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Syntheon, LLC v. Covidien AG

United States District Court, D. Massachusetts

June 28, 2017

SYNTHEON, LLC, Plaintiff,
v.
COVIDIEN AG, Defendant.

          MEMORANDUM AND ORDER

          ALLISON D. BURROUGHS UNITED STATES DISTRICT JUDGE.

         This case involves a contractual dispute between Syntheon, LLC (“Syntheon”) and Covidien AG (“Covidien”) related to certain medical technology and related patents. Presently pending before this Court are Syntheon's motions for partial summary judgment [ECF No. 62] and to strike inadmissible hearsay statements [ECF No. 91]. For the reasons explained below, both motions are DENIED.

         I. PROCEDURAL BACKGROUND

         On February 12, 2016, Syntheon filed a complaint against Covidien [ECF No. 1], which it amended on April 20, 2016 [ECF No. 14] and again on December 1, 2016 [ECF No. 52]. The Second Amended Complaint (“SAC”) contains the following counts: breach of contract (Count I); breach of good faith and fair dealing (Count II); violation of Mass. Gen. Laws ch. 93A (Count III); specific performance (Count IV); a request for injunctive relief (Count V); and a request for declaratory relief (Count VI). Covidien answered the SAC on December 15, 2016. [ECF No. 55].

         On January 30, 2017, Syntheon moved for partial summary judgment on the breach of contract claim with respect to whether Covidien breached their contract by withholding consent for Syntheon to file its proposed patent applications. [ECF No. 62]. Covidien opposed the motion. [ECF No. 71]. Both parties have also filed statements of material fact and responses pursuant to Local Rule 56.1 [ECF Nos. 64, 72, 85], as well as affidavits with attached exhibits [ECF Nos. 65, 66, 73, 74, 75]. Further, Syntheon filed a reply [ECF No. 84] and Covidien filed a sur-reply [ECF No. 88]. Finally, Syntheon filed a motion to strike inadmissible hearsay contained in Covidien's opposition to the partial summary judgment motion [ECF No. 91], which Covidien opposed [ECF No. 93].

         II. FACTUAL BACKGROUND

         Pursuant to Local Rule 56.1, material facts contained in the statements of material fact are deemed admitted for purposes of this summary judgment motion unless controverted by the opposing party's statement. Additional relevant facts will be discussed as needed in this Memorandum and are presented in the light most favorable to Covidien, the non-moving party.[1]

         Defendant Covidien is a Swiss corporation and a subsidiary of Medtronic Public Limited Company. Plaintiff Syntheon, a Florida limited liability company, describes itself as engaged in the business of designing and developing new medical devices. P.Facts ¶ 1. In 2007 and 2008, Syntheon developed a cordless ultrasonic scalpel. During that time, it filed more than a dozen patent applications with the U.S. Patent Office (“PTO”) in connection with various features of the scalpel, including its handle, transducer, and assembly.

         In December 2008, the parties entered into an Asset Purchase Agreement (“APA”) [ECF No. 65-2], and a Development Agreement (“DA”) [ECF No. 65-3]. As part of the APA, Syntheon sold certain intellectual property relating to the cordless surgical cutting devices, including patent applications that were pending at the time, to Covidien. The APA provides for royalty payments to Syntheon in connection with the intellectual property. As part of the DA, Freedom Surgical LLC, a wholly-owned subsidiary of Syntheon, is required to “develop exclusively for Covidien one or more products based on the Subject Technology.” The “Subject Technology” is “all or substantially all of the assets and properties related to cordless surgical products licensed to, invented, or designed by Freedom or one or more of its affiliates based on or utilizing certain ‘smart' battery, articulation, and/or ultrasonic and/or radiofrequency technologies and associated intellectual property, ” which were purchased or licensed pursuant to the APA. The parties, however, dispute which agreement, the APA or the DA, governs the proposed patent applications at issue in the pending motion. D.Facts ¶ 6. Syntheon claims that the APA governs the issues in this motion, while Covidien claims that the DA applies.

         Under the APA, “[f]or the duration of the Royalty Term, Covidien AG shall pay to the Seller [Syntheon] in the manner provided herein a running royalty of 4% on Net Sales of each Covered Product sold.” APA § 2.6(b)(i). The APA defines a “covered product” as any product within the scope of “any Patent included in, or that otherwise issues from, the Transferred Intellectual Property.” APA § 1.1. “Transferred Intellectual Property” is defined in the APA at 2.1(a)(i) and is listed in Schedule 2.1(a)(i). It includes, among other things, patent applications related to the ultrasonic cordless scalpel that were pending at the time the agreements were executed.

         With respect to “Patent Filing and Prosecution, ” the APA provides:

After the Closing Date, Covidien AG shall be solely responsible for the continued prosecution and maintenance of any Patent Application included in the Transferred Intellectual Property. Covidien AG also shall be solely responsible for the preparation, filing and maintenance of any new Patent Application filed after the Closing Date with respect to any Transferred Intellectual Property. [Syntheon] shall promptly disclose to Covidien AG all inventions related to the Transferred Intellectual Property and [Syntheon] shall cooperate with and assist Covidien AG in seeking protection and protecting the same in the name of Covidien AG or its designee, including without limitation executing any documents that Covidien AG may reasonably request and obtaining the cooperation of current and former employees and consultants of [Syntheon] to sign such documents.

APA. § 7.8(a). It further provides:

If Covidien AG determines not to file any particular Patent Application in the Specified Countries, or determines not to file any new Patent Application regarding an invention contained in the Transferred Intellectual Property as disclosed by [Syntheon], Covidien AG shall timely notify [Syntheon] of such determination, and following such notification [Syntheon] may, upon Covidien AG's prior written approval (which, after review of any such Patent Application, shall not be unreasonably withheld), in good faith prepare and file any such application at [Syntheon]'s sole and exclusive cost and expense and shall provide Covidien AG with copies of all documents filed by [Syntheon] with respect to such application. All Patent Applications filed by [Syntheon] as set forth above shall be assigned to, and exclusively owned by, Covidien AG.

APA § 7.8(c). Of particular importance to the instant motion is the clause under which Covidien cannot “unreasonably with[o]ld” its consent to allow Syntheon to file a patent application that Covidien chose not to file (hereinafter, the “Reasonable Consent Clause”). The parties agree that APA § 7.8(c) and DA § 9.3(b) contain substantially similar language, and ...


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