Albritton v. Acclarent, Inc.

Brief/Memorandum in Support

N.D. Tex.January 23, 2017

IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION DR. FORD ALBRITTON IV, Plaintiff, v. ACCLARENT, INC., Defendant. § § § § § § § § § § § § Civil Action No. 3:16-cv-03340-M JURY TRIAL DEFENDANT ACCLARENT, INC.’S BRIEF IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFF’S COMPLAINT Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 1 of 28 PageID 235 TABLE OF CONTENTS Page i INTRODUCTION .......................................................................................................................... 1 LEGAL STANDARD ..................................................................................................................... 1 ARGUMENT .................................................................................................................................. 2 I. Plaintiff fails to state a claim for breach of the NDA (Count One) .................................... 2 A. Count One is barred by the statute of limitations ................................................... 2 B. Information submitted to the Patent Office cannot give rise to breach of the NDA .................................................................................................................. 4 II. Plaintiff’s claim for breach of the Consulting Agreement is barred by the statute of limitations (Count Two) ................................................................................................. 6 III. Plaintiff fails to state a claim for fraudulent inducement (Count Three) ............................ 7 A. Rule 9(b) ................................................................................................................. 7 B. Plaintiff’s fraudulent inducement claim is barred by the statute of limitations ............................................................................................................. 10 IV. Plaintiff’s fraud claim is barred by the statute of limitations (Count Four) ...................... 11 V. Plaintiff fails to state a claim for direct infringement of the ‘412 patent (Count Five) .................................................................................................................................. 12 A. The Complaint demonstrates that no index finger manipulates a working device; thus the Accused Products fail to meet the limitations “adapted to permit the operator to position a thumb and index finger of the hand to manipulate the working device” (claims 1 and 14) / “substantially simultaneously manipulating the working device with a thumb and index finger of the hand” (claim 8) ................................................................................. 16 B. The working device is not manipulated “via a portion of the working device immediately adjacent to the handle opening” (claims 1, 8 and 14) ........... 18 VI. Plaintiff fails to state a claim for indirect infringement of the ‘412 patent (Count Six) .................................................................................................................................... 19 CONCLUSION ............................................................................................................................. 23 Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 2 of 28 PageID 236 TABLE OF AUTHORITIES Page(s) i Cases American Vehicular Sci. LLC v. Mercedes-Benz U.S. Int’l, Inc., No. 13-cv-307, 2014 WL 10291478 (E.D. Tex. Feb. 7, 2014) ................................................20 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .......................................................................................................2, 22, 23 Atlas IP, LLC v. Exelon Corp., No. 15-cv-10746, 189 F.3d 768, 2016 WL 2866134 (N.D. Ill. May 17, 2016) ................12, 19 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .......................................................................................................1, 22, 23 BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011) ......................................................................................................11 Ferrer v. Chevron Corp., 484 F.3d 776 (5th Cir. 2007) .....................................................................................................2 Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998) ........................................................................................................8 Glue-Fold, Inc. v. Slautterback Corp., 98 Cal. Rptr. 2d 661 (Cal. App. 2000) .......................................................................................6 Guidry v. Bank of LaPlace, 954 F.2d 278 (5th Cir. 1992) .....................................................................................................2 Hooks v. Samson Lone Star, LP, 457 S.W.3d 52 (Tex. 2015) ................................................................................................10, 11 Lone Star Fund V (U.S.) LP v. Barclays Bank PLC, 594 F.3d 383 (5th Cir. 2010) ....................................................................................................3 Meltzer/Austin Res. Corp. v. Benihana Nat’l Corp., No. 11-CV-542-LY, 2013 WL 12093755 (W.D. Tex. Jan. 31, 2013) .....................................10 Patel v. Holiday Hospitality Franchising, Inc., 172 F. Supp. 2d 821 (N.D. Tex. 2001) ......................................................................................9 Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., No. 2015-1329, slip op. (Fed. Cir. Dec. 12, 2016) ..................................................................19 Raindance Techs., Inc. v. 10x Genomics, Inc., No. 15-cv-152, 2016 WL 927143 (D. Del. Mar. 4, 2016) .......................................................12 Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 3 of 28 PageID 237 TABLE OF AUTHORITIES (continued) Page(s) ii Scripps Research Inst. v. Illumina, Inc., No. 16-cv-661, 2016 WL 6834024 (S.D. Cal. Nov. 21, 2016) ..........................................12, 22 Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011) ....................................................................................................11 Sheppard v. Texas Dep’t of Transp., 158 F.R.D. 592 (E.D. Tex. 1994) ..............................................................................................3 Stier v. Reading & Bates Corp., 992 S.W.2d 423 (Tex. 1999) ....................................................................................................10 Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, LLC., 637 F.3d 604 (5th Cir. 2011) ...........................................................................................4, 6, 11 United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997) .....................................................................................................7 Via Net v. TIG Ins. Co., 211 S.W.3d 310 (Tex. 2006) ..................................................................................................2, 3 Vita-Mix Corp. v. Basic Holdings, Inc., 581 F.3d 1317 (Fed. Cir. 2009)..........................................................................................21, 23 Williams v. WMX Techs., Inc., 112 F.3d 175 (5th Cir. 1997) .................................................................................................7, 9 Wilson Oilfield Servs. Inc. v. Vishal Enter., No. 7:11-cv-00111, 2011 WL 6029948 (N.D. Tex. Dec. 5, 2011) ............................................7 Wright’s Well Control Servs., LLC v. Oceaneering Int’l, Inc., No. 15-1720, 2015 WL 7281618 (E.D. La. Nov. 16, 2015) ..................................................5, 9 Statutes 35 U.S.C. § 271(c) .........................................................................................................................23 Cal. Code Civ. P. § 337....................................................................................................................6 Tex. Civ. Prac. & Rem. Code § 16.004(a)(4) ................................................................................10 Tex. Civ. Prac. & Rem. Code § 16.051 ...........................................................................................2 Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 4 of 28 PageID 238 INTRODUCTION Pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6), Defendant Acclarent, Inc. (“Acclarent”) respectfully moves to dismiss Plaintiff Dr. Ford Albritton IV’s (“Plaintiff”) Complaint. Each of the Complaint’s six claims is fatally flawed and should be dismissed. Each of Plaintiff’s first four claims is barred by the applicable statute of limitations. Additionally, Plaintiff’s first claim, alleging breach of a nondisclosure agreement (“NDA”), should be dismissed for the independent reason that the NDA does not even protect the information that Plaintiff accuses Acclarent of improperly disclosing, and the third claim, alleging fraudulent inducement, should be dismissed for failure to meet the heightened pleading requirements for fraud. Plaintiff’s fifth and sixth claims, for direct and indirect patent infringement, respectively, also should be dismissed for failing to plausibly allege infringement as Twombly and Iqbal require. Rather than alleging facts plausibly supporting direct or indirect infringement claims, the Complaint presents facts that affirmatively demonstrate that Plaintiff’s infringement claims have no factual basis. For these reasons, Acclarent respectfully asks the Court to dismiss the Complaint in its entirety under Federal Rules of Civil Procedure 9(b) and 12(b)(6). LEGAL STANDARD To survive a Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted, “a plaintiff must plead ‘enough facts to state a claim to relief that is plausible on its face.’” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). This requires “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 5 of 28 PageID 239 2 Dismissal under Rule 12(b)(6) is warranted when the complaint fails to state a claim that is factually plausible and legally viable even when all of its factual allegations are presumed to be true. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). However, the Court need not presume “conclusory allegations, unwarranted factual inferences, or legal conclusions” to be true. Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007). Further, the severe nature of fraud allegations requires they be plead with particularity. Fed. R. Civ. P. 9(b); see also Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir. 1992) (“This higher standard stems from the obvious concerns that general, unsubstantiated charges of fraud can do damage to a defendant’s reputation.”) ARGUMENT I. Plaintiff fails to state a claim for breach of the NDA (Count One) Plaintiff’s claim for breach of the NDA should be dismissed for at least two independent reasons: because it is barred by the statute of limitations and because the NDA never protected the information that Plaintiff alleges was improperly disclosed. A. Count One is barred by the statute of limitations Under Texas law, which governs the NDA (Compl., Ex. A at 2 [Dkt. 1-1 at 3]), the statute of limitations requires a breach of contract claim to be brought within four years of when the claim accrued (Tex. Civ. Prac. & Rem. Code § 16.051), and “a breach of contract claim accrues when the contract is breached.” Via Net v. TIG Ins. Co., 211 S.W.3d 310, 314-315 (Tex. 2006). But Plaintiff alleges that the NDA was breached beginning in 2008, more than eight years before the filing of the Complaint, or even the execution of the parties’ Tolling Agreement. See, e.g., Compl. ¶ 26 (“Acclarent’s [September 18, 2008] provisional application misappropriates and incorporates the ideas Dr. Albritton shared with Acclarent under the protections of the NDA”); id. ¶ 33 (“Acclarent misappropriated Dr. Albritton’s innovations, Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 6 of 28 PageID 240 3 incorporating them into the Acclarent Provisional Application and other applications leading to the issuance of the ’473 patent”); id. ¶¶ 48-49 (describing Tolling Agreement but not alleging that the agreement tolled the relevant statute of limitations). Furthermore, any contention by Plaintiff that it could not have discovered breach of the NDA for a sufficient length of time to toll the statute of limitations has no merit. In Texas, the so-called “discovery rule” exception to statutes of limitations applies only when “the nature of the injury incurred is inherently undiscoverable and the evidence of injury is objectively verifiable.” Via Net, 211 S.W.3d at 313. Whether an injury is “inherently undiscoverable” is a legal question “decided on a categorical rather than case-specific basis.” Id. at 314. The Texas Supreme Court has cautioned that application of the discovery rule to breach of contract cases “should be rare, as diligent contracting parties should generally discover any breach during the relatively long four-year limitations period provided for such claims.” Id. at 315. This is not one of those rare cases. Throughout the Complaint, Plaintiff repeatedly cites Acclarent provisional application No. 61/098,157 (“the Acclarent ‘157 Application”), which “eventually issued as U.S. Patent No. 8,414,473” (“the ‘473 patent”) as purported evidence of breach. Compl. ¶¶ 26-33. But the United States Patent and Trademark Office published the patent application stemming from the Acclarent ‘157 Application and leading to the ‘473 patent on April 22, 2010. Exhibit 1, ‘473 patent at 1 [APPX.0004].1 Thus, there can be no dispute that Plaintiff could have discovered this alleged breach of contract by April 22, 2010 at the absolute 1 The ‘473 patent (which Plaintiff requests assignment of as a remedy) may be considered as a document “central to the claim and referenced by the complaint.” See, e.g., Lone Star Fund V (U.S.) LP v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (considering “the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.”); Sheppard v. Texas Dep’t of Transp., 158 F.R.D. 592, 597 (E.D. Tex. 1994) (considering exhibit attached by defendant when granting 12(b)(6) motion when the exhibit was “specifically referred to” in the complaint and “central and necessary” to plaintiff’s claim). Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 7 of 28 PageID 241 4 latest. See Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, LLC., 637 F.3d 604, 612 (5th Cir. 2011) (“There can be no dispute that a published patent application, like a patent, is readily available”). Accordingly, the statute of limitations bars Plaintiff’s NDA breach claim. B. Information submitted to the Patent Office cannot give rise to breach of the NDA Even if Plaintiff’s NDA breach claim were not barred, it would nonetheless fail because the NDA expressly excludes from protection the subject matter underlying the claim. Plaintiff alleges section “two of the NDA prohibits the disclosure of confidential information or the use of confidential information for any purpose other than the business relationship contemplated in the NDA,” but, in so doing, Plaintiff ignores the NDA’s definition of “Confidential Information.” Compl. ¶ 53. The NDA states in relevant part: “Confidential Information shall not, however, include any information which . . . (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party.” Compl., Ex. A at 1 [Dkt. 1-1 at 2]. Thus, under the NDA’s plain terms, any information that subsequently “becomes publicly known and made generally available” falls outside the definition of “Confidential Information” and was never protected by the NDA. A recent decision applying Texas law to patent application disclosure under an analogous NDA provision demonstrates this point: Oceaneering argues that under Section Six of the agreement, the publication of these patent applications removed any contractual duty it may have had to WWCS. Section Six states that a recipient’s “obligation with respect to the protection and handling of proprietary information” is not applicable to, among other things, “[i]nformation which is within or later falls within, the public domain without breach of this Agreement by the recipient.” Importantly, this provision use[s] prospective language. If, at any point, an informational item “falls within the public domain,” the effect is that the item was never protected by the NDA at all. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 8 of 28 PageID 242 5 So the recipient is not merely absolved of an existing contractual duty to protect and keep the item confidential; rather, the recipient never had any such duty in the first place. Wright’s Well Control Servs., LLC v. Oceaneering Int’l, Inc., No. 15-1720, 2015 WL 7281618, at *6 (E.D. La. Nov. 16, 2015) (emphasis in original). The Complaint alleges that Acclarent misappropriated information from, or information that was otherwise reflected in, Plaintiff’s provisional patent application No. 61/127,848 (Compl., Ex. C) (“the ‘848 Application”). Compl. ¶¶ 25-34. Plaintiff further alleges that he provided a copy of his ‘848 Application to Acclarent employees, id. ¶ 25, and compares the ‘848 Application against Acclarent’s later-filed provisional patent application, thereby purportedly confirming the overlap between the ‘848 Application and what Plaintiff alleges to have been misappropriated. See id. ¶¶ 28-34. The ‘848 Application became “publicly known and made generally available . . . through no action or inaction” of Acclarent, as the contents of the ‘848 Application were incorporated into Plaintiff’s subsequent non-provisional patent application leading to the ‘412 patent both literally (compare Compl., Ex. C [Dkt. 1-1 at 7-17] with Ex. D. [Dkt. 1-1 at 18-26]) and by reference. Compl., Ex. D, at 1:14-18 [Dkt. 1-1 at 23]. Furthermore, the ‘412 patent states on its face that its underlying non-provisional application was published March 4, 2010 (Compl., Ex. D. at 1 [Dkt 1-1 at 19]), and it “is undisputed that ‘a published patent application, like a patent, is readily available.’” Wright’s Well Control Servs., 2015 WL 7281618 at *7. Thus, the disclosure of the ‘848 Application became publicly available as of March 4, 2010, all information contained within that application was never protected by the NDA, and Count One should be dismissed. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 9 of 28 PageID 243 6 II. Plaintiff’s claim for breach of the Consulting Agreement is barred by the statute of limitations (Count Two) Count Two alleges breach of the Consulting Agreement signed on “December 18, 2008, with an effective date of June 8, 2008” (the “Consulting Agreement”). Compl. ¶ 23. But the version of the Consulting Agreement attached as Exhibit F to the Complaint is incomplete. See Dkt. 1-1 at 38 (referring to “Section 10.D of this Agreement,” which is not present in Exhibit F). A complete version of the Consulting Agreement is attached to this Motion as Exhibit 2 (APPX.0058-APPX.0065), and all citations to the “Consulting Agreement” herein are to this complete version.2 California law governs the Consulting Agreement. Consulting Agreement § 10.A. Like Texas, California has a four-year statute of limitations for breach of contract claims (see Cal. Code Civ. P. § 337), and the statute of limitations begins running when “a cause of action accrues, i.e., all essential elements are present and a claim becomes legally actionable.” Glue- Fold, Inc. v. Slautterback Corp., 98 Cal. Rptr. 2d 661, 668 (Cal. App. 2000). As with the NDA, the Complaint alleges breach of the Consulting Agreement as early as 2008. See, e.g., Compl. ¶ 26 (“Acclarent’s provisional application [filed September 18, 2008] misappropriates and incorporates the ideas Dr. Albritton shared with Acclarent under the protections of . . . the Consulting Agreement”); id. ¶ 64 (alleging breach of the Consulting Agreement arising out of “using Dr. Albritton’s confidential information to apply for patent protection”). Count Two is further time-barred in view of the April 22, 2010 publication of the patent application arising from the Acclarent ’157 Application. See Tewari De-Ox Sys., Inc., 637 2 Either under the “rule of completeness” (see Fed. R. Evid. 106) or the case law that documents “central to the claim and referenced by the complaint” are effectively part of the pleadings, this Court is entitled to consider a complete version of the Consulting Agreement in deciding this motion to dismiss. See, supra, n.1. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 10 of 28 PageID 244 7 F.3d at 612; see also, supra, Section I.A. Accordingly, Plaintiff’s claim for breach of the Consulting Agreement accrued over eight years before the filing of the Complaint, and even execution of the parties’ Tolling Agreement. Thus, this claim is barred by the statute of limitations, and Count Two should be dismissed. III. Plaintiff fails to state a claim for fraudulent inducement (Count Three) Plaintiff’s claim for fraudulent inducement should be dismissed because it fails to satisfy the heightened pleading requirements applicable to fraud allegations and because it is barred by the statute of limitations. A. Rule 9(b) Rule 9(b) imposes a heightened pleading requirement on fraud allegations, including fraudulent inducement.3 “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). In the Fifth Circuit, “[a]t a minimum, Rule 9(b) requires that a plaintiff set forth the ‘who, what, when, where, and how of the alleged fraud.’” United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997) (citing Williams v. WMX Techs., Inc., 112 F.3d 175, 179 (5th Cir. 1997)). Accordingly, pleading “fraud with particularity requires a plaintiff to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Williams, 112 F.3d at 177. As to Count Three, Plaintiff alleges “Acclarent made numerous material misrepresentations . . . in order to induce Dr. Albritton to sign the NDA and later, the Consulting Agreement” (Compl. ¶ 69), but the alleged “material misrepresentations” appear to merely parrot 3 See Wilson Oilfield Servs. Inc. v. Vishal Enter., No. 7:11-cv-00111, 2011 WL 6029948 (N.D. Tex. Dec. 5, 2011) (dismissing fraudulent inducement claim under Rule 9(b)). Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 11 of 28 PageID 245 8 the NDA and Consulting Agreement. The following charts illustrate the similarity between the alleged “material misrepresentations” and the agreements themselves: Complaint NDA “Acclarent would not use Dr. Albritton’s confidential information for its own use.” Compl. ¶ 70(a). “Each party agrees not to use any Confidential Information of the other party for its own use . . .” NDA § 2. “Acclarent would not disclose Dr. Albritton’s confidential information to any other third party.” Id. ¶ 70(b). “Each party agrees not to disclose any Confidential Information of the other party to third parties . . .” Id. “Acclarent would not reverse engineer any of the prototypes Dr. Albritton provided to Acclarent under the NDA or Consulting Agreement.” Id. ¶ 70(c). “Neither party shall reverse engineer, disassemble or decompile any prototypes . . .” Id. Complaint Consulting Agreement “[A]ccepted Dr. Albritton’s amendment to the original draft agreement deleting provisions that would have given Acclarent a royalty-free license to Dr. Albritton’s pre-existing inventions.” Compl. 72(a). Compare Ex. E, § 3.C [Dkt. 1-1 at 29] (original draft agreement) with Consulting Agreement § 3.C (absence of “Pre-Existing Materials” provision). “[R]epresented that Dr. Albritton would own his own pre-existing inventions.” Id. ¶ 72(b). “The Company agrees that all Confidential Information of Consultant will remain sole property of the Consultant, or its designee.” Consulting Agreement § 2.B. “[R]epresented that Acclarent would not disclose Dr. Albritton’s inventions or other confidential information to third parties.” Id. ¶ 72(c). “Consultant and the Company also agree to take all reasonable precautions to prevent any unauthorized disclosure of such Confidential Information.” Id. There are no material misrepresentations here. All Plaintiff complains about is a breach of contract for failure to comply with the representations made in the contract. This may be breach of contract, but it is not fraudulent inducement. Thus, Count Three fails for yet another reason-“mere failure to perform a contract is not evidence of fraud.” Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998). In addition, to the extent the Complaint alleges material misrepresentations, it does not clearly state whether the alleged “material misrepresentations” were actual statements made by Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 12 of 28 PageID 246 9 an Acclarent employee to Plaintiff (and if so, which employee, when, and where), or if it is simply alleging that the NDA and Consulting Agreement constitute the material misrepresentations themselves. This failure to particularly plead facts supporting the claim warrants dismissal of Count Three under Rule 9(b) because Plaintiff entirely fails to “specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Williams, 112 F.3d at 177; see also Patel v. Holiday Hospitality Franchising, Inc., 172 F. Supp. 2d 821, 824-25 (N.D. Tex. 2001) (dismissing complaint under Rule 9(b) for failure to identify “(a) the particular person who made the allegedly fraudulent representations, (b) when they were made, (c) the particular person to whom they were made, (d) where and by what means they were made, (e) whether they were oral or written, (f) which property improvement requirements were included in the represented waivers and extensions, (g) the exact content of the representations, or (h) why they were fraudulent”); Wright’s Well Control Servs., 2015 WL 7281618 at *12 (fraudulent inducement claim “concerning contractual negotiations fails because it does not attribute a specific fraudulent statement or omission to any particular speaker; nor does it detail the time, place, or manner in which the alleged fraud took place.”). Plaintiff also alleges “Acclarent misrepresented to Dr. Albritton that it had already developed a single-handed handle concept and that Dr. Albritton’s novel intellectual property was worthless, when in fact Acclarent had not conceived of this design before Dr. Albritton.” Compl. ¶ 75. Such language neither discloses the exact content of any statements nor where, when or by whom the statements were made, or whether these statements were intended to Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 13 of 28 PageID 247 10 induce Plaintiff to enter into the NDA, the Consulting Agreement, or both. This allegation also fails to meet the Rule 9(b) standard for the same reasons. Accordingly, Plaintiff’s fraudulent inducement claim should be barred by Rule 9(b), and Count Three should be dismissed. B. Plaintiff’s fraudulent inducement claim is barred by the statute of limitations Texas law applies to Plaintiff’s fraudulent inducement claim for both the NDA and the Consulting Agreement. While the Consulting Agreement states it “shall be governed by the laws of California without regard to California’s conflicts of laws rules” (Consulting Agreement § 10.A), such language, which applies only to interpretation and enforcement of the contract, does not extend to Plaintiff’s tort causes of action. See Stier v. Reading & Bates Corp., 992 S.W.2d 423, 433 (Tex. 1999) (provision that “agreement shall be interpreted and enforced in accordance” with Texas law “does not purport to encompass all disputes between the parties or to encompass tort claims.”); see also Meltzer/Austin Res. Corp. v. Benihana Nat’l Corp., No. 11- CV-542-LY, 2013 WL 12093755, at *3 (W.D. Tex. Jan. 31, 2013) (applying Texas law to “fraud and other tort claims” over provision that “Agreement shall be governed by and construed in accordance with” New York law). Texas applies a four-year statute of limitations to claims based on fraud. Tex. Civ. Prac. & Rem. Code § 16.004(a)(4). While claims typically accrue, and thus statutes of limitations typically begin, “when facts come into existence that authorize a claimant to seek a judicial remedy,” for fraud, the clock “does not start to run until the fraud is discovered or the exercise of reasonable diligence would discover it.” Hooks v. Samson Lone Star, LP, 457 S.W.3d 52, 57 (Tex. 2015) (citations omitted). “The same rule applies to claims of fraudulent inducement” because “[f]raudulent inducement is a subspecies of fraud.” Id. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 14 of 28 PageID 248 11 While what constitutes “reasonable diligence is an issue of fact . . . in some circumstances, we can still determine as a matter of law that reasonable diligence would have uncovered” the fraud. Id. at 58. For instance, when “information is ‘readily accessible and publicly available,’ then, as a matter of law, the accrual of a fraud claim is not delayed.” Id. at 59 (quoting Shell Oil Co. v. Ross, 356 S.W.3d 924, 929 (Tex. 2011)); see also BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 67 (Tex. 2011) (“We have repeatedly held that reasonable diligence obliges owners of property interests to make themselves aware of pertinent information available in the public record.”). Here, Plaintiff relies on Acclarent’s ‘473 patent to support its fraudulent inducement claim. See Compl. ¶ 33 (“despite agreeing to the terms of the NDA and Consulting Agreement, Acclarent misappropriated Dr. Albritton’s innovations, incorporating them into the Acclarent Provisional Application and other applications leading to the issuance of the ’473 patent”); see also id. ¶ 76 (“Acclarent in fact misappropriated Dr. Albritton’s confidential information and incorporated that information into the Acclarent Provisional Application, which led to the issuance of the ’473 patent.”). The application leading to the ‘473 patent was published on April 22, 2010. Exhibit 1, ‘473 patent at 1 [APPX.0004]. Because there is “no dispute that a published patent application, like a patent, is readily available,” it follows that reasonable diligence would have uncovered any alleged fraudulent inducement by April 22, 2010, at the latest. Tewari De-Ox Sys., Inc., 637 F.3d at 612. Thus, the four-year statute of limitations has passed and Plaintiff’s fraudulent inducement claim should be barred. IV. Plaintiff’s fraud claim is barred by the statute of limitations (Count Four) Plaintiff’s allegations of fraud similarly depend on subject matter found in Acclarent’s ‘473 patent. Plaintiff alleges Acclarent “was under a duty to disclose any and all use of Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 15 of 28 PageID 249 12 [Plaintiff’s confidential information,] including in particular the use of such information to apply for patent protection” and “was using Dr. Albritton’s confidential information and inventions for Acclarent’s own purposes, namely filing for patent protection.” Compl. ¶¶ 82-83 (emphasis added). Plaintiff also alleges Acclarent did not “honor its commitment to list Dr. Albritton as a co-inventor on the Acclarent Provisional Application or the ‘473 patent.” Id. ¶ 83. For the same reasons set forth with respect to fraudulent inducement (see, supra, Section III.B), Plaintiff’s fraud claim is barred by the statute of limitations. Again, the application resulting in the ‘473 patent was published on April 22, 2010. Reasonable diligence (i.e., examining the public record) would have uncovered then what Plaintiff belatedly alleges now- that Acclarent used Plaintiff’s confidential information to file for patent protection and that Plaintiff was not listed as a co-inventor on the Acclarent Provisional Application or the ‘473 patent. V. Plaintiff fails to state a claim for direct infringement of the ‘412 patent (Count Five) Under Fed. R. Civ. P. 8(a), Iqbal, and Twombly, a patentee “must plausibly allege that a defendant directly infringes each limitation in at least one asserted claim.” Scripps Research Inst. v. Illumina, Inc., No. 16-cv-661, 2016 WL 6834024, at *5 (S.D. Cal. Nov. 21, 2016); see also Atlas IP, LLC v. Exelon Corp., No. 15-cv-10746, 189 F.3d 768, 2016 WL 2866134, at *5 (N.D. Ill. May 17, 2016) (“[F]actual allegations that do not permit a court to infer that the accused product infringes each element of at least one claim are not suggestive of infringement-they are merely compatible with infringement.”); Raindance Techs., Inc. v. 10x Genomics, Inc., No. 15-cv-152, 2016 WL 927143, at *2 (D. Del. Mar. 4, 2016) (finding complaint failed to state a claim for direct patent infringement after conducting a limitation-by- limitation analysis, comparing the asserted claim to the factual allegations in the complaint). Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 16 of 28 PageID 250 13 Plaintiff accuses “the Relieva Devices marketed under the trade names Relieva Spin® and Relieva SpinPlus®” (the “Accused Products”) of infringing the ‘412 patent. The Complaint addresses the independent claims of the ‘412 patent, i.e., claim 1 (Compl. ¶¶ 95-102), claim 8 (id. ¶¶ 103-109), and claim 14 (id. ¶¶ 110-116), but Plaintiff’s contentions for each of these claims are so flawed they actually demonstrate why the Accused Products cannot infringe the ‘412 patent. For example, claims 1, 8, and 14 each require the Accused Products be adapted to permit an operator to (claims 1 and 14), or actually be used (claim 8), to manipulate:  with “a thumb and index finger of the hand”  a working device “via a portion of the working device immediately adjacent to the handle opening” (each bulleted limitation a “Disputed Limitation”). The ’412 Patent’s application provides a clear example of the subject matter to which these limitations are directed. See Compl., Ex. C at 4-5, Fig. 5 [Dkt. 1-1 at 11-12 (para [0012]), 17 (Fig. 5, below)] (“FIGURE 5 illustrates the surgical cathteter 300 in use . . . The fore finger and thumb are left free to manipulate a working device inserted into the opening 318 . . .”). In addressing the Disputed Limitations, Plaintiff alleges: Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 17 of 28 PageID 251 14 The structure of the Relieva Devices’ handle is adapted to permit the operator to position a thumb and index finger of the hand to manipulate the working device via a portion of the working device immediately adjacent to the handle opening. For example, the Relieva Spin marketing literature describes the a [sic] “Balloon Slider” and “Wire Spinner and Wire Slider,” as depicted below. Similarly, the Relieva SpinPlus marketing literature describes an independent “Balloon Slider” that allows for precise control of the balloon catheter, and “Wire Spinner and Wire Slider,” described as “[an] [e]longated tactile thumb wheel to easily gain thumb purchase and navigate sinus anatomy.” Compl. ¶ 101 (claim 1). The Relieva Devices also allow the user to substantially simultaneously manipulate the working device with a thumb and index finger of the hand via a portion of the working device immediately adjacent to the handle opening. For example, the Relieva Spin marketing literature describes a handle featuring a “Balloon Slider” and “Wire Spinner and Wire Slider” as depicted below. Similarly, the Relieva SpinPlus marketing literature describes an independent “Balloon Slider” that allows for precise control of the balloon catheter, and “Wire Spinner and Wire Slider,” described as “[an] [e]longated tactile thumb wheel to easily gain thumb purchase and navigate sinus anatomy.” Id. ¶ 108 (claim 8). The Relieva Devices include a handle structure that is adapted to permit the operator to position a thumb and index finger of the hand to manipulate a working device via a portion of the working device immediately adjacent to the handle opening when the working device is inserted through the handle opening into the lumen of the shaft. For example, the Relieva Spin marketing literature describes a “Balloon Slider” and “Wire Spinner and Wire Slider,” as depicted below. Similarly, the Relieva SpinPlus marketing literature describes an independent “Balloon Slider” that allows for precise control of the balloon catheter, and “Wire Spinner and Wire Slider,” described as “[an] [e]longated tactile thumb wheel to easily gain thumb purchase and navigate sinus anatomy,” as shown below. Id. ¶ 115 (claim 14). As indicated in the passages above, only five features of the Accused Products are pertinent to Plaintiff’s analysis of the Disputed Limitations: the “Sinus Illumination System,” “Sinus Balloon Catheter,” “Balloon Slider,” “Wire Spinner,” and “Wire Slider.” The Complaint and its exhibits show the location of these five components within the Accused Products, and what the respective functions of these five components are: Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 18 of 28 PageID 252 15 Compl., Ex. H at 2 [Dkt. 1-1 at 111] (Relieva Spin). Compl., Ex. M at 2 [Dkt. 1-1 at 147] (Relieva SpinPlus). Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 19 of 28 PageID 253 16 Compl., Ex. L at 2 [Dkt. 1-1 at 137] (Relieva SpinPlus). As shown in the above diagrams, the Wire Slider and Wire Spinner control the Sinus Illumination System, while the Balloon Slider controls the Sinus Balloon Catheter. A. The Complaint demonstrates that no index finger manipulates a working device; thus the Accused Products fail to meet the limitations “adapted to permit the operator to position a thumb and index finger of the hand to manipulate the working device” (claims 1 and 14) / “substantially simultaneously manipulating the working device with a thumb and index finger of the hand” (claim 8) The Complaint fails to plausibly allege that the operator’s thumb and index finger are used to manipulate the working devices. Plaintiff contends that the “Sinus Balloon Catheter,” “Sinus Illumination System” and “Integrated Dilation and Irrigation Catheter”4 are the “working devices” within the scope of the ‘412 patent (Compl. ¶¶ 100, 106), but the Complaint establishes that only the operator’s thumb-but never the index finger-controls the position of the Sinus Balloon Catheter and Sinus Illumination System, and the thumb does so only via the top- mounted Balloon Slider, Wire Spinner, and Wire Slider. Absolutely nothing in the Complaint demonstrates, supports, or even allows one to plausibly infer that an index finger (and thumb) 4 The balloon catheter in the Relieva SpinPlus (“Integrated Dilation and Irrigation Catheter”) adds integrated irrigation to the balloon catheter of the Relieva Spin (“Sinus Balloon Catheter”); this addition has no effect on the non-infringement argument presented here. See Compl., Ex. I at 1 [Dkt 1-1 at 114]. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 20 of 28 PageID 254 17 manipulates or otherwise controls the position of the Sinus Balloon Catheter and Sinus Illumination System. Instead, the Complaint and exhibits show holding the Accused Products with the four fingers and using only the thumb to operate the Balloon Slider, Wire Spinner, and Wire Slider. The Complaint alleges that marketing literature describes the Wire Spinner and Wire Slider “as an elongated tactile thumb wheel to easily gain thumb purchase and navigate sinus anatomy,” confirming that the Wire Spinner and Wire Slider are to be operated by the thumb alone. Compl. ¶¶ 101, 108, and 115 (brackets omitted); see also Ex. H at 2 [Dkt. 1-1 at 111] (“Simply steer the . . . Sinus Illumination System with your thumb”). Furthermore, the Complaint includes images demonstrating that the Accused Products are held such that the Balloon Slider, Wire Spinner, and Wire Slider are available only to the thumb: Compl. ¶ 114. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 21 of 28 PageID 255 18 Ex. H at 1 [Dkt. 1-1 at 110]. As shown above, the Accused Products are not held in a manner that even remotely resembles that shown in Figure 5 of the ’412 Patent’s application, and there is no indication that they are adapted to the “thumb and index finger” operation the claims require. B. The working device is not manipulated “via a portion of the working device immediately adjacent to the handle opening” (claims 1, 8 and 14) Nothing in the Complaint demonstrates or even supports an inference of the operator manipulating the working device “via a portion of the working device immediately adjacent to the handle opening.” The Complaint and its exhibits excerpted above establish that the operator’s thumb-to the extent it “manipulates” the working device at all-does so only via the Balloon Slider, Wire Spinner, and Wire Slider. See Ex. L at 2 [Dkt 1-1 at 137] (“The Wire Slider allows the user to advance, retract and spin the Sinus Illumination System with a single Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 22 of 28 PageID 256 19 hand while simultaneously supporting the Handle. The Balloon Slider allows the user to advance and retract the Sinus Balloon Catheter”). The Balloon Slider, Wire Spinner, and Wire Slider are not “portion[s]” of working devices, and moreover, are not “immediately adjacent to the handle opening.” On this point, Plaintiff fails to specifically identify the relevant opening, and even if it had, it is clear from the images of the Accused Products above that any manipulation would not occur immediately adjacent to it, as the claims require. Accordingly, the Complaint fails to plausibly allege that the thumb, let alone the thumb and index finger, manipulates any working device “via a portion of the working device immediately adjacent to the handle opening.” Because “factual allegations that do not permit a court to infer that the accused product infringes each element of at least one claim are not suggestive of infringement,” each of the Disputed Limitations provides independent grounds to dismiss Count Five for failure to state a claim. Atlas IP, 2016 WL 2866134, at *5. VI. Plaintiff fails to state a claim for indirect infringement of the ‘412 patent (Count Six) Plaintiff fails to state a claim for either inducement of infringement or contributory infringement. For inducement, Plaintiff must show “(1) a third party directly infringed the asserted claims of [the ‘412 patent]; (2) [Acclarent] induced those infringing acts; and (3) [Acclarent] knew the acts it induced constituted infringement.” Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., No. 2015-1329, slip op. at 26 (Fed. Cir. Dec. 12, 2016). The Complaint fails to plausibly allege any of these elements. Plaintiff alleges that Acclarent induces infringement through marketing materials, instructions, etc. that encourage or cause health care professionals to use Accused Products in a manner that infringes the ’412 Patent: Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 23 of 28 PageID 257 20 Acclarent’s affirmative acts of selling the Relieva Devices, causing the Relieva Devices to be manufactured and distributed, and providing marketing materials, labeling, package inserts, a website, and other promotional materials encourage, aid, instruct, and cause the public, including doctors and other health care professionals, to use the Relieva Devices in a manner that infringes the claims of the ’412 Patent. Acclarent performed the acts that constitute induced infringement, and would induce actual infringement, with the knowledge of the ’412 Patent and with the knowledge or willful blindness that the induced acts would constitute infringement. Compl. ¶ 125; see also id. ¶¶ 124, 126. But contrary to Plaintiff’s allegations, the Complaint fails to plead facts giving rise to a reasonable inference that Acclarent induced acts of direct infringement, that the Accused Products directly infringe, or that Acclarent knew the acts it induced constituted infringement. First, Plaintiff fails to plead facts giving rise to a plausible inference that Acclarent induced others to infringe because nothing in the “instructions for use,” advertising, or marketing materials for Accused Products referenced in the Complaint suggests positioning a “thumb and index finger” of a hand to manipulate “a portion of the working device immediately adjacent to the handle opening.” See id. ¶¶ 38-39, 95-116; see also Compl., Exs. H, I, and K-M [Dkt. 1-1 at 109-115 and 121-148]. To the contrary, to the extent those documents instruct third parties how to use the Accused Products, they instruct users to manipulate working devices using their thumbs alone, as explained in Section V.A and shown in the images above. Thus, Count Six should be dismissed as to inducement for failing to plead facts giving rise to a plausible inference that Acclarent induced others to infringe. See American Vehicular Sci. LLC v. Mercedes-Benz U.S. Int’l, Inc., No. 13-cv-307, 2014 WL 10291478, at *4 (E.D. Tex. Feb. 7, 2014) (allegations of inducement stemming from “‘detailed explanations, instructions, and information’ concerning the alleged products” failed to “establish a plausible inference that Defendants had the specific intent to induce its customer’s actions, and knowledge that those actions amounted to infringement.”) Moreover, the threshold for establishing a plausible inference of intent to induce Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 24 of 28 PageID 258 21 infringement should be especially high here, where the Complaint concedes a substantial non- infringing use of the Accused Products. See Vita-Mix Corp. v. Basic Holdings, Inc., 581 F.3d 1317, 1320 (Fed. Cir. 2009) (“Especially where a product has substantial non-infringing uses, intent to induce infringement cannot be inferred even when the defendant has actual knowledge that some users of its product may be infringing the patent.”). Second, Count Six should be dismissed as to inducement because, Plaintiff fails to plausibly allege that the Accused Products or any user of the Accused Products directly infringes the asserted claims of the ‘412 patent. As shown in Section V, supra, the claims of the ’412 Patent require positioning a “thumb and index finger” of a hand to manipulate “a portion of the working device immediately adjacent to the handle opening,” as shown in Fig. 5 of the patent’s provisional application, but the Complaint alleges no facts giving rise to a reasonable inference that the “thumb and index finger” are so positioned during use of the Accused Products. To the contrary, a comparison between the provisional application’s Fig. 5 and the marketing materials and instructions relied on by the Complaint clearly shows that, in the Accused Products, only the thumb is used to manipulate a working device, and even that such thumb manipulation does not occur directly adjacent to the handle opening. Rather, in the Accused Products, the portion of the working device immediately adjacent to the handle opening rests in a channel that a thumb cannot access, and the user only indirectly manipulates the working device with the Balloon Slider, Wire Spinner, and/or Wire Slider. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 25 of 28 PageID 259 22 Count Six should therefore be dismissed as to inducement for failure to plead facts giving rise to a plausible inference of the direct infringement required to maintain an inducement claim. See Scripps Research Inst., 2016 WL 6834024, at *7 (“Because the Court has already concluded that Plaintiff has failed to state a claim for direct infringement, Plaintiff's claims for induced infringement must fail as well.”). Finally, Count Six should be dismissed as to inducement also for failing to allege that Acclarent knew its acts constituted infringement. Plaintiff’s allegations regarding intent is naught but a legal conclusion-Plaintiff alleges: “Acclarent performed the acts that constitute induced infringement . . . with the knowledge of the ’412 Patent and with the knowledge or willful blindness that the induced acts would constitute infringement.” Compl. ¶ 125. Putting aside the demonstrated lack of infringement, the Supreme Court has made clear that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). Thus, Plaintiff’s inducement claim should be dismissed for at least these three independent reasons. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 26 of 28 PageID 260 23 Plaintiff’s allegations as to contributory infringement (Compl. ¶¶ 127-31) fare no better. Similar to its allegations regarding intent for inducement, Plaintiff’s contributory infringement allegations merely recite legal conclusions without alleging any supporting facts: Acclarent has offered to sell and/or sold the Relieva Devices, which constitute a material part of the invention of the ’412 Patent, knowing the same to be especially made or especially adapted for use in an infringement of the ’412 Patent, and knowing that the same are not staple articles or commodities of commerce suitable for substantial noninfringing use. Id. ¶ 128; cf. 35 U.S.C. § 271(c) (statutory provision for contributory infringement). Again, such “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements” are insufficient. Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). Moreover, the Complaint demonstrates the falsity of Plaintiff’s allegation by identifying only examples of the Accused Products being used in a noninfringing manner, i.e., the manner explained above in Section V. Such uses are substantial noninfringing uses that preclude a finding of contributory infringement. See Vita-Mix Corp., 581 F.3d at 1327 (“non-infringing uses are substantial when they are not unusual, far-fetched, illusory, impractical, occasional, aberrant, or experimental”). For these reasons, Plaintiff’s claim for contributory infringement should also be dismissed. CONCLUSION Acclarent respectfully requests this Court grant its motion to dismiss for the reasons presented above. Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 27 of 28 PageID 261 24 Dated: January 23, 2017 Respectfully submitted, COUNSEL FOR DEFENDANT /s/ Tracey B. Davies William B. Dawson TX State Bar No. 05606300 wdawson@gibsondunn.com Tracey B. Davies TX State Bar No. 24001858 tdavies@gibsondunn.com Andrew Lin TX State Bar No. 24092702 alin@gibsondunn.com GIBSON DUNN & CRUTCHER, LLP 2100 McKinney Ave, Suite 1100 Dallas, Texas 75201 Telephone: 214.698.3100 Facsimile: 214.571.2900 William C. Rooklidge, CA State Bar No. 134483 wrooklidge@gibsondunn.com Frank P. Cote CA State Bar No. 204529 fcote@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 3161 Michelson Drive, Suite 1200 Irvine, California 92612 Telephone: 949.451.3800 Facsimile: 949.451.4220 CERTIFICATE OF SERVICE I hereby certify that on the 23rd day of January, 2017, a true and correct copy of the foregoing document was served upon all counsel of record via the Court’s ECF system. /s/ Tracey B. Davies Tracey B. Davies Case 3:16-cv-03340-M Document 12 Filed 01/23/17 Page 28 of 28 PageID 262