C.R. Bard Incorporated v. Atrium Medical Corporation

• Court: District Court, D. Arizona
• Decided: April 18, 2022
• Docket: 2:21-cv-00284
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 C. R. Bard, Inc., No. CV-21-00284-PHX-DGC

10 Plaintiff/Counterdefendant, ORDER

11 v.

12 Atrium Medical Corporation,

13 Defendant/Counterclaimant. 14 15 16 Plaintiff C. R. Bard, Inc. (“Bard”) asserts breach of contract and related claims 17 against Defendant Atrium Medical Corporation (“Atrium”). See Docs. 1, 37, 53. Atrium 18 moves to dismiss Bard’s second amended complaint for failure to state a claim for relief. 19 Docs. 53, 61. Bard moves to dismiss Atrium’s amended counterclaims as time barred. 20 Docs. 57, 63. The motions are fully briefed (Docs. 65, 68, 69, 71, 74), and oral argument 21 will not aid the Court’s decision. See LRCiv 7.2(f). For reasons stated below, the Court 22 will deny each motion. 23 I. Background. 24 In August 2010, Bard’s wholly-owned subsidiary, Bard Peripheral Vascular 25 (“BPV”), filed suit against Atrium alleging infringement of U.S. Patent 6,435,135 26 (“’135 Patent”). See BPV, Inc. v. Atrium Med. Corp., No. 2:10-cv-01694-PHX-DGC 27 (D. Ariz. Aug. 10, 2010). In January 2011, Bard and Atrium entered into a Settlement 28 Agreement and a Licensing Agreement. See Docs. 61-2, 61-3. 1 Under those Agreements, BPV’s infringement claim against Atrium was dismissed 2 and Atrium was granted a license to the ’135 Patent and all other patents that rely on the 3 ’135 Patent (“Licensed Patents”). See Docs. 61-2 § 2(c), 61-3 § 2.1. Atrium agreed in the 4 License Agreement to pay royalties to Bard in an amount equal to 15% of net sales of 5 licensed products or a minimum of $3.75 million quarterly. See Doc. 61-3 §§ 3.1, 3.2. The 6 License Agreement remains in effect until the last of the Licensed Patents expires. See id. 7 §§ 1.15, 7.1. Bard claims that Canadian Patent 1,341,519 (“Canadian Patent”) is a 8 Licensed Patent and the Agreement is effective until January 2, 2024 – the date on which 9 the Canadian Patent expires. See Doc. 53 ¶¶ 15, 22-23, 31. 10 The ’135 Patent expired on August 20, 2019. See Doc. 53 ¶ 24. Thereafter, Atrium 11 made royalty payments to Bard totaling 15% of its net profits on licensed products at 12 amounts significantly lower than the $3.75 million due each quarter under the minimum 13 royalties provision. See id.; 61-3 § 3.2.1 Atrium claims that the License Agreement ended 14 when the ’135 Patent expired. Doc. 61 at 6.2 Bard alleges that Atrium’s failure to make 15 minimum royalty payments after the ’135 Patent expired constitutes a breach of the 16 Agreements. Doc. 53 ¶¶ 26, 53, 83. Atrium counters that no royalty payments were owed 17 to Bard after the ’135 Patent expired because BPV – not Bard – owns the Canadian Patent. 18 See Docs. 44 at 4, 61 at 6, 20. 19 Bard’s first amended complaint asserts claims for breach of contract (Counts I-V), 20 declaratory judgment (Count VI), specific performance (Count VII), promissory estoppel 21 (Count VIII), and quantum meruit (Count XII). Doc. 37 ¶¶ 51-111, 115-19.3

22 1 According to Bard, for the quarter during which the ’135 Patent was still partially valid, Atrium paid Bard $2,078,084. Doc. 53 ¶ 25. For the subsequent quarters, Atrium 23 paid Bard $139,391, $132,149, $105,070, $138,399.73, $139,015.34, $91,029.74, and $97,467.09, for a grand total of $2,921,145.90. Id. Had the minimum royalty amount been 24 paid quarterly over the same time period, Atrium would have paid Bard $30 million, $27,078,854.10 more than it has paid. 25 2 Page citations are to numbers attached to the top of pages by the Court’s electronic 26 filing system.

27 3 The Court denied Bard leave to add claims for abuse of process (Counts IX and X) and breach of the covenant of good faith and fair dealing (Count XI). See id. ¶¶ 112-14; 28 Doc. 35 at 9-12. 1 A hearing was held on December 20 to discuss a possible motion for sanctions 2 against Bard under Rule 11 of the Federal Rules of Civil Procedure. See Doc. 54. Atrium 3 claimed that Bard falsely states in paragraph eight of the complaint that it owns the 4 Canadian Patent. Doc. 59 at 4-5. Bard argued that this statement is not false because Bard 5 owns BPV and its assets, including the Canadian Patent. Id. at 14-15. Bard offered to 6 resolve the dispute by amending paragraph eight to make clear that it owns the Canadian 7 Patent “through its wholly-owned subsidiary [BPV].” Id. at 16.4 The Court found that a 8 Rule 11 motion was not appropriate and that Bard should simply amend the complaint. 9 Doc. 59 at 25-27. 10 Bard filed the second amended complaint on December 21. Doc. 53. A week later, 11 Atrium filed amended counterclaims for breach of contract, unjust enrichment, fraudulent 12 inducement, and negligent misrepresentation. Doc. 57. 13 II. Atrium’s Motion to Dismiss Bard’s Second Amended Complaint. 14 As noted, minimum royalties are owed under the License Agreement until the 15 expiration of all Licensed Patents. Doc. 61-3 §§ 3.2, 7.1. Licensed Patents include the 16 ’135 Patent and “all other patents of [Bard]” that rely on the ’135 Patent. Id. § 1.15. While 17 the ’135 patent expired in August 2019, the Canadian Patent – which relies on the ’135 18 Patent – remains valid until January 2024. See Docs. 44 at 2, 53 ¶¶ 8, 23-24, 31. 19 Bard alleges in Count I that Atrium has breached the License Agreement by failing 20 to make minimum royalty payments after the ’135 Patent expired. Doc. 53 ¶¶ 22-29, 51-55. 21 Atrium contends that Bard does not own the Canadian Patent and it therefore is not a 22 Licensed Patent under the Agreement. Doc. 61 at 14-16. Atrium moves to dismiss Count I 23 and all remaining claims for failure to state a claim for relief. See id. at 11-17. 24 A. Rule 12(b)(6) Standard. 25 Under Rule 12(b)(6), the well-pled factual allegations of the complaint are taken 26 as true and construed in the light most favorable to the plaintiff. See Cousins v. Lockyer,

27 4 The proposed amendment is consistent with paragraph six of the complaint, which alleges that “Bard, through its wholly-owned subsidiary [BPV], is the owner of [the] ’135 28 Patent[.]” Doc. 37 ¶ 6. 1 568 F.3d 1063, 1067 (9th Cir. 2009). A complaint that sets forth a cognizable legal theory 2 will survive a motion to dismiss if it contains “sufficient factual matter, accepted as true, 3 to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 4 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has 5 facial plausibility when the plaintiff pleads factual content that allows the court to draw the 6 reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although 7 the plausibility standard requires “more than a sheer possibility that a defendant has acted 8 unlawfully[,]” it “is not akin to a ‘probability requirement[.]’” Id. (citing Twombly, 550 9 U.S. at 556). 10 B. Bard Has Pled a Plausible Breach of Contract Claim. 11 The parties agree that Delaware law governs Bard’s breach of contract claims. See 12 Docs. 53 ¶ 13, 61 at 7, 61-2 § 14, 61-3 § 8.5. “The elements of a breach of contract under 13 Delaware law are: ‘(1) a contractual obligation; (2) a breach of the obligation by the 14 defendant; and (3) a resulting damage to the plaintiff.’” Miller v. Trimont Glob. Real Est. 15 Advisors LLC, No. CV 21-49-MAK, 2022 WL 610820, at *4 (D. Del. Feb. 28, 2022) 16 (quoting H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003)); see also 17 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003) (explaining that 18 the plaintiff must allege these three elements “to survive a motion to dismiss for failure to 19 state a breach of contract claim”). 20 Bard alleges that the License Agreement constitutes a valid and enforceable contract 21 between Bard and Atrium, the Canadian Patent is a Licensed Patent under the Agreement, 22 and Atrium has an obligation under the Agreement to make minimum royalty payments of 23 $3.75 million each quarter until the Canadian Patent expires. Doc. 53 ¶¶ 15, 17, 22-23, 52; 24 see also Doc. 61-3 §§ 1.15, 3.2. Bard further alleges that Atrium has breached that 25 obligation by refusing to make minimum royalty payments. Doc. 53 ¶¶ 24-26, 53. And 26 Bard claims that it has been damaged by Atrium’s breach in an amount not less than $27 27 million. Id. ¶¶ 27-29, 54. The Court finds that Bard has pled each element of a breach of 28 contract claim under Delaware law. See Doc. 35 at 4 (reaching the same conclusion in 1 denying Atrium’s initial motion to dismiss); Murdock v. Omega Fin., LLC, No. 7:20-CV- 2 00508-RDP, 2020 WL 3791878, at *3 (N.D. Ala. July 7, 2020) (finding that the plaintiff 3 stated a breach of contract claim under Delaware law by alleging that the parties’ stock 4 purchase agreement constitutes a contractual obligation, the defendant breached the 5 obligation by failing to pay an indemnity holdback amount, and the breach damaged the 6 plaintiff in the amount of $458,000); Johnson v. GEICO Cas. Co., 516 F. Supp. 2d 351, 7 357-58 (D. Del. 2007) (finding that the plaintiffs had “sufficiently pled the requirements 8 for a breach of contract claim so as to withstand dismissal” by alleging that they entered 9 into insurance contracts with the defendants, personal injury coverage provided in those 10 contracts was denied, and the plaintiffs were harmed by these breaches). 11 Atrium notes that while a complaint’s factual allegations need not be detailed, 12 surviving a Rule 12(b)(6) motion “requires more than labels and conclusions, and a 13 formulaic recitation of the elements of a cause of action will not do.” Doc. 61 at 12 (quoting 14 Twombly, 550 U.S. at 555); see also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the 15 elements of a cause of action, supported by mere conclusory statements, do not suffice.”). 16 But the complaint does not merely recite the elements of a breach of contract claim. It 17 contains detailed factual allegations that are “enough to raise a right to relief above the 18 speculative level[.]” Twombly, 550 U.S. at 555. Specifically, the complaint alleges that 19 BPV is Bard’s wholly-owned subsidiary, that Bard owns the Canadian Patent through 20 BPV, that the Canadian Patent is within the scope of the License Agreement, and that 21 Atrium has breached the Agreement and damaged Bard by failing to pay minimum 22 royalties. Doc. 53 ¶¶ 1, 8, 15, 22-23, 25-29. These factual allegations “possess enough 23 heft to ‘show that [Bard] is entitled to relief.’” Twombly, 550 U.S. at 557 (quoting Fed. R. 24 Civ. P. 8(a)(2)). 25 Atrium’s contention that the breach of contract claim is not plausible lacks merit. 26 See Doc. 61 at 16-20 The terms of the Settlement Agreement and the License Agreement 27 suggest that Bard exercised its ownership control over BPV to grant a license to the 28 Licensed Patents, and Atrium understood that fact. See Doc. 63 at 7. After the Agreements 1 had been executed, Bard caused BPV to dismiss the patent infringement claim against 2 Atrium, and Atrium began using the technology covered by the Licensed Patents without 3 fear of further litigation. See id.; Doc. 53 ¶¶ 9-15. Under the License Agreement, Atrium 4 has paid Bard more than $130 million in royalties since 2011. See Doc. 61 at 1, 7. Given 5 this history, and construing the complaint’s factual allegations in the light most favorable 6 to Bard, see Cousins, 568 F.3d at 1067, the Court cannot conclude that the breach of 7 contract claim “stops short of the line between possibility and plausibility of ‘entitlement 8 to relief.’” Twombly, 550 U.S. at 557 (brackets omitted); see also Iqbal, 556 U.S. at 679 9 (“Determining whether a complaint states a plausible claim for relief will . . . be a context- 10 specific task that requires the reviewing court to draw on its judicial experience and 11 common sense.”).5 12 According to Atrium, the breach of contract claim should be dismissed because Bard 13 “now admits that BPV, a separate and distinct entity, owns the Canadian Patent.” Doc. 61 14 at 11 (citing Doc. 53 ¶ 8); see also Doc. 69 at 7 (“Bard concedes that . . . the Canadian 15 Patent has been ‘owned by’ BPV, not C.R. Bard.”) (citations and brackets omitted). But 16 the complaint states that “Bard . . . owns the Canadian Patent and all substantive rights in 17 and to the Canadian Patent.” Doc. 53 ¶ 8 (emphasis added). While Bard claims to own 18 the Canadian Patent “through its wholly-owned subsidiary [BPV]” (id.), the Court cannot 19 simply ignore Bard’s alleged ownership interest in the Canadian Patent. See Doc. 65 at 7; 20 Twombly, 550 U.S. at 555 (explaining that courts must “assum[e] that all the allegations in 21 the complaint are true (even if doubtful in fact)”); Iqbal, 556 U.S. at 679 (“When there are 22 well-pleaded factual allegations, a court should assume their veracity and then determine 23 whether they plausibly give rise to an entitlement to relief.”); In re Dynamic Random 24 Access Memory (DRAM) Indirect Purchaser Antitrust Litig., 28 F.4th 42, 44-45 (9th Cir. 25 2022) (“The standard for surviving a motion to dismiss under Rule 12(b)(6) is a familiar 26 one: a complaint must contain sufficient factual matter, accepted as true, to state a claim 27 5 Atrium notes that the complaint does not specifically allege that “other patents of 28 Licensor” means “other patents of [Bard],” but acknowledges that this is “a necessary inference from the pleading[.]” Doc. 69 at 7. 1 to relief that is plausible on its face.”) (emphasis added); see also McZeal v. Sprint Nextel 2 Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007) (finding that the plaintiff’s complaint for 3 patent infringement contained “enough detail to allow the defendants to answer and thus 4 meets the notice pleading required to survive a Rule 12(b)(6) motion” where the plaintiff 5 alleged ownership of the patent and described the means of infringement); Iguana, LLC v. 6 Lanham, No. 7:08-CV-09 (CDL), 2009 WL 1620586, at *2 (M.D. Ga. June 9, 2009) 7 (same).6 8 Atrium notes that under Delaware law, clear and unambiguous contract terms must 9 be given their ordinary meaning without reference to extrinsic evidence. Doc. 61 at 7, 10 13-14, 19-20 (citations omitted). The License Agreement states that Bard is the 11 “Licensor.” Doc. 63-1 at 1, ¶ 1.18. According to Atrium, “Delaware law construes 12 ‘Licensor’ to mean what it says: C.R. Bard.” Doc. 61 at 7. Atrium contends that dismissal 13 is warranted because Bard does not allege that “Licensor” includes BPV and any such 14 allegation would not pass muster under Iqbal and Twombly as it would be inconsistent with 15 the License Agreement’s express terms. Id. at 6-7, 18. But Bard does not dispute that it is 16 the sole Licensor under the Agreement. See Doc. 65 at 16 (“Bard, not BPV, is the 17 Licensor.”); Doc. 69 at 7 (“Bard concedes that it alone, and not BPV, is the ‘Licensor[.]’”). 18 Bard argues that “as BPV’s corporate parent, [Bard] can act as the Licensor and grant 19 Atrium a license to BPV’s patents.” Doc. 65 at 16; see id. at 6-7, 9-10 (citing cases). 20 Atrium does not dispute that argument. See Doc. 69 at 8-9. 21 Atrium cites several cases for the proposition that a parent company’s corporate 22 ownership of a subsidiary does not confer on the parent company ownership of the 23 subsidiary’s patents. Doc. 61 at 16-17 (citations omitted). Bard counters that the cited 24 cases are inapposite to this breach of contract action, noting that while a corporate parent 25

26 6 Contrary to Atrium’s assertion, Bard does not ask the Court to “conclude, as a matter of law, that the Canadian Patent may be deemed to be owned by C.R. Bard merely 27 because C.R. Bard owns BPV and BPV owns the Canadian Patent.” Doc. 69 at 11-12. Bard merely notes that the complaint’s well-pled allegations about its ownership of the 28 Canadian Patent “cannot simply be ignored by the Court” in ruling on this motion. Doc. 65 at 7. 1 may not bring an infringement suit in its own name, this does not mean that it cannot license 2 the patents of its subsidiary. Doc. 65 at 9-11.7 3 As the Federal Circuit has recently explained, determination of patent ownership is 4 an issue that “requires robust fact development[.]” Atleisure, LLC v. Sunvilla Corp., No. 5 1:20-CV-4662-TWT, 2021 WL 2449855, at *4 (N.D. Ga. May 5, 2021) (citing AntennaSys, 6 Inc. v. AQYR Techs., Inc., 976 F.3d 1374, 1381 (Fed. Cir. 2020)). The Court concludes 7 that, to the extent the issue of patent ownership is material to the breach of contract claim, 8 that issue is best resolved on summary judgment or at trial. See Doc. 59 at 26 (noting at 9 the December 20 hearing that “there may well be a factual issue . . . about what was 10 intended by the parties in the license and the settlement agreement that cannot be resolved 11 on a motion to dismiss”); AntennaSys, Inc., 976 F.3d at 1377 (concluding that “the 12 appropriate thing to do is to deny the Motion to Dismiss and address the question of 13 ownership of the patent at the summary judgment stage”); Windy City Innovations, LLC v. 14 Facebook, Inc., 411 F. Supp. 3d 886, 893 (N.D. Cal. 2019), aff’d, 835 Fed. App’x 610 15 (Fed. Cir. 2021) (finding that “disputed issues of material fact as to [patent] ownership 16 rights preclude dismissal”); Danfoss Turbocor Compressors B.V. v. Johnson Controls, Inc., 17 No. 4:10CV145-RH/WCS, 2010 WL 11519527, at *1 (N.D. Fla. Aug. 25, 2010) (“[T]here 18 is much to be said for the proposition that when a defendant . . . contests the plaintiff’s 19 allegation that it owns the patent at issue, the factual dispute over that allegation must be 20 resolved . . . through a Rule 56 summary-judgment motion or a trial.”); Zeiss A.G. v. Nikon 21 Corp., No. 2:17-cv-07083-RGK-MRW, 2018 WL 5078256, at *3 (C.D. Cal. Oct. 4, 2018) 22 (denying summary judgment because “there is a [triable] issue of whether Plaintiffs own

23 7 Atrium asserts that Bard, through its same counsel of record in this case, argued in another case that it should be dismissed because it did not own patents of its wholly-owned 24 subsidiary. Doc. 61 at 16 (citing CryoLife, Inc. v. C.R. Bard, Inc., No. CV 14-559-SLR, 2015 WL 1069397 (D. Del. Mar. 10, 2015)). Bard notes, correctly, that CryoLife does not 25 address the relevant question in this breach of contract case – whether a corporate parent has sufficient ownership control over a subsidiary to grant licenses to the subsidiary’s 26 patents – and instead held that only the legal owner of the patent can be a named party in a patent infringement action. Doc. 65 at 12; see CryoLife, 2015 WL 1069397, at *2 (“A suit 27 for infringement must ordinarily be brought by a party holding legal title to the patent. A court, therefore, lacks jurisdiction over a declaratory judgment action if the patent holder 28 is not a defendant.”). 1 the rights to the patents”); Tucker v. Oregon Aero, Inc., 474 F. Supp. 2d 1192, 1211 (D. 2 Or. 2007) (denying summary judgment “because the issue of whether plaintiff had any 3 ownership rights to the patents remains outstanding”); Sim Kar Lighting Fixture Co. v. 4 Genlyte, Inc., 906 F. Supp. 967, 974 (D.N.J. 1995) (denying summary judgment because 5 “a material issue of fact exists concerning [the defendant’s] ownership rights in the ‘132 6 patent”).8 7 Because the second amended complaint’s allegations are sufficient to state a 8 plausible claim for breach of contract, Atrium’s motion to dismiss will be denied. 9 III. Bard’s Motion to Dismiss Atrium’s Amended Counterclaims. 10 Atrium alleges that Bard misrepresented that it owns the ’135 Patent to induce 11 Atrium into executing the License Agreement, and that Bard has never provided a license 12 to the ’135 Patent as promised in the License Agreement. Doc. 57 ¶¶ 4, 62. Atrium asserts 13 counterclaims for breach of contract, unjust enrichment, fraudulent inducement, and 14 negligent misrepresentation. Id. ¶¶ 5, 89-124. Atrium seeks to recover the more than $130 15 million it has paid Bard since the License Agreement became effective in 2011. Id. ¶¶ 4, 6. 16 Each counterclaim depends on Atrium’s allegation that Bard does not own the ’135 17 Patent. Id. ¶¶ 58-61, 92-93, 100, 104-08, 116-19. Bard asserts that Atrium knew or should 18 have known who owned the ’135 Patent when it entered into the Settlement Agreement 19 and the License Agreement in 2011. Doc. 63 at 5-7. Bard contends that Atrium’s claims 20 therefore accrued in 2011 and, regardless of the law to be applied, are barred by a statute 21 of limitations that is six years or less. Id. at 7, 10-16. Bard further contends that Atrium 22 has failed to plead facts sufficient to toll the running of the limitation periods under the 23 discovery rule. Doc. 63 at 7, 16-21.9

24 8 Atrium asserts in its reply that “Bard’s claims are all amenable to resolution as a matter of law” because extrinsic evidence about what the parties intended in the License 25 Agreement is not admissible under Delaware law. Doc. 69 at 6-7. But as noted, the complaint contains sufficient allegations to state a plausible breach of contract claim, 26 including the allegation that Bard owns the Canadian Patent through BPV. Doc. 53 ¶ 8. Whether the Canadian Patent is a “patent[] of [Bard]” (Doc. 61-3 § 1.15) is not a purely 27 legal issue.

28 9 The parties cite both Arizona and Delaware law in addressing Bard’s motion to dismiss. See Docs. 63 at 10-20, 68 at 9-21. The Court will do the same. 1 “Under Arizona’s discovery rule, a claim does not accrue until ‘the plaintiff knows 2 or, in the exercise of reasonable diligence, should know the facts underling the cause.’” 3 Perez v. First Am. Title Ins. Co., No. CV-08-1184-PHX-DGC, 2010 WL 1507012, at *3 4 (D. Ariz. April 14, 2010) (quoting Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of 5 Am., 898 P.2d 964, 966 (Ariz. 1995)); see also McGill v. Nat’l Specialty Ins. Co., No. CV- 6 12-01671-PHX-DGC, 2013 WL 331256, at *6 (D. Ariz. Jan. 29, 2013) (Arizona’s 7 “discovery rule tolls limitations until the plaintiff possess a minimum knowledge sufficient 8 to recognize that a wrong occurred and caused injury”) (quoting ELM Ret. Ctr., LP v. 9 Callaway, 246 P.3d 938, 941 (Ariz. Ct. App. 2010)). Delaware law provides a similar 10 discovery rule where the alleged injury is inherently unknowable and sustained by a 11 blamelessly ignorant plaintiff. See David B. Lilly Co. v. Fisher, 18 F.3d 1112, 1117 (3d 12 Cir. 1994) (citing Isaacson, Stolper & Co. v. Artisan’s Sav. Bank, 330 A.2d 130, 132 (Del. 13 1974); Kaufman v. C.L. McCabe & Sons, Inc., 603 A.2d 831, 835 (Del. 1992)). Under this 14 rule, “the statute of limitations will begin to run ‘upon the discovery of facts constituting 15 the basis of the cause of action or the existence of facts sufficient to put a person of ordinary 16 intelligence and prudence on inquiry which, if pursued, would lead to the discovery of such 17 facts.’” TL of Fla., Inc. v. Terex Corp., 54 F. Supp. 3d 320, 328 (D. Del. 2014) (quoting 18 Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004)). 19 Atrium alleges that it first discovered that Bard does not own the ’135 Patent during 20 this litigation. Doc. 57 ¶¶ 3, 26, 54-57. Atrium further alleges that it had no reason to 21 believe that anyone other than Bard owns the ’135 Patent because Bard made repeated 22 representations – during negotiations in 2010 and in the License Agreement – that Bard, 23 not BPV, owns the ’135 Patent. Id. ¶ 29. Atrium claims that a reasonable company in its 24 position would have had no reason to confirm the veracity Bard’s ownership statements, 25 that Atrium exercised reasonable diligence by relying on those statements, and that Bard 26 and BPV alone possessed information about the ownership of the ’135 Patent. Id. ¶¶ 31, 27 43-47, 52-53. Bard counters that, through the exercise of reasonable diligence, Atrium 28 1 could have discovered that BPV owned the ’135 patent by September 2013 – when the 2 ’135 Patent was recorded in the Canadian Patent Office. Doc. 63 at 8-9, 17-20. 3 Under both Arizona and Delaware law, the issue of whether the discovery rule tolls 4 the limitations period generally is a fact-intensive inquiry to be resolved by the trier of fact. 5 See Gust, Rosenfeld & Henderson, 898 P.2d at 969 (“The statute of limitations did not 6 commence on [plaintiff]’s claim until [plaintiff] knew or in the exercise of reasonable 7 diligence should have known that it had been injured. The trial court was correct to let the 8 jury decide when that event occurred.”); IceMOS Tech. Corp. v. Omron Corp., No. CV- 9 17-02575-PHX-JAT, 2019 WL 5960069, at *3 (D. Ariz. Nov. 13, 2019) (“Whether to 10 apply the discovery rule generally ‘depends on resolution of . . . factual issues,’ and thus, 11 a court cannot resolve these questions on summary judgment.”); Barten v. State Farm Mut. 12 Auto. Ins. Co., 28 F. Supp. 3d 978, 999 (D. Ariz. 2014) (“Because the discovery rule 13 mitigates the harshness of statutory limitations by equitably considering the facts of each 14 case, the question of when a plaintiff discovered or should have discovered facts giving 15 rise to a claim is ‘usually and necessarily’ left to the jury.”) (quoting Doe v. Roe, 955 P.2d 16 951, 961 (Ariz. 1998)); Hutchinson v. Bos. Sci. Corp., No. 20-CV-1084-RGA, 2020 WL 17 5752393, at *3 (D. Del. Sept. 25, 2020) (the discovery rule involves “a fact-intensive 18 inquiry to determine whether a plaintiff was blamelessly ignorant of a potential claim or 19 dilatory in pursuing the action.”); Shockley v. Minner, 726 F. Supp. 2d 368, 376 (D. Del. 20 2010), aff’d, 448 F. App’x 263 (3d Cir. 2011) (“The determination of when a reasonable 21 person knew or should have known of the facts constituting a claim is a fact intensive 22 inquiry.”); Live Face on Web, LLC v. Rockford Map Gallery, LLC, No. CV 17-539, 2020 23 WL 5821750, at *3 n.2 (D. Del. Sept. 30, 2020) (“Ordinarily, when the facts are in dispute, 24 the date on which the discovery rule is triggered is left to the fact finder.”). 25 Atrium has pled facts sufficient to invoke the discovery rule. See Doc. 57 ¶¶ 3, 26, 26 29, 31, 43-47, 52-57. And because the determination of whether the limitations period has 27 been tolled “requires a factual inquiry not amenable to resolution on a motion to dismiss[,]” 28 the Court will deny Bard’s motion. TL of Fla., 54 F. Supp. 3d at 329. Indeed, many courts 1 have held that a Rule 12(b)(6) motion is not a proper procedural vehicle to resolve 2 application of the discovery rule.10 See Shockley, 2008 WL 2699978, at *4 (“Whether 3 Corporal Shockley can meet [his] burden [under the discovery rule] is a factual question 4 that the Court cannot resolve as a matter of law in the context of Defendants’ motion to 5 dismiss.”); Wal-Mart Stores, 860 A.2d at 321 (“[T]he pleaded facts . . . create a reasonable 6 inference that Wal-Mart was blamelessly ignorant of the ‘wrongful acts.’ To be sure, the 7 pleaded facts also create reasonable inferences to the contrary. A Rule 12(b)(6) motion, 8 however, is not a proper procedural vehicle to resolve conflicting inferences of fact.”); 9 Krasemann v. Scholastic Inc., No. CV-18-08313-PCT-DWL, 2019 WL 3220535, at *7 (D. 10 Ariz. July 17, 2019) (“[W]hether the statute of limitations has expired is a fact-based 11 inquiry and thus an improper ground for seeking dismissal at the pleading stage.”) 12 (quotation marks omitted).11 13 Bard asserts that the important inquiry in applying the discovery rule is whether the 14 conduct causing the injury “is difficult for plaintiff to detect.” Doc. 71 at 7 (quoting Gust, 15 Rosenfeld & Henderson, 182 Ariz. at 590); see also Docs. 63 at 16-17, 71 at 7-8 (citing 16 DuBose v. Wyndham Vacation Resorts, Inc., No. CV 20-1118-CFC, 2021 WL 3145206, 17 at *4 (D. Del. July 26, 2021) (noting that the discovery rule required the plaintiffs to plead 18 facts showing that it was “practically impossible for them to discover the existence of a 19 cause of action”); Cavan v. Maron, 182 F. Supp. 3d 954, 963 (D. Ariz. 2016) (the plaintiff 20 must plead facts showing an “inability to have made earlier discovery despite reasonable 21 diligence”)). But even if true, the Court concludes that whether the discovery rule applies 22 in this case is best resolved on summary judgment or at trial.12

23 10 Given this ruling, the Court need not consider Atrium’s alternative arguments that equitable tolling and fraudulent concealment preclude dismissal and that Bard’s breach of 24 contract and fraud is ongoing. See Doc. 68 at 15-22.

25 11 By denying Bard’s motion to dismiss, the Court does not find that Atrium’s claims necessarily will survive a statute of limitations challenge on summary judgment and go to 26 a jury, only that the amended counterclaims are sufficient to survive a motion to dismiss. See Quinonez v. Remington Arms Co. LLC, No. CV 11-02319-PHX-NVW, 2012 WL 27 1623205, at *3 (D. Ariz. May 9, 2012).

28 12 Contrary to Bard’s assertion, Atrium has not ignored BPV’s 2010 complaint and waived related arguments. See Docs. 71 at 5-6, 74 at 2. 1 Bard’s alternative argument for dismissal — that it has not breached its obligation to || license the °135 Patent to Atrium — lacks merit because Bard has not shown that Atrium || fails to state a plausible breach of contract or tort claim. See Doc. 63 at 21. 4 IT IS ORDERED: 5 1. Atrium’s motion to dismiss the second amended complaint (Doc. 61) is 6 denied. 7 2. Bard’s motion to dismiss Atrium’s amended counterclaims (Doc. 63) is 8 denied. 9 3. Atrium’s unopposed motion to file a sur-reply (Doc. 73) is granted. The 10 Clerk shall filed the lodged proposed sur-reply (Doc. 74). 11 Dated this 18th day of April, 2022. 12 Daal E Cou 14 and &. pitt 15 David G. Campbell 6 Senior United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28

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