University of Pittsburgh of the Commonwealth System of Higher Education v. Varian Medical Systems, Inc.

Memorandum in Opposition re MOTION to Dismiss CORRECTED Notice of Motion and Motion to Dismiss Plaintiff's Claims Pursuant to Fed. R. Civ. P. 12

N.D. Cal.August 15, 2008

MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) DANIEL JOHNSON, JR. (SBN 57409) RITA E. TAUTKUS (SBN 162090) MORGAN, LEWIS & BOCKIUS LLP One Market, Spear Street Tower San Francisco CA 94105 Telephone: (415) 442-1000 Facsimile: (415) 442-1001 Email: djjohnson@morganlewis.com Email: rtautkus@morganlewis.com Attorneys for Plaintiff UNIVERSITY OF PITTSBURGH UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION UNIVERSITY OF PITTSBURGH OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION d/b/a UNIVERSITY OF PITTSBURGH Plaintiff, vs. VARIAN MEDICAL SYSTEMS, INC. Defendant. Case No. CV 08-02973 MMC UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. Date: September 5, 2008 Time: 9:00 a.m. Courtroom 7, 19th Floor Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 1 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page DB2/20806008.1 i UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) I. INTRODUCTION .............................................................................................................. 1 II. APPLICABLE LAW .......................................................................................................... 2 III. PROCEDURAL HISTORY................................................................................................ 2 A. Relevant Facts ......................................................................................................... 2 B. When UPitt Filed The Pennsylvania Action, It Had A Reasonable Basis To Believe It Had Standing .......................................................................................... 4 C. New Facts Establishing Standing............................................................................ 4 IV. ARGUMENT ...................................................................................................................... 4 A. Claim Preclusion Requires A Prior Decision On The Merits ................................. 4 B. The Prior Dismissal In The Pennsylvania Case Was Not “On The Merits” Because It Was A Dismissal For Failure To Join A Necessary Party .................... 5 1. Under Rule 41(b), A Dismissal Based On Failure To Join A Party Is Not A Judgment On The Merits.............................................................. 5 2. A Dismissal For Lack Of Standing Is Not Preclusive To A Future Suit Where Standing Exists......................................................................... 5 3. Rule 41(b) Prohibits The Result That Varian Seeks ................................... 8 4. Varian’s Untimeliness Argument Is Wrong As A Matter Of Fact And Law...................................................................................................... 8 5. The Cases Cited By Varian Concern A Party Trying To Relitigate The Same Standing Issue A Second Time, An Issue Not Presented In This Case .............................................................................................. 11 C. UPitt Corrected Any Standing Issues That Had Existed In The Pennsylvania Litigation......................................................................................... 13 1. It Does Not Matter Whether CMU Could Have Sued Varian .................. 13 2. It Does Not Matter Whether UPitt And CMU Were In Privity In The Prior Lawsuit...................................................................................... 14 D. UPitt Engaged In No Misconduct In The Pennsylvania Litigation, And Its Complaint Was Not Dismissed As A Sanction..................................................... 15 E. Public Policy Demands That UPitt Be Allowed To Have The Merits Of Its Dispute With Varian Resolved.............................................................................. 17 F. The Appeal Of The Pennsylvania Case Challenges The Ruling That UPitt’s Original Ownership Rights Did Not Convey Standing......................................... 19 V. CONCLUSION................................................................................................................. 19 Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 2 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 ii UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) TABLE OF AUTHORITIES Cases Accrued Fin. Servs., Inc. v. Prime Retail, Inc., 298 F.3d 291 (4th Cir. 2002)...................................................................................................... 18 Adarand Constructors, Inc. v. Mineta, 534 U.S. 103 (2001)..................................................................................................................... 8 Adolph Coors Co. v. Sickler, 608 F. Supp. 1417 (C.D. Cal. 1985) .......................................................................................... 10 Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574 (Fed. Cir. 1991).................................................................................................. 16 Ball v. Halsell, 161 U.S. 72 (1896)..................................................................................................................... 18 Baris v. Sulpicio Lines, Inc., 74 F.3d 567 (5th Cir. 1996)........................................................................................................ 11 Chemlen v. Bank of Ireland First Holdings, Inc., No. 93-1592, 1993 U.S. App. LEXIS 28614 (1st Cir. Nov. 3, 1993)........................................ 12 Cory v. Fahlstrom, No. 05-3010, 2005 U.S. App. LEXIS 13074 (10th Cir. Jun. 29, 2005)..................................... 12 Dore v. Kleppe, 522 F.2d 1369 (5th Cir. 1975).................................................................................................... 17 Envtl. Prot. Info. Ctr. v. Pac. Lumber Co., 469 F. Supp. 2d 803 (N.D. Cal. 2007) ......................................................................................... 7 Hughes v. United States, 71 U.S. (4 Wall.) 232 (1866) ............................................................................................... 5, 7, 8 Int’l Nutrition Co., v. Horphag Research Ltd., 257 F.3d 1324 (Fed. Cir. 2001).................................................................................................. 14 Intellectual Property Development, Inc. v. TCI Cablevision of California, Inc., 248 F.3d 1333 (Fed. Cir. 2001).................................................................................................... 6 Israel Bio-Eng’g Project v. Amgen Inc., 475 F.3d 1256 (Fed. Cir. 2007).................................................................................................. 14 Kaspar Wire Works, Inc. v. Leco Eng’g & Mach., Inc., 575 F.2d 530 (5th Cir. 1978)........................................................................................................ 2 Kearns v. General Motors Corp., 94 F.3d 1553 (Fed. Cir. 1996).................................................................................................... 18 Kremer v. Chem. Constr. Corp., 456 U.S. 461 (1982)............................................................................................................... 2, 12 Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 3 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 iii UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) La. Envtl. Action Network v. Browner, 87 F.3d 1379 (D.C. Cir. 1996) ..................................................................................................... 7 Lowe v. United States, 79 Fed. Cl. 218 (Fed. Cl. 2007) ................................................................................................... 1 Mann v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 88 F.2d 75 (5th Cir. 1973)................................................................................................ 9, 10, 11 Martin v. Brown, 63 F.3d 1252 (3d Cir. 1995) .............................................................................. 17 Media Techs. Licensing, LLC v. Upper Deck Co., 334 F.3d 1366 (Fed. Cir. 2003)...................................................................................... 5, 6, 7, 19 Mentor H/S, Inc. v. Med. Device Alliance, Inc., 240 F.3d 1016 (Fed. Cir. 2001)................................................................................................ 7, 8 Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2d Cir. 2004)........................................................................................................... 7 ProtoComm Corp. v. Novell, Inc., Civ. Action No. 94-7774, 1998 U.S. Dist. LEXIS 9636 (E.D. Pa. June 29, 1998) ................... 10 Regents of Univ. of N.M. v. Knight, 21 F.3d 1111 (Fed. Cir. 2003)................................................................................................ 4, 14 Saylor v. Lindsley, 391 F.2d 965 (2d Cir. 1968)................................................................................................... 5, 17 Segal v. Am. Tel. & Tel. Co., 606 F.2d 842 (9th Cir. 1979)........................................................................................................ 1 Semtek International, Inc. v. Lockheed Martin Corp., 521 U.S. 497 (2001)..................................................................................................................... 5 Smith v. Pittsburgh Gage & Supply Co., 388 F.2d 983 (3d Cir. 1968)....................................................................................................... 18 Staples v. Ruyter Bay Land Partners, Civ. No. 2005-11, 2007 U.S. Dist. LEXIS 90806 (D. V.I. Dec. 10, 2007) ............................... 12 Stewart v. U.S. Bancorp., 297 F.3d 953 (9th Cir. 2002)................................................................................................ 12, 13 Talbot v. Quaker-State Oil Refining Co., 104 F.2d 967 (3d Cir. 1939)....................................................................................................... 15 Tripati v. Henman, 857 F.2d 1366 (9th Cir. 1988).................................................................................................... 19 Trujillo v. Colorado, 649 F.2d 823 (10th Cir. 1981)................................................................................................ 9, 11 United States v. McGann, 951 F. Supp. 372 (E.D.N.Y. 1997) ............................................................................................ 10 Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 4 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 iv UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) Venuto v. Witco Corp., 117 F.3d 754 (3d Cir. 1997)....................................................................................................... 10 Wong v. Regents of Univ. of Cal., 410 F.3d 1052 (9th Cir. 2005).................................................................................................... 11 Statutes 28 U.S.C. § 1295.............................................................................................................................. 7 35 U.S.C. § 100(d) ......................................................................................................................... 14 35 U.S.C. § 261.............................................................................................................................. 14 35 U.S.C. § 281.............................................................................................................................. 14 Rules 10th Cir. R. 32.1............................................................................................................................. 12 Fed. R. Civ. P. 11 ........................................................................................................................... 16 Fed. R. Civ. P. 19(b) ........................................................................................................................ 3 Fed. R. Civ. P. 41(b) ............................................................................................................... passim Other Authorities Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction § 4435 (2d ed.) ....................................................................................................... 11 Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 5 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 1 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) The University of Pittsburgh (“UPitt”) opposes the motion by Varian Medical Systems, Inc. (“Varian”) to dismiss this case on res judicata grounds. I. INTRODUCTION The issue before the Court is straightforward: can a party whose complaint has been dismissed for lack of standing file a new complaint after correcting the alleged ownership defect that led to the finding of a lack of standing, and proceed with the new lawsuit? The answer according to all of the courts to consider this issue and Federal Rule of Civil Procedure 41(b) is YES. Varian, by ignoring controlling precedent, citing unpublished opinions that do not address the issues to be decided by this Court, and misstating the facts, seeks to dismiss this action, even though there has never been any consideration of the merits of this claim. Varian makes three arguments to support its motion. It claims that UPitt cannot file a new lawsuit because the first lawsuit was dismissed “on the merits.” It also argues that the case was dismissed due to UPitt’s alleged unreasonable delay in adding Carnegie Mellon Uiversity (“CMU”) as a party, and UPitt must be punished for its unreasonable delay in naming CMU as a party. Finally, it argues that the prior order is entitled to res judicata effect because the decision was based on prudential rather than constitutional standing. None of Varian’s arguments have any merit. In case after case, the courts of this circuit and the Federal Circuit have held a litigant whose action has been dismissed based on a lack of standing, can cure the defect and re-file, so long as it makes sufficient allegations of facts that it has corrected the standing issue. In Segal v. Am. Tel. & Tel. Co., 606 F.2d 842, 844-45 (9th Cir. 1979), the Ninth Circuit held: Although a judgment of dismissal for lack of jurisdiction is valid and final, the judgment does not bar another action by the plaintiff on the same claim. The aspect of res judicata with which we are concerned is issue preclusion, formerly denominated “direct estoppel.” Issue preclusion, unlike bar, forecloses litigation only of those issues of fact or law that were actually litigated . . . . (citations omitted). Quoting the Restatement, the court went on to note that filing a new claim after the barrier to suit no longer exists is not prohibited. Id. at 845. The Court of Federal Claims has ruled on this issue as well, providing a cogent summary of the law. See Lowe v. United States, 79 Fed. Cl. 218, 230 (Fed. Cl. 2007): Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 6 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 2 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) In summary, a prior dismissal on jurisdictional grounds does not prohibit a subsequent claim on the merits, because those merits have not been heard by the court; the prior dismissal does preclude the same action based on the same facts unless the jurisdictional flaw that necessitated dismissal of the first suit has been cured. . . . If the alleged “cure” is sufficient to repair the prior jurisdictional defect, collateral estoppel does not apply to the prior jurisdictional determination because the issue of the court’s subject matter jurisdiction over the case as situated post- “cure” has not yet been litigated. (emphasis in original). In the instant case, there are “new facts” and “new issues” for the Court to consider. In particular, the current standing posture must be evaluated by considering the sufficiency of an assignment of patent rights from CMU to UPitt, occurring after the prior standing dismissal, which cures any prior standing issue, and unquestionably enables UPitt to bring its patent claims in this Court. As will be shown herein, Varian’s motion is without merit, and is little more than an effort to convince this Court to ignore long standing precedent and to transform an improvidently granted “dismissal with prejudice” based on standing into a bar against further litigation between the parties. II. APPLICABLE LAW Res judicata is composed of two doctrines: (1) claim preclusion or “true res judicata,” and (2) issue preclusion or “collateral estoppel.” Kaspar Wire Works, Inc. v. Leco Eng’g & Mach., Inc., 575 F.2d 530, 535 (5th Cir. 1978). Claim preclusion holds that a “judgment on the merits of an action precludes the parties . . . from relitigating issues that were or could have been raised in that action.” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 467 n.6 (1982) (emphasis added). Issue preclusion does not require a judgment on the merits, but is more limited than claim preclusion, in that it only prevents litigation of an issue that is identical to an issue fully litigated in the prior case. Id. III. PROCEDURAL HISTORY A. Relevant Facts UPitt has asserted infringement of U.S. Patent Nos. 5,727,554 (’554 Patent) and 5,784,431 (’431 Patent), collectively the “patents-in-suit.” See Docket Entry 1 (Compl. ¶¶ 11, 16). UPitt owns the patents-in-suit, including the right to maintain this lawsuit. Id. at Exs. 1, 2, 4. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 7 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 3 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) UPitt filed a prior lawsuit against Varian alleging infringement of the ’554 Patent and ’431 Patent in the Western District of Pennsylvania in April 2007. Varian’s Req. for Judicial Notice in Supp. of Mot. to Dismiss Ex. A [hereinafter “Varian’s Req. for Judicial Notice”]. On November 21, 2007, Varian moved to dismiss the case based on lack of standing, asserting that CMU had an ownership interest in the patents-in-suit. UPitt’s Req. for Judicial Notice In Opp’n to Varian’s Mot. to Dismiss Ex. 2 [hereinafter “UPitt’s Req. for Judicial Notice”]. Varian asserted that CMU’s ownership rights created a “jurisdictional” defect, and raised the prospect that an appellate court would void any final judgment based on “no jurisdiction.” Id. at Ex. 1 at 2, 9. Varian’s summary judgment motion in the Pennsylvania Litigation was unmistakably based on the absence of CMU: If a patent is jointly owned, all co-owners must consent to join as plaintiffs in an infringement suit. A co-owner acting alone lacks standing to sue for patent infringement. As a result, “one co-owner has the right to impede the other co- owner’s ability to sue infringers by refusing to voluntarily join in such a suit” . . . . CMU is a co-owner of the patents in suit. . . . . Accordingly, UPitt is not the sole owner and lacks standing to sue Varian for patent infringement. (citations omitted). UPitt’s Req. for Judicial Notice Ex. 2 at 6-7. Fed. R. Civ. P. 19(b) provides that a court can dismiss the action “[i]f a person who is required to be joined . . . cannot be joined.” The Special Master recommended dismissal of UPitt’s claims based on lack of standing due to non-joinder of CMU: In sum, we find that CMU is a co-owner of the patents and retained substantial rights in the patents-in-suit. CMU is a necessary party to this action. We recommend that the District Court grant the motion for summary judgment without prejudice. Varian’s Req. for Judicial Notice Ex. G at 10. Judge Schwab agreed with the Special Master that Varian’s motion for summary judgment for lack of standing should be granted based on non- joinder of a necessary party. Noting that the Special Master had found that “CMU thus is a necessary party to this action,” Judge Schwab stated that “[t]his Court agrees with the analysis of the Special Master on this legal point.” Id. at Ex. H at 2. On April 30, 2008, the Pennsylvania Court granted Varian’s motion for “lack of Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 8 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 4 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) standing,” and dismissed the case. Varian’s Req. for Judicial Notice Ex. H at 6. B. When UPitt Filed The Pennsylvania Action, It Had A Reasonable Basis To Believe It Had Standing Patent ownership begins with the inventor(s). Regents of Univ. of N.M. v. Knight, 321 F.3d 1111, 1118-19 (Fed. Cir. 2003). All of the inventors of the ’554 and ’431 Patents assigned their “entire right, title and interest” to the patents-in-suit solely to UPitt. See Docket Entry 1 (Compl. Exs. 2, 4 (assignments dated August 1996 and October 1996, respectively)). No other entity was assigned these rights, not even CMU. CMU and UPitt created policies for joint development projects (“Joint IP Policy Guidelines”) such as the project that led to the patents-in-suit. See Sealed Declaration of Matthew H. Poppe in Support of Varian’s Motion to Transfer Action to U.S. District Court for the Western District of Pennsylvania Exs. H, I [hereinafter “Poppe Decl.”]. These policies, when read in their entirety, are consistent with a single institution, here UPitt, receiving legal title to the patents-in-suit so that it could commercialize the patents, while both institutions shared in the proceeds of this commercialization. Id. at Ex. H § G, Ex. I § G C. New Facts Establishing Standing After the order in April dismissing the matter, less than two months later on June 16, 2008, CMU assigned to UPitt any ownership interest it had in the patents-in-suit. See Docket Entry 1 (Compl. Ex. 1). After that assignment, UPitt unquestionably had full ownership of the patents and the right to sue Varian. Id. at Exs. 1, 2, 4. On the same day it received the assignment from CMU, UPitt filed the instant lawsuit, alleging the “new facts” concerning its standing to bring suit. See Docket Entry 1 (Compl. ¶¶ 10, 15, Ex. 1). Unable to dispute these facts, Varian’s brief simply ignores the factual change in ownership, and argues as if the transfer did not occur. The law makes clear that the transfer of title requires this Court to allow this case to proceed. IV. ARGUMENT A. Claim Preclusion Requires A Prior Decision On The Merits For over 100 years, a fundamental requirement for res judicata has been a prior judgment Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 9 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 5 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) on the merits. Hughes v. United States, 71 U.S. (4 Wall.) 232, 237 (1866). Determining whether a decision is on the merits cannot be accomplished by inspection of the prior judgment for a “with prejudice” designation. See Semtek International, Inc. v. Lockheed Martin Corp., 521 U.S. 497, 499, 509 (2001) (analyzing Rule 41(b) and finding prior judgment not necessarily preclusive even though it was “with prejudice”). Rather, the issue is whether the prior judgment decided the matter in dispute. As noted by the court in Saylor v. Lindsley, 391 F.2d 965, 968 (2d Cir. 1968), “[t]he requirement that a judgment, to be res judicata, must be rendered ‘on the merits’ guarantees to every plaintiff the right once to be heard on the substance of his claim” (emphasis added). B. The Prior Dismissal In The Pennsylvania Case Was Not “On The Merits” Because It Was A Dismissal For Failure To Join A Necessary Party 1. Under Rule 41(b), A Dismissal Based On Failure To Join A Party Is Not A Judgment On The Merits Fed. R. Civ. P. 41(b) says a judgment is to be considered an adjudication on the merits “except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19” (emphasis added). The rule is clear on its face that dismissals based on failure to join a party are not “on the merits.” Of course, that also has been black-letter law for over a century. Hughes, 71 U.S. at 237 (“If the first suit was dismissed for defect of pleadings, or parties, . . . or the want of jurisdiction, or was disposed of on any ground which did not go to the merits of the action, the judgment rendered will prove no bar to another suit.”) (emphasis added). 2. A Dismissal For Lack Of Standing Is Not Preclusive To A Future Suit Where Standing Exists A judgment based on lack of standing is jurisdictional in nature, rather than on the merits. Media Techs. Licensing, LLC v. Upper Deck Co., 334 F.3d 1366 (Fed. Cir. 2003) is controlling authority on this issue and requires that Varian’s Motion to Dismiss be denied. Despite Varian’s efforts to conjure up some distinctions between the current facts and Media Technologies, the cases are identical for purposes of resolving the claim preclusion issue presented by Varian’s motion. Like this case, Media Technologies involved two lawsuits, the first one having been Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 10 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 6 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) dismissed on standing grounds. See 334 F.3d at 1368. More particularly, the first suit was dismissed because the assignment to the plaintiff was ineffective, so that, just like this case, the plaintiff was alleged not to have full ownership of the patents. See id. The first suit in Media Technologies was dismissed “with prejudice,” as was the Pennsylvania Litigation. See id. at 1369. The ownership was subsequently corrected by a proper transfer to Media Technologies, and suit was refiled. Id. at 1368-69. The District Court dismissed the second suit based on claim preclusion. Id. at 1369. It relied on the fact that the prior case “was dismissed with prejudice,” the same language that Varian treats as a magical incantation in this case. See id. The Federal Circuit reversed, stating unambiguously that dismissals based on standing are not preclusive: To be given preclusive effect, a judgment must be a final adjudication of the rights of the parties and must dispose of the litigation on the merits. . . . The Ninth Circuit, in common with other federal courts, recognizes that standing is a threshold question that must be resolved before proceeding to the merits of a case. . . . Because standing is jurisdictional, lack of standing precludes a ruling on the merits. Thus, the district court erred in giving preclusive effect to the Telepresence judgment because its dismissal of Telepresence’s complaint for lack of standing was not a final adjudication of the merits. Id. at 1369-70 (emphasis added). Similarly, the Pennsylvania Court’s dismissal, see Varian’s Req. for Judicial Notice Ex. H at 6 (“the Court grants the Motion for Summary Judgment for Lack of Standing”), is not preclusive, and Media Technologies makes crystal clear that it would be legal error to give that prior judgment preclusive effect. Varian attempts to get around the controlling holding in Media Technologies by arguing that the case concerned constitutional standing while the dismissal in the Pennsylvania Litigation involved “prudential” standing, and therefore, was not a “jurisdictional” dismissal. Varian’s Mem. of P. & A. in Supp. of Mot. To Dismiss 13 [hereinafter “Varian Mem.”]. To support its position Varian relies on Intellectual Property Development, Inc. v. TCI Cablevision of California, Inc., 248 F.3d 1333, 1348-49 (Fed. Cir. 2001). Id. Contrary to Varian’s assertions, TCI does not hold that a dismissal based on prudential standing is not jurisdictional. In fact there is controlling Federal Circuit law, conveniently ignored by Varian that is directly on point and reaches a contrary conclusion. The Federal Circuit has held that lack of standing is Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 11 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 7 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) jurisdictional, whether based on constitutional standing or prudential standing. Mentor H/S, Inc. v. Med. Device Alliance, Inc., 240 F.3d 1016, 1018 (Fed. Cir. 2001).1 After noting that Mentor satisfied constitutional standing as an exclusive licensee, the Federal Circuit still dismissed the case based on lack of standing because “the issue of whether an exclusive licensee has sufficient rights in a patent to bring suit in its own name is jurisdictional, and, therefore, is not waived by a party’s failure to raise the issue in the district court.” Id. This Court has ruled consistently with Mentor. See Envtl. Prot. Info. Ctr. v. Pac. Lumber Co., 469 F. Supp. 2d 803, 812 (N.D. Cal. 2007) (“An Article III court cannot entertain the claims of a litigant unless that party has demonstrated the threshold issue of whether it has constitutional and prudential standing to sue.”). Unable to square its “prudential” argument with the decisions in Media Technologies and Mentor,2 Varian cites off-point decisions (like TCI) and misstates their holdings. Varian’s argument is surprising given the contrary position it took on the same issue in the Pennsylvania Court. In its opposition to add CMU to that case, Varian said “[t]he defect caused by its non-participation during the last eight months is jurisdictional, and jurisdiction cannot be conferred by consent.” UPitt’s Request for Judicial Notice Ex. 1 at 2. Varian worried that, if the case were to proceed in its current form, the parties would find the “judgment voided by an appellate court finding of no jurisdiction.” Id. at 9. Now that Varian perceives that previous position is no longer advantageous, it blithely takes a contrary position in this Court. Such flip- flops cannot change the law as articulated in Mentor. The other theory that Varian advances in a weak attempt to distinguish Media Technologies is that the correction of standing in that case occurred “promptly,” whereas in this 1 Varian cites Motorola Credit Corp. v. Uzan, 388 F.3d 39, 55 (2d Cir. 2004) for the proposition that prudential standing is not jurisdictional. However, unlike Motorola, this is a patent case, and Federal Circuit law controls. 28 U.S.C. § 1295. There appears to be a significant split in the circuits on this issue. See also La. Envtl. Action Network v. Browner, 87 F.3d 1379, 1381 (D.C. Cir. 1996) (“An Article III court cannot entertain the claims of a litigant unless the party has demonstrated constitutional and prudential standing . . . .”). 2 Because lack of standing is jurisdictional under Federal Circuit law, Rule 41(b) prevents a standing dismissal from being considered “adjudications on the merits” for res judicata purposes. See Fed. R. Civ. P. 41(b); Hughes 71 U.S. at 237. This is yet another reason why the dismissal in the Pennsylvania Litigation cannot be given claim preclusive effect. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 12 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 8 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) case it allegedly did not. Varian Mem. 16. UPitt disagrees with that statement factually, but it is also legally irrelevant. Varian cites no case for the theory that standing, left uncorrected for too long, results in an adjudication on the merits. Such a holding would be contrary to established precedent that lack of standing always requires dismissal for want of jurisdiction, even if raised, sua sponte, for the first time at the Supreme Court. See Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 110 (2001); see also Mentor, 240 F.3d at 1018. A lack of standing always precludes a court from reaching the merits. See id. Therefore, Media Technologies controls this case, and mandates that Varian’s motion to dismiss be denied. 3. Rule 41(b) Prohibits The Result That Varian Seeks Because (1) the Pennsylvania Litigation was dismissed due to failure to join a necessary party and the lack of jurisdiction that resulted, and (2) Rule 41(b) excludes dismissals for failure to join a party or for lack of jurisdiction from being adjudications on the merits, it is indisputable that the dismissal in Pennsylvania was not an adjudication on the merits. It is equally clear that, because the dismissal was not an adjudication on the merits, it is not preclusive to the current action. See Hughes, 71 U.S. at 237. 4. Varian’s Untimeliness Argument Is Wrong As A Matter Of Fact And Law Varian argues to this court that the basic premise of the dismissal was that UPitt failed to address the standing issue in a timely way and its “failure to do so was unreasonable.” Varian Mem. 2. That is, Varian is arguing to this court that the dismissal was based on UPitt’s conduct. But in the Pennsylvania Litigation, Varian argued that the dismissal was required as a matter of law. It argued there was only one time to address the standing issue: on of the filing of the complaint. The Pennsylvania Court adopted Varian’s argument that UPitt could not correct or cure the standing problem by amending the pleadings. The Pennsylvania Court’s decision to dismiss rests on a legal conclusion of whether UPitt had standing to sue at the time it filed the complaint, and not on findings of fact as to UPitt’s conduct and the timeliness of its response to the issue. As discussed earlier, at the time it filed the initial complaint UPitt believed it had all of the authority it needed to bring the action in its own name. All of the inventors had assigned their Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 13 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 9 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) rights to UPitt and CMU had entered into an agreement giving UPitt the exclusive right to commercialize the patents. Undaunted, Varian argues that because the attempt to amend the pleading occurred after the expiration of the local rule for adding new parties, the failure to name the parties in accordance with the local rule means a subsequent suit must be barred. Varian cites no Ninth Circuit precedent to support its position, and the other circuit courts that have considered the issue have specifically held that the words of Rule 41(b) cannot be ignored. In Trujillo v. Colorado, 649 F.2d 823, 824 (10th Cir. 1981), the District Court ruled that an indispensable party had to be joined for the case to continue. When the plaintiff did not offer an amendment to correct the deficiency, the District Court dismissed the action. Id. Plaintiff refiled, and the District Court found the claim barred by res judicata. Id. at 825. The Tenth Circuit reversed, citing Rule 41(b). Id. Just like Varian, the defendant argued that the case was dismissed for failure to obey orders of the Court, but the Tenth Circuit rejected that proposition: Trujillo’s Title VII action was dismissed for failure to join proper parties and not for disobedience of a court order. The dismissal, therefore, did not constitute an adjudication on the merits and did not render that action res judicata to Trujillo’s present suit. Id. Trujillo relied on an earlier Fifth Circuit case that reached the same conclusion. In Mann v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 488 F.2d 75, 76 (5th Cir. 1973), the District Court found that Mann had not established diversity jurisdiction, and gave him 10 days to amend his complaint. He did not amend, and the District Court “dismissed for failure to obey the Court’s March order.” Id. The suit was refiled, but dismissed because the District Court “saw it as ‘an apparent effort to thwart the Court’s prior dismissal and denials of plaintiff’s two motions to vacate said dismissal.’” Id. The Fifth Circuit reversed, and was pointed in its assessment of the allegation that failure to timely amend the complaint can turn what Rule 41 states is not an adjudication on the merits into an adjudication on the merits: We hold that the suit should not have been dismissed. . . . Had the District Judge intended what he wrote literally – that the action was being dismissed because the March order had been “disobeyed” – he would have been guilty of an abuse of his Rule 41(b) discretion to dismiss. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 14 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 10 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) Id. Based on Rule 41(b) and the case law interpreting that provision, it would be legal error to conclude that the dismissal in Pennsylvania Litigation was a judgment on the merits that has claim preclusive effect. Varian cites a hodgepodge of district court cases, often unpublished, that give preclusive effect to denials of requests to amend the pleadings. Those cases are all distinguishable from the current facts because they did not involve jurisdictional dismissals or other dismissals that Rule 41(b) states are not adjudications on the merits. Varian relies heavily on ProtoComm Corp. v. Novell, Inc., Civ. Action No. 94-7774, 1998 U.S. Dist. LEXIS 9636 (E.D. Pa. June 29, 1998) (cited in Varian Mem. 14). The original case in ProtoComm was not dismissed for defect of parties; rather, it was tried to a jury resulting in a money judgment. Id. at *6-7. An attempt to add Novell prior to trial was denied (and later given preclusive effect), but there is no indication that Novell was ever considered to be a necessary party to the case as filed. Id. at *6, *13-14. Rule 41(b) did not apply. See also United States v. McGann, 951 F. Supp. 372, 375, 382 (E.D.N.Y. 1997) (court’s rejection of new claims against the same defendant did not implicate the Rule 41(b) categories of non-adjudications on the merits) (cited in Varian Mem. 14); Adolph Coors Co. v. Sickler, 608 F. Supp. 1417, 1429, 1433 (C.D. Cal. 1985) (same) (cited in Varian Mem. 14); Venuto v. Witco Corp., 117 F.3d 754, 756-57 (3d Cir. 1997) (the plaintiffs sought to be added were not necessary parties, and the case was tried to plaintiff’s verdict as filed instead of being dismissed on a party joinder issue) (cited in Varian Mem. 15). In each of these cases cited by Varian, the Courts had jurisdiction and had all necessary parties before them. The Courts involved also reached the merits of the claims in those cases. The Pennsylvania Court, by virtue of its holding on standing, concluded that it did not have all necessary parties before the Court, and lacked jurisdiction to hear the matter. Accordingly, it did not reach the merits of the claims. While the cases cited by Varian indicate that courts have authority to preclude new claims at a late stage of the litigation, the cases do not stand for the proposition that UPitt is barred from pursuing its previously-dismissed claims now that it is unquestionably before a Court with jurisdiction, and all necessary parties are unquestionably present. The cases similarly do not stand for the proposition that a court can enter Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 15 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 11 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) an order in contravention of Rule 41(b), or that a dismissal related to joinder of parties can be treated as an adjudication on the merits and given preclusive effect. Wong v. Regents of Univ. of Cal., 410 F.3d 1052 (9th Cir. 2005) (cited in Varian Mem. 9) does not concern the issues raised by Varian’s motion. The case did not involve a motion to dismiss on joinder grounds, and did not involve a motion to amend at all. Whether tardily- produced evidence can be excluded, the issue in Wong (id. at 1060), is not governed by Rule 41(b). On the other hand, whether to treat a dismissal for failure to join a party, or for lack of jurisdiction, as preclusive is governed by Rule 41(b), which answers the question with a resounding “no.” As Wright, Miller & Cooper have noted: The first category covers involuntary dismissals for lack of jurisdiction, . . . or failure to join a party under Civil Rule 19. . . . [S]uch dismissals do not operate as an adjudication upon the merits. Dismissal on any of these grounds indeed should not preclude a second action on the same claim that overcomes the initial defect of jurisdiction, venue, or parties. . . . [T]he court should not have any option to provide that such a dismissal does operate as an adjudication that bars a second action. Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction § 4435 (2d ed.). Of course, that is exactly the result that Trujillo and Mann, discussed supra, reached. The cases cited by Varian did not reach that conclusion because they did not concern that issue. 5. The Cases Cited By Varian Concern A Party Trying To Relitigate The Same Standing Issue A Second Time, An Issue Not Presented In This Case Trying to skirt established law, Varian cites several cases that bear little resemblance to the facts here. However, they have one important characteristic in common. Each case cited by Varian involves a second lawsuit where the standing issue is the same as in a prior case. The doctrine of issue preclusion prevents the same litigant from relitigating the same standing issue based on the same underlying facts a second time. See Baris v. Sulpicio Lines, Inc., 74 F.3d 567 (5th Cir. 1996) (a standing dismissal should not preclude a party from “litigating the same claim, provided that the specific defect has been corrected,” but “[s]uch a dismissal should, however, preclude relitigation of the specific issue of jurisdiction”) (emphasis added). UPitt is not trying to relitigate the same standing issue that was presented in the Pennsylvania Litigation. Rather, this case presents a different standing posture than presented in the Pennsylvania Litigation. The Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 16 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 12 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) Pennsylvania Court decided whether UPitt had standing based on the assignments from the inventors to UPitt. See Docket Entry 1 (Compl. Exs. 2, 4); Varian’s Req. for Judicial Notice Ex. G at 10. The standing posture of this case is based on those two assignments and a new assignment from CMU that did not form a part of the standing resolution in the Pennsylvania Litigation. Docket Entry 1 (Compl. Ex. 1). UPitt’s standing based on those three assignments has never been litigated, and issue preclusion cannot apply. See Kremer, 456 U.S. at 467 n.6. In Staples v. Ruyter Bay Land Partners, Civ. No. 2005-11, 2007 U.S. Dist. LEXIS 90806 (D. V.I. Dec. 10, 2007) (cited in Varian Mem. 11), plaintiffs were dismissed for lack of standing, and then later returned, with no changed facts, and reasserted the same claims with the same standing issue existing. Id. at * 12 (“In the instant action, without asserting a basis for standing, the Staples allege claims in the same capacity as the 2003 Plaintiffs in the 2003 Action.”). The Court did not allow the plaintiffs to relitigate the same standing issue a second time. Id. While Staples uses the term claim preclusion, it is facially an issue preclusion case.3 For this same reason, Chemlen v. Bank of Ireland First Holdings, Inc., No. 93-1592, 1993 U.S. App. LEXIS 28614 (1st Cir. Nov. 3, 1993) (cited in Varian Mem. 11-12), does not control this case. A bankruptcy proceeding had determined that Chemlen did not have standing to prosecute an appeal of a lawsuit settlement by a trustee. Id. at *1-3. Chemlen filed another case that had the same standing deficiency as the first case. Id. at *3-4. It was held that res judicata prevented the second case. Id. at *4. It is unclear why Varian cited Stewart v. U.S. Bancorp., 297 F.3d 953 (9th Cir. 2002) (see Varian Mem. 12 n.15), as that case did not concern a dismissal for failure to join the proper parties, or for lack of jurisdiction, or for lack of standing. Rather, plaintiffs’ claims were dismissed because they were preempted by federal law. Id. at 959. The case actually supports 3 Whether the Court uses the term “claim preclusion” or the term “issue preclusion” is not determinative. See, e.g., Cory v. Fahlstrom, No. 05-3010, 2005 U.S. App. LEXIS 13074 (10th Cir. Jun. 29, 2005) (unpublished) (affirming district court’s dismissal of plaintiff’s claims for lack of standing where facts underlying standing did not change). The Tenth Circuit noted that the District Court’s reference to claim preclusion was not correct, but that issue preclusion did apply. Id at *4-*5. The Tenth Circuit allows citation to its unpublished decisions. See 10th Cir. R. 32.1. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 17 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 13 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) UPitt because the Ninth Circuit confirms that Rule 41(b) prohibits a dismissal based on “lack of jurisdiction, for improper venue, or for failure to join a party” from being an adjudication on the merits. Id. at 956. The reason the court found res judicata to apply is that preemption is a substantive bar to a claim, not a lack of subject matter jurisdiction. Id. at 958 (“[F]ederal preemption is a defense that applies once the court that is exercising jurisdiction considers the merits of the claims presented.”). As discussed above, standing is jurisdictional, and precludes reaching the merits. Therefore, under Stewart, Rule 41(b) would control and mandate that the dismissal in Pennsylvania Litigation was not “on the merits,” and thus not preclusive to this case. Moreover, unlike standing, preemption cannot be cured. Therefore, finding it to be a decision on the merits is far more sensible than any finding that a dismissal for lack of standing is claim preclusive to a future suit with corrected standing. Varian’s arguments to this Court that a prior dismissal on standing bars the current claims where any standing issue has been corrected is unsupported by any legal authority. It would be legal error to grant Varian’s motion. C. UPitt Corrected Any Standing Issues That Had Existed In The Pennsylvania Litigation Varian argues that UPitt has not cured the standing issue that existed in the Pennsylvania Litigation. Varian Mem. 17-20. The arguments advanced are misplaced. 1. It Does Not Matter Whether CMU Could Have Sued Varian Varian seems to be arguing that, since CMU did not have standing to sue as a co-owner, its assignee would not have standing to sue either. Varian Mem. 17. That would be true if CMU had transferred its rights to some stranger to the case. However, CMU transferred its rights to UPitt, the entity that already had all rights other than those CMU allegedly had. Accordingly, after the assignment, UPitt necessarily has all rights in the patents, and standing to sue. The cases cited by Varian are not relevant as they simply hold that all co-owners must join as plaintiffs in a patent infringement suit. In this case, UPitt acquired whatever interest CMU had, if any, in the patents-in-suit. It added what CMU had to its own prior ownership rights, unquestionably Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 18 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 14 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) securing full ownership, and standing to sue by itself.4 See Int’l Nutrition Co., v. Horphag Research Ltd., 257 F.3d 1324, 1331 (Fed. Cir. 2001) (50% co-owner cannot bring suit) (cited in Varian Mem. 17); Israel Bio-Eng’g Project v. Amgen Inc., 475 F.3d 1256, 1264-65 (Fed. Cir. 2007) (there is no standing unless all co-owners join the suit) (cited in Varian Mem. 17). Varian cites no case for the proposition that, if Party A and Party B are co-owners, and Party B assigns to Party A, Party A still lacks standing to sue. No such case law exists, and the proposition is facially unsound. Title to an invention initially vests in the inventors. Regents of Univ. of N.M., 321 F.3d at 1118-19. They typically assign the invention to their employer. See id. at 1119. According to Varian’s theory, the employer would lack standing to sue because no individual inventor had standing. Varian ignores that after execution of such assignments, employers sue based on inventions of their employees every day, which is specifically authorized by statute. 35 U.S.C. § 261 (patents freely assignable), § 100(d) (“patentee” includes successors in title), § 281 (“patentee” has remedy of civil suit). 2. It Does Not Matter Whether UPitt And CMU Were In Privity In The Prior Lawsuit Varian stretches the doctrine of claim preclusion beyond all recognition when it asserts that CMU lost its patents rights as a result of a jurisdictional standing resolution in the Pennsylvania Litigation where it was not a party. Varian Mem. 17 n.19, 18. It is ironic that Varian spent so much time in the Pennsylvania Litigation complaining that CMU was not a party, and now, in this Court, argues that CMU was for all practical purposes a party (Varian Mem. 18), and is barred by the result.5 4 If Varian contends that the combination of UPitt’s original rights and CMU’s prior rights are not the entire ownership interest, that would be a question of fact precluding the grant of a 12(b)(6) motion where UPitt’s operative pleading asserts full ownership rights. See Docket Entry 1 (Compl. ¶¶ 10, 15). 5 Varian does not seem troubled by such inconsistencies. In the Pennsylvania Litigation, in opposition to UPitt’s efforts to add CMU, Varian said UPitt “should be required to commence a new action to avoid the possibility of jurisdictional defects and to eliminate the prejudice that Varian would suffer if the current case were to continue with CMU as an added party.” UPitt’s Request for Judicial Notice Ex. 1 at 3. After convincing the Pennsylvania Court to deny the motion to amend, requiring UPitt to file this new case, Varian flip-flops and says it is prejudiced by the new case, and the new case is barred. Varian is apparently willing to say anything to avoid facing the merits of this infringement case. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 19 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 15 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) First and foremost, as discussed above, the dismissal in the Pennsylvania Litigation was not on the merits, so it is not preclusive to UPitt. It is for the same reason not preclusive to CMU, whether or not UPitt and CMU were in privity in that lawsuit. The cases cited by Varian do not support the legal propositions that Varian advances. In Talbot v. Quaker-State Oil Refining Co., 104 F.2d 967, 968 (3d Cir. 1939) (cited in Varian Mem. 18-19), the first court decided that the defendant was licensed, noting that “a license by one of two joint owners is a complete defense to an infringement suit.” Unlike a standing dismissal for failure to join a necessary party, a successful license defense is a defense on the merits and, therefore, the court precluded a privy to the plaintiff from litigating the same claim. The case has no application here. Varian’s citation of a case on license defense is odd, to say the least, given that Varian’s refusal to license the UPitt patents is the reason for this lawsuit. The other cases by Varian in its brief at page 18 relate to whether two parties are in privity, and have nothing to do with a prior dismissal that was not on the merits. D. UPitt Engaged In No Misconduct In The Pennsylvania Litigation, And Its Complaint Was Not Dismissed As A Sanction Varian speaks of UPitt’s “slippery legal tactics,” and “unjustified delay.” Varian Mem. 2, 10. While such name-calling is irrelevant to whether a standing dismissal is preclusive, the allegations are also factually untrue. Shortly before filing the application that would become the ’554 Patent, UPitt secured an assignment from each of the inventors. See Docket Entry 1 (Compl. Ex. 2 (assignment dated August 1996)). The assignment was recorded at the United States Patent and Trademark Office (“USPTO”), and the USPTO issued the ’554 patent listing “University of Pittsburgh of the Commonwealth System of Higher Education” as the assignee. Id. at Ex. 3. Similarly, shortly before filing the application that would become the ’431 Patent, UPitt secured an assignment from each of the inventors. Id. at Ex. 4 (assignment dated October 1996). Again, the assignment was recorded at the USPTO, and the ’431 Patent issued listing “University of Pittsburgh of the Commonwealth System of Higher Education” as the assignee. Id. at Ex. 5. When UPitt filed its suit in Pennsylvania, it believed it had standing to file the suit, and official title records so indicated. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 20 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 16 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) The cornerstone of a patentee’s right to sue is possession of legal title to the patent at issue. See Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991) (“The general rule is that one seeking to recover money damages for infringement of a United States patent (an action ‘at law’) must have held legal title to the patent during the time of infringement.”) (emphasis in original). At all times UPitt has had legal title to both patents in suit. All of the inventors assigned all right, title, and interest in the patents-in-suit to UPitt. No other entity was assigned these rights, not even CMU. Varian argued in the Pennsylvania Litigation that two policy documents relating to joint development projects between UPitt and CMU (“Joint IP Policy Guidelines”) prevented UPitt from having all substantial rights in the patent. See Poppe Decl. Exs. H, I. Particularly, Varian latches on to statements in the policies that all IP jointly developed by UPitt and CMU would be jointly owned by UPitt and CMU, but that does not change the fact that the inventors transferred legal title in the patents-in-suit to UPitt, and what CMU received under the Joint IP Policy Guidelines was a right to share in licensing proceeds from the patents-in-suit. Id. at Ex. H § G, Ex. I § G. At no time did CMU claim that it had the right to assert the patents. Varian notes that CMU was aware of the Pennsylvania Litigation (Varian Mem. 18); CMU never asserted that UPitt was not the proper party to sue Varian. While these facts are not relevant to the instant motion, they make clear that UPitt had a reasonable basis to file the suit in Pennsylvania. As discussed earlier, Varian tries to suggest that the standing dismissal in the Pennsylvania Litigation is some type of sanction for “wrongful” conduct by UPitt. Varian Mem. 16. The record in Pennsylvania says otherwise. Trying to press its wrongful conduct theory in Pennsylvania, Varian filed a motion for sanctions under Fed. R. Civ. P. 11. UPitt’s Req. for Judicial Notice Ex. 3. Varian submitted a proposed order asking for a myriad of over-zealous, punitive relief, including the following: “This action is hereby DISMISSED WITH PREJUDICE. The Court finds this further sanction is also needed to deter future violations of Rule 11 . . . .” Id. The Court denied the motion for sanctions in its entirety. Varian’s Req. for Judicial Notice Ex. E at 43 (Apr. 30, 2008 Text Order). Therefore, there is no basis in the evidentiary record to conclude that the “with prejudice” dismissal in the Pennsylvania Litigation is based on anything Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 21 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 17 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) other than the basis stated, namely, lack of standing.6 E. Public Policy Demands That UPitt Be Allowed To Have The Merits Of Its Dispute With Varian Resolved Varian apparently believes that public policy entitles it to a free ride on UPitt’s hard work because the Pennsylvania Court disagreed with UPitt that the inventions solely belonged to UPitt, and instead found they were jointly owned by UPitt and CMU. See Varian Mem. 19. It is clear that the inventions were not developed by Varian, or owned in any part by Varian, or licensed in any way to Varian, even though Varian has misappropriated them to make a profit. In that circumstance, public policy counsels that UPitt should have its day in court on the substance of the patent infringement claims, now that it has all the ownership interests that anyone has ever claimed are necessary to fully own the patents-in-suit. “[R]es judicata is a principle of public policy and should be applied so as to give rather than deny justice.” Dore v. Kleppe, 522 F.2d 1369, 1374 (5th Cir. 1975); see also Saylor, 391 F.2d at 968 (“every plaintiff [has] the right once to be heard on the substance of his claim”). While Varian complains of prejudice, it never articulates what prejudice it suffered. For example, it never identified any discovery it took in the Pennsylvania Litigation that would have been unnecessary had CMU been a party. The important question is not what burden litigation placed on Varian, as it is a patent infringer whose conduct is actionable. Rather, the question is what burden did the initial portion of the dispute occurring without CMU as a party place on Varian. As Varian admits in its paper, CMU was subject to discovery in the Pennsylvania Litigation. Varian Mem. 18. The only additional burden placed on Varian by CMU’s absence was the motion practice to determine whether CMU had ownership rights. However, the parties disputed that issue (and still dispute it), so resolution of the disputed issue was not an undue burden, or an unfair burden, to place on Varian.7 Ultimately, the District Court in Pennsylvania 6 To the extent Varian is arguing that the Pennsylvania Court nevertheless dismissed the Pennsylvania Action with prejudice as a sanction, it would be contrary not only to the record, but to the law. See Martin v. Brown, 63 F.3d 1252, 1262-63 (3d Cir. 1995) (holding that imposition of sanctions violates due process if it was done without particularized notice and an opportunity to be heard) (emphasis added). 7 UPitt has also taken other steps to avoid inefficiencies going forward, such as (1) agreeing that Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 22 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 18 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) disagreed that UPitt was the sole owner, and promptly thereafter, UPitt obtained a new assignment from CMU so that Varian’s infringement could be addressed. Public policy does not suggest that infringers be allowed unfettered access to the intellectual property of others over an initial standing dispute about whether a patent is solely owned or co-owned by the plaintiff, which is later mooted by a supplemental assignment. In a troubling pattern in its motion, Varian’s cases on this subject simply do not support the proposition it argues. See Ball v. Halsell, 161 U.S. 72, 77-78, 84 (1896) (enforcing a statute that forbade the assignment of claims against the government for purposes of litigation) (cited in Varian Mem. 19); Accrued Fin. Servs., Inc. v. Prime Retail, Inc., 298 F.3d 291, 298 (4th Cir. 2002) (rejecting “lawsuit-mining” assignments for litigation “with no regard for the informed wishes of the real parties in interest”) (cited in Varian Mem. 19). In this case, the assignment from CMU to UPitt was for the purpose of vesting ownership in a single party that could enforce the patents against an infringer who might otherwise get a free ride on the work of others. The assignment from CMU to UPitt does not violate public policy. Varian’s motion is particularly shocking in that it asks the Court to invalidate the assignment on public policy grounds in the context of a Rule 12(b)(6) motion based on no factual findings. That would be legal error. While public policy sometimes counsels courts to reject res judicata even though it technically applies (see Smith v. Pittsburgh Gage & Supply Co., 388 F.2d 983, 984 (3d Cir. 1968)), Varian cites no cases for the application of res judicata due to public policy when the technical requirements, like a prior judgment on the merits, are not met. Finally, the Federal Circuit has noted that “[w]hen applying res judicata to bar causes of action that were not before the court in the prior action, due process of law and the interest of justice requires cautious restraint.” Kearns v. General Motors Corp., 94 F.3d 1553, 1556 (Fed. Cir. 1996). Varian told the Pennsylvania Court that the Pennsylvania Litigation could not discovery taken in the prior case can be used in this case, and (2) agreeing to have the Special Master from the Pennsylvania Litigation finish his work on claim construction, or alternatively, to have an accelerated Markman hearing in this case, since the issues have already been briefed. On the other hand, Varian is not looking for fairness or efficiency; it is looking to win the lottery by turning a minor standing issue in the prior suit into a multimillion dollar release. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 23 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 19 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) proceed due to a “jurisdictional” issue, and that a new suit should be required. UPitt Request for Judicial Notice Ex. 1 at 2, 3. Varian is poorly situated from a justice and public policy perspective to assert that this new case is barred because of the jurisdictional dismissal it brought about in the prior case by its motion practice. F. The Appeal Of The Pennsylvania Case Challenges The Ruling That UPitt’s Original Ownership Rights Did Not Convey Standing UPitt has never contended that the appeal in the Pennsylvania Case made the dismissal in the Pennsylvania Case non-preclusive. Thus, Varian’s extended discussion of the finality of judgments pending appeal (Varian Mem. 20) is irrelevant. The prior judgment is not preclusive because it was a finding of lack of jurisdiction, based on standing, for failure to join a necessary party, and thus not on the merits, under either common law or Fed. R. Civ. P. 41(b). Given that the prior decision is not preclusive, the presence of an appeal of that decision cannot justify dismissal of this case. Varian cites no authority for that proposition. That would be new law. The concern voiced by Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 1988) (cited in Varian Mem. 20 n.22) is not present here. UPitt has not filed an “identical” case to the one previously filed in Pennsylvania. Rather, UPitt has filed a new case where it unquestionably has standing to sue, even if it did not have standing in Pennsylvania.8 V. CONCLUSION Varian has wholly failed to demonstrate that this case should be dismissed. It cites no case, in any court, where a dismissal based on a standing deficiency was held to be res judicata against a subsequent suit where standing had been corrected. Fed. R. Civ. P. 41(b) and Media Technologies control this case and require that the case be allowed to proceed. Varian’s Motion to Dismiss should be denied and this case must be allowed to proceed to trial. 8 UPitt believes it had standing originally, and that is why it has appealed the dismissal in the Pennsylvania Litigation. The Court of Appeals will not address the standing posture presented in this case as that issue was not litigated in the Pennsylvania Court. Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 24 of 25 MORGAN, LEWIS & BOCKIUS LLP ATTORNEYS AT LAW SAN FR AN C I SC O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DB2/20806008.1 20 UNIVERSITY OF PITTSBURGH’S OPPOSITION TO MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. (CASE NO. CV 08-02973 MMC) Respectfully submitted, Dated: August 15, 2008 MORGAN, LEWIS & BOCKIUS LLP DANIEL JOHNSON, JR. RITA E. TAUTKUS By: /s/ Daniel Johnson, Jr. Daniel Johnson, Jr. Attorneys for Plaintiff UNIVERSITY OF PITTSBURGH Case 3:08-cv-02973-MMC Document 57 Filed 08/15/2008 Page 25 of 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [PROPOSED] ORDER DENYING MOTION TO DISMISS (Case No. CV 08-02973 MMC) DB2/20808494.1 1 DANIEL JOHNSON, JR. (SBN 57409) RITA E. TAUTKUS (SBN 162090) MORGAN, LEWIS & BOCKIUS LLP One Market, Spear Street Tower San Francisco CA 94105 Telephone: (415) 442-1000 Facsimile: (415) 442-1001 Email: djjohnson@morganlewis.com Email: rtautkus@morganlewis.com Attorneys for Plaintiff UNIVERSITY OF PITTSBURGH UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION UNIVERSITY OF PITTSBURGH OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION d/b/a UNIVERSITY OF PITTSBURGH Plaintiff, v. VARIAN MEDICAL SYSTEMS, INC. Defendant. Case No. CV 08-02973 MMC [PROPOSED] ORDER DENYING MOTION TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) BY VARIAN MEDICAL SYSTEMS, INC. Case 3:08-cv-02973-MMC Document 57-2 Filed 08/15/2008 Page 1 of 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [PROPOSED] ORDER DENYING MOTION TO DISMISS (Case No. CV 08-02973 MMC) DB2/20808494.1 2 Upon consideration of Defendant Varian Medical Systems, Inc.’s (“Varian’s”) Motion to Dismiss Under Fed. R. Civ. P. 12(b)(6), Plaintiff University of Pittsburgh’s Opposition to Varian’s Motion to Dismiss Under Fed. R. Civ. P. 12(b)(6), any reply thereto, supporting papers and materials, the pleadings and papers of record, and oral arguments by counsel, IT IS HEREBY ORDERED THAT: The Motion to Dismiss Under Fed. R. Civ. P. 12(b)(6) by Varian Medical Systems, Inc. is hereby DENIED. IT IS SO ORDERED. Dated: ________________, 2008 ________________________________ The Honorable Maxine M. Chesney United States District Court Judge Case 3:08-cv-02973-MMC Document 57-2 Filed 08/15/2008 Page 2 of 2