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Orthophoenix, LLC v. Stryker Corp.

United States District Court, D. Delaware

March 28, 2017

ORTHOPHOENIX, LLC, Plaintiff,
v.
STRYKER CORPORATION, et al, Defendants. STRYKER CORPORATION, Counterclaim-Plaintiff,
v.
ORTHOPHOENIX, LLC, IP NAVIGATION GROUP, LLC, and MEDTRONIC, INC., Counterclaim-Defendants.

         UNSEALED 03/30/17

          John W. Shaw, SHAW KELLER LLP, Wilmington, DE Edward R. Reines and Michele Gauger, WEIL, GOTSHAL & MANGES LLP, Redwood Shores, CA Attorneys for Medtronic, Inc.

          Richard D. Kirk, Stephen B. Brauerman, Vanessa R. Tiradentes, and Sara E. Bussiere, BAYARD, P.A., Wilmington, DE Marc A. Fenster, Adam Hoffman, Amir A. Naini, and Jacob Buczko, RUSS, AUGUST & KABAT, Los Angeles, CA Attorneys for Orthophoenix, LLC.

          MEMORANDUM OPINION

          STARK, U.S. District Judge

         Presently before the Court is Medtronic, Inc.'s ("Medtronic") motion to enforce the parties' settlement agreement. (D.I. 274) Counterclaim co-defendants Medtronic and Orthophoenix, LLC ("Orthophoenix") dispute whether Orthophoenix agreed to pay Medtronic's legal fees as part of the settlement agreement in this case. Under the terms of the parties' Stipulation of Dismissal (D.I. 272)[1], the Court has jurisdiction to enforce their settlement agreement.

         I. BACKGROUND[2]

         A. The Orthophoenix/Medtronic Patent Purchase Agreement

         In April 2013, Medtronic assigned patents to Orthophoenix. The parties signed a Patent Purchase Agreement setting forth the terms of the sale. (See D.I. 276-4, -5, -6) The Purchase Agreement includes an indemnity provision, which provides that, in the event of a third-party claim against Medtronic, Orthophoenix would "provide counsel to Medtronic to defend such claim and .. . pay for the reasonable legal expenses of such counsel and such claim, " unless the claim arose from Medtronic's own actions. (D.I. 276-4 at § 4.14) A license agreement accompanying the Purchase Agreement also requires Orthophoenix to "defend, indemnify and hold Medtronic harmless from any claim, damage, or liability, including attorneys' fees, relating to [Orthophoenix's] enforcement or defense of any of the Patents." (D.I. 276-7 at § 3.5)

         B. Medtronic's Pursuit of Indemnification in this Lawsuit

         In October 2013, Orthophoenix filed a lawsuit alleging that Defendant Stryker Corporation ("Stryker") infringed the patents Medtronic assigned. Stryker answered with antitrust counterclaims against Orthophoenix and Medtronic.[3] (See D.I. 24 at ¶¶ 118-138)

         In September 2014, Orthophoenix moved to bifurcate and stay discovery of the antitrust claims. (See D.I. 41) Meanwhile, the patent case proceeded. Although Medtronic was not a party to the patent case, Stryker sought discovery from Medtronic. (See D.I. 281-1) In January 2015, Medtronic called Orthophoenix's litigation counsel to verify that Orthophoenix would indemnify Medtronic for the fees Medtronic incurred in responding to Stryker's discovery requests. (See id.) Orthophoenix's litigation counsel responded that Orthophoenix would not indemnify Medtronic, because the fees arose from Orthophoenix's patent case against Stryker, and the Purchase Agreement's indemnity provision covered only fees "arising directly from or in connection with a third party claim against Medtronic." (D.I. 281-2 (emphasis added)) Orthophoenix's counsel contended that only the antitrust counterclaim in which Medtronic was named as a co-defendant could be considered a claim against Medtronic, and that, as a result, Orthophoenix was not responsible for costs Medtronic incurred as a result of Orthophoenix's patent case against Stryker. (See id.)[[4]]

         C. The Stryker/Orthophoenix/Medtronic Settlement Agreement

         In early 2016, the parties began to negotiate a settlement. In the days before they signed a final agreement, Orthophoenix and Medtronic discussed whether and how Medtronic would be reimbursed for the legal fees it incurred during the litigation. On April 27, Medtronic emailed Marathon Patent Group, Orthophoenix's parent company, regarding the relevant provisions of the draft agreement.[5] In the email, Medtronic discussed its expectations regarding reimbursement:

You'll note we did not include in our draft a date for the payment to Medtronic reimbursing its fees and costs. We think it would be appropriate to set such a date, but it doesn't have to be in the main agreement. I'd suggest we agree in a separate letter that the reimbursement payment will be made within 30 days of Medtronic providing a final statement. You have statements for past fees and expenses. Given the heavy discovery requirements of the last several weeks, we will have additional statements to submit to you. Certainly, if you can pay any of the past statements earlier, Medtronic would appreciate it, but it is willing to complete the agreement with Stryker and then submit a final statement to you so long as there is an agreement that Medtronic's fees and costs will indeed be reimbursed fully.

(D.I. 276-11 at 2)

         Five days later, Medtronic emailed Marathon to confirm the logistics of the reimbursement. Medtronic wrote that it "need[ed] to confirm a date for reimbursement of Medtronic's fees and costs incurred in relation to Ortho's litigation, " and asked Marathon to propose one. (D.I. 276-12 at 3) Marathon responded by proposing that it would reimburse Medtronic ten days after Stryker sent the settlement payment. (See Id . at 2; see also D.I. 276-10 at 6) Marathon also requested "full detail of all invoices." (D.I. 276-12 at 2) Medtronic responded that Marathon "should have invoices from earlier in the case" and promised that future invoices would "be [at] that same level of detail." (Id.) Medtronic also confirmed that "ten days works for Medtronic for the reimbursement of its fees and costs." (Id.)

         On May 4, Medtronic asked Marathon to confirm that Marathon had received copies of invoices for Medtronic's legal fees for the month of April. (See D.I. 276-13 at 2; see also D.I. 276-14) Marathon responded by asking Medtronic how the new invoices related to earlier invoices, and whether additional invoices were forthcoming. Marathon wrote:

Can you send any additional invoices? So to be clear it is this invoice plus the email from the other day? I am just trying to get all the invoices from MedTronic and want to make sure we have all of them.

(D.I. 276-13 at 2)

         The next day, Medtronic sent Marathon a compilation of all of the invoices for which it sought reimbursement. (See D.I. 276-16 at 2) Medtronic stated that, per the earlier discussion regarding the timing of the payment, Medtronic expected Marathon to pay the invoiced amount within ten days of the date Marathon received Stryker's settlement payment. (See id.) Medtronic also explained that it expected Marathon to pay any additional legal expenses incurred during ...


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