C.R. Bard Incorporated v. Atrium Medical Corporation

Opinion

1 WO 2 3 4 5 8 9 10 C. R. Bard, Inc., No. CV-21-00284-PHX-DGC 11 Plaintiff/Counterdefendant, ORDER AND JUDGMENT 12 v. 13 Atrium Medical Corp., 14 Defendant/Counterclaimant.

15 16 The parties have submitted proposed calculations of the damages and interest to be 17 awarded to Bard. Docs. 207, 210. Based on those submissions, the Court will enter 18 judgment in favor of Bard in the total amount of $65,819,332. The Court will deny 19 Atrium’s requests for judgment in its favor and for leave to amend its pleading. Doc. 210 20 at 9-14, 16-21. 21 I. Background.1 22 Bard alleges that Atrium breached the parties’ License Agreement by failing to 23 make minimum royalties. Doc. 53 ¶¶ 51-55. Following the Court’s summary judgment 24 ruling and its finding that the minimum royalty provisions in the parties’ License 25 Agreement were ambiguous, the Court asked the parties to identify the steps that remained 26 in this case. Doc. 143 at 16-21. Atrium proposed an evidentiary hearing to resolve

27 1 A more thorough description of the facts and procedural history of this case is set 28 forth in the Court’s order following the bench trial. Doc. 189. 1 Atrium’s patent misuse defense as well as Bard’s remaining claims. Doc. 145 at 2. Bard 2 proposed the same, but preferred to call it a bench trial. Id. 3 The Court held the suggested hearing in the form of a two-day bench trial, addressed 4 all of the issues raised by the parties, and ruled that the patent misuse doctrine barred 5 enforcement of the minimum royalty provisions after the date the U.S. patent expired. 6 Doc. 189. Atrium appealed and the Ninth Circuit reversed. Doc. 202-1; see C. R. Bard., 7 Inc. v. Atrium Medical Corp., 112 F.4th 1182 (9th Cir. 2024), cert. denied, No. 24-1143, 8 2025 WL 1549867 (June 2, 2025). The Ninth Circuit held that patent misuse does not bar 9 enforcement of the minimum royalty provisions in the parties’ License Agreement. 10 Doc. 202-1 at 4. The Ninth Circuit separately affirmed the Court’s summary judgment 11 order resolving outstanding contract interpretation issues. Doc. 201-2. 12 On remand, the Court directed the parties to file a joint memorandum setting forth 13 their views on next steps. Doc. 202. The parties’ memorandum presented very different 14 views of the remaining tasks. Doc. 203. Bard argued that the Ninth Circuit’s ruling, 15 combined with the Court’s previous rejection of Atrium’s contract interpretation arguments 16 (which was affirmed on appeal), ended the factual and legal inquiry on Bard’s breach of 17 contract claim and only calculation of damages and interest remained. Id. at 2-5. Atrium 18 argued that the Ninth Circuit completely reinterpreted the parties’ License Agreement, and 19 that this new interpretation raised several contract enforcement issues that were not 20 relevant before, including (1) whether there was a meeting of the minds between the parties 21 on essential contract terms, (2) whether the contract as reinterpreted by the Ninth Circuit 22 is unconscionable, (3) whether the contract as reinterpreted by the Ninth Circuit arose from 23 a mutual or unilateral mistake, and (4) whether Bard is entitled to damages or other relief 24 under the reinterpreted contract. Id. at 8-12. 25 The Court agreed with Bard and rejected Atrium’s argument. Doc. 204. The Court 26 noted that Atrium had agreed there was only a narrow scope of issues to be presented to 27 the Court in the bench trial and had identified none of the new issues it sought to litigate. 28 Id. at 4. The Court concluded that the Ninth Circuit’s holding that the patent misuse 1 doctrine did not bar collection of the royalties resolved all issues Atrium and Bard had 2 identified as remaining in this case before the bench trial, and that the only tasks left were 3 calculation of damages and interest. Id. The Court ordered Atrium to produce to Bard 4 sales information for its Licensed Products sold in Canada for the period from March 22, 5 2023 (the date Atrium received FDA approval for iCast) to January 2, 2024 (the expiration 6 date of the Canadian Patent). Id. at 4-5. The Court directed the parties to submit to the 7 Court their respective proposed calculations of damages and interest. Id. at 5. The parties 8 have provided those submissions. Docs. 207, 210. 9 II. Damages. 10 Bard has shown that it is entitled to a total of $53,117,258 for the unpaid royalties 11 under the License Agreement. Docs. 207 at 2-4, 207-1 at 2-3. Atrium does not dispute 12 this damages calculation. Doc. 210 at 21. The Court accordingly will enter judgment for 13 Bard in the amount $53,117,258. 14 III. Interest. 15 The parties agree that Section 3.3 of the License Agreement specifies the timing of 16 payments and how interest is to be calculated when payments are missed. Docs. 207 at 5, 17 210 at 14. Section 3.3 provides that “[n]ot later than the 15th day of each January, April, 18 July and October of the Term (commencing April 15, 2011), Licensee must . . . pay to 19 Licensor all such amounts due to Licensor.” Doc. 160-13 at 6. Section 3.3 further provides 20 that “[p]ayments provided for in this Agreement, when overdue, will bear interest at a rate 21 per annum equal to two percent (2%) in excess of the ‘Prime Rate’ published by ‘The Wall 22 Street Journal’ at the time such payment is due, and for the time period until payment is 23 received by Licensor.” Id. 24 Bard seeks $19,334,138 in variable-rate interest compounded quarterly (through 25 April 14, 2025). Docs. 207 at 6-7, 207-2 at 2-3. This approach is based on Bard’s 26 contention that “the interest rate is recalculated every quarter” and applies to the “entire 27 cumulative overdue balance including royalties accrued during the past quarter, past-due 28 royalties[,] and interest accrued from previous quarters.” Doc. 205 at 4-5. But this is not 1 consistent with the terms of the License Agreement. Section 3.3 states that an overdue 2 payment “will bear interest at a rate per annum equal to two percent (2%) in excess of the 3 ‘Prime Rate’ published by ‘The Wall Street Journal’ at the time such payment is due, and 4 for the time period until payment is received by Licensor.” Doc. 160-13 at 6 (emphasis 5 added). In other words, the interest rate for each overdue payment (1) is set once, “at the 6 time such payment is due,” and (2) applies “until payment is received[.]” Id.; see Doc. 210 7 at 14-15. Contrary to Bard’s assertion, the rate for any given overdue quarterly royalty 8 payment does not reset every quarter, and there is no mention in the License Agreement of 9 compound interest. See Doc. 160-13.2 10 Bard cites two cases for the proposition that periodic interest recalculations are 11 appropriate when overdue royalty payments span multiple quarters: Gentile v. Rossette, 12 No. CIV.A. 20213-VCN, 2010 WL 3582453 (Del. Ch. Sept. 10, 2010), and McGlothlin v. 13 Petrunich Oral & Maxillofacial Surgery, No. N20C-08-186 FWW, 2023 WL 5747520, 14 (Del. Super. Ct. Sept. 6, 2023). Doc. 207 at 6. But neither case involved an agreement that 15 specified how interest should be calculated. See Gentile, 2010 WL 3582453, at *1 (finding 16 the defendant liable for his breach of fiduciary duties); McGlothlin, 2023 WL 5747520, 17 at *1 (the defendant unlawfully discriminated against its former employee). 18 Based on the calculation method specified in the parties’ contract, the Court will 19 award Bard prejudgment interest in the amount of $12,702,074 (through July 16, 2025, the 20 date of judgment).3 21 Bard is also entitled to post-judgment interest if Atrium does not pay the judgment 22 immediately. See Doc. 205-1 at 3. Under 28 U.S.C. § 1961(a), post-judgment interest is 23 calculated at a rate equal to the weekly average 1-year Treasury constant maturity yield for

24 2 Atrium notes that Bard’s approach is further disproved by course of dealing, 25 explaining that in each quarterly statement Atrium identified only amounts due for the 26 immediately preceding quarter, not other past-due amounts. Doc. 210 at 16 (citing Trial Exs. PTX 114-34). 27 3 The interest calculations are set forth in Exhibit A attached to this order and were based on the formulas Atrium used in calculating interest through April 14, 2025 (Doc. 28 210-1 at 2). 1 the calendar week preceding the date of judgment. See Selected Interest Rates (Daily), 2 Fed. Rsrv., https://www. federalreserve.gov/releases/H15 (listing daily rates for 1-year 3 Treasury constant maturity yields). The post-judgment interest is “awarded on the entire 4 amount of the specified judgment, including [the] pre-judgment interest.” Lagstein v. 5 Certain Underwriters at Lloyd’s of London, 725 F.3d 1050, 1056 (9th Cir. 2013). 6 III. Atrium’s Request for Judgment in Its Favor. 7 Atrium seeks judgment in its favor. Doc. 210 at 14. It argues that based on the 8 Ninth Circuit’s reinterpretation of the License Agreement, Bard has failed to establish a 9 “meeting of the minds” on an essential term of the License Agreement – that Atrium would 10 pay minimum royalties on Atrium’s Canadian sales after Bard’s U.S. patent expired. Id. 11 at 9-14. Atrium made this same argument in the parties’ joint memorandum following 12 remand from the Ninth Circuit. Doc. 203 at 8-10. The Court rejected the argument, 13 explaining that the Ninth Circuit decided only the patent misuse question and did not 14 interpret the License Agreement for other purposes. “The decision did not produce a 15 radical reinterpretation of the License Agreement for purposes of Bard’s breach of contract 16 claim, as Atrium claims, and does not warrant reopening Atrium’s case and allowing it to 17 assert defenses never pled in its answer (see Doc. 80) and never asserted in this case[.]” 18 Doc. 204 at 3. 19 Atrium has not shown that this conclusion by the Court constitutes manifest error, 20 see LRCiv 7.2(g)(1), and mere disagreement with an order is an insufficient basis for 21 reconsideration, see McIntyre v. Ariz. Bd. of Regents, No. CV-24-08151-PCT-DGC, 2025 22 WL 296399, at *1 (D. Ariz. Jan. 24, 2025). The Court will deny Atrium’s request for 23 judgment in its favor. 24 IV. Atrium’s Request for Leave to Amend. 25 Atrium seeks leave to amend its pleadings to pursue an affirmative defense of 26 unconscionability and a counterclaim for reformation of contract. Doc. 210 at 16-21. But 27 this request also is premised on the view that the Ninth Circuit reinterpreted the parties’ 28 License Agreement for all purposes, including Bard’s breach of contract claim. As in its 1 previous order, the Court concludes that the Ninth Circuit’s published decision is simply 2 an application of the patent misuse doctrine, not a general reinterpretation of the parties’ 3 contract. 4 Before the appeal to the Ninth Circuit, the Court construed the License Agreement 5 under Delaware law (which the parties agreed controlled this case), specifically found the 6 agreement ambiguous (Doc. 143 at 16-21), and considered relevant and admissible 7 extrinsic evidence presented during the bench trial to determine the parties’ actual intent 8 (Doc. 189). The Ninth Circuit held that this was not the proper approach under the Supreme 9 Court’s patent misuse cases, specifically Brulotte v. Thys Co., 379 U.S. 29 (1964), and 10 Kimble v. Marvel Enterprises LLC, 576 U.S. 446 (2015). The Circuit held that a court 11 should construe the contract purely as a matter of law: “[the District Court’s] factual 12 findings do not control our review . . . because the application of the Brulotte rule is a 13 question of law that depends on the terms of the contract at issue.” 112 F.4th at 1191. “The 14 Brulotte inquiry does not turn on the parties’ motivations, the course of their negotiations, 15 or the consideration received by either party in exchange for the inclusion of a particular 16 contract term.” Id. The Court of Appeals therefore disregarded this Court’s application of 17 Delaware law, its express finding of ambiguity, and its consideration of extrinsic evidence 18 presented by the parties, and instead looked “only at the terms of the agreement,” asking 19 whether those terms, without regard to the parties’ motivations and intent, violated the 20 patent misuse doctrine. Id. at 1191-92. 21 In short, the Court of Appeals held that “the application of the Brulotte rule is a 22 question of law.” Id. at 1191. In making this decision on the patent misuse doctrine, the 23 Circuit did not purport to reinterpret the License Agreement for other purposes, such as 24 Bard’s breach of contract claim. Indeed, the same panel affirmed this Court’s remaining 25 interpretation of the contract in a separate opinion – an interpretation that relied on state- 26 law principles – without stating that it was using Brulotte’s law-only approach. See C. R. 27 Bard, Inc. v. Atrium Med. Corp., No. 23-16020, 2024 WL 3916211 (9th Cir. Aug. 23, 28 2024); Doc. 143. 1 Because the License Agreement has not been reinterpreted for non-patent-misuse 2 purposes, such as Bard’s breach of contract claim, Atrium’s request to amend its pleadings 3 to address such a reinterpretation is not warranted.4 4 V. Judgments and the Parties’ Claims. 5 The Court will vacate the judgment entered in favor of Atrium (Doc. 189 at 19) in 6 light of the Ninth Circuit’s reversal of that judgment (Doc. 201-1 at 18). The Court will 7 enter judgment in favor of Bard on its breach of contract claim based on Atrium’s failure 8 to make minimum royalty payments under the License Agreement. Doc. 53 ¶¶ 51-55 9 (Count I). The judgment in favor of Bard on Count I renders moot its claim for breach of 10 the Settlement Agreement and its claims for declaratory judgment, specific performance, 11 promissory estoppel, and quantum meruit. Id. ¶¶ 77-84, 94-111, 115-19 (Counts IV, 12 VI-VIII, and XII). The Court denied Bard’s request for leave to amend to assert claims for 13 abuse of process and breach of the covenant of good faith and fair dealing. Doc. 35 at 14 9-12; Doc. 53 ¶¶ 113-15 (proposed Counts IX-XI). Bard has dismissed its breach of 15 contract claims based on Atrium’s filing for reexamination of the Canadian Patent. Doc. 16 53 ¶¶ 56-76, 85-93 (Counts II, III, and V); Doc. 152. The Court granted summary judgment 17 in favor of Bard on Atrium’s breach of contract, unjust enrichment, negligent 18 misrepresentation, and fraudulent inducement counterclaims. Doc. 57 ¶¶ 89-124 (Claims 19 1-4); Doc. 143 at 20-21. No outstanding claims or defenses remain in the case. 20

21 4 As in its February order, the Court acknowledges that the Ninth Circuit’s approach creates an uncomfortable dichotomy – one interpretation of the contract for patent misuse 22 purposes and a different interpretation for all other purposes. Doc. 204 at 3 n.2. The Court 23 can reach no other conclusion. If the Court of Appeals intended to reverse the Court’s contract interpretation for all purposes, surely it would have addressed Delaware law, the 24 Court’s express finding that the minimum royalty provisions are ambiguous, and the 25 extrinsic evidence presented by the parties and used by the Court to resolve the ambiguity. It did none of this. However, if the Court of Appeals did not intend to create this dichotomy 26 – if it intended to reinterpret the contract for all purposes – this Court respectfully asks that 27 it say so on appeal of this order. That fact might well cause this Court to revisit Atrium’s request to assert defenses and claims that became relevant only when the contract was 28 reinterpreted to adopt a reading Bard never asserted in this Court. 1 IT IS ORDERED: 2 1. The judgment (Doc. 189 at 19) entered in favor of Defendant Atrium Medical Corporation on Plaintiff C. R. Bard, Inc.’s claims for breach of contract, declaratory 4| judgment, specific performance, promissory estoppel, and quantum meruit (Counts I, IV, 5 | VI-VIII, and XID is vacated. 6 2. Judgment is entered in favor of Plaintiff C. R. Bard, Inc. on its breach of contract claim under the License Agreement (Count I) in the total amount of 8 | $65,819,332.00 ($53,117,258 in damages and $12,702,074 in prejudgment interest). 9 3. Pursuant to 28 U.S.C. § 1961, Plaintiff C. R. Bard, Inc. is entitled to post- 10 | judgment interest from the date of this judgment until the judgment is satisfied. 11 4. Plaintiff C. R. Bard, Inc.’s claims for breach of the Settlement Agreement, 12| declaratory judgment, specific performance, promissory estoppel, and quantum meruit 13 | (Counts IV, VI-VII, and XII) are denied as moot. 14 5. Defendant Atrium Medical Corporation’s requests for judgment in its favor 15 | and for leave to amend its pleading (Doc. 210 at 9-14, 16-21) are denied. 16 6. The parties’ motions to seal documents (Docs. 206, 209) are granted. The 17 | Clerk is directed to file under seal the documents lodged at Docs. 207 and 210, using the 18 | same document numbers. 19 Dated this 16th day of July, 2025. 20 . + 21 aun © Cour phtl 22 David G. Campbell 23 Senior United States District Judge 24 25 26 27 28