Abbott Point of Care Inc. v. Epocal, Inc.

United States Court of Appeals
for the Federal Circuit
__________________________
ABBOTT POINT OF CARE INC.,
Plaintiff-Appellant,
v.
EPOCAL, INC.,
Defendant-Appellee.
__________________________
2011-1024
__________________________
Appeal from the United States District Court for the
Northern District of Alabama in Case No. 09-CV-1678,
Chief Judge Sharon Lovelace Blackburn
_________________________
Decided: January 13, 2012
_________________________
GREGORY A. CASTANIAS, Jones Day, of Washington,
DC, argued for plaintiff-appellant. With him on the brief
were JASON G. WINCHESTER and DENNIS MURASHKO, of
Chicago, Illinois.
J. ANTHONY DOWNS, Goodwin Procter, LLP, of Boston,
Massachusetts, argued for defendant-appellee. With him
on the brief were DARYL L. WIESEN and SAFRAZ W.
ISHAMAEL.
__________________________
ABBOTT POINT v. EPOCAL 2
Before RADER, Chief Judge, LOURIE, and BRYSON, Circuit
Judges.
Opinion for the court filed by Chief Judge RADER. Dis-
senting opinion filed by Circuit Judge BRYSON.
RADER, Chief Judge.
The United States District Court for the Northern
District of Alabama granted Epocal, Inc.’s (“Epocal”)
Motion to Dismiss and dismissed Abbott Point of Care
Inc.’s (“Abbott”) Complaint without prejudice. Because
Abbott lacks standing, this court affirms.
I.
Abbott filed a complaint against Epocal in the North-
ern District of Alabama alleging infringement of U.S.
Patent Nos. 6,845,327 (’327 patent) entitled “Point-Of-
Care In-Vitro Blood Analysis System” and 6,896,778 (’778
patent) entitled “Electrode Mode.” These patents cover
systems and devices for testing blood samples. Abbott
and Epocal are competitors in the diagnostic field. Abbot
is a New Jersey corporation that manufactures and sells a
variety of healthcare products, including point-of-care
systems that enable medical professionals to quickly test
blood without sending a sample away to a lab. Epocal is a
Canadian corporation founded by Dr. Imants Lauks, the
named inventor of the patents-in-suit. Likewise, Epocal
manufactures and sells point-of-care blood testing sys-
tems. Both parties claim to own the ’328 and ’772 pat-
ents. Both patents name Epocal as the assignee. Abbott
claims ownership on the basis of contracts between Lauks
and Abbott’s predecessors. Lauks entered into three
contracts: two employment agreements and one consult-
ing agreement.
3 ABBOTT POINT v. EPOCAL
Before founding Epocal, Lauks was an employee of
Abbott’s predecessors, Integrated Ionics Incorporated
(“Integrated Ionics”) and i-STAT Corporation (“i-STAT”).
Lauks executed an employment agreement with Inte-
grated Ionics on January 10, 1984 (“1984 Agreement”),
which included confidentiality, non-competition, non-
solicitation, disclosure and assignment provisions. In
relevant part, the agreement provided that:
I [Lauks] agree to promptly communicate
to Integrated Ionics, and to assign to Inte-
grated Ionics or its designee all of my
rights in, any inventions, improvements or
discoveries, whether patentable or not,
which I currently own or possess or which
I may make or conceive during my em-
ployment by Integrated Ionics or which re-
late to any present or prospective
activities of Integrated Ionics; and I
hereby assign to Integrated Ionics and au-
thorize and request competent patent au-
thorities, domestic and foreign, to honor
and recognize this document as a full and
complete assignment thereof.
J.A. 231-32 (“Disclosure and Assignment Covenant”).
Integrated Ionics subsequently became i-STAT. Lauks
executed an employment agreement with i-STAT on
January 29, 1992 (“1992 Agreement”). The 1992 Agree-
ment included Lauks’ employment duties, compensation,
benefits, termination, and severance payments.
Lauks resigned from i-STAT on September 1, 1999.
At that time, he signed an eighteen-month consulting
agreement with i-STAT (“1999 Consulting Agreement”),
which expired on March 1, 2001. The 1999 Consulting
Agreement notes that Dr. Lauks “resigns from all his
ABBOTT POINT v. EPOCAL 4
positions” at i-STAT. The 1999 Agreement then defines
Lauks’ exclusive consulting services and specifies that
“[t]he Consulting Agreement does not extend to work on
new products, whether or not based on [i-STAT’s] core
technology and whether or not for point-of-care blood
analysis applications.” Id. The agreement gave i-STAT
and Lauks a flexible work schedule, particularly “recog-
nizing Lauks’ desire to pursue other, non-conflicting
interests.” Id. The confidentiality provision noted “the
existing agreement between Lauks and [i-STAT] regard-
ing confidentiality, non-solicitation and non-competition
(the ‘Existing Confidentiality Agreement’) shall remain in
place as if Lauks remained employed by [i-STAT], except
that the covenants regarding non-competition shall run
18 months after the execution of the Consulting Agree-
ment.” J.A. 70. The 1999 Consulting Agreement does not
address invention assignments or obligations.
On June 4 and June 8, 2001, Lauks filed applications
that led to the ’328 and ’772 patents, identifying himself
as the sole inventor. In December 2003, Lauks assigned
the patents-in-suit to Epocal. Abbott acquired i-STAT in
2004.
On August 25, 2009 Abbott filed its Complaint assert-
ing infringement and legal title to the contested patents.
Citing the 1984 Agreement, Abbott alleged Lauks agreed
to disclose and assign his inventions, improvements, and
discoveries to its predecessor, Integrated Ionics. Abbott
also referenced the 1999 Consulting Agreement, alleging
it expressly recognized that the 1984 Agreement re-
mained in effect for the duration of Lauks’ consulting
period, specifically the provision assigning all Lauks’
rights in inventions, improvements, or discoveries. The
Complaint further alleged that Lauks conceived the
contested inventions before March 1, 2001, thus giving
Abbott ownership rights.
5 ABBOTT POINT v. EPOCAL
Epocal filed a motion to dismiss for lack of subject
matter jurisdiction and failure to state a claim. In its
opposition to Epocal’s motion to dismiss, Abbott requested
limited jurisdictional discovery if the district court deter-
mined extrinsic evidence was necessary to construe the
1999 Agreement. In addition, Abbott filed a motion for an
in camera review of a “clawed back” privileged letter,
which related to the 1984 Agreement, and a motion to
compel discovery and determine the status of the privi-
leged letter. In response, Epocal filed a motion to stay or
strike Abbott’s privilege motions.
During oral arguments, the district court granted Ab-
bott’s motion for an in camera review. The district court
issued a memorandum opinion and order that granted
Epocal’s motion to dismiss. The district court found
Abbott lacked standing because the 1999 Consulting
Agreement did not continue the 1984 Agreement’s Disclo-
sure and Assignment Covenant. Therefore, Abbott did
not own the patents-in-suit. The district court declined as
moot Abbott’s motion to compel discovery and determine
the status of the 2000 letter. The trial court also declined
to entertain Epocal’s motion to stay or strike Abbott’s
privilege motions. The district court entered final judg-
ment on September 7, 2010. Abbott appealed, and this
court has jurisdiction under 28 U.S.C. § 1295(a)(1).
II.
This court reviews standing to sue for patent in-
fringement without deference. See Rite-Hite Corp. v.
Kelley Co., 56 F.3d 1538, 1551 (Fed. Cir. 1995) (en banc).
Only a patentee may bring an action for patent infringe-
ment. See 35 U.S.C. § 281 (“A patentee shall have remedy
by civil action for infringement of his patent.”). Title 35
defines “patentee” as the party to whom the patent issued
or any successors in title to the patent. See 35 U.S.C. §
ABBOTT POINT v. EPOCAL 6
100(d). Transfers of title, otherwise known as assign-
ments, are controlled by 35 U.S.C. § 261:
Applications for patent, patents, or any in-
terest therein, shall be assignable in law
by an instrument in writing. The appli-
cant, patentee, or his assigns or legal rep-
resentatives may in like manner grant
and convey an exclusive right under his
application for patent, or patents, to the
whole or any specified part of the United
States.
Accordingly, a patentee or successor in title to the pat-
entee may bring an action for patent infringement. See
Mentor H/S, Inc. v. Med. Device Alliance, Inc., 240 F.3d
1016, 1017 (Fed.Cir. 2001).
This court also reviews contract interpretations with-
out deference. See Spring Creek Holding Co. v. Shinnihon
U.S.A. Co., 943 A.2d 881, 900 (N.J. Super. Ct. App. Div.
2008). Finally, this court reviews "the district court's
denial of discovery, an issue not unique to patent law, for
abuse of discretion, applying the law of the regional
circuit," here the United States Court of Appeals for the
Eleventh Circuit. Patent Rights Prot. Group, LLC v.
Video Gaming Techs., Inc., 603 F.3d 1364, 1371 (Fed. Cir.
2010).
Abbott has the burden to show necessary ownership
rights to support standing to sue. See Fieldturf, Inc. v.
Southwest Recreational Indus., Inc., 357 F.3d 1266, 1269
(Fed. Cir. 2004). Abbot asserts that the 1984 Agreement,
as carried forward by the 1999 Consulting Agreement,
gave it ownership of the ’328 and ’772 patents.
State law governs contract interpretation. See Me-
tabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370
7 ABBOTT POINT v. EPOCAL
F.3d 1354, 1369 (Fed. Cir. 2004). Thus, the law of the
state of New Jersey governs these Agreements. In inter-
preting a contract, it is “well-settled . . . that when the
terms of a contract are clear, ‘it is the function of a court
to enforce it as written and not to make a better contract
for either of the parties.’” CSFB 2001-CP-4 Princeton
Park Corporate Ctr., LLC v. SB Rental L LLC, 980 A.2d 1,
4 (N.J. Super. Ct. App. Div. 2009) (quoting Kampf v.
Franklin Life Ins., Co., 161 A.2d 717 (N.J. 1960); see also
Borough of Princeton v. Bd. of Chosen Freeholders of Cnty.
of Mercer, 755 A.2d 637, 645 (N.J. Super. Ct. App. Div.
2000) (“The polestar of contract construction is to discover
the intention of the parties as revealed by the language
used by them.”). Therefore, “[a]bsent ambiguity, the
intention of the parties is to be ascertained by the lan-
guage of the contract.” CSFB 2001-CP-4, 980 A.2d at 4.
Lauks’ resignation from i-STAT terminated his em-
ployment. Accordingly, the 1984 and 1992 Agreements
ended when he ceased to be an employee in 1999. The
1999 Agreement echoes this termination, stating that
Lauks “resigns from all his positions” at i-STAT. Further,
the 1999 Consulting Agreement labels Lauks as a “Senior
Consultant.”
The 1999 Consulting Agreement did not specify that
the entire 1984 Agreement remains in effect for the
duration of Lauks’ consulting period. The confidentiality
provision of the 1999 Consulting Agreement, entitled
“Continuation of Employee Confidentiality, Non-
Solicitation and Non-Competition Covenants,” simply
retains the existing confidentiality agreement in place.
That provision is explicitly limited to confidentiality, non-
solicitation, and non-competition, without any reference
to any obligation to assign inventions:
ABBOTT POINT v. EPOCAL 8
The existing agreement between Lauks
and [i-STAT] regarding confidentiality,
non-solicitation and non-competition (the
“Existing Confidentiality Agreement”)
shall remain in place as if Lauks remained
employed by [i-STAT], except that the
covenants regarding non-competition shall
run 18 months after the execution of the
Consulting Agreement.
J.A. 70.
While the 1984 Agreement contained a Disclosure and
Assignment Covenant, the 1999 Consulting Agreement
does not contain any obligation that Lauks must assign
rights in inventions, improvements, or discoveries made
or conceived during the consultation period. Rather, the
1999 Consulting Agreement recognized and allowed
Lauks to pursue other, non-conflicting interests. It also
explicitly excluded work on new products, regardless of
the subject matter, including point-of-care blood analysis
applications. Abbott’s proposed interpretation of the
Agreements as containing a continued assignment obliga-
tion finds no support in the documents themselves. An
automatic assignment of “inventions, improvements or
discoveries” conceived while pursuing other interests
directly conflicts with the agreement’s allowance that
Lauks may work on his own behalf. Moreover, the plain
language of the 1999 Consulting Agreement is unambigu-
ous and does not continue the 1984 Agreement’s Disclo-
sure and Assignment Covenant. See Borough of
Princeton, 755 A.2d at 645 (N.J. Super. App. Div. 2000)
("The document, moreover, must be read as a whole,
without artificial emphasis on one section, with a conse-
quent disregard for others.”). Because the 1999 Consulta-
tion Agreement is silent with respect to any assignment of
Lauks’ rights in inventions, improvements, or discoveries
9 ABBOTT POINT v. EPOCAL
made or conceived during the consultation period, Lauks
had no obligation to assign inventions from the consulting
period to i-STAT. Thus, as the district court correctly
concluded, the contract does not convey all substantial
interest in the ’328 or ’772 patents.
Although the 1999 Consulting Agreement was unam-
biguous, Abbott faults the district court for denying
Abbott’s request for additional discovery. New Jersey law
explains that extrinsic evidence is admissible to aid in
contract interpretation, but it is “not for the purpose of
modifying or enlarging or curtailing its terms” Conway v.
287 Corporate Ctr. Assocs., 901 A.2d 341, 346-47 (N.J.
2006); see also Dontzin v. Myer, 694 A.2d 264, 267 (N.J.
Super. Ct. App. Div. 1997) (“Extrinsic evidence is admis-
sible as an aid to understand the significance of the
contract language, but not to give effect to an intent at
variance with that language.”). Because the agreements
contain no ambiguity, Abbott’s request is unavailing.
Extrinsic evidence simply cannot change or contradict the
contract’s language. As such, the district court properly
evaluated all of the agreements between Lauks and
Abbott’s predecessors, considered the entirety of the
contracts, and reasoned the contract language unambigu-
ously conveyed the parties’ intention. Therefore, the
district court did not abuse its discretion in denying
jurisdictional discovery. United Technologies Corp. v.
Mazer, 556 F.3d 1260, 1281 (11th Cir. 2009) (affirming
the district court’s denial of jurisdictional discovery).
Because Abbott lacks standing, the district court
properly dismissed its claim.
AFFIRMED
United States Court of Appeals
for the Federal Circuit
__________________________
ABBOTT POINT OF CARE INC.,
Plaintiff-Appellant,
v.
EPOCAL, INC.,
Defendant-Appellee.
__________________________
2011-1024
__________________________
Appeal from the United States District Court for the
Northern District of Alabama in Case No. 09-CV-1678,
Chief Judge Sharon Lovelace Blackburn.
__________________________
BRYSON, Circuit Judge, dissenting.
In order to understand the meaning of the 1999 Con-
sulting Agreement, it is necessary to examine not only
that agreement, but the two prior agreements that pro-
vide the context and, by incorporation, at least some of
the content of the 1999 agreement. The prior agreements
between Dr. Lauks and Abbott’s corporate predecessors
are an untitled 1984 agreement, which outlined various
aspects of Dr. Lauks’s rights and responsibilities as an
employee, and a 1992 document entitled “Employment
Agreement,” which incorporated the covenants of the 1984
agreement. The 1984 agreement contained an assign-
ment-of-invention clause. The 1999 Consulting Agree-
ment does not contain an explicit assignment-of-invention
ABBOTT POINT v. EPOCAL 2
clause, but it contains a provision that incorporates at
least some of the covenants found in the 1992 and 1984
agreements. The question in this case is whether the
assignment-of-invention clause from the 1984 and 1992
agreements was incorporated by reference in the 1999
agreement. The majority states that the 1999 Consulting
Agreement “does not contain any obligation that Lauks
must assign rights in inventions, improvements, or dis-
coveries made or conceived during the consultation pe-
riod,” and that the 1999 agreement “is unambiguous and
does not continue the 1984 Agreement’s Disclosure and
Assignment Covenant.” I disagree with that conclusion. I
believe that the 1999 Consulting Agreement is at least
ambiguous as to whether it incorporated the assignment
covenant of the 1984 agreement. I would therefore vacate
the judgment of the district court and remand this case
for discovery and consideration of extrinsic evidence
regarding whether, and to what extent, the 1999 Consult-
ing Agreement incorporated the assignment-of-invention
clause that was first found in the 1984 agreement.
Abbott and Epocal agree that by signing the 1984
agreement, Dr. Lauks assumed obligations related to
confidentiality, non-competition, non-solicitation, disclo-
sure of inventions, and, most importantly for our pur-
poses, assignment of inventions. Abbott and Epocal also
agree that in the 1992 Employment Agreement Dr. Lauks
and i-STAT referenced the entirety of the 1984 agreement
in two ways. First, they assigned a shorthand title to the
untitled 1984 document: the “Confidentiality and Non-
Competition Agreement.” That shorthand title did not, of
course, include specific reference to all of the covenants of
the 1984 agreement, but it was clearly intended to refer to
the entire 1984 agreement with all of its covenants,
including the assignment-of-invention clause. Second, Dr.
Lauks and i-STAT identified the 1984 agreement by
3 ABBOTT POINT v. EPOCAL
describing some, but not all, of the subject matter of that
agreement. They did so by referring to the 1984 agree-
ment as the “certain letter agreement . . . concerning
employee confidentiality and non-competition.” Even
though the 1992 Employment Agreement does not use the
word “assignment,” Epocal acknowledges that Dr. Lauks’s
assignment obligations from the 1984 agreement carried
over into the 1992 agreement because the 1992 agreement
incorporated all of the obligations imposed on Dr. Lauks
by the 1984 agreement.
In the 1999 Agreement, Dr. Lauks and i-STAT con-
tinued their practice of referring to the untitled 1984
agreement with a shorthand title; in 1999 they referred to
it as the “Existing Confidentiality Agreement.” Moreover,
as in the 1992 agreement, the 1999 agreement made
reference to the 1984 document without listing each of the
covenants found in that agreement. The 1999 agreement
described the 1984 agreement as “the existing agreement
. . . regarding confidentiality, non-solicitation, and non-
competition.”
Epocal’s position is that the 1999 agreement, unlike
the 1992 agreement, carried forward only the three listed
covenants (confidentiality, non-solicitation, and non-
competition) and not the rest of the covenants from the
1984 agreement. The problem with that position is that,
if the assignment obligation found in the 1984 agreement
was incorporated into the 1992 agreement (and Epocal
agrees that it was), there is no reason to interpret the
similar terms of the 1999 agreement to exclude the as-
signment obligation.
The differences between the 1992 and 1999 agree-
ments with respect to the manner in which they refer to
the 1984 agreement are minor. First, the 1992 and 1999
agreements use slightly different language to refer to the
ABBOTT POINT v. EPOCAL 4
1984 agreement (“Confidentiality and Non-Competition
Agreement” in 1992, and “Existing Confidentiality
Agreement” in 1999), but it is clear that both are simply
shorthand references to the 1984 agreement. Second, the
1992 agreement refers to the 1984 agreement as the
agreement “concerning employee confidentiality and non-
competition,” while the 1999 agreement refers to the 1984
agreement as the agreement “regarding confidentiality,
non-solicitation and non-competition.” Again, it is quite
plain that both references are to the 1984 agreement.
Accordingly, if the quoted language in the 1992 agree-
ment refers to the 1984 agreement as a whole—as Epocal
concedes—the similar quoted language from the 1999
agreement would appear to have the same meaning.
In arguing to the contrary, Epocal places great weight
on the fact that the 1992 agreement permitted Dr. Lauks
to be terminated for breach of “any of the covenants” in
the 1992 Employment Agreement or in the 1984 agree-
ment. The 1999 agreement, however, has substantially
similar language, stating that Dr. Lauks could be termi-
nated for breach “of any material covenant in the Consult-
ing Agreement (including the Existing Confidentiality
Agreement . . . ).” Moreover, in light of the parties’ prac-
tice of referring to the 1984 agreement by reference to
fewer than all of its covenants, the fact that the section of
the 1999 agreement defining “Existing Confidentiality
Agreement” is titled “Continuation of Employee Confiden-
tiality, Non-Solicitation and Non-Competition Covenants”
is not sufficient to establish that the 1999 agreement was
intended to exclude any form of the assignment covenant
found in the prior agreements.
It is true that the 1992 agreement was an employ-
ment agreement whereas the 1999 agreement was a
consultancy agreement. However, the change in the
nature of Dr. Lauks’s relationship with i-STAT does not
5 ABBOTT POINT v. EPOCAL
suggest that the parties intended to deviate from their
established practice of identifying the entirety of the 1984
agreement with a shorthand name consisting of a refer-
ence to some, but not all, of the covenants contained in
that 1984 document. Because I disagree with the major-
ity’s conclusion that the 1999 Consulting Agreement
unambiguously excludes any version of the assignment
obligation initially contained in the 1984 agreement, I
would reverse the district court’s dismissal order. I would
direct the district court on remand to permit discovery
and to consider extrinsic evidence bearing on whether the
parties contemplated that Dr. Lauks would continue to
have an assignment obligation with respect to inventions
made in the course of his work for i-STAT and, if so,
whether either of the inventions at issue in this case fall
within the scope of that assignment obligation.