E.I. du Pont de Nemours & Co. v. Medtronic Vascular, Inc.
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IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
E.I. DU PONT DE NEMOURS
AND COMPANY,
Plaintiff,
)
)
)
)
) C.A. No. N10C-09-058-MMJ CCLD
v.
)
)
MEDTRONIC VASCULAR, INC., )
Defendant.
)
Submitted: November 26, 2012
Decided: January 18, 2013
On Motions for Summary Judgment
OPINION
Richard L. Horwitz, Esquire and John A. Sensing, Esquire, POTTER ANDERSON
& CORROON, LLP, Wilmington, Delaware, John P. Donohue, Jr., Esquire, David
J. Wolfsohn, Esquire (argued), Aleksander J. Goranin, Esquire, and Kevin M.
Bovard, Esquire, WOODCOCK WASHBURN, LLP, Philadelphia, Pennsylvania,
Attorneys for Plaintiff.
David S. Eagle, Esquire, Sally E. Veghte, Esquire and Sean M. Brennecke,
Esquire, KLEHR HARRISON HARVEY BRANZBURG, LLP, Wilmington,
Delaware 19801, William Z. Pentelovitch, Esquire (argued), Haley N. Schaffer,
Esquire (argued), D. Scott Aberson, Esquire and David E. Suchar, Esquire,
MASLON EDELMAN BORMAN & BRAND, LLP, Minneapolis, Minnesota,
Attorneys for Defendant.
JOHNSTON, J.
I.
PROCEDURAL CONTEXT
Plaintiff E.I. duPont de Nemours and Company (“DuPont”) filed this action
against Defendant Medtronic Vascular, Inc. (“Medtronic”) on September 9, 2010.
DuPont asserted claims of Breach of Contract (Count I); Fraudulent
Misrepresentation (Count II); and Negligent Misrepresentation (Count III). By
Order dated November 26, 2012, the Court dismissed Counts II and III.
DuPont and Bard/Medtronic worked together to develop and market devices
to be used in medical procedures. The device at issue in this case is a balloon
catheter system, which is used in coronary angioplasty. DuPont and Medtronic’s
predecessor in interest, C.R. Bard, Inc. (“Bard”), entered into a Patent Assignment
and Cooperative Agreement (“PACRA”). The overarching purpose of the PACRA
was to establish a system of royalty payments to DuPont, for Products sold by
Medtronic that utilize DuPont Materials and Technology.
The following summary judgment motions are pending:
(1)
Medtronic’s summary judgment motion on the issue of whether this
action is barred by the applicable statute of limitations;
(2)
DuPont’s summary judgment motion on the issue of whether the
January 1995 Amendment to the PACRA affects royalty provisions;
(3)
DuPont’s summary judgment motion on the issue of whether the April
1995 Amendment to the PACRA affects royalties on stents;
2
(4)
Medtronic’s cross-motion for summary judgment on the issue of
whether the April 1995 Amendment to the PACRA waives royalties
on stents;
(5)
DuPont’s summary judgment motion on the issue of whether a stent is
“part” of a “Catheter” under the PACRA;
(6)
Medtronic’s cross-motion for summary judgment on the issue of
whether a stent is a “Related Product” and a separate “Catheter” under
the PACRA;
(7)
DuPont’s summary judgment motion on the issue of whether royalties
under Paragraph 3 of the 1999 Amendment to the PACRA revert to
the royalty rate after July 5, 2003;
(8)
Medtronic’s cross-motion for summary judgment on the issue of
whether royalties under Paragraph 3 of the 1999 Amendment to the
PACRA terminated on July 5, 2003;
(9)
DuPont’s summary judgment motion on the issue of whether the
PACRA applies to Cordis sales;
(10)
Medtronic’s summary judgment motion on the issue of whether
apportionment is applicable to Cordis sales; and
(11)
Medtronic’s summary judgment motion on the issue of whether
Medtronic owes royalties on Abbott sales.
The Court heard oral argument on these motions on November 26, 2012.
Trial is scheduled to begin on March 4, 2013.
II. FACTUAL SUMMARY
For purposes of these motions, the following facts are undisputed.
A. Background of the PACRA
3
In September 1982, Bard, a manufacturer of various medical devices,
entered into a Collaborative Development and Supply Agreement (“CDSA”) with
DuPont. 1 Pursuant to the CDSA, DuPont agreed to provide Bard with access to its
materials scientists to help Bard develop material for certain cardiovascular
catheters. During this collaboration, DuPont provided Bard with research
conducted by employee Stanley Levy, which concentrated on the use of balloon
catheters in medical dilation procedures. Levy’s research on balloon catheters led
to the issuance of a patent referred to as the “Levy Patent.” 2
Finding that the CDSA did not adequately address the parties’ existing
relationship, Bard and DuPont elected to terminate the CDSA, and enter into a new
agreement - the Patent Assignment and Cooperative Agreement (“PACRA”) – on
December 22, 1989.3
B. Relevant Provisions of the PACRA
Under the PACRA, DuPont assigned its rights under the Levy Patent and
foreign counterparts to Bard. 4 The PACRA further provides that Bard and DuPont
would collaborate on new projects supporting Bard’s research and development
1
MT Ex. 115. Citations to Medtronic’s exhibits are cited herein as “MT Ex. ___ ,” and citations
to DuPont’s exhibits are cited herein as “DP Ex. ___ .”
2
MT Exs. 100, 101. DuPont is the assignee of the Levy Patent.
3
MT Ex. 32.
4
PACRA, Art. V(A).
4
efforts, with Bard receiving worldwide exclusive licenses on resulting products
within the defined Field of Use. 5
Article VII of the PACRA obligates Bard to pay DuPont royalties only on
“Products.” The term “Products” is limited to certain medical devices that utilize
Material and Technology developed by DuPont6 under the CDSA or the PACRA. 7
Specifically, Article II of the PACRA defines “Products” as:
(i) any Catheter which utilizes a Material8 or Technology 9 ; (ii) any
medical device or system, other than a Catheter, which is sold for
application within the Field of Use and which utilizes a Material or
Technology, except [for certain devices]; and (iii) any other device
that the parties may mutually agree to in writing.
5
PACRA, Art. III. “Field of Use” is defined as: “(i) all actual or potential applications within
the vessels and channels of the human body, including, but not limited to, the following:
coronary, peripheral and neurological arteries; gastric and urological tracts; reproductive system,
tear ducts and nerve centers for pain control; and (ii) any other medical applications that the
parties may mutually agree to in writing.” PACRA, Art. II(J).
6
“Products” include material developed by DuPont individually or jointly with Bard under the
CDSA or the PACRA. PACRA, Art. II(K).
7
Conversely, medical devices that do not utilize Material or Technology developed by DuPont
under the CDSA or the PACRA are not considered “Products,” and therefore, Bard need not pay
royalties on such devices.
8
“Material” is defined as “any material developed by DuPont pursuant to the Collaborative
Development and Supply Agreement as well as any material developed by DuPont individually
or jointly with Bard pursuant to Article III [of the PACRA] or a material substantially
corresponding in composition, properties and/or structure to any such material.” PACRA, Art.
II(B).
9
“Technology” is defined as “any technology as developed by DuPont pursuant to the
Collaborative Development and Supply Agreement as well as any technology developed by
DuPont individually or jointly with Bard pursuant to Article III.” PACRA, Art. II(L).
5
Relevant to the instant action is the definition of “Catheter,” as set forth in
Article II of the PACRA. A “Catheter” is defined as “any tubular medical device
or parts thereof designed for insertion into the vessels and channels of the human
body to permit injection or withdrawal of fluid or to occlude, dilate or keep a
passage open.” 10
C. Calculating Royalty Payments on “Products”
Pursuant to the PACRA, Bard is obligated to pay royalties to DuPont for the
sale of any “Product.” Article VII sets forth the payment schedule for royalties:
(A) Bard shall pay to DuPont, beginning June 1, 1989, the following fees,
which shall not be returnable in any event, based on the cumulative Selling
Price of all quantities of Products sold annually worldwide during the term
of this Agreement by:
(i) Bard,
(ii) any sublicensee of Bard,
(iii) any Affiliate of Bard, and
(iv) any third party that has been given the right to do so by
Bard or any sublicense or Affiliate of Bard,
to any party other than any aforesaid party and DuPont and its Affiliates:
-
on the first Five Million Dollars ($5,000,000) in worldwide sales –
ten percent (10%) of the Selling Price;
on the next Five Million Dollars ($5,000,000) in worldwide sales –
seven percent (7%) of the Selling Price;
10
PACRA, Art. II(A). Balloon catheters are used by angioplasty surgeons for the purpose of
opening constricted blood vessels. During a balloon angioplasty, a catheter, with a small balloon
attached at the tip, is inserted in the patient. The balloon is then inflated to push apart the plaque
in the clogged arteries so as to improve blood flow. During another type of angioplasty
procedure, a coronary stent is placed in the diseased area to help keep the artery open. The stent
is mounted on a balloon catheter, which is inflated to expand the stent. Once the stent is fully
expanded, the balloon is deflated and removed. The stent stays in place permanently.
6
-
-
on the next Sixteen Million, Two Hundred Fifty Thousand Dollars
($16,250,000) in worldwide sales – four percent (4%) of the
Selling Price; and,
above Twenty-Six Million, Two Hundred Fifty Thousand Dollars
($26,250,000) in worldwide sales – three percent (3%) of the
Selling Price. 11
“Selling Price,” as defined by the PACRA, is the invoice price charged on the sale
of any “Product,” less certain fees. 12
D. Apportioning Royalty Payments on “Related Products”
Under the PACRA, Bard only is obligated to pay royalties on the sale of a
“Product” 13 - that is, any medical device which utilizes Material and Technology
developed by DuPont. In instances when a “Product” is sold in conjunction with a
non-product, or “Related Product,” 14 for a single price, DuPont is owed royalty
payments on only the fraction of the “Selling Price” attributable to the “Product.”
Article II provides a formula to calculate royalties due DuPont when a “Product” is
sold in conjunction with a “Related Product”:
_____________Product’s Factory Cost________________
(Product’s Factory Cost) + (Related Product’s Factory Cost)
11
PACRA, Art. VII(A).
12
PACRA, Art. II(D).
13
PACRA, Art. VII(A).
14
A “Related Product” is defined as “any and all other materials or products sold by any party
listed in Article VII(A)(i)-(iv) to any party other than a party listed in Article VII(A)(i)-(iv),
DuPont or any of its affiliates in conjunction with a Product.” PACRA, Art. II(I).
7
This ratio is then applied to the invoice price of the entire unit to determine the
“Selling Price” attributable to the “Product.” 15
E. Quarterly Reports
Pursuant to Subsection D of Article VII, Bard is required to submit and
maintain quarterly reports on the sale of Products:
BARD shall report in writing to DU PONT within sixty (60) days next
following December 31, 1989 and thereafter within sixty (60) days
next following the end of each calendar quarter the cumulative Selling
Price of all Products which were sold….
BARD shall keep accurate records of the Selling Price of all Products
for which it is required to render a report to DU PONT hereunder….
If DU PONT requests an audit, BARD will permit DU PONT, at its
sole expense, to have an independent auditor acceptable to BARD
examine and make copies of appropriate records at such time as DU
PONT may reasonably request in writing during normal business
hours at the facility where BARD maintains such records.
F. Cordis Sublicense
In December 1993, Bard entered into a license agreement (“Levy License
Agreement”) with Cordis Corporation (“Cordis”), whereby Bard granted Cordis a
non-exclusive license to make, use and sell products under the Levy Patent. 16 The
Levy License Agreement obligates Cordis to pay royalties to Bard as follows:
3.01 For the rights granted under this Agreement, Cordis shall [ ]:
15
PACRA, Art. II(D)(i)-(ii).
16
MT Ex. 35.
8
(a) pay to Bard the sum of $3,000,000 within 10 days of
entering into this Agreement …
3.02 In addition, Cordis shall pay to Bard a royalty in the amount of
eight percent (8%) of the Net Selling Price for each Licensed
Product …
Pursuant to the Levy License Agreement, Cordis began paying royalties to Bard,
which were then passed on to DuPont pursuant to the PACRA.
At some point in 1994, Cordis stopped making royalty payments to Bard.
Bard moved to enforce the Levy License Agreement. Cordis and Bard ultimately
reached a settlement agreement, and executed an Addendum to the Levy License
Agreement (“Levy Addendum”). 17
G. Addendum to Levy License Agreement
In December 1996, the Levy Addendum was executed by Bard and Cordis.
The Levy Addendum provided, in relevant part:
It is further agreed that if Licensed Products are bundled with other
goods, such as stents, or provided in kits, apportionment will be on a
formula of:
Net Selling Price = __a__
a+b
where “a” is the Net Selling Price of the Licensed Products, and “b” is
the net Average Selling Price of the unpatented portion of the bundle
or kit. 18
17
MT Ex. 36.
18
Id. at ¶ 6.
9
It is undisputed that the formula set forth in the Levy Addendum for apportioning
the “Selling Price” – when a “Product” is sold in conjunction with a non-product –
differs from the formula set forth in the PACRA. The Levy Addendum formula is
based on relative selling price rather than relative manufacturing cost.
H. Amendments to the PACRA
On January 17, 1995, Bard and Dupont executed an amendment to the
PACRA (“January 1995 Amendment”), which was intended to limit DuPont’s
product liability risk. 19
The January 1995 Amendment added the following
provisions to the PACRA:
(B) BARD will not use any Material in any medical applications
involving permanent implantation in the human body or permanent
contact with internal body fluids or tissues (where permanent means
residing for more than 30 days).
(C) BARD will indemnify DU PONT for all direct and consequential
costs and damages caused to DU PONT due to a recall of a BARD
product developed under a program of work described in Article III A,
provided such recall is not a result of the negligence or willful
misconduct of DU PONT, its agents or employees. 20
On April 11, 1995, Bard and DuPont executed a second amendment to the
PACRA (“April 1995 Amendment”). 21
19
MT Ex. 33.
20
Id. at ¶ 2.
21
MT Ex. 34.
10
Under the April 1995 Amendment,
DuPont agreed to waive certain royalties due under the PACRA. Paragraph 4 of
the April 1995 Amendment provides:
4. DuPont and Bard had previously conducted work under the
[PACRA] in the areas of stents and aortic aneurysm liners. DuPont
agrees to waive any royalties due under the [PACRA] attributable to
stents (unless bioresorbable) and aortic aneurysm liners.
Paragraph 6 of the April 1995 Amendment clarifies that such a waiver is specific
to certain projects:
6. The waivers and reduction in royalties described above are specific
to the projects enumerated herein. All other terms and conditions of
the [PACRA] continue in full force and effect regarding these projects
except where expressly modified herein. Moreover, the waivers and
reduction in royalties described above do not constitute a loss of any
other rights under the [PACRA] or applicable law, including without
limitation the right to collect fees for other Products.
I. Medtronic’s Acquisition of Bard’s Coronary Catheter Business
On July 9, 1998, Bard sold its coronary catheter business to Arterial
Vascular Engineering, Inc. (“AVE”). 22 In the parties’ Stock and Asset Purchase
Agreement, Bard represented to AVE that Bard was not “in breach of or default in
the performance of its obligations under any Business Contract,” including the
PACRA and the Levy Addendum. 23
22
See MT Ex. 139 (Bard and AVE Stock and Asset Purchase Agreement).
23
Id.
11
On January 1, 1999, Bard assigned to AVE all of “Bard’s rights and interest
under the R&D Agreement [i.e., the PACRA]” (the “1999 Assignment
Agreement”). 24 The 1999 Assignment Agreement provides, in pertinent part:
Effective as of January 1, 1999, AVE assumes all of the liabilities and
obligations of Bard under the R&D Agreement, except for the
payment of fees with respect to (i) any sales of Products (as defined
in the R&D Agreement) made prior to January 1, 1999, (ii) any sales
of products made on or after January 1, 1999 by Bard or any Affiliate
(as defined in the R&D Agreement) of Bard and (iii) any sales of
Products made on or after January 1, 1999 by any party identified in
clause (ii) or (iv) pursuant to a sublicense or other grant of right
granted on or after January 1, 1999. 25
“[C]lause (ii) or (iv)” refers to Article VII(A)(ii) or (iv) of the PACRA, which
provide for royalties on sales by Bard’s sublicensees or licensees.
J. Medtronic and DuPont Discuss Apportionment
On January 28, 1999, Medtronic, Inc. (“Medtronic”) acquired AVE. 26
Following Medtronic’s acquisition, DuPont and Medtronic engaged in a series of
discussions regarding how to calculate royalties when a “Product” is sold in
conjunction with a non-product. A March 25, 1999 email from DuPont’s Kitty
Knox to Mark Brister, Medtronic’s Vice President of Research and Development,
24
MT Ex. 37 (Assignment, Assumption and Consent Agreement).
25
Id. at ¶ 2.
26
MT Ex. 150 (SEC Form 8k); MT Ex. 151 (SEC Form 10k).
12
lists the “[c]alculation of royalty for balloons sold as part of a stent delivery
package” as an issue that the parties discussed at a meeting the previous day. 27
During a March 31, 1999 conference call between DuPont employee Charles
Molnar and Medtronic in-house attorney Rick Klein, the parties discussed how to
calculate royalties when a balloon catheter is sold with a stent. 28
Molnar’s
handwritten notes from the conference call reflect that royalties were only to be
paid on the balloon catheter portion of the stent system. 29
On April 13, 1999, Brister sent a letter to Knox, attaching a two-page
spreadsheet reflecting projected royalties due DuPont from the sale of coronary
27
MT Ex. 44 (3/25/99 email from Knox to Brister).
28
See MT Ex. 80 (Molnar’s handwritten notes from 3/31/99).
29
Id. Molnar’s notes provide an example of how to calculate royalty when a balloon catheter is
sold with a stent.
How to calculate royalty
Ratio of
mfg cost balloon
mfg stent
$1500 kit
50
50
50
50
750
750
Royalty 750 x 1.5% = $11.25
In Molnar’s example, the kit, or stent system, sells for $1500. This selling price is apportioned
50/50 between the balloon catheter and stent, so that royalty is only paid on the balloon portion
of the stent system.
13
catheters. 30 Brister’s projected royalty calculations were based on the average
selling price of the balloon catheter only.
Thereafter, on April 16, 1999, Knox created her own spreadsheet from
Brister’s projections, whereby she apportioned the sales price of the stent system
between the balloon catheter and the stent in calculating royalties. 31
Knox
performed additional calculations to determine whether it would be more
advantageous for DuPont to use the manufacturing cost or the average sales price
for apportioning the sales price of balloon catheters in stent systems.
Knox
ultimately determined that DuPont’s royalties would be higher if revenues were
apportioned based on relative manufacturing costs.
K. The 1999 Amendment to the PACRA
On October 19, 1999, DuPont and Medtronic executed an amendment to the
PACRA (the “1999 Amendment”), which established reduced royalty rates for
certain medical devices. 32 As to balloon catheters being developed for future
products, Paragraph 2 of the 1999 Amendment provides:
2. Article VII, Section (A) of the Research Agreement is hereby
amended so that, with respect to the Product described in the
immediately preceding Section (1), Medtronic AVE shall pay to
Dupont, beginning the effective date of this Agreement a fee of one
and one-half percent (1.5%), which shall not be returnable in any
30
MT Ex. 38 (4/13/99 letter from Brister to Knox).
31
MT Ex. 81 (Knox royalty calculations).
32
MT Ex. 42 (1999 Amendment).
14
event, based on the cumulative Selling Price of all quantities of such
Products sold annually worldwide until July 5, 2003. Except as
provided in Section (8) herein, no other fees shall be due with respect
to any such Products.
With respect to balloon catheters presently sold, Paragraph 3 of the 1999
Amendment provides:
3. Effective January 1, 2000, catheters with nylon balloons presently
sold under the names GX and LTX, and substantially equivalent or
similar nylon balloon products or derivatives, will be deemed to be a
Product under the Research Agreement, subject to a fee of one percent
(1.0%), which shall not be returnable in any event, also based on the
cumulative Selling Price of all quantities of such Products sold
annually worldwide until July 5, 2003.
In consideration for the 1999 Amendment’s “advantageous royalties,”
Medtronic agreed to pay DuPont a one-time fee of $1.75 million. 33 The 1999
Amendment further provides:
Neither said fee nor the royalties provided in Sections (2) or (3) above
constitute an admission of any kind by Medtronic AVE regarding the
relationship of the GX and LTX balloons to the intellectual property
identified in the Research Agreement. 34
L. PriceWaterhouseCoopers Audit
In August 2000, DuPont engaged PriceWaterhouseCoopers (“PwC”) to
conduct an audit of Medtronic’s royalty payments to DuPont under the PACRA for
33
Id. at ¶ 8.
34
Id.
15
the period of October 1, 1998 through June 30, 2000. 35 The parties’ agreement,
dated September 18, 2000, provided that the work performed by PwC was “only
for the use and benefit of DuPont.” 36
By letter dated September 8, 2000, PwC advised Medtronic that it had been
retained by DuPont to conduct a royalty audit under the PACRA, the 1999
Assignment and the 1999 Amendment.37
PwC requested certain documents
necessary for completion of the royalty audit:
(1) Provide detailed description of the sales and royalty calculation
systems;
(2) Provide detailed description of methodology used to identify all
royalty-bearing sales, as well as the procedures for calculating the
relevant royalties under the [PACRA, 1999 Assignment, and 1999
Amendment];
(3) Provide a list of all products offered through Medtronic’s Vascular
business unit. From that list, please identify the following: (i) all
catheters and medical devices sold for application in the Field of Use
that utilise a Material or Technology and thus, are royalty bearing
Products under the [PACRA, 1999 Assignment, and 1999
Amendment] … and (ii) all catheters and medical devices in the Field
of Use that don’t utilise a Material of [T]echnology and thus, are
excluded from the royalty calculation; …
35
See MT Ex. 21 (audit engagement letter from PwC to DuPont). DuPont contends that the PwC
audit was merely part of DuPont’s initiative to audit its larger licensing arrangements, rather than
in response to any particular suspicions of Medtronic’s under-reporting.
36
Id.
37
MT Ex. 28.
16
(10) Provide access to the following: (i) all sublicense agreements
entered into by Medtronics (i.e., Cordis …); (ii) copies of royalty
statements and checks submitted to Medtronics by sublicensees; and
(iii) copies or any reports and/or correspondence obtained in
connection with the examination of the books and records of any
sublicensee. 38
From October 15, 2000 through October 19, 2000, PwC was on-site at
Medtronic’s office, meeting with Medtronic employees and reviewing Medtronic’s
records.
During the audit, PwC requested additional information from
Medtronic. 39
1. PwC October 2000 Memorandum
On October 25, 2000, PwC sent DuPont a memorandum outlining key issues
uncovered by PwC during the audit. 40 According to PwC, Medtronic identified
those products that were subject to the 1999 Amendment’s reduced royalty rate of
1.5%, as well as those products subject to the 1999 Amendment’s reduced royalty
rate of 1.0%. 41 PwC also noted the following: “Based upon our examination, it
38
MT Ex. 29.
39
See MT Ex. 22 (memorandum listing issues to be discussed); MT Ex. 23 (memorandum listing
items to be discussed).
40
MT Ex. 30.
41
Id. at ¶¶ 1, 2.
17
appears that Medtronics does not pay royalties relative to any products other than
balloons and stents that incorporate balloons.” 42
2. PwC Final Report
PwC issued its Final Report on December 12, 2000. 43 The Final Report
again identified those products that were subject to the 1999 Amendment’s 1.5%
reduced royalty rate, those products that were subject to the 1999 Amendment’s
1.0% reduced royalty rate, and those products that were non-royalty bearing. The
Final Report recommended that DuPont and Medtronic engineers meet to
determine whether these products were, in fact, entitled to reduced royalty rates:
PwC … recommends that DuPont and Medtronic AVE engineers
discuss the underlying specifications of these products to determine
whether application of the reduced royalty rate is appropriate. If
application of the reduced royalty rate is not warranted, PwC shall
calculate the amount of additional royalties due DuPont using the
appropriate royalty rates. 44
The Final Report found that Medtronic was apportioning the Selling Price of
stent systems when calculating royalties. According to PwC:
Pursuant to Article II (D)(i) of the [PACRA], “If any such Product is
sold with any Related Product, Selling Price [i.e., the royalty base]
means the amount obtained by multiplying the invoice price for such
sale by a fraction, the numerator of which is the Factory Cost of such
Product to Bard … and the denominator of which is the Factory Cost
of such Product plus the Related Product sold in conjunction
42
Id. at ¶ 3.
43
MT Ex. 25 (PwC Final Report).
44
Id. at DUP0000445.
18
therewith.” In connection with this engagement, we noted that
Medtronic AVE applies this provision to the Selling Price of stent
products. This appears reasonable given that stents include Related
Products.
Furthermore, based upon the testing performed in
connection with this engagement, the factor Medtronics AVE applies
to the Selling Price of the stents appears reasonable and in conformity
with the terms of the [PACRA]. 45
With respect to the sublicense agreement between Medtronic and Cordis, the
Final Report noted that PwC did not audit the royalty statements submitted by
Cordis. Therefore, the Final Report made the following recommendation:
Given the materiality of the net revenues included in the Royalty
Reports relative to Cordis, it is recommended that DuPont suggest that
Medtronic AVE perform a royalty examination of the reports
submitted by Cordis under the sublicense agreement between Cordis
and Medtronic AVE. 46
PwC ultimately found that Medtronic owed DuPont an additional $2,083.00
as a result of unreported royalty bearing revenues. 47 Medtronic promptly paid this
amount.
M. DuPont’s Internal Correspondence Regarding Apportionment
During the PwC audit and after issuance of PwC’s Final Report, Blake
Bichlmeir, DuPont’s manager of the PACRA relationship at that time, sent several
internal emails concerning royalty payments under the PACRA. Three separate
45
Id. at DUP0000443.
46
Id.
47
MT Ex. 25.
19
emails, dated March 2, 2000, 48 June 1, 2000, 49 and September 1, 2000,50 state that
DuPont will benefit from the sales of a new line of Medtronic stent systems (S670
system) because “the nylon balloons, part of the S670 system, generate royalties to
DuPont.”
Thereafter, on June 29, 2001, Bichlmeir sent another internal email,
attaching a rough draft of Medtronic’s “Working Term Sheet.”51 The Working
Term Sheet was intended as DuPont’s proposed term sheet for a new licensing and
development agreement with Medtronic on polymer coated stents. Under the
heading “Payments,” the Working Term Sheet describes several payment options
for Medtronic, which Bichlmeir then contrasts with the current practice under the
PACRA:
We propose to change payments significantly from current practice.
Under the old Bard angioplasty balloon agreement, compensation to
DuPont depended solely on royalties on patents. Payments were
based on a percentage of the cost of manufacture for the product subunit in question, in that case the balloon structure itself. The
calculation was based on the manufacturing cost of the balloon as
a percent of the manufacturing cost of the total catheter system
times a stepped set of royalty rates. 52
48
MT Ex. 48.
49
MT Ex. 63.
50
MT Ex. 49.
51
MT Ex. 66.
52
MT Ex. 66 at DUP0011978.
20
(emphasis added).
N. Abbott Sales
On May 9, 2002, Medtronic and Abbott Laboratories (“Abbott”) entered into
an OEM Agreement, whereby Medtronic agreed to supply Abbott with balloon
catheters to incorporate into Abbott’s stent systems. 53 In 2005, Medtronic began
selling Products to Abbott. 54
It is undisputed that Medtronic never paid any
royalties to DuPont on Abbott’s sales.
O. Termination of Royalty Payments
On July 5, 2003, Medtronic stopped paying royalties to DuPont on
Medtronic sales.
Following Medtronic’s July 2003 termination of royalty payments, DuPont
disseminated several internal emails and/or notes regarding the termination of such
payments. For example, handwritten notes by Craig Evans, DuPont’s in-house
counsel, dated August 28, 2003, state: “Mike Jaro [Patent and Intellectual Property
Counsel for Medtronic] did internal check and says no more royalty due … no
more products benefit … no more agmt due to no royalty.” 55
53
MT Ex. 83 (OEM Agreement).
54
DP Ex. JJJJ (Abbott Royalty Report); DP Ex. KKKK (Product List).
55
MT Ex. 93 (Evans handwritten notes).
21
Thereafter, on September 8, 2003, Donald Loveday, Bichlmeir’s successor
at DuPont, sent an email, stating: “Mike Jaro believes that the Agreement with
terminate with the termination of the Levy side-agreement [the 1999
Amendment].” 56 By email dated September 21, 2004, DuPont’s William Cotreau
confirmed that certain royalty obligations would end in July 2003. 57
P. Medtronic’s Quarterly Reports
On October 8, 2003, DuPont received the second quarter royalty report from
Medtronic for the period of April through July 5, 2003. 58 The report reflects the
total amount of royalty payments due DuPont on Medtronic sales.
On January 1, 2004, Medtronic produced the third quarter royalty report, for
the period of July through September 2003.59
The report shows no royalty
payments due DuPont on Medtronic sales. Similarly, subsequent quarterly royalty
reports sent to DuPont from Medtronic show that no royalties were being paid to
DuPont on Medtronic sales after July 5, 2003. 60
56
MT Ex. 51 (9/9/03 internal email from Loveday)
57
MT Ex. 73 (9/21/04 email from Cotreau).
58
MT Ex. 119 (DuPont Royalty Calculation: CY2003 Quarter 2 April –July 5, 2003).
59
MT Ex. 96 (DuPont Royalty Payment Calculation: CY2003 Quarter 3 July – September 2003).
60
MT Ex. 97 (DuPont Royalty Payment Calculation: CY2003 Quarter 4 October – December
2003); MT Ex. 98 (DuPont Royalty Payment Calculation: CY2004 Quarter 2 April – June 2004).
22
Q. Medtronic Advises DuPont that Royalty Payments Terminated
By letter dated December 30, 2005, Robert Allred, Financial Analyst for
Medtronic, advised DuPont:
As per the terms of the Amendment to Patent Assignment and
Cooperative Research Agreement between DuPont and C.R. Bard
dated December 22, 1989, all royalty obligations terminated upon
expiration of the U.S. Levy patent, which occurred on July 5, 2004
[sic]. 61
R. Deloitte and Touche Audit
1. Purpose and Process
On October 13, 2003, DuPont retained Deloitte and Touche LLP
(“Deloitte”) to conduct a second audit of Medtronic. 62 The apparent catalyst for
the second audit was DuPont’s belief that Medtronic had decided on its own that
certain products were not subject to the PACRA. 63 DuPont requested that Deloitte
determine whether: (1) Medtronic owed any royalty to DuPont due to devices
subject to the PACRA not included in a reported royalty calculation; (2) Medtronic
owed any royalty to DuPont due to ongoing issues as noted in the 2000 PwC audit;
61
MT Ex. 91.
62
Mt Ex. 87 (Deloitte audit engagement letter).
63
MT Ex. 64 (Loveday email dated 11/04/2003). The email provides: “DuPont is not choosing
to audit arbitrarily: our 2000 audit indicated that AVE had decided on its own that some renal
catheter products were not ‘subject to the agreement.’
The audit firm (then,
PriceWaterhouseCoopers) told DuPont that this did not appear to be correct, although DuPont
did not bring this finding to the attention of AVE. Dupont feels that there exists a possibility of
non-compliance just based on past experience and observation of PWC in 2000.”
23
and (3) Medtronic owed any royalty to DuPont due to any other noncompliance on
the part of Medtronic. 64
By letter dated December 18, 2003, Deloitte advised Medtronic that it would
be conducting a royalty inspection pursuant to the PACRA. 65 Deloitte requested
that Medtronic provide specific information, including:
(1) A description of the processes and sources of information used to
generate the royalty reports submitted to DuPont by AVE.
(2) A listing of all sublicensees of AVE and copies of royalty reports
received by AVE from those sublicensees.
On December 24, 2003 Medtronic’s Housman sent DuPont an email stating
that although he did not believe an audit was necessary, he understood “the
dynamics in light of the Amendment ending worldwide royalties on covered
balloon products.” 66
2. Deloitte’s Audit Report
On August 25, 2006, Deloitte issued its audit report. 67
With regard to
apportionment, the report found:
Based on our discussions with Mr. Housman and Mr. Jaro [Medtronic
employees], we understand that AVE calculated royalties only on the
64
Id.
65
MT Ex. 75.
66
MT Ex. 53 (12/24/03 Housman email).
67
MT Ex. 61 (8/14/06 Deloitte Draft Report); MT Ex. 74 (8/25/06 Deloitte Draft Report).
24
balloon portion of the stent sales. AVE allocated 44% of the sales
price of the stent product (i.e., the POBA percentage) as the balloon
portion of the sale, which was used as the basis for AVE’s royalty
calculation. We discussed this matter with DuPont and DuPont
disagreed with AVE’s interpretation of the Agreements ….
In accordance with DuPont’s interpretation of the Agreements,
stents are considered Product [sic] and are thus royalty bearing in their
entirety.
S. Tolling Agreement
On August 25, 2009, Medtronic and DuPont executed a Tolling
Agreement. 68 The Tolling Agreement provides:
From the date of the last signature of the parties executing this
Agreement until either party terminates this Agreement as set forth
below, the running of any statute of limitations, period of repose, or
time within which to act in connection with any and all rights, claims,
or causes of actions arising from or relating to the PACRA are hereby
tolled.
III. STANDARD OF REVIEW
The standard of review on a motion for summary judgment in Delaware is
well-settled. The function of the court when considering a party’s motion for
summary judgment is to determine whether genuine issues of material fact exist,
but not to render decisions on those issues. 69
The court will grant summary
judgment if, after viewing the record in the light most favorable to the non-moving
68
MT Ex. 114 (Tolling Agreement).
69
In re Asbestos Litig., 2007 WL 2410879, at *2 (Del. Super.) (citing Merrill v. CrothallAmerican Inc., 606 A.2d 96, 99-100 (Del. 1992) (internal citations omitted)).
25
party, no genuine issues of material fact exist and the moving party is entitled to
judgment as a matter of law. 70 If an issue of material fact exists, or if the record
has not been sufficiently developed to allow the court to apply the law to the
factual record, then summary judgment will be denied. 71 The initial burden of
demonstrating that the undisputed facts support its claims or defenses falls upon
the moving party. 72 When the moving party meets its burden, the non-moving
party then must show that there are material issues of fact for resolution by the
fact-finder. 73
“In the case of a motion for summary judgment based on a statute of
limitations defense, the Court must grant the motion if the record reveals that no
genuine issues of fact exist[] regarding the date on which the applicable statute of
limitations began to run, the date to which the statute of limitations may have been
tolled, and the date on which the plaintiff filed her complaint with the court.” 74
Where the parties have filed cross motions for summary judgment, and have
not argued that there are genuine issues of material fact, “the Court shall deem the
motions to be the equivalent of a stipulation for decision on the merits based on the
70
Super. Ct. Civ. R. 56.
71
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
72
Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979) (citing Ebersole, 180 A.2d at 470).
73
See Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).
74
Burrell v. Astrazeneca LP, 2010 WL 3706584, at *2 (Del. Super.) (citation omitted).
26
record submitted with the motions.” 75 Neither party’s motion will be granted
unless no genuine issue of material fact exists and one of the parties is entitled to
judgment as a matter of law. 76
IV. ANALYSIS
A. STATUTE OF LIMITATIONS
DuPont alleges that Medtronic breached its contractual obligations under the
PACRA by: (1) discontinuing royalty payments on sales of its products as of July
5, 2003; (2) apportioning the selling price of stent systems between the balloon
catheter and the stent, rather than paying royalties on the entire selling price; 77 (3)
making royalty payments based on Cordis’ “reduced” payment formula pursuant to
the Levy Addendum; (4) misclassifying Products for purposes of royalty
calculations; and (5) failing to pay royalties on Abbott Laboratories’ sales. 78
Medtronic contends that each of DuPont’s purported breach of contract
claims is time-barred. Medtronic further argues that the facts of the case do not
warrant the application of a tolling doctrine to any of DuPont’s claims. Medtronic
75
Super. Ct. Civ. R. 56(h).
76
Emmons v. Hartford Underwriters Ins. Co., 697 A.2d 742, 744-45 (Del. 1997).
77
DuPont’s apportionment claim concerns both Medtronic’s product sales and Cordis product
sales.
78
In DuPont’s Opposition Brief to Medtronic’s Motion for Summary Judgment, DuPont
withdrew its breach of contract claim stemming from Medtronic’s alleged failure to pay royalties
on world-wide Cordis sales. See DuPont’s Brf. in Opp. at 2 n.1.
27
argues that there are no genuine issues of matter fact and that it is entitled to
judgment as a matter of law.
1. Applicable Statute of Limitations
Under Delaware law, the statute of limitations for a breach of contract claim
is three years. 79 The cause of action accrues “at the time of the wrongful act, even
if the plaintiff is ignorant of the cause of action.”80 The wrongful act in a breach of
contract claim is the breach and the cause of action accrues at the time of breach. 81
In this case, the parties entered into a tolling agreement on August 25, 2009. Thus,
if DuPont’s claims accrued before August 25, 2006, they are time-barred unless a
tolling doctrine applies.
2. Tolling and Inquiry Notice
Under Delaware law, it is plaintiff’s burden to plead facts to demonstrate
that the statute of limitations was, in fact, tolled. 82 The statute of limitations can
only be tolled until a plaintiff discovers, or by exercising reasonable diligence
should have discovered, facts constituting the basis of the cause of action (i.e.,
breach and injury).83
79
10 Del. C. § 8106.
80
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004) (per curiam).
81
Wright v. Dumizo, 2002 WL 31357891, at *2 (Del. Super.).
82
Burrell, 2010 WL 3706584, at *4.
83
Wal-Mart, 860 A.2d at 319.
28
“Inquiry notice does not require a plaintiff to have actual knowledge of a
wrong, but simply an objective awareness of the facts giving rise to the wrong.” 84
Inquiry notice is determined objectively.85 The Court must find that the facts
known to the plaintiff would have “clearly and unmistakably . . . led a prudent
person of ordinary intelligence to inquire,” and if pursued, would have led to
discovery of the elements of the claim being asserted. 86
DuPont asserts two theories to support tolling the statute of limitations in
this case: (1) inherently unknowable injuries; and (2) fraudulent concealment.
Under the “inherently unknowable injury” doctrine, also known as the “discovery
rule,” the statute of limitations is tolled “where it would be practically impossible
for a plaintiff to discover the existence of a cause of action” and “the claimant is
blamelessly ignorant of the wrongful act and the injury complained of.” 87
The statute of limitations also will be tolled if a defendant engaged in
fraudulent concealment of the facts necessary to put a plaintiff on notice of the
truth. 88 Fraudulent concealment requires an affirmative act of concealment or
84
Sunrise Ventures, LLC et al. v. Rehoboth Canal Ventures, LLC et al., 2010 WL 363845, at *7
(Del. Ch.).
85
Id.
86
Coleman v. Pricewaterhousecoopers LLC, 854 A.2d 838, 842 (Del. 2004).
87
Cent. Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 2012 WL 3201139,
at *22 (Del. Ch.) (citations omitted).
88
Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL 5750601, at *19 (Del. Ch.).
29
some misrepresentation by a defendant that prevents a plaintiff from gaining
knowledge of the facts. 89 Mere nondisclosure is not enough to toll the limitations
period. 90
3. Medtronic’s Termination of Royalty Payments
a. Parties’ Contentions
Medtronic argues that DuPont’s breach of contract claim based on
Medtronic’s termination of royalty payments is time-barred. Medtronic contends
that in 2003, DuPont was informed multiple times that Medtronic’s obligation to
pay royalties on sales of its Products would terminate as of July 5, 2003. On that
date, and in accordance with the 1999 Amendment, Medtronic discontinued its
royalty payments.
Because Medtronic’s November 30, 2003 royalty report
reflected that cessation in payments, Medtronic contends that DuPont’s purported
claim accrued no later than November 30, 2003.
DuPont concedes that it had actual notice that Medtronic intended to, and in
fact, did, terminate royalty payments on July 5, 2003, upon expiration of the Levy
Patents. However, DuPont contends that its claim did not accrue until issuance of
89
Id.
90
Ruger v. Funk, 1996 WL 110072, at *7 (Del. Super.).
30
Deloitte’s Final Report in September 2006, when DuPont could “learn whether or
not there were any damages as a result of this breach.” 91
b. Actual Notice
The Court finds that DuPont’s claim as to Medtronic’s July 5, 2003
termination of royalty payments is time-barred.
The undisputed evidence
demonstrates that DuPont had actual knowledge of Medtronic’s termination of
royalty payments by the end of November 2003. Medtronic’s royalty report for
July through September 2003 showed no royalties due to DuPont on Medtronic
sales. 92 All subsequent royalty reports provided to DuPont likewise showed no
royalties due DuPont on Medtronic sales. 93 In light of Medtronic’s royalty report
for April through July 5, 2003 94 (the last royalty report provided to DuPont which
reflected any royalties due DuPont on Medtronic sales), DuPont clearly was on
notice that Medtronic intended to stop, and in fact, did stop, paying royalties on
Medtronic sales.
91
See DuPont’s Brf. in Opp. 39.
92
MT Ex. 96 (DuPont Royalty Payment Calculation: CY2003 Quarter 3 July – September 2003).
93
See MT Ex. 97 (DuPont Royalty Payment Calculation: CY2003 Quarter 4 October –
December 2003); MT Ex. 98 (DuPont Royalty Payment Calculation: CY2004 Quarter 2 April –
June 2004).
94
MT Ex. 119 (DuPont Royalty Calculation: CY2003 Quarter 2 April –July 5, 2003). DuPont
received that document in October 2003.
31
Moreover, there is record evidence of ongoing discussions between
Medtronic and DuPont beginning in August 2003, and continuing through
December 2005, regarding Medtronic’s termination. 95 The Court need not address
inquiry notice on this issue because DuPont had actual knowledge of Medtronic’s
intention to stop paying royalties, and Medtronic’s subsequent failure to pay.
Further, DuPont’s argument – that its cause of action did not accrue until it
learned whether or not it had been damaged – is inconsistent with Delaware law.
In Delaware, the cause of action accrues at the time of the wrongful act, “even if
the plaintiff is ignorant of the cause of action.” 96 The claim does not arise only
after the plaintiff suffers a loss. 97
DuPont was aware as early as November 2003 of Medtronic’s decision not
to pay royalty payments after July 5, 2003.
The doctrines of inherently
unknowable injury, and fraudulent concealment, do not apply when the plaintiff
95
See, e.g., MT Ex. 93 (8/28/2003 internal notes by Evans noting that Medtronic did an internal
check and decided no royalty payments were due any more); MT Ex. 51 (9/8/2003 internal
Dupont email explaining that Medtronic informed DuPont that royalty payments would end with
the termination of the Levy Patent); MT Ex. 138 (12/3/2003 email within Medtronic regarding
DuPont’s position that royalty payments were still due); MT Ex. 53 (12/24/2003 email from
Medtronic’s Housman to DuPont’s Loveday stating that the 1999 Amendment ends worldwide
royalties on the covered balloon products); MT Ex. 91 (12/30/2005 letter from Medtronic to
DuPont stating that all royalty obligations terminated on July 5, 2004 [sic] with the expiration of
the Levy patent). See also MT Ex. 118 (internal Medtronic meeting agenda notes for July 31,
2002 meeting with DuPont noting the expiration of the Levy patent as one topic to discuss).
96
Wal-Mart, 860 A.2d at 319.
97
Albert, 2005 WL 5750601, at *18.
32
has actual knowledge of the breach and potential injuries to follow. DuPont’s
suggested application of the rule – allowing a plaintiff to accrue more damages
over time before filing an action – would, in effect, defeat the purpose of a statute
of limitations for a breach of contract claim. 98
4. Medtronic’s Royalty Apportionment on Medtronic’s Sales and
Quarterly Reports
Medtronic’s alleged breach of the PACRA by apportioning the sales price
between the balloon catheter and the stent system occurred by March 1999, when
Medtronic first apportioned its royalty payments to DuPont in that fashion. The
breach of contract accrued no later than June 1999 when DuPont received a royalty
report for that quarter, reflecting the apportionment. This claim is barred unless
DuPont can prove the statute of limitations is tolled.
Unlike DuPont’s 2003
termination claim, the Court finds genuine issues of disputed fact about whether
DuPont had actual knowledge of Medtronic’s royalty apportionment. Therefore,
the Court must analyze the application of tolling doctrines.99
98
The Court rejects DuPont’s argument that “even if the statute arguably ran on this claim,
DuPont would still be entitled to recover any royalties that became due for three years before the
parties’ tolling agreement was signed - in other words, any royalties due from August 25, 2006
on.” DuPont provided no case law in support of this proposition, and the Court is not aware of
any such support.
99
See DP Ex. G, Knox Dep. 302:22-303:17 (explaining that she would have found Medtronic’s
decision not to pay royalties on stents in stent delivery systems “unacceptable”); DP Ex. F,
Bichlmeir Dep. 54:9-13 (explaining that he did not have an understanding of Medtronic’s royalty
payments while he was licensing manager); MT Ex. 3, Brister Dep. 75:11-77:8 (explaining that
he told Ms. Knox before April 1999 how Medtronic was going to interpret the PACRA); DP Ex.
H, Evans Dep. 182:24-183:11 (explaining that he first found out how Medtronic apportioned
33
a. Fraudulent Concealment Standard
Fraudulent concealment requires that the plaintiff show an affirmative act of
concealment by defendant to put the plaintiff off the trail of inquiry or to prevent
the plaintiff from gaining knowledge of the facts. 100
b. Medtronic Complied with the PACRA’s Reporting Provisions
DuPont’s main assertion of fraudulent concealment is that Medtronic
purposefully doctored its quarterly reports so that DuPont would not realize how it
was paying royalties. 101 Specifically, DuPont contends that Medtronic made a
“hefty deduction before calculating royalties on the ‘net sales’ of stent systems,”
“scrubbed the [royalty calculation] spreadsheet of any incrimination information,”
and then “sent the tampered version to unsuspecting DuPont.” 102
The Court finds no record evidence to support DuPont’s allegations. Rather,
the evidence establishes that Medtronic provided DuPont with quarterly reports as
required under the PACRA. Pursuant to Article VII(D), Medtronic was required to
“report in writing to DuPont . . . within sixty (60) days following the end of each
calendar quarter the cumulative Selling Price of all Products which were sold by
royalty payments on stent delivery systems in Deloitte’s prelimary report to DuPont); DP Ex.
MMM, Koopmans Dep. 30(b)(6) 35:14-24 (explaining that Medtronic’s royalty reports did not
specifically include the percentage deducted from its payments to DuPont).
100
Burrell, 2010 WL 3706584, at *7; Smith v. McGee, 2006 WL 3000363, at *3 (Del. Ch.).
101
See DuPont’s Brf. in Opp. at 30-33.
102
Id. at 31.
34
the parties listed [therein].” 103 The PACRA did not require Medtronic to provide
calculations or more detailed reports. Medtronic disclosed the data required, based
on its interpretation. 104 There is no indication of an “affirmative act of actual
artifice” that led DuPont away from the truth. 105 Based on the evidence, the Court
finds that no reasonable juror could find that Medtronic’s failure - to give more
detailed reports than was required by the PACRA - constitutes fraudulent
concealment.106
103
PACRA, Art. VII(D).
104
Compare DP Ex. UUU with DP Ex. TTT. DuPont’s argument that Medtronic should have
sent more detailed reports, as requested by Bichlmeir in October 1999 (see DP Ex. SSS), is of
little significance. The evidence indicates that DuPont requested more detailed reports after it
received one such report and did not identify the underlying “problem” with Medtronic’s
apportionment within that report. See DP Ex. SSS (describing revenue for “RELY on Stent
Products” - - where RELY is a balloon catheter) (emphasis supplied).
105
DuPont points to the fact that Medtronic drafted a letter explaining its position on royalty
payments of stents, which was never sent, as an indication that Medtronic was hiding its position.
The Court does not find that this act rises to the level of fraud, especially in light of the evidence
that shows DuPont had inquiry notice of Medtronic’s royalty apportionment.
106
See, e.g., SmithKlineBeecham Pharm. Co. v. Merck & Co., 766 A.2d 442, 450-51 (Del. 2000)
(affirming the Court of Chancery’s finding that “while there may have been some acts of
concealment committed, . . . there was no evidence of fraudulent concealment presented”);
Ruger, 1996 WL 110072, at *7 (“[F]raudulent misrepresentation for pur[poses] of tolling the
statute of limitations requires an affirmative act. The argument that a fiduciary’s silence tolls the
statute has been specifically rejected . . . .”). Had DuPont wanted to inquire into Medtronic’s
calculations, the PACRA provided ways to do so. See Art. VII(D) (requiring that Medtronic
keep accurate records of the Selling Price of all Products for two years from the date of the report
and allowing DuPont to audit Medtronic).
35
c. Apportionment Discovered
There is ample record evidence that Medtronic and DuPont discussed
apportionment of royalty payments between the balloon catheter and the stent
throughout 1999 and into 2000. 107
d. No Evidence of Fraudulent Concealment During Audits
DuPont’s only other allegation of fraudulent concealment stems from the
two audits performed by PwC and Deloitte on behalf of DuPont. 108 DuPont argues
that: (1) Medtronic hid information from PwC about apportioned payments; and
(2) Medtronic intentionally prolonged the Deloitte audit so that DuPont could not
learn the facts of its claims before the running of the statute of limitations.
As to DuPont’s first claim, the Court has not found any record evidence to
support DuPont’s contention that Medtronic hid information from PwC. The PwC
auditors testified that they were not under the impression that anyone at Medtronic
was “hiding the ball” or was dishonest. 109 Further, Medtronic’s 30(b)(6) deponent,
Barbara Crandell, remembers being part of the discussion with PwC about
calculating the Plain Old Balloon Angioplasty (“POBA” – i.e., an angioplasty
107
See discussion infra A.4.e.
108
See DuPont’s Brf. in Opp. at 32-33.
109
DP Ex. OO, Swan Dep. 79:18-80:16.
36
procedure using a balloon catheter without a stent) percentage, which PwC’s report
then describes. 110
With regard to the Deloitte audit, the evidence shows a general lack of
availability and unresponsiveness by Medtronic. 111
However, even DuPont
understood this as pushback from Medtronic because of the disruption the audit
was causing Medtronic’s business. 112 In the end, Deloitte and DuPont received the
information requested.
DuPont has not pointed to any affirmative acts of
concealment that could constitute fraudulent concealment.
e. Inquiry Notice Evidenced by DuPont’s Internal
Correspondence about Apportionment
The Court finds undisputed record evidence of inquiry notice by 1999. 113 In
April 1999, during negotiations over whether Medtronic’s nylon balloons were
110
MT Ex. 6, Crandell Dep. 79:6-80:25.
111
See DP Ex. ZZ (7/15/2003 letter from Bahl to Housman with a list of failures to cooperate);
DP Ex. YY, Bahl Dep. 152:14-155:24.
112
See DP Ex. XX, Loveday Dep. 83:11-15 (“My understanding from Medtronic was they were - their key objection was the disruption to the ongoing business, that an audit could not [sic] be
onerous or a disruption to business.”).
113
DuPont argues that the evidence prior to June 1999 may not be considered by the Court as
evidence of inquiry notice because its claim against Medtronic had not accrued at that time.
Although the Court agrees that the discovery rule does not place a duty on prospective plaintiffs
to inquire into possible future wrongful conduct, the Court sees no reason why it may not
consider pre-accrual evidence of DuPont’s knowledge of royalty apportionment within the
broader “mix of information” known to DuPont in the case. The post-accrual evidence in light
of the pre-accrual evidence shows clearly that “red flags” existed as early as June 2000 which
would have led a prudent person to inquire about facts sufficient to then enable the plaintiff to
discover the basis of its claim.
37
covered by the Levy Patent and therefore fell within the PACRA, DuPont
considered whether it would benefit from apportioning the balloon portion of the
assembly based on manufacturing cost (as is stated in the PACRA) or apportioning
the balloon portion of the assembly based on selling price.
The relevant
documents do not discuss whether the stent system would be apportioned, but how
it would be apportioned.
Specifically, during the 1999 negotiations, DuPont’s Kitty Knox requested
sales projections for Medtronic’s nylon balloons. 114
In response, Medtronic
provided projections for DuPont royalties for the next five years. 115 Subsequently,
Knox broke down the spreadsheet provided by Medtronic and internally calculated
the apportionment of the sales price of stent systems based on two methods: the
manufacturing costs of the balloon and stent (noted as DuPont’s calculation) and
the average sales price (noted as Medtronic’s calculation). 116 In May 1999, Knox
wrote to Mark Brister, Medtronic’s Vice President of Research and Development,
suggesting that the royalty base calculation remain as it was in the PACRA [i.e.,
114
MT Ex. 44 (3/25/99 email from Knox to Brister).
115
MT Ex. 38 (4/13/99 from Brister to Knox enclosing sales projection report).
116
MT Ex. 81.
38
based on manufacturing cost] until January 1, 2001, at which time it would be
reduced to two-times the average selling price. 117
Thereafter, beginning in March 2000, Blake Bichlmeir, DuPont’s Licensing
Manager, disseminated three internal emails concerning royalties on the balloon
portion of the stent systems.
These emails, dated March 2, 2000, 118 June 1,
2000,119 and September 1, 2000,120 state that DuPont will benefit from the sales of
a new line of Medtronic stent systems because “the nylon balloons, part of the
S670 system, generate royalties to DuPont.” 121
Perhaps most compelling to the Court is the draft term sheet for a new
licensing and development agreement written by Bichlmeir in the hope of
replacing the PACRA. Bichlmeir forwarded the document internally to others at
DuPont on June 29, 2001. The proposed term sheet states:
We propose to change payments significantly from current practice.
Under the old Bard angioplasty balloon agreement, compensation to
DuPont depended solely on royalties on patents. Payments were
based on a percentage of the cost of manufacture for the product subunit in question, in that case the balloon structure itself. The
117
MT Ex. 39 (5/4/1999 letter from Knox to Brister)
118
MT Ex. 48.
119
MT Ex. 63.
120
MT Ex. 49.
121
MT Ex. 48 (3/2/2000 email regarding 1999 fourth quarter royalty payments); MT Ex. 63
(6/1/2000 email regarding 2000 first quarter royalty payments); MT Ex. 49 (9/1/2000 email
regarding 2000 second quarter royalty payments).
39
calculation was based on the manufacturing cost of the balloon as a
percent of the manufacturing cost of the total catheter system times a
stepped set of royalty rates. 122
During his deposition in this litigation, Bichlmeir testified that this draft sheet was
a mistake and that he later corrected the statement. 123 The Court, however, cannot
ignore the fact that this document shows that Bichlmeir, DuPont’s own Licensing
Manager, acknowledged that apportionment between the balloon part of the
assembly and the stent part of the assembly was one method for calculating
royalties. 124
The Court finds that Knox’s calculations and the discussions in 1999
concerning different ways to calculate apportionment, along with the later
statements of Bichlmeir, show indisputably that DuPont was aware that
apportionment of royalty payments was at least a viable option for calculating
royalty payments beginning in 1999. DuPont’s knowledge should have led a
prudent person to inquire as to how Medtronic calculated its royalties on stent
systems.
122
MT Ex. 66 at DUP0011978.
123
Ex. BB, Bichlmeir Dep. 87:24-90:14, attached to DuPont’s Reply in Support of Partial
Summary Judgment.
124
See also MT Ex. 118 (internal Medtronic meeting agenda for July 31, 2002 meeting with
DuPont noting the basis for royalties to DuPont as one topic to discuss).
40
f. Diligent Inquiry Would Have Uncovered Alleged Breach
The final question is whether diligent inquiry by DuPont should have
uncovered facts sufficient to assert a breach of contract claim. 125 The Court must
consider what information a diligent inquiry would have uncovered in light of
efforts that were undertaken and what information the plaintiff would have had
access to. 126
The record shows that Bichlmeir first attempted to get more fully-detailed
royalty reports in 1999, but failed. DuPont conducted an audit of Medtronic in
1999, and again in 2006. DuPont argues that nothing in the audit reports explained
how Medtronic was calculating its royalties.
The Court finds DuPont’s suggested interpretation of the undisputed
evidence unpersuasive. The 2000 Final Report by PwC states that Medtronic
applied Article II(D)(i) of the PACRA, or the “Related Product” apportionment
formula, to “the Selling Price of stent products” which “appears reasonable given
that stents include Related Products.” 127
The Report continues: “Furthermore,
based upon the testing performed in connection with this engagement, the factor
Medtronics AVE applies to the Selling Price of the stents appears reasonable and
125
Coleman, 854 A.2d at 842-43.
126
Id.
127
MT Ex. 25.
41
in conformity with the terms of the Bard Agreement.” 128 The Court finds that the
2000 PwC Final Report reflected that Medtronic was apportioning royalties to
some extent on stent products.
In 2006, DuPont was again put on notice. The Deloitte royalty audit draft
report, dated August 4, 2006, states that “AVE calculates royalties on 44% of the
stent sales to quantify balloon portion of the stent sales.” 129 According to the
report, this finding was discussed with DuPont and DuPont disagreed with AVE’s
interpretation of the Product. 130
A second draft report, dated August 25, 2006, reiterates that DuPont had
been advised of AVE’s apportionment of Selling Price and disagreed with that
finding. 131 The report further states: “In accordance with DuPont’s interpretation
of the Agreements, stents are considered Product and are thus royalty bearing in
their entirety.” 132
In sum, the evidence shows that on multiple occasions, DuPont was
presented with data and calculations suggesting that Medtronic might not be
paying royalties on the stent portion of a stent delivery system. The Court finds
128
Id.
129
MT Ex. 61 (7/27/06 draft Deloitte audit report).
130
Id.
131
MT Ex. 74 (8/25/06 draft Deloitte audit report).
132
Id.
42
that DuPont was at least on inquiry notice prior to August 25, 2006. With diligent
inquiry, DuPont should have had sufficient grounds to raise a breach of contract
claim before the statute of limitations expired.
5. Cordis Payments
DuPont has raised two breach of contract claims that derive from
Medtronic’s treatment of Cordis sales. First, DuPont contends that Medtronic
erroneously calculated royalties on Cordis sales pursuant to the formula set forth in
the Levy Addendum, as opposed to the PACRA formula. Second, DuPont argues
that Medtronic improperly apportioned the Selling Price on sales of Cordis
products.
Medtronic argues that both claims are time-barred. As to the calculation of
royalty payments per the Levy Addendum, Medtronic contends that DuPont had
actual notice in 2000 following issuance of PwC’s Final Report. With respect to
apportionment of Cordis sales, Medtronic argues that DuPont was on inquiry
notice as early as December 2000.
a. Calculation of Cordis Royalties Pursuant to Levy Addendum
DuPont retained PwC in August 2000 to conduct an audit of Medtronic’s
royalty payments to DuPont under the PACRA for the period of October 1, 1998
through June 30, 2000. 133
133
Pursuant to the parties’ agreement, PwC was to
See MT Ex. 21 (audit engagement letter from PwC to DuPont).
43
undertake a multi-phase approach in conducting the royalty audit. The agreement
expressly provided that PwC was to obtain DuPont’s approval before performing
certain work. 134 Additionally, PwC was to defer to DuPont on key issues. After a
thorough review of the parties’ express agreement and course of dealing, the Court
finds the requisite amount of control to establish a principal-agent relationship
between DuPont and PwC. 135
During the 2000 audit, PwC requested and received, inter alia, a copy of the
Levy License Agreement and the Levy Addendum, which set forth the formula for
apportionment on Cordis sales. PwC’s Final Report explicitly states that PwC
reviewed the sublicense agreements (i.e., Levy License Agreement and Levy
Addendum) and relevant correspondence. 136
Under agency principles, PwC’s
notice and knowledge of the Cordis formula, as set forth in the Levy Addendum, is
134
See, e.g., id. The engagement letter provides: “After consultation with you and review of
available documentation, we will work with you to determine the precise extent and nature of our
procedures”; “Meet with DuPont or its representatives to determine expectations …”; “With
DuPont approval, additional fieldwork as deemed necessary”; “[T]he work is performed only for
the use and benefit of DuPont.”
135
See Estate of Eller v. Bartron, 31 A.3d 895, 897 (Del. 2011) (“As a general matter, ‘[a]gency
is the fiduciary relationship that arises when a person (a ‘principal’) manifests assent to another
person that the agent shall act on the principal's behalf and subject to the principal's control, and
the agent manifests assent or otherwise consents so to act.’”) (citing Restatement (Third)
Agency, § 1.01 (2006).
136
MT Ex. 25 at DUP0000443.
44
imputed to DuPont. 137
Knowledge is imputed regardless of whether such
knowledge or notice is actually communicated. 138 Therefore, the Court finds that
DuPont was on notice of the Levy Addendum formula for Cordis sales as early as
2000.139
b. Apportionment of Cordis Sales
The Court finds genuine issues of material fact as to whether DuPont had
actual knowledge that Medtronic was apportioning the Selling Price on Cordis
sales.
Therefore, the Court must address the applicability of the inherently
unknowable tolling doctrine.
c. No Inherently Unknowable Injury
DuPont contends that Medtronic’s apportionment of Cordis sales was
inherently unknowable and that DuPont was blamelessly ignorant of the cause of
action. In support of this contention, DuPont points to the fact that neither the
PwC audit nor the Deloitte audit discovered any “red flags” with respect to Cordis
137
See Wavedivision Holdings, LLC v. Highland Capital Mgmt. L.P., 2011 WL 5314507, at *15
(Del. Super.) (“Under agency law, knowledge of the agent generally imputes to the principal.”).
138
See Abrose v. Thomas, 1992 WL 208478, at *2 (Del. Super.).
139
In reaching this conclusion, the Court need not address DuPont’s argument that Medtronic
“hid” the Levy Addendum from DuPont or that DuPont had not way of obtaining such
information.
45
payments. DuPont contends that “this fact … actually proves how hard it was for a
reasonably prudent plaintiff to discover the basis for this claim.” 140
In its Final Report, issued in 2000, PwC noted: “Medtronic has never
audited the [royalty] statements submitted by the Sublicensees [i.e., Cordis].” 141
Therefore, PwC recommended that DuPont examine the royalty statements:
Given the materiality of the net revenues included on the Royalty
Reports relative to Cordis, it is recommended that DuPont suggest that
Medtronic AVE perform a royalty examination of the reports
submitted by Cordis under the sublicense agreement between Cordis
and Medtronic AVE. 142
DuPont, however, elected not to follow-up with PwC’s recommendation.
The Court finds that PwC’s recommendation, coupled with PwC’s Final
Report’s finding that Medtronic was apportioning Medtronic’s stent products in
some capacity, should have raised DuPont’s suspicions that Medtronic also may
have been apportioning Cordis sales.
Diligent inquiry by DuPont into the
calculation of Cordis royalty payments should have uncovered facts sufficient to
assert a breach of contract claim. Therefore, the Court finds that DuPont was on
inquiry notice by December 2000 when PwC issued its Final Report.
140
DuPont’s Brf. in Opp. at 26.
141
MT Ex. 25 at DUP0000443.
142
Id.
46
6. Misclassification of Products
DuPont contends that Medtronic breached the PACRA by misclassifying
certain Products under the 1999 Amendment. According to DuPont, between 1999
and 2000, Medtronic miscategorized certain products as bearing a 1.0% royalty
rate, as opposed to the correct royalty rate of 1.5%. Although Medtronic realized
its mistake in 2001, DuPont contends that it was neither informed of the error nor
paid for the underpayment in sales during the relevant time period.
Medtronic argues that this claim is time-barred because DuPont had actual
notice as early as December 2000 when DuPont received a copy of PwC’s Final
Report. Medtronic contends that the Final Report provided DuPont with “lists of
specifically identified products that Medtronic had classified as being subject to the
1999 Amendment’s 1.5% royalty rate, or its 1.0% rate, or as not being subject to
royalties at all.” 143
The record evidence demonstrates that DuPont had actual knowledge of
Medtronic’s classification of products in December 2000. During its 2000 audit,
PwC reviewed Medtronic’s product classifications. In its December 12, 2000 Final
Report, PwC specifically identified those products subject to a 1.0% royalty rate
and those subject to a 1.5% royalty rate. 144 PwC, however, acknowledged that it
143
144
Medtronic’s Op. Brf. at 40.
MT Ex. 25 at DUP0000444-446.
47
did not have sufficient information to determine whether Medtronic’s
classifications were accurate, and therefore, recommended that DuPont speak with
Medtronic:
PwC … recommends that DuPont and Medtronic AVE engineers
discuss the underlying specifications of these products to determine
whether application of the reduced royalty rate is appropriate. If
application of the reduced royalty rate is not warranted, PwC shall
calculate the amount of additional royalties due DuPont using the
appropriate royalty rates. 145
It appears that DuPont and Medtronic never discussed these product classifications.
As it turns out, several of the product classifications identified in PwC’s
Final Report were erroneous.
For example, the Final Report identified the
following products as bearing a 1.0% royalty rate – X1S balloons, X2S balloons,
D114s balloons, and Be2 RX stents. DuPont contends, however, that these four
products (as well as several others) were miscategorized and actually subject to a
1.5% royalty rate. 146 Yet, DuPont never brought these alleged misclassifications to
light until this litigation commenced, approximately ten years after receipt of
PwC’s Final Report.
DuPont’s apparent failure to adequately review PwC’s Final
Report, or to recognize the alleged misclassifications, does not provide a basis to
invoke any tolling doctrine. Therefore, DuPont’s breach of contract claim with
respect to product misclassification is time-barred.
145
Id. at DUP0000445-446.
146
See DuPont’s Brf. in Opp. at 41.
48
7. Abbott Sales
DuPont argues that Medtronic breached the PACRA by failing to pay
royalties to DuPont for Abbott sales. Although DuPont acknowledges that it was
aware of the underlying OEM Agreement between Medtronic and Abbott, effective
May 9, 2002, DuPont contends that it was never informed that Medtronic was
selling Products to Abbott on which royalties were due. According to DuPont, it
did not learn of Medtronic’s breach until this litigation “when certain internal
documents showed such sales had been made, apparently beginning in 2005, and
which were subject to the PACRA.” 147
The undisputed record establishes that the alleged breach occurred in 2005
when Medtronic sold Products to Abbott but failed to pay any royalties to
DuPont. 148 DuPont neither alleges that this breach was inherently unknowable nor
fraudulently concealed by Medtronic. Rather, DuPont’s entire argument hinges on
the fact that Medtronic never revealed to DuPont that it began selling Products to
Abbott in 2005. DuPont’s ignorance, however, does not operate as a basis for
tolling the statute of limitations. 149
147
See DuPont’s Brf. in Opp. at 42.
148
See DP Ex. JJJJ (Abbott Royalty Report).
149
See Discussion supra IV.A.1. See also Burrell v. Astrazeneca LP, 2010 WL 3706584, at *7
(Del. Super.) (“Mere ignorance of the facts by a plaintiff, where there has been no [fraudulent]
concealment, is no obstacle to operation of the statute [of limitations].”) (citing In re Dean Witter
P’ship Litig., 1998 WL 442456, at *6 (Del. Ch.)).
49
The Court finds that the cause of action accrued in 2005, more than three
years before the parties entered into the tolling agreement, and is therefore timebarred.
8. Conclusion
The Court finds that each of DuPont’s breach of contract claims is timebarred. The undisputed record establishes that DuPont was on notice of facts
sufficient to lead to the discovery of each of the alleged breaches prior to August
25, 2006 – more than three years before DuPont and Medtronic executed a tolling
agreement. DuPont has failed to meet its burden in demonstrating that a tolling
doctrine resurrects any of its claims. Therefore, Medtronic is entitled to summary
judgment as a matter of law.
B. CONTRACT INTERPRETATION
This case is complicated. It would be an understatement to say that the
record is extensive. The attorneys for both parties have provided the Court with
excellent written briefs.
Oral argument, held over three days, was extremely
helpful. All attorneys demonstrated extraordinary advocacy before this bench.
Having exhaustingly reviewed the evidence, written submissions and
transcripts, it seems appropriate to provide the parties with a fulsome analysis.
Therefore, even having found that this case must be dismissed as barred by the
50
statute of limitations, by way of alternative holding, a discussion of the substantive
claim follows.
1. Principles of Contract Construction
Where the language of a contract is clear and unambiguous, the Court must
construe the contract terms by their ordinary and usual meaning.150 “Contract terms
themselves will be controlling when they establish the parties' common meaning so
that a reasonable person in the position of either party would have no expectations
inconsistent with the contract language.” 151
Upon a finding that the contract
clearly and unambiguously reflects the parties’ intent, the Court must refrain from
destroying or twisting the contract’s language, and confine its interpretation to the
contract’s “four corners.” 152
A contract is not rendered ambiguous merely because the parties dispute the
meaning of its terms. 153 “Rather, a contract is ambiguous only when the provisions
150
GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 780 (Del. 2012)
(citing Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009)). See also RhonePoulenc Basic Chems. Co v. American Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992)
(“Ambiguity does not exist where the court can determine the meaning of a contract ‘without any
other guide than a knowledge of the simple facts on which, from the nature of the language in
general, its meaning depends.’”).
151
GMG Capital Invs, 36 A.3d at 780 (citing Eagle Indus., Inc. v. DeVilbiss Health Care, Inc.,
702 A.2d 1228, 1232 (Del. 1997)).
152
Doe v. Cedars Academy, LLC, 2010 WL 5825343, at *5 (Del. Super.); O’Brien v. Progressive
Northern Ins. Co., 785 A.2d 281, 288-89 (Del. 2001).
153
GMG Capital Invs, 36 A.3d at 780 (citing Rhone-Poulenc, 616 A.2d at 1195).
51
in controversy are reasonably or fairly susceptible of different interpretations or
may have two or more different meanings.” 154 “[W]here reasonable minds could
differ as to the contract's meaning, a factual dispute results and the fact-finder must
consider admissible extrinsic evidence.” 155
2. PACRA Amendment Signed January 17, 1995 Does Not Affect
Royalties
DuPont and Bard signed the 1995 amendment to the PACRA on January 17,
1995.156 The January 1995 Amendment addressed limitations of DuPont’s product
liability risk. The following language was added:
(B) BARD will not use any Material in any medical applications
involving permanent implantation in the human body or permanent
contact with internal body fluids or tissues (where permanent means
residing for more than 30 days.).
(C) BARD will indemnify DUPONT for all direct and consequential
costs and damages caused to DUPONT due to a recall of a BARD
product developed under a program of work described in Article III A,
provided such recall is not a result of the negligence or willful
misconduct of DUPONT, its agents or employees. 157
Medtronic argues that because the January 1995 Amendment prohibited use
of any DuPont Material in stents, it is now inconsistent for DuPont to seek
summary judgment on its entitlement to collect royalties on stents.
154
Rhone-Poulenc, 616 A.2d at 1196.
155
GMG Capital Invs, 36 A.3d at 776.
156
MT Ex. 33 (January 1995 Amendment).
157
Id. at DUP0000359.
52
DuPont
contends that this change to the PACRA does not pertain to any provisions relating
to payment of royalties, or to the definition of “Catheter.”
The Court finds that the January 1995 Amendment does not alter any
definition of “Catheter” in the PACRA. Further, the clear and narrow intent of the
January 1995 Amendment was to prohibit DuPont Material from being used in any
product or component part that would be left in a human body for more than 30
days; and to add indemnification to DuPont should DuPont be found liable in
connection with the recall of a non-DuPont product.
Therefore, the Court grants summary judgment to DuPont on this issue. The
amendment signed January 17, 1995 has no bearing on Medtronic’s obligation to
pay royalties under the PACRA.
3. Interpretation of PACRA Amendment Signed April 13, 1995
In April 1995, the parties amended the PACRA to address royalties on
certain products. 158 The explicitly stated purpose of the April 1995 Amendment
was to codify the agreement reached following “a series of discussions relating to
program direction and royalties due under the [PACRA].” 159 The first numbered
paragraph lists 3 areas in which the parties intended to continue collaborative
158
MT Ex. 34 (April 1995 Amendment).
159
Id. at DUP0000361.
53
research and development. 160 The second paragraph involves new work statements
to be executed. 161
The third paragraph lists three projects for which no further work will be
done - megalumen guide, balloon catheter shaft, and coated guide wire projects.162
This paragraph further provides:
The parties recognize that Bard presently offers products in these
areas but elected not to incorporate certain developments made via
these work statements. DuPont anticipated that these developments
would be incorporated into these products to compensate DuPont for
its efforts under the work statements. Nevertheless, in view of
current Bard business circumstances, DuPont agrees to waive any
royalties due under the [PACRA] on the presently offered products.
This concession by DuPont is made despite considerable resources
that were expended by DuPont under these work statements. In the
event that Bard should at a later time offer a new product
incorporating any features developed, proposed or suggested by
DuPont pursuant to these work statements (whether individually or
jointly with Bard), royalties will be due pursuant to the [PACRA]. 163
(Emphasis added).
Paragraph 4 contains the language most disputed by the parties:
160
Id.
161
Id. at DUP0000361-362.
162
Id. at DUP0000362.
163
Id.
54
DuPont and Bard had previously conducted work under the [PACRA]
in the areas of stents and aortic aneurysm liners. DuPont agrees to
waive any royalties due under the [PACRA] attributable to stents
(unless bioresorbable) and aortic aneurysm liners. 164
Paragraph 5 addresses the reduction on the royalty rate for a specific product
referred to as “RELY polyurethane balloon.” 165
Paragraph 6 states:
The waivers and reduction in royalties described above are specific to
the projects enumerated herein. All other terms and conditions of the
[PACRA] continue in full force and effect regarding these projects
except where expressly modified herein. Moreover, the waivers and
reduction in royalties described above do not constitute a loss of any
other rights under the [PACRA] or applicable law, including without
limitation the right to collect fees for other Products. 166
In its motion for summary judgment, DuPont argues that the April 1995
Amendment was not a waiver of royalties on the stent parts of the catheter at issue
in this litigation. Rather, the April 1995 Amendment waived royalties only on
those materials or technology developed under five specific projects. DuPont
claims that it is undisputed that the five projects concerned research done on (1)
megalumens, (2) guide wires, (3) balloon shaft development, (4) aortic aneurysm
devices, and (5) stents. According to DuPont, the stent components involved in
164
Id. at DUP0000362.
165
Id.
166
Id. at DUP0000363.
55
this case arose out of, or were related to, the stent project referenced in the April
1995 Agreement.
Medtronic counters that the April 1995 Amendment constitutes DuPont’s
waiver of any right to receive royalties on Medtronic’s sale of any stents, other
than bioresorbable stents. Additionally, unlike the other four projects for which
DuPont was waiving royalties, Medtronic argues that there were no collaborative
projects for stents other than the bioresorbable stent project. Medtronic contends
that Paragraph 6 was not intended to apply to stents because other than
bioresorbable stents, there were no other stent projects undertaken.
Reading the April 1995 Amendment as a whole, the Court finds the
document to be unambiguous on its face. The Court need not refer to extrinsic
evidence. Following negotiations, DuPont agreed, as set forth in Paragraph 3, to
waive any royalties due under the PACRA on products offered as of the date of the
Amendment. Paragraph 4 is DuPont’s waiver of royalties on non-bioresorbable
stents, to the extent work on those stents previously had been conducted under the
PACRA. Paragraph 6 makes clear that the waivers and reduction in royalties are
limited to the specifically-enumerated projects. All other terms and conditions of
the PACRA continue in full force and effect. All rights to collect fees for other
products are not affected.
56
The only reasonable interpretation of the April 1995 Amendment is that
the waiver of royalties applies only to those non-bioresorbable stents, which were
part of a product offered as of the date of the Amendment. It would be an overlybroad reading of the Amendment to find that the parties intended to waive
royalties on all stents (other that bioresorbable): regardless of when the stent was
developed; regardless of whether DuPont and Bard had previously conducted
work under the PACRA in connection with a particular stent; or regardless of
whether the stent was part of a product offered as the date of the Amendment.
4. Propriety of Apportionment of Royalties Under the PACRA
DuPont and Bard executed the PACRA on December 22, 1989. 167 Bard
agreed to pay to DuPont certain fees. Article VII(A) states that such fees shall be
“based on the cumulative Selling Price of all quantities of Products sold annually
worldwide during the term of [the PACRA].” (Emphasis added). 168
The PACRA defined a “Product” as: “any Catheter which utilizes a
Material or Technology.” 169 “‘Material’ means any material developed by DU
PONT... individually or jointly with BARD....” 170 “‘Technology’ means any
167
MT Ex. 32.
168
PACRA, Art. VII(A).
169
PACRA, Art. II(K).
170
PACRA, Art. II(B).
57
technology as developed by DU PONT...as well as any technology developed by
DU PONT individually or jointly with BARD ....” 171 (Emphasis added).
The parties now dispute the definition of “Catheter.”
The PACRA
provides: “‘Catheter’ means any tubular medical device or parts thereof designed
for insertion into the vessels and channels of the human body to permit injection
or withdrawal of fluids, or to occlude, dilate or keep a passage open.”172
(Emphasis added).
DuPont argues that the stent at issue in this case is “part” of the “Catheter.”
However, Medtronic did not pay royalties on the stent portion of the medical
device. Therefore, according to DuPont, Medtronic underpaid DuPont by not
calculating royalties on the full Selling Price of the “Catheters.”
Medtronic contends that the stent and balloon catheter are separate.
According to Medtronic, both the stent and balloon catheter are “Catheters,” as
defined by the PACRA. Although a stent would not be called a catheter “[i]n the
real world,” for purposes of the PACRA, a stent is a “Catheter” because it is a
“tubular medical device or part[] thereof designed for insertion into vessels and
channels of the human body to permit injection or withdrawal of fluids, or to
occlude, dilate or keep a passage open.” Because the stent is a “Catheter” that
171
PACRA, Art. II(L).
172
PACRA, Art. II(A).
58
does not use any DuPont Material or Technology, it is not a “Product” that
generates royalties under the PACRA.
Nevertheless, Medtronic posits, it does not matter whether a stent is called
a “Catheter;” a medical device other than a “Catheter;” an undefined catheter; or
a stent. This is because a stent is a “Related Product.” “Related Products” do not
generate royalties.
The precise question before the Court on this issue is whether the stent is
part of the total balloon catheter system - and thus subject to royalties; or whether
the stent is either a separate “Catheter” or a “Related Product” - neither of which
would generate royalties.
a. A Stent is not a “Catheter” as Defined by the
PACRA
In its brief in opposition to DuPont’s summary judgment motion,
Medtronic conceded: “In the real world, a catheter is not a stent, and a stent is not
a catheter, and confusing the two could be fatal for a patient.” 173 Nevertheless,
Medtronic posits:
In the world that consists only of the four corners of the PACRA,
and thus in this Court, a catheter still is not a stent, and a stent still is
not a catheter. But within the four corners of the PACRA, and thus
in this Court, a “Catheter” (with a capital “C”) is an intentional
creation of the PACRA drafters defined as “any tubular medical
device or parts thereof designed for insertion into the vessels and
channels of the human body to permit injection or withdrawal of
173
Medtronic’s Brf. in Opp. at 3.
59
fluids, or to occlude, dilate or keep a passage open.”...As a result, a
catheter is a Catheter (with a capital “C”) and a stent is also a
Catheter (with a capital “C”). More importantly, and at the heart of
the present dispute, within the four corners of the PACRA, and thus
in this Court, a Catheter that uses a Material or Technology is a
Product (with a capital “P”) that generates royalties under the
PACRA whereas a Catheter that does not use a Material or
Technology is not a Product, but can be a Related Product (if sold in
conjunction with a Product). A stent is a Catheter that does not use a
Material or Technology. Thus, no royalties are due to DuPont on
stents regardless of whether stents are called a Catheter, a medical
device other than a Catheter, a catheter, or a stent, because a stent is
a Related Product. And that distinction between a Product and a
Related product, intentionally created by the drafters of the PACRA
and used exactly in that manner for the 20 years since the PACRA’s
creation, is the critical distinction that DuPont all but ignores in its
summary judgment briefing. That failure is fatal to DuPont’s
case. 174
The Court is not persuaded by Medtronic’s argument that the parties
intended that a stent fall within the definition of “Catheter” for purposes of the
PACRA. It strains reason and common sense to call a stent a Catheter. The
parties to the agreement are highly sophisticated in the area of medical
technology. If the definition of “Catheter” had been intended to include stents,
the parties could have so stated. Such a clear definition would have been entirely
consistent with the careful and scientifically-precise drafting reflected throughout
the agreement. The PACRA simply cannot reasonably be read to reflect any joint
intention of the parties that a stent is a “Catheter.”
174
Id. at 3-4.
60
The apparently purely-coincidental fact that a stent happens to be a
“tubular medical device...designed for insertion into the vessels and channels of
the human body...to occlude, dilate or keep a passage open” does not mean that
the parties considered a stent a Catheter. The PACRA cannot reasonably be
interpreted so as to convert a stent into a Catheter. Such an interpretation would
require the type of convoluted and contorted analysis necessary to wedge a
square peg into a round hole.
In any event, this finding is not dispositive on the issue of whether the stent
is royalty-generating.
b. A Stent is not a “Part” of a Stent System Catheter
Under the PACRA
The device at the center of this case is composed of a stent, balloon,
proximal shaft, distal shaft, guidewire lumen, and proximal adapter.
It is
undisputed that only the balloon portion of the device utilizes DuPont Material
and Technology. It is also undisputed that the stent does not utilize DuPont
Material and Technology.
The type of catheter at issue in this litigation is used in coronary
angioplasty. Angioplasty surgeons use catheters to open constricted or blocked
blood vessels. Catheters are designed both with and without stents.
61
Without a stent, a tubular device is equipped with a balloon. The balloon
end of the catheter is inserted into a blood vessel, and the balloon is inflated. The
entire device then is removed from the body.
If a stent is used, it is mounted on the outside of the balloon portion of the
catheter device. When the balloon is inflated, the stent expands with the balloon
until the stent touches the blood vessel wall. The stent remains to hold the vessel
open. The rest of the catheter device is removed from the body.
At the present time, the Medtronic catheter is sold as a single product. The
tubular device, with attached balloon and mounted stent, are described in the
Medtronic marketing materials, which advertise the stent system as a single unit.
The catalog describes a single medical device - a “coronary stent...mounted on an
extended pressure, semi-compliant, over-the-wire delivery system.” One item
number or product code applies to the entire catheter system. Customers may
purchase the stent system in various sizes, however, the stent is mounted on other
parts of the catheter. The catheter system is shipped in a single sterile package.
The Food and Drug Administration approved the catheter system as a single
device.
The packaging and marketing materials are informative for purposes of
determining whether the stent is part of a Catheter.
62
Nevertheless, Medtronic’s
choice of the most advantageous means of selling the medical device is not
determinative. The terms of the PACRA control this disputed issue.
i. Development of Stents
DuPont contends that at the time the parties negotiated and executed the
PACRA in 1989, DuPont intended the term “Catheter” to cover stents.
According to DuPont’s Patrick Foley, although stents were not completely
“evolved” at the time the PACRA was executed, DuPont nonetheless “anticipated
[that] stents may play a role” in the development of balloon catheters. 175
Therefore, Dupont contends that it negotiated for a broad definition of the term
“Catheter” so as to ensure that stents would be included within this definition. 176
The Court is not persuaded by DuPont’s argument.
The undisputed
evidence establishes that in 1989, at the time the PACRA was executed, DuPont
was not manufacturing or selling stents.177 Bard’s product line did not include
175
DP Ex. A, Foley Dep. 80:2-80:24 (explaining that DuPont “knew stents were going on, and
[was] aware of [stents]” and therefore anticipated that stents may play a role in catheters). But
see MT Ex. 13, Knox Dep. 62:1-64:10 (explaining that DuPont and Bard collaborated on the
development of angioplasty balloons before the existence of stents).
176
See DP Ex. A, Foley Dep. 80:23-80:25.
177
DP Ex. A, Foley Dep. 79:23-80:19 (explaining that DuPont “knew stents were going on,
and [was] aware of [stents]”); DP Ex. 13, Knox Dep. 62:3-65:17 (explaining that at the time
Bard and DuPont collaborated on angioplasty balloons, stents were not yet in existence).
63
any commercial stent products at that time. 178 Indeed, stents were not even
commercially available for use in coronary angioplasty procedures in the United
States in 1989.179 It was not until 1993 that the FDA approved the sale of
coronary stents in the United States. 180
Therefore, at least initially, the
angioplasty balloons developed as a result of the collaboration between Bard and
DuPont did not include stents. 181
ii. A Stent is a Separate Component
Balloon catheters have been commonly used for angioplasty procedures
since at least the mid-1980s. Bard first began to sell balloon catheters mounted
with stents in the 1990s. It is undisputed that a balloon catheter can be produced,
sold and used as a medical device without a stent.
The parties have never disagreed that Medtronic owed royalties to DuPont
on balloon catheters attached to balloons that were designed using DuPont
Materials and Technology. Only the balloon piece of the catheter uses DuPont
Materials and Technology.
178
See DP Ex. X, Brister Dep. 35:22-36:14 (Bard had no commercial sales of any stent
products before AVE’s acquisition); MT Ex. 43 (7/9/98 interoffice memorandum from Knox
stating that Bard has not had a stent product to date).
179
Housman Affidavit in Support of Medtronic’s Op. Brief at ¶ 4 (“When C.R. Bard, Inc.
(‘Bard’) entered into the PACRA in 1989, stents were not commercially available for use in
coronary angioplasty procedures in the United States.”).
180
Housman Affidavit in Support of Medtronic’s Op. Brief at ¶ 5.
181
DP Ex. 13, Knox Dep. 62:3-65:17 (explaining that there was no expectation, early on, that
angioplasty balloons would include stents).
64
With the advance of medical technology, the balloon catheter was
repurposed for use, in part, as a stent delivery system. The stent slides onto the
balloon portion of the catheter system like a sleeve, and then is compressed onto
the balloon in preparation for insertion into the body. The balloon opens the
vessel, the balloon catheter is removed, and the stent remains in the body to keep
the vessel open.
The stent is not glued, bonded, fused, or otherwise permanently attached to
the balloon catheter. The balloon catheter functions as a delivery system for the
stent, which remains in place after the balloon catheter is removed. A balloon
catheter without a stent is a disposable device. The stent is a permanent implant
in the body, and is not dependent on the balloon catheter to perform its
continuing function. The stent is the only portion of the balloon catheter system
that is not permanently attached, and that ultimately is separated from the other
pieces of the catheter.
The Court finds that although used in conjunction with the balloon
catheter, the stent is not “part” of the Catheter as defined in the PACRA.
Viewing the PACRA in its entirety, the Court finds that the stent is a separate
component designed for use with the royalty-bearing balloon catheter system.
65
iii.
A Stent is a “Related Product” When Sold with
a Balloon Catheter that Incorporates a
“Material” or “Technology”
A “Related Product” is any material or product “sold in conjunction with a
Product.” 182
The “Selling Price” is the invoice price, less certain costs, taxes and other
allowances. 183 If a “Product” is sold with any “Related Product,” the “Selling
Price” is calculated by:
(i) multiplying the invoice price for such sale by a fraction, the
numerator of which is the Factory Cost of such Product to BARD or
its Affiliate or sublicensee hereunder and the denominator of which
is the Factory Cost of such Product plus the Related Product sold in
conjunction therewith to BARD or such Affiliate or sublicensee.... 184
The clear purpose of the PACRA was to reasonably compensate DuPont
for its contribution of DuPont Materials and Technology to Medtronic products.
It is undisputed that the balloon is the only piece of the Medtronic catheter
system that utilized DuPont Materials and Technology. There is no dispute that
stents contain no DuPont Materials or Technology. The remaining pieces of the
catheter system, which are permanently attached to the balloon, are not the result
of DuPont Materials or Technology.
182
PACRA, Art. II(I).
183
PACRA, Art. II(D).
184
Id.
66
There is no question that the entire Medtronic catheter system is sold
together, and designed to be used at the same time, for the same medical
procedure. Having found that the stent is not “part” of the balloon catheter as
defined in the PACRA, the only rational conclusion is that the stent is a Related
Product.
5. 1999 Amendment Terminated Royalty Obligations on Sales of
Medtronic Products as of July 5, 2003
The 1999 Amendment to the PACRA established reduced royalty rates for
certain medical devices. Specifically, as to balloon catheters developed for future
use, Paragraph 2 provides, in pertinent part:
2. Medtronic AVE shall pay to Dupont, beginning the effective date
of this Agreement a fee of one and one-half percent (1.5%), which
shall not be returnable in any event, based on the cumulative Selling
Price of all quantities of such Products sold annually worldwide until
July 5, 2003. Except as provided in Section (8) herein, no other
fees shall be due with respect to any such Products. 185
(Emphasis added).
Similarly, Paragraph 3 provides for a reduced royalty rate for balloon
catheters presently sold:
3. Effective January 1, 2000, catheters with nylon balloons … will be
deemed to be a Product under the Research Agreement, subject to a
fee of one percent (1.0%), which shall not be returnable in any
record, also based on the cumulative Selling Price of all quantities of
such Products sold annually worldwide until July 5, 2003.
185
MT Ex. 42 (1999 Amendment).
67
Because Paragraph 3 does not contain the last sentence of Paragraph 2, DuPont
contends that only fees on Paragraph 2 Products expired on July 5, 2003. As to
Paragraph 3 Products, sold after July 5, 2003, DuPont claims that Article VII of
the PACRA sets forth the appropriate royalty rate.
The Court finds that the clear and unambiguous language of the 1999
Amendment establishes that from January 1, 2000 until July 5, 2003, Paragraph 3
Products would be subject to a 1% royalty rate. Medtronic’s royalty obligations,
with respect to Paragraph 3 Products, then would terminate on July 5, 2003.
Contrary to DuPont’s assertion, the 1999 Amendment is devoid of any
language whatsoever suggesting that Medtronic would owe fees on Paragraph 3
Products after July 5, 2003, much less be subject to PACRA’s heightened royalty
rates. Had the parties intended for Paragraph 3 Products to be subject to royalties
after July 5, 2003, such a provision should have been explicitly included in the
parties’ agreement. The Court declines to insert a new term into the parties’
agreement. 186
The Court finds that pursuant to the 1999 Amendment,
Medtronic’s royalty obligations, with respect to Paragraph 2 and Paragraph 3
Products, terminated on July 5, 2003.
186
See Cincinnati SMSA Ltd. P’Ship v. Cincinnati Bell Cellular Sys. Co., 708 A.2d 989, 992
(Del. 1998) (“[I]t is not the proper role of a court to rewrite or supply omitted provisions to a
written agreement…. In the narrow context governed by principles of good faith and fair
dealing, this Court has recognized the occasional necessity of implying such terms in an
agreement so as to honor the parties' reasonable expectations. But those cases should be rare
and fact-intensive, turning on issues of compelling fairness.”) (internal citations omitted).
68
6. PACRA Applies to Cordis Sales
In December 1993, Bard licensed certain patents to Cordis. 187
agreed to pay Bard royalties for licensed products.
Cordis
The PACRA provides that
Bard was obligated to pay royalties to DuPont on Products sold by its
licensees. 188 The royalty-calculation provisions under the PACRA differ in many
ways from the method of calculating royalties in the agreement between Cordis
and Bard.
It is undisputed that Medtronic succeeded to all obligations of Bard under
the PACRA. As successor, Medtronic received royalties from Cordis pursuant to
the license agreement. Some royalties were passed on to DuPont. Medtronic
does not contest that it is obligated to pay DuPont royalties on Cordis sales
pursuant to the terms of the PACRA - not pursuant to the terms of its license
with Cordis. However, the parties dispute how such royalties should have been
calculated under the PACRA. DuPont claims that it is entitled to royalties on
stents. Medtronic contends that royalties should be apportioned.
Medtronic also argues that summary judgment should be denied because
DuPont has failed to present evidence that Cordis’ method of royalty calculations
has resulted in any damage to DuPont. DuPont counters that it need not prove
187
MT Ex. 35 (Levy License Agreement).
188
See PACRA, Art. VII(A).
69
damages at this point because quantification of damages should take place during
expert discovery.
On the record before the Court at this juncture, there simply is not sufficient
evidence to determine whether or not royalties due to DuPont (from Cordis sales
through Medtronic) have been calculated properly. Nor is there record evidence
necessary for a finding of whether DuPont has been damaged. 189
There are
genuine issues of material fact that cannot be resolved on this summary judgment
record. In any event, the correct royalty calculation must be consistent with the
Court’s prior rulings on interpretation of the PACRA.
7. Abbott Sales
It is undiputed that Medtronic never paid royalties to DuPont on any sales
of Catheters to Abbott.
The parties, however, dispute whether DuPont was
entitled to any royalties from these sales. Medtronic argues that pursuant to the
1999 Assignment Agreement, Medtronic was not obligated to pay royalties on
sales by new licensees granted licenses after January 1, 1999.
In response,
DuPont contends that the PACRA requires Medtronic to pay royalties on any sales
by sublicensees, which includes sales by Abbott.
Paragraph 2 of the 1999 Assignment Agreement provides, in pertinent part:
189
The Court is not opining on the issue of whether DuPont has the burden at this stage in the
proceedings to demonstrate the existence of damages.
70
Effective as of January 1, 1999, AVE assumes all of the liabilities
and obligations of Bard under the R&D Agreement, except for the
payment of fees with respect to (i) any sales of Products (as defined
in the R&D Agreement) made prior to January 1, 1999, (ii) any sales
of products made on or after January 1, 1999 by Bard or any
Affiliate (as defined in the R&D Agreement of Bard and (iii) any
sales of Products made on or after January 1, 1999 by any party
identified in clause (ii) or (iv) pursuant to a sublicense or other
grant of right granted on or after January 1, 1999. 190
(Emphasis added). “[C]lause (ii) or (iv)” refers to Article VII(A)(ii) and Article
VII(A)(iv) of the PACRA, which provides for royalties on sales by Bard’s
licensees and sublicensees. 191
Pursuant to the 1999 Assignment Agreement, AVE/Medtronic “stepped into
the shoes” 192 of Bard and assumed all of Bard’s obligations, liabilities, rights and
interest under the PACRA and its amendments, with some exemptions. 193 As set
forth above, Paragraph 2 of the 1999 Assignment Agreement exempts Medtronic
from paying royalties to DuPont on any sales made by sublicensees of Bard
(PACRA, Article VII(A)(ii)) or any third parties given the right to do so by Bard
190
MT Ex. 37 at ¶ 2.
191
See PACRA, Art. VII(A) (“(A) Bard shall pay to DuPont, beginning June 1, 1989, the
following fees, which shall not be returnable in any event, based on the cumulative Selling
Price of all quantities of Products sold annually worldwide during the term of this Agreement
by: (i) Bard, (ii) any sublicensee of Bard, (iii) any Affiliate of Bard, and (iv) any third party
that has been given the right to do so by Bard or any sublicense or Affiliate of Bard ….”).
192
See Price Auto Group v. Dannemann, 2002 WL 31260007, at *8 (Del. Super.) (citing
Merck & Co. v. Smithkline Beecham Pharms. Co., 1999 WL 669354, at *44 (Del. Ch.)
(“[A]ssignee steps into shoes of the assignor.”)).
193
See MT Ex. 37 at ¶¶ 1, 2.
71
or any sublicensee or Affiliate of Bard (PACRA, Article VII(A)(iv)), if the
sublicensee was granted on or after January 1, 1999.
However, by executing the 1999 Assignment Agreement, Bard relinquished
all rights and obligations under the PACRA as of January 1, 1999. including
Bard’s right to grant sublicensees. Therefore, to give any meaning to Paragraph 2
of the 1999 Assignment Agreement, the Court must substitute “Medtronic” for
“Bard” in Article VII(A) of the PACRA, and find that Medtronic is exempted
from paying royalties on sales of Products made by sublicensees of Medtronic, or
any third parties given the right to do so by Medtronic or any sublicensee or
Affiliate of Medtronic, if Medtronic granted the sublicense on or after January 1,
1999.194
Abbott was granted a sublicense by Medtronic in 2002. 195
Therefore,
pursuant to Paragraph 2 of the 1999 Assignment Agreement, Medtronic is exempt
from paying royalties to DuPont on any of Abbott’s sales of Products.
194
See Sonitrol Holding Co. v, Marceau Investissments, 602 A.2d 1177, 1183 (Del. 1992)
(“Under general principles of contract law, a contract should be interpreted in such a way as to
not render any of its provisions illusory or meaningless.”) (citing Seabreak Homeowners Ass’n,
Inc. v. Gresser, 517 A.2d 263, 269 (Del. Ch. 1986)).
195
MT Ex. 83 (OEM Agreement).
72
V. CONCLUSION
The Court hold as follows:
(1)
Medtronic’s summary judgment motion on the issue of whether this
action is barred by the applicable statute of limitations is hereby
GRANTED.
By way of alternative holding, the Court finds as follows:
(2)
DuPont’s summary judgment motion on the issue of whether the
January 1995 Amendment to the PACRA affects royalty provisions
is hereby GRANTED.
(3)
DuPont’s summary judgment motion on the issue of whether the
April 1995 Amendment to the PACRA affects royalties on stents is
hereby GRANTED.
(4)
Medtronic’s cross-motion for summary judgment on the issue of
whether the April 1995 Amendment to the PACRA waives royalties
on stents is hereby DENIED.
(5)
DuPont’s summary judgment motion on the issue of whether a stent
is “part” of a “Catheter” under the PACRA is hereby DENIED.
(6)
Medtronic’s cross-motion for summary judgment on the issue of
whether a stent is a “Related Product” and a separate “Catheter”
under the PACRA is hereby GRANTED IN PART AND DENIED
IN PART.
(7)
DuPont’s summary judgment motion on the issue of whether
royalties under Paragraph 3 of the 1999 Amendment to the PACRA
revert to the royalty rate after July 5, 2003 is hereby DENIED.
(8)
Medtronic’s cross-motion for summary judgment on the issue of
whether royalties under Paragraph 3 of the 1999 PACRA
Amendment terminated on July 5, 2003 is hereby GRANTED.
(9)
DuPont’s summary judgment motion on the issue of whether the
PACRA applies to Cordis sales is hereby GRANTED.
73
(10)
Medtronic’s summary judgment motion on the issue of whether
apportionment is applicable to Cordis sales is hereby DENIED.
(11)
Medtronic’s summary judgment motion on the issue of whether
Medtronic owes royalties on Abbott sales is hereby DENIED.
IT IS SO ORDERED.
/s/ Mary M. Johnston
MARY M. JOHNSTON, JUDGE
Original to Prothonotary
cc: All counsel via File & Serve
74
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