston Scien-
tific, was liable for Medtronic’s fees, because only
Mirowski Family Ventures gave notice of infringement.
The district court reasoned that the 1991 Agreement
places the obligation to pay attorney fees on only the
party asserting infringement, and Mirowski Family
MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION 9
Ventures was the sole party that gave Medtronic notice of
infringement under ¶ 7(c) of the Tolling Agreement.
JA109.
Mirowski Family Ventures appeals, arguing that it is
not liable for Medtronic’s attorney fees. Alternatively,
Mirowski Family Ventures argues that if it is liable for
Medtronic’s fees, then Guidant and Boston Scientific must
also be liable for those fees. Medtronic, Boston Scientific,
and Guidant all defend the district court’s determination
that Mirowski Family Ventures, and only Mirowski
Family Ventures, is liable for Medtronic’s attorney fees.
Medtronic cross-appeals, arguing that if Mirowski Family
Ventures is not liable for the attorney fees, then Boston
Scientific and Guidant must be liable for those fees.
Boston Scientific and Guidant cross-appeal, arguing that
Medtronic’s motion for fees was untimely. Guidant also
asserts that it cannot be liable for Medtronic’s attorney
fees because the district court lacked subject matter
jurisdiction over Medtronic’s non-infringement claim
against Guidant. We have jurisdiction to review the
district court’s final decision pursuant to 28 U.S.C.
§ 1295(a)(1).
STANDARD OF REVIEW
This Court reviews decisions on issues not unique to
patent law under the standards of review applicable in
the relevant regional circuit, which in this case is the
Third Circuit. Info-Hold, Inc. v. Muzak LLC, 783 F.3d
1365, 1371 (Fed. Cir. 2015). The Third Circuit reviews
the legal interpretation of procedural rules de novo and
has held that de novo review applies when considering
whether a motion for attorney fees is timely under Rule
54(d) of the Federal Rules of Civil Procedure. United Auto
Workers Local 259 Soc. Sec. Dep’t v. Metro Auto Ctr., 501
F.3d 283, 286 (3d Cir. 2007).
The standard of review within the Third Circuit for
contract law issues depends on whether the issue pre-
10 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
sented is one of contract interpretation or contract con-
struction. Contract interpretation is a question of fact
reviewed under a clearly erroneous standard. Contract
construction is a question of law reviewed de novo. See
John F. Harkins Co., Inc. v. Waldinger Corp., 796 F.2d
657, 659 (3d. Cir. 1986).
Contract interpretation involves determining the
meaning of the contract language and giving effect to the
parties’ intent. Id. Construction of a contract goes be-
yond interpretation and requires determining the legal
effect and consequences of contractual provisions:
If we make this distinction, then the construction
of a contract starts with the interpretation of its
language but does not end with it; while the pro-
cess of interpretation stops wholly short of a de-
termination of the legal relations of the parties.
When a court gives a construction to the contract
as that is affected by events subsequent to its
making and not foreseen by the parties, it is de-
parting very far from mere interpretation of their
symbols of expression, although even then it may
claim somewhat erroneously to be giving effect to
the “intention” of the parties.
Id. (quoting CORBIN ON CONTRACTS § 534 at 9 (1960)).
This case raises an issue of contract construction be-
cause the issue on appeal does not require interpretation
of any particular terms, but instead asks us to determine
the legal effect of and interplay between various provi-
sions of the 2006 Tolling Agreement and the 1991 Agree-
ment. This is analogous to Ram Constr. Co. v. Am. States
Ins. Co., where the Third Circuit found an issue of con-
tract construction when presented with the question of
whether the provisions of a contract for removal of one
rock slide from a roadway governed removal of a subse-
quent rock slide, or whether the actions of the parties
created a second contract. 749 F.2d 1049, 1052−53 (3d
MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION 11
Cir. 1984). As such, we apply a de novo standard of
review.
DISCUSSION
A. Timeliness of Medtronic’s Claim
Mirowski Family Ventures, Boston Scientific, and
Guidant contend that Medtronic’s motion for fees was
untimely because it was not filed within fourteen days of
judgment as required by Rule 54(d)(2) of the Federal
Rules of Civil Procedure. We disagree.
Subparagraph (A) of Rule 54(d)(2) provides that: “A
claim for attorney’s fees and related nontaxable expenses
must be made by motion unless the substantive law
requires those fees to be proved at trial as an element of
damages.” Subparagraph (B) of the same rule provides
that, “unless a statute or court order provides otherwise,”
the motion for attorney fees must “be filed no later than
14 days after the entry of judgment.” The Advisory
Committee notes to Rule 54(d)(2) elaborate on the excep-
tion in subparagraph (A):
As noted in subparagraph (A), it does not, howev-
er, apply to fees recoverable as an element of
damages, as when sought under the terms of a
contract; such damages typically are to be claimed
in a pleading and may involve issues to be re-
solved by a jury.
Medtronic’s claim for attorney fees falls within sub-
paragraph (A)’s exception to Rule 54(d)(2), because its
contractual right to fees is an element of damages proven
at trial. Medtronic’s right to fees is based on its contrac-
tual rights and obligations under the 1991 Agreement.
Mirowski Family Ventures’ assertion that Medtronic’s
InSync devices infringed the ’119 patent triggered Med-
tronic’s obligation under the 1991 Agreement to pay
royalties unless and until Medtronic obtained a declarato-
ry judgment holding that no royalties were due. Once
12 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
Medtronic proved at trial that no royalty obligations were
due, Medtronic was contractually entitled to the royalties
it paid pending declaratory judgment, plus interest, and
its reasonable attorney fees. J.A. 306−07.
Because Medtronic’s attorney fees were proven at tri-
al as an element of damages, the fourteen-day deadline of
Rule 54(d)(2) does not apply to its claim for attorney fees.
The district court, then, did not err in finding that Med-
tronic’s claim for attorney fees was timely.
B. Effect of the 1991 Agreement on
Mirowski Family Ventures
Mirowski Family Ventures argues that it cannot be
held liable under the 1991 Agreement’s fee shifting provi-
sion because Mirowski Family Ventures was not a party
to the 1991 Agreement. We disagree.
The 1991 Agreement and the 2006 Litigation Tolling
Agreement provide that Minnesota law govern their
interpretation. J.A. 312, 708. Under Minnesota contract
law, the primary goal of contract construction is to “allow
the intent of the parties to prevail.” Turner v. Alpha Phi
Sorority House, 276 N.W.2d 63 (Minn. 1979).
It is undisputed that the 1991 Agreement, as initially
contemplated and understood by the parties, only legally
bound Eli Lilly and Medtronic. Under Article III of the
1991 Agreement, Eli Lilly was obligated to protect the
Mirowski family’s interest against infringing Medtronic
devices. Only Eli Lilly could give Medtronic notice of
infringement and thereby trigger the dispute resolution
provisions of the 1991 Agreement that required Medtronic
to begin paying royalties. Likewise, only Eli Lilly was
obligated to pay Medtronic’s attorney fees if Medtronic
was the winning party in any resulting declaratory judg-
ment action. As explained at the outset, when Guidant
and Eli Lilly executed their 2004 agreement, Guidant
thereby assumed all of Eli Lilly’s rights and obligations to
MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION 13
the Mirowski family. Thus, pursuant to that 2004 agree-
ment, Guidant obtained Eli Lilly’s exclusive authority to
trigger the sublicense dispute resolution mechanisms and
the fee shifting provisions of the 1991 Agreement.
The 2006 Tolling Agreement modified the sublicense
dispute resolution provisions of the 1991 Agreement.
Specifically, ¶ 7(c) of the Tolling Agreement modified the
1991 Agreement by giving Mirowski Family Ventures
authority to trigger the sublicense dispute provisions as
applied to the ’119 patent or any subsequent reissuance.
This clause explicitly superseded provisions of the 1991
Agreement. In other words, the Tolling Agreement put
Mirowski Family Ventures and Guidant on equal footing,
and both enjoyed the position Eli Lilly initially occupied
on its own.
As the district court recognized, the parties to the
2006 Tolling Agreement carefully made specific modifica-
tions to the 1991 Agreement’s dispute resolution provi-
sions, but they did not modify the fee shifting provision.
The 2006 Tolling Agreement further stated that the 1991
Agreement would be modified only “as necessary” to
conform to the 2006 Tolling Agreement. We construe the
legal effect of the 2006 Tolling Agreement to be that
Mirowski Family Ventures assumed both Eli Lilly’s right
to assert infringement against Medtronic and Eli Lilly’s
obligation to pay Medtronic’s attorney fees if Medtronic
was deemed the winning party in any resulting litigation.
Therefore, the district court did not err in finding that
Mirowski Family Ventures was bound by the fee shifting
provision of the 1991 Agreement.
C. Effect of the 1991 Agreement on Guidant
and Boston Scientific
Mirowski Family Ventures argues that if it is liable
for Medtronic’s attorney fees, then Guidant and Boston
Scientific should be deemed also liable for those fees. We
disagree. Under the 1991 Agreement, only the party that
14 MEDTRONIC, INC. v. BOSTON SCIENTIFIC CORPORATION
gave notice of infringement and initiated the sublicense
dispute resolution provisions was obligated to pay the
winning party’s fees. As the district court recognized,
only Mirowski Family Ventures gave Medtronic notice of
infringement pursuant to ¶ 7(c) of the 2006 Tolling
Agreement. Therefore, the district court correctly con-
cluded that only Mirowski Family Ventures is liable for
Medtronic’s attorney fees.
CONCLUSION
The district court correctly held that Medtronic’s
claim for attorney fees was timely and that Mirowski
Family Ventures is liable for those fees. Because we also
find that the district court correctly determined that
Boston Scientific and Guidant are not liable for Medtron-
ic’s fees, we need not reach Guidant’s alternative jurisdic-
tional argument. We affirm.
AFFIRMED
COSTS
Each party to bear its own costs.