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XY, LLC v. Trans Ova Genetics, LC

United States District Court, D. Colorado

January 11, 2018

XY, LLC, BECKMAN COULTER, INC., and INGURAN, LLC d/b/a STGENETICS, Plaintiffs,
v.
TRANS OVA GENETICS, LC, Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART TRANS OVA'S MOTION TO DISMISS

          William J. Martinez United States District Judge.

         In this lawsuit, Plaintiffs XY, LLC, Beckman Coulter, Inc., and Inguran, LLC (together, “XY”) bring patent infringement claims, as well as certain non-patent claims, against defendant Trans Ova Genetics, LC (“Trans Ova”). Currently before the Court is Trans Ova's Motion to Dismiss Plaintiffs' Second Amended Complaint. (ECF No. 31.) Since this motion's filing, XY has filed two additional amended complaints, and the Fourth Amended Complaint (ECF No. 74) is the currently operative complaint. However, the parties filed a Joint Status Report stating that Trans Ova's motion may be decided as if directed at the Fourth Amended Complaint (see ECF No. 83), which the Court will refer to below simply as the “Complaint.”

         For the reasons stated below, the Court will grant Trans Ova's motion as to XY's Counts II and IV-XI, but will otherwise deny the motion. The upshot of this order is that this case will proceed on XY's Counts I, III, and XII.

         I. BACKGROUND

         Broadly speaking, this case centers around technology developed by XY that attempts to sort, and usually succeeds in sorting, non-human mammalian semen based on whether a sperm cell carries an X chromosome or a Y chromosome. Such “sexed semen” is useful in artificial insemination to ensure the gender of the offspring.

         A. The 2012 Lawsuit

         Trans Ova provides semen-sorting services through XY's technology. Many XY patents related to this technology, as well as a patent license agreement (“License Agreement”) between XY and Trans Ova, were already litigated before the undersigned in XY, LLC v. Trans Ova Genetics, LC, Case No. 13-cv-876-WJM-NYW. The Court will refer to this as the “2012 Lawsuit” because, although it bears a 2013 Case number, it was originally filed in 2012 in the Eastern District of Texas, and was later transferred here.

         The 2012 Lawsuit was tried to a jury in January and February 2016, resulting in a verdict mostly in XY's favor. (See 2012 Lawsuit, ECF No. 461.) In particular, the jury found that XY had breached the parties' License Agreement sometime before April 2009, but that Trans Ova had also breached the Agreement before that date, and so the License Agreement terminated by then and deprived Trans Ova of its right to practice XY's patents. (Id. at 1-2.) The jury also found that XY's patents had been infringed, and that most of Trans Ova's defenses and counterclaims failed (including assertions of invalidity, and antitrust violations). (Id. at 3-9.) The lone defense with which the jury agreed was Trans Ova's assertion of unclean hands, thus barring any claims by XY for unjust enrichment or injunctive relief. (Id. at 9.) The jury ultimately awarded $4.585 million to XY as patent infringement damages and $1.481 million as contractual damages, but the latter sum was subsequently offset by $528, 000 that the jury awarded to Trans Ova as contractual damages against XY. (Id. at 2, 9.)

         On April 8, 2016, the Court entered an Order on Post-Trial Motions upholding the jury verdict (except as to ancillary matters not relevant here), denying enhanced damages and attorneys' fees to XY, awarding XY prejudgment interest, and also awarding XY an ongoing royalty in lieu of an injunction. (2012 Lawsuit, ECF No. 500.) XY subsequently filed a Rule 59(e) motion to amend the judgment, arguing that the ongoing royalty was set at an unlawfully low rate. (Id., ECF No. 505.) By order dated November 10, 2016, the Court denied that motion. (Id., ECF No. 555 at 1-6.)

         The 2012 Lawsuit is now on appeal to the Federal Circuit. (Id., ECF Nos. 556, 557.)

         B. The 2016 Lawsuit

         On December 6, 2016-just short of four weeks after the Court's order on XY's motion to amend the judgment-XY filed a new lawsuit against Trans Ova in the Eastern District of Texas, which the Court will refer to as the “2016 Lawsuit.” (ECF No. 1-1.)[1] That case was transferred to this District on April 18, 2017. (ECF No. 1.) The 2016 Lawsuit-i.e., this lawsuit-again focuses largely on whether Trans Ova has breached various XY patents regarding semen-sorting technology. XY's specific causes of action are currently as follows:

• Count I: infringement of U.S. Patent No. 9, 145, 590 (“590 Patent”), issued on September 29, 2015;
• Count II: infringement of U.S. Patent No. 7, 723, 116 (“116 Patent”), issued on May 25, 2010;
• Count III: infringement of U.S. Patent No. 9, 365, 822 (“822 Patent”), issued on June 14, 2016;
• Count IV: infringement of U.S. Patent No. 7, 208, 265 (“265 Patent”), issued on April 14, 2007;
• Count V: infringement of U.S. Patent No. 6, 372, 422 (“422 Patent”), issued on April 16, 2002;
• Count VI: infringement of U.S. Patent No. 8, 652, 769 (“769 Patent”), issued on February 18, 2014;
• Count VII: trade secret misappropriation under the Defend Trade Secrets Act, based on a former XY employee teaching certain techniques to Trans Ova;
• Count VIII: common-law trade secret misappropriation, based on the same conduct;
• Count IX: common-law unfair competition, based on the same conduct;
• Count X: quantum meruit, based on the same conduct;
• Count XI: unjust enrichment, based on the same conduct;
• Count XII: infringement of U.S. Patent No. RE46, 559 (“559 Patent”), reissued on September 26, 2017, and originally derived from United States Patent No. 9, 134, 220 (“220 Patent”), which issued on September 15, 2015.

(ECF No. 74 at 8-36.)

         II. ANALYSIS

         Trans Ova asserts-and XY nowhere denies-that this lawsuit is XY's second attempt to do what it failed to do in the 2012 Lawsuit, namely, shut down Trans Ova, thus eliminating a competitor. (ECF No. 31 at 2, 14-15; see also ECF No. 41 at 1-2, 3 n.3, 5, 8.) Trans Ova, however, makes no argument that such intentions are themselves the basis for dismissal. Rather, Trans Ova's Motion to Dismiss argues that the ongoing royalty this Court awarded in the 2012 Lawsuit equates to a perpetual license to practice all of XY's patents, including all of those asserted in this lawsuit. Trans Ova further argues that the causes of action asserted in Counts II-XI are barred by claim preclusion. The Court addresses these arguments in turn.

         A. Scope of the Ongoing Royalty Awarded in the 2012 Lawsuit

         Trans Ova's first argument turns on language used by the Court in its Order on Post-Trial Motions in the 2012 Lawsuit. Specifically, when awarding an ongoing royalty, the Court ordered that “Trans Ova shall pay a rate of 12.5% of all gross receipts for the licensed products set forth in the parties' prior License Agreement, with an additional 2% royalty for reverse sorting services.” (2012 Lawsuit, ECF No. 500 at 36, ¶ 4.) Trans Ova notes that “licensed products” under the License Agreement included “the Technology, ” which the License Agreement further defined to include all intellectual property that XY “now or hereafter, owns, controls, licenses, or has an interest in.” (ECF No. 31 at 6-7 (internal quotation marks omitted; emphasis removed).) Thus, says Trans Ova, it “has a perpetual, paid-up license” to all of XY's intellectual property, including all of the patents and trade secrets at issue in this lawsuit. (Id. at 7.)

         XY counters, correctly, that this consideration was never before the Court in the 2012 Lawsuit. Rather, the Court was resolving XY's motion specifically for an ongoing royalty relating to the 2012 Lawsuit's patents-in-suit. (ECF No. 39 at 2-3.) The Court never intended to grant, and never was informed (until now) that its language might be construed to grant, a perpetual license to all of XY's intellectual property, existing or yet to be acquired. Accordingly, the Court rejects this basis for dismissal of XY's new lawsuit.

         B. Claim Preclusion: Patent Infringement Claims (Counts II-VI)

         1. Legal Standard & General Points of Contention

         Claim preclusion (res judicata) can apply to patent infringement causes of action, but the extent to which a prior suit precludes such a cause of action is a question “particular to patent law, [and therefore analyzed] under applicable Federal Circuit law, ” rather than regional circuit law. Hallco Mfg. Co. v. Foster, 256 F.3d 1290, 1294 (Fed. Cir. 2001).

         “The general concept of claim preclusion is that when a final judgment is rendered on the merits, another action may not be maintained between the parties on the same ‘claim, ' and defenses that were raised or could have been raised in that action are extinguished.” Id. In approaching this analysis, the Federal Circuit ...


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