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Cornell University v. Illumina, Inc.

United States District Court, Third Circuit

June 25, 2013

ILLUMINA, INC., Defendant.


MARY PAT THYNGE, Magistrate Judge.


On May 10, 2010, Cornell University, Cornell Research Foundation, Inc. (collectively, "Cornell"), Life Technologies Corporation ("Life Technologies"), and Applied Biosystems, LLC ("Applied Biosystems") (collectively, "plaintiffs") brought this action against Illumina, Inc. ("defendant"), alleging infringement of eight patents.[1] Defendant answered on August 23, 2010, asserting counterclaims seeking declaratory judgment of invalidity and non-infringement of each patent.[2] Defendant did not initially plead any affirmative defenses or counterclaims concerning a covenant not to sue.[3] On October 4, 2010, defendant amended its answer to include that plaintiffs' claims are barred, as to Life Technologies and Applied Biosystems, based on a "grant of a covenant not to sue [defendant]."[4]

Thereafter, defendant filed a motion to bifurcate the covenant issue, and stay the patent infringement case, pursuant to FED. R. CIV. P. 42(b).[5] While that motion was pending, plaintiffs amended their complaint to add claims of infringement for three additional patents.[6] On October 20, 2011, the court granted defendant's motion to bifurcate and stay.[7]

Subsequently, defendant filed its amended answer and counterclaims to plaintiffs' first amended complaint.[8] In this pleading, defendant added a counterclaim for breach of the same contract that served as the basis for its covenant not to sue affirmative defense.[9] On May 23, 2012, a Report and Recommendation was issued granting plaintiffs' motion to dismiss defendant's breach of contract counterclaim, under FED. R. CIV. P. 12(b)(6), for failure to state a claim upon which relief can be granted, and denying defendant's request to file an amended counterclaim, pursuant to FED. R. CIV. P. 15(a).[10] The Report and Recommendation was adopted by the Honorable Leonard P. Stark on June 29, 2012.[11] Presently before the court are the defendant's[12] and plaintiffs'[13] cross-motions for summary judgment on the covenant not to sue issue, and plaintiffs' motion to strike.[14] The parties' cross-motions for summary judgment are directed to a covenant not to sue contained in a settlement and cross license agreement ("Settlement Agreement") between Applera Corporation ("Applera") and defendant Illumina.[15] Before considering the parties' respective arguments in their cross-motions for summary judgment, however, the court must address plaintiffs' motion to strike.

II. Motion To Strike

A. Summary of Arguments

In their motion to strike, plaintiffs argue:[16]

(1) Defendant's reply brief[17] relies on inadmissible evidence from an incomplete record on the parties' settlement negotiations, including the negotiation history, draft settlement agreements, and correspondence.

(2) Defendant's reply brief contains arguments and alleged facts that were not included in defendant's opening brief.

B. Discussion

Plaintiffs move to strike portions of defendant's response to plaintiffs' motion for summary judgment and reply in support of defendant's motion for summary judgment.[18] Plaintiffs contend defendant's arguments violate the parties' confidentiality agreements, the California mediation privilege, [19] and this court's Local Rules governing the form and contents of briefs, memoranda of points and authorities, and appendices.[20] More specifically, they argue defendant's reply brief relies on inadmissible evidence from an incomplete, and therefore, inaccurate record of the parties' settlement negotiations, and contains arguments and facts not included in defendant's opening brief.[21] Defendant notes motions to strike under FED. R. CIV. P. 12(f)[22] are "generally disfavored, unless the matter is clearly irrelevant to the litigation or will prejudice the adverse party."[23] Additionally, "[w]hen ruling on a motion to strike, the [c]ourt must construe all facts in favor of the nonmoving party and deny the motion if the defense is sufficient under law. Further, a court should not grant a motion to strike a defense unless the insufficiency of the defense is clearly apparent."[24]

1. Inadmissible Evidence - Settlement Negotiations and Settlement Agreement Drafts

Plaintiffs contend defendant's reply brief relies on inadmissible evidence from the parties' settlement negotiations. For the following reasons, plaintiffs' motion to strike inadmissible evidence from the settlement negotiations is granted.

a. Negotiation Record

Plaintiffs note defendant and Applera[25] entered into a confidentiality agreement where "any information discussed, exchanged, or disclosed" during negotiations "will be used only for settlement purposes" and not for "discovery or at trial or for any other purpose in any proceeding or litigation."[26] Thus, they argue defendant cannot rely on the negotiation history to clarify the terms "Defined Product, " "Blocking Patents, " and "necessarily infringed."[27] Defendant counters, by relying on material covered by the confidential agreements in their opening brief, plaintiffs "opened the door to the use of the negotiation record, ' and equity requires that [defendant] also be allowed to rely on this evidence."[28]

As to defendant's argument, plaintiffs contend they objected to defendant's evidence as inadmissible, and cited a settlement related document should the evidence be admitted.[29] Plaintiffs maintain such an "evidentiary proffer is a well-accepted tool of trial, and eliminates the unfairness of having an incomplete record should the objection about admissibility turn out to be wrong."[30]

While defendant does not cite any authority to support its proposition, evidence from the settlement agreement can be used if "offered for a purpose other than to prove the specific details of a negotiated claim."[31] "Evidence of agreements in general, or a policy of making a particular type of agreement may be relevant and not prohibited by Rule 408 as long as it does not extend to the terms of those licenses granted in settlement of litigation.'"[32] Even if plaintiffs "opened the door, " that door should remain closed where plaintiffs' references to the settlement agreement were inappropriate, and neither parties' evidence would be admissible.

Plaintiffs maintain defendant's arguments on pages nineteen to twenty-two of its reply brief, [33] based on the parties' settlement negotiations, are inadmissible. Because defendant relies upon settlement negotiations to prove the specific details or terms, the arguments based upon the parties' settlement negotiations contained in pages nineteen to twenty, [34] and twenty-one to twenty-two, [35] of defendant's reply brief are inadmissible.[36]

b. California Mediation Privilege

The California mediation privilege bars the admissibility, discovery, and disclosure of any evidence, including writings and communications, "prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation."[37] An exception to § 1119 exists if the parties expressly agree in writing to waive the protection. Plaintiffs represent no such consent exists here.[38] Defendant contends a private contract cannot constrain the court's ability to admit or exclude relevant evidence, [39] and "[a]n appropriate protective order can alleviate problems and concerns regarding both confidentiality and scope of the discovery material produced in a particular case."[40]

Plaintiffs point out when there is a question of general contract interpretation, the court looks to applicable state law.[41] "[I]n a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision."[42] Plaintiffs argue that presently, "the only issues ripe for decision by the Court are contract interpretation issues governed by state law."[43] Since the law to be applied at this stage is state law, that is, California law, which specifically addresses the use of writings and communications in mediation, the previously noted arguments contained in pages twenty-one to twenty-two[44] of defendant's reply brief are inadmissible.

c. Incomplete Record

Plaintiffs maintain defendant "created an incomplete factual record and blocked discovery on the very negotiations it relies on in its reply brief, " and should not be allowed to rely on the negotiation history.[45] By such conduct, plaintiffs argue defendant "has used the confidentiality agreements and the California mediation privilege as a shield against discovery and, therefore, should not be allowed to use self-serving parts of the negotiation history as a sword in its motion for judgment."[46]

Defendant counters, because plaintiffs did not agree to waive any rights under the September 18, 2003 confidentiality agreement in return for production of documents, "it was Plaintiffs, not Illumina, who blocked discovery of this information."[47] As such, it alleges "[p]laintiffs should not be entitled to use the parties' negotiation history as both a shield and a sword, presenting partial evidence of the parties' negotiation history, and, at the same time, preventing Illumina from offering its evidence of the negotiation history, which would provide a complete and accurate record."[48] Nevertheless, for the reasons discussed above, because information disclosed during negotiations is inadmissible for discovery or at trial or for any other purpose in any proceeding or litigation, the incomplete record issue is moot.

2. Inadmissible Evidence - New Arguments and Alleged Facts

Plaintiffs point out a party may not "reserve material for the reply brief which should have been included in a full and fair opening brief."[49] They contend defendant's reply brief "raised numerous new arguments and cited new evidence that could have, and should have, been raised in its opening brief."[50] Defendant argues its "reply" brief was actually a "reply in support of its own motion for summary judgment, combined with a response to Plaintiffs' own motion for summary judgment" pursuant to the briefing schedule.[51] As such, the arguments and evidence in defendant's brief were "either explicitly contained within Illumina's initial brief or directly responsive to an argument raised by Plaintiffs."[52] Plaintiffs note while defendant was given twenty pages for its answering brief to oppose plaintiffs' cross motion, [53] and ten pages in its reply brief to address plaintiffs' answering brief, [54] through its conflated answering and reply brief, defendant reserved material for its reply brief which should have been in its opening brief.[55]

Plaintiffs state:
Illumina moved for summary judgment on the following three discrete issues addressed in its opening brief: (1) that the lawsuit is barred by the covenant not to sue in the 2004 Agreement (based on the definitions of "Defined/Modified Defined Product, " "Blocking Patents, " and "Excluded Patent Claims"); (2) that the Cornell Plaintiffs and Applied Biosystems lack standing; and (3) that Life Technologies and Applied Biosystems are bound by the covenant not to sue.[56]


Plaintiffs answered Illumina's motion and opened on their cross-motion, moving on the following four independent grounds: (1) that Life Technologies is not bound by the covenant not to sue; (2) that the Cornell Plaintiffs are not bound by the covenant not to sue; (3) that the Cornell Patents are not "owned or licensed by Applera" and therefore are not "Blocking Patents" covered by the covenant; and (4) that the Cornell Patents are not "necessarily infringed["] by the "Defined Product" and, therefore, are not "Blocking Patents."[57]

At first blush, many of the aforementioned issues overlap. Defendant's brief does not clearly delineate where its answering or reply briefs begin and end.[58] Despite these concerns, the court will address defendant's combined brief, and plaintiff's claims of new arguments and new alleged facts.[59]

a. New Arguments

For the following reasons, plaintiffs' motion to strike new arguments is granted in part and denied in part.

i. Evasion of the Covenant

Plaintiffs contend defendant merely speculates that they "shifted patent license rights to evade the Covenant, in derogation of Illumina's rights."[60] Defendant counters that no new argument exists in its combined brief, and plaintiffs are merely contorting the facts regarding the mergers and acquisitions to avoid their obligations under the Settlement Agreement, including the covenant.[61] Despite each side's spin, and, even if defendant's comment is mere conjecture, the court agrees this is not a new argument.

ii. Readers

Plaintiffs maintain defendant argues, for the first time in its reply brief, that "Illumina's readers, used to practice GoldenGate and DASL, also fall within the definition of Defined Products."[62] They point out defendant's opening brief only argued "Illumina's GoldenGate™ and DASL™ assays, performed using BeadChip arrays, SAM' or VeraCode beads - are Defined and Modified Defined Products, respectively."[63] Defendant contends because plaintiffs argued genuine material factual issues exist regarding whether the accused assays, Bead-Based products and readers fall within "Defined Products, " it is allowed to respond to plaintiffs' arguments.[64] The court finds defendant, in its combined brief, [65] merely responds to arguments raised in plaintiffs' answering brief on the issue of readers and Defined Products, and is not improperly raising new argument.[66]

iii. "Essentially Identical" And "Exactly The Same"

Plaintiffs contend defendant's argument that "Illumina's GoldenGate and DASL assays performed using VeraCode Beads are Modified Defined Products"[67] is premised on the assertion in defendant's opening brief that "[t]he chemistry of the GoldenGate or DASL assay performed using VeraCode Beads is essentially identical to the chemistry used to perform steps one through four of Exhibit 1 using SAM and BeadChip as of August 2004."[68] In its reply brief, defendant alleges "[t]he GoldenGate and DASL assays are performed in exactly the same manner, using the same steps of Exhibit 1."[69] Plaintiffs maintain omitting this argument in defendant's opening brief precludes raising it now, [70] and "to the extent that [defendant] believed that [defendant's] own documents supported its argument that assays using VeraCode beads are Modified Defined Products, ' [defendant] should have cited that material in its opening brief."[71]

Defendant counters the "in exactly the same manner" language is consistent with the argument in its initial brief, and was merely responsive to plaintiffs' assertions concerning the similarities between the products.[72]

The parties dispute the meaning of "substantially similar" as it applies to "Modified Defined Products." As plaintiffs argue, there is a difference between "essentially identical" and "exactly the same." In its opening brief, [73] defendant uses the term "essentially identical, " but notes "minor differences, " suggesting a distinction between its use of the terms "essentially identical" and "exactly the same." By using a term with a more restrictive meaning in its reply brief, defendant is essentially making a new argument, and therefore, the material on page twenty concerning "Modified Defined Products"[74] is struck, along with defendant's own documents cited in support of its argument that assays are performed "in exactly the same manner."[75]

iv. PCR Method Patents

Plaintiffs point out defendant, in its opening brief, did not argue equating "Genetic Analysis Patents [to] PCR method patents is contrary to the express purpose of the claimed invention."[76] Defendant counters it "spent nearly three pages in its initial brief addressing this argument."[77] The court finds defendant's argument is not new as its opening brief discusses that the claims at issue do not constitute "Excluded Patent Claims" since they are not claimed inventions that are PCR methods.[78]

b. New Facts

Plaintiffs contend that by referencing a 2003 Illumina press release, defendant introduces new factual material in support of its argument that the Sentrix Array Matrix and BeadChip are both an Illumina BeadArray.[79] Defendant responds the 2003 press release was publicly available, and was used to counter plaintiffs' argument that BeadChip products are not Illumina BeadArrays.[80]

In their response to defendant's opening brief, plaintiffs discuss whether BeadChip products are Illumina BeadArrays.[81] Since this was not in the section relating to plaintiffs' opening brief, defendant is not responding to plaintiffs' argument.[82] Rather, plaintiffs are responding to defendant's contentions, with defendant adding factual material in its reply brief not previously included in its opening brief. Therefore, plaintiffs' motion to strike new facts is granted, and the factual material on page eighteen of defendant's reply brief[83] will not be considered.[84]

3. Leave to File a Sur-Reply

In light of the findings herein, it is unnecessary for plaintiffs to file a sur-reply brief to purportedly "provide a full and fair opportunity to respond to [defendant's] newly raised factual and legal arguments."[85] The court denies plaintiffs' motion to strike on three issues: (1) the evasion of covenant argument, (2) the readers argument, and (3) the PCR method patents argument. For the evasion and PCR method patents arguments, defendant included its position in its opening brief, [86] and plaintiffs suffer no prejudice because they had a chance to reply.[87] As to the readers argument, [88] defendant was responding to issues raised in plaintiffs' answering brief.[89]

III. Cross-Motions for Summary Judgment

A. Legal Standard

Summary Judgment is appropriate if the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and the movant is entitled to a judgment as a matter of law."[90] Once there has been adequate time for discovery, Rule 56(c) mandates judgment against the party who "fails to make a sufficient showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."[91] When a party fails to make such a showing, "there can be no genuine issue as to any material fact' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."[92] The moving party is therefore entitled to judgment as a matter of law because "the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof."[93] A dispute of material fact exists where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party."[94]

The moving party bears the initial burden of identifying portions of the record which demonstrate the absence of a genuine issue of material fact.[95] However, a party may move for summary judgment with or without supporting affidavits.[96] Therefore, "the burden on the moving party may be discharged by showing' - that is, pointing out to the district court - that there is an absence of evidence supporting the nonmoving party's case."[97]

If the moving party has demonstrated an absence of material fact, the nonmoving party must then "come forward with specific facts showing that there is a genuine issue for trial."[98] If the nonmoving party bears the burden of proof at trial, he "must go beyond the pleadings in order to survive a motion for summary judgment."[99] That party "may not rest upon the mere allegations or denials of his pleadings, but must set forth specific facts showing that there is a genuine issue for trial."[100] At the summary judgment stage, the court is not to "weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial."[101] Further, "there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party."[102] The threshold inquiry therefore is "determining whether there is a need for trial - whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party."[103]

This standard does not change merely because there are cross-motions for summary judgment.[104] Cross-motions for summary judgment:

are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist.[105]

Moreover, "[t]he filing of cross-motions for summary judgment does not require the court to grant summary judgment for either party."[106]

B. Background

In 2004, in an attempt to resolve disputes following a joint development venture, Applera and Illumina entered into a settlement and cross license agreement ("Settlement Agreement").[107] The Settlement Agreement included a covenant not to sue, under which "Applera... its Successors, or its assigns" would not bring suit against Illumina for infringement of "the Blocking Patents by the Defined Product or Modified Defined Product."[108] The Settlement Agreement included an integration clause[109] and a California choice of law provision.[110]

Subsequent to execution of the Settlement Agreement, a series of business transactions occurred. As recited in the parties' Stipulation of Agreed Facts:[111]

1) Applied Biosystems Inc. was formed on June 24, 2008 as a direct, wholly owned subsidiary of Applera Corporation.
2) Effective July 1, 2008, Applied Biosystems Inc. merged with and into Applera Corporation (the "Applied Biosystems Inc. ...

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