Russo v. Baxter Healthcare

• Court: Court of Appeals for the First Circuit
• Decided: March 26, 1998
• Docket: 97-1824
• Status: Published

Opinion

USCA1 Opinion

                  UNITED STATES COURT OF APPEALS

                      FOR THE FIRST CIRCUIT

                       ____________________



No. 97-1824



                         RONALD D. RUSSO,



                      Plaintiff - Appellant,



                                v.



              BAXTER HEALTHCARE CORPORATION, ET AL.,



                     Defendants - Appellees.



                       ____________________



           APPEAL FROM THE UNITED STATES DISTRICT COURT



                 FOR THE DISTRICT OF RHODE ISLAND



          [Hon. Ronald R. Lagueux, U.S. District Judge]

        [Hon. Timothy M. Boudewyns, U.S. Magistrate Judge]



                       ____________________



                              Before



                      Selya, Circuit Judge,



                  Coffin, Senior Circuit Judge,



and Shadur, Senior District Judge.



                      _____________________



    Steven E. Snow, with whom Thomas R. Noel, Partridge, Snow &

Hahn were on brief for appellant.

    John Henry Pelzer, with whom Ruden, McClosky, Smith, Schuster

& Russell, P.A., Edward L. Gnys, Jr. and Gunning, LaFazia & Gnyswere on brief for appellees.


____________________



                         March 25, 1998

                       ____________________

          SHADUR, Senior District Judge.  Ronald Russo ("Russo")

brought this diversity-of-citizenship action against Baxter

Healthcare Corporation ("Baxter"), claiming that Baxter had

violated his rights under the Rhode Island Uniform Trade Secrets

Act, had interfered with his prospective business relationships and

had negligently injured him by rendering his invention unpatentable

in foreign countries.  When the case went to trial, Baxter

exercised its right under Fed. R. Civ. P. ("Rule") 50(a) to move

for judgment as a matter of law when Russo had completed his proofs

and rested.  That motion was granted, and the action was dismissed. 

Russo appeals, and we affirm the district court's final judgment in

Baxter's favor.

                        Standard of Review

          We review the grant of a Rule 50(a) motion for judgment

as a matter of law de novo, using the same standards as the

district court (Andrade v. Jamestown Hous. Auth., 82 F.3d 1179,

1186 (1st Cir. 1996)).  All of the evidence and inferences drawn

from the evidence are therefore considered in the light most

favorable to nonmovant Russo, and we hereafter apply that principle

in the Facts section.

          As for the legal standard to be applied to the facts as

so considered, Andrade, id. (quoting Murray v. Ross-Dove Co., 5

F.3d 573, 576 (1st Cir. 1993), and using the older Rule 50(a) term

"directed verdict") teaches:

          A verdict may be directed only if the

          evidence, viewed from this perspective, "would

          not permit a reasonable jury to find in favor

          of the plaintiff[] on any permissible claim or

          theory."



But the plaintiff must provide "more than a mere scintilla' of

evidence and may not rely on conjecture or speculation" to justify

the submission of an issue to the jury (Katz v. City Metal Co., 87

F.3d 26, 28 (1st Cir. 1996)).

                              Facts

          In 1983 Russo began working with a company then called

Superior Plastics Products Corp. and later known as Superior

Healthcare Corporation ("Superior") under an agreement calling for

him to develop new medical products in return for royalties based

upon the success of his inventions.  In 1989 Russo developed a new

kind of closed-seal tracheal suction catheter, a device that uses

an endotracheal tube to clear the airways of patients breathing on

a mechanical ventilator.  Russo's catheter had unique features,

such as a rear irrigation port and a clamp valve, that

distinguished it from others on the market. 

          Russo disclosed his idea for the improved catheter to

Superior's President David Brodsky ("Brodsky").  Because Brodsky

considered that Superior lacked the ability to market such a

product, he sought another company to fill that role.  To that end,

in April 1990 Brodsky and Baxter discussed an agreement under which

Baxter would manufacture and distribute the device.  As part of

its evaluation of the product, Baxter sent prototypes of the

catheter to two clinicians so they could conduct bench trials. 

Baxter did not require that either clinician sign a confidentiality

agreement before doing so.

     In May Brodsky told Russo about his discussions with

Baxter (but not about the bench trials).  Russo asked that Baxter

be required to sign a confidentiality agreement, and Brodsky orally

agreed to obtain one. Later in May Russo stopped working with

Superior because of a dispute over money and issues unrelated to

this action.  Nonetheless, Russo retained some access to Superior's

offices and observed that Superior continued to develop his

catheter.  He also learned that in June Baxter and Superior had

entered into an Exclusive Distribution Agreement ("Agreement") that

granted Baxter an option to obtain rights in the catheter.

     Russo acted promptly in response to that discovery,

sending two letters to Baxter asserting that he held the rights to

the catheter.  On June 14 he also filed an application with the

United States Patent and Trademark Office ("PTO") for a patent on

the catheter, and on June 25 he sued Superior and Baxter in Rhode

Island Superior Court, seeking an injunction to prevent both

companies from implementing the Agreement.  Baxter and Superior

promptly countered in July by submitting their own application to

the PTO for a United States patent on the catheter.  In addition

Baxter, without Russo's knowledge, conducted additional field

trials on the catheter from June to August.  As part of those field

trials, Baxter sent out samples of the device to 14 hospitals

around the United States to solicit practitioner comments.  Again

Baxter did not require that the participants in its field trials

agree to keep the catheter confidential.

     Over a year later, in late October 1991, Russo's patent

attorney Robert Doherty ("Doherty") received a Notice of Allowance

from the PTO informing him that Russo's United States patent

application had been approved.  Doherty paid the mandatory issuance

fee and expected that the PTO would issue the patent within two or

three months.  In November 1991 Russo discussed filing patent

applications in foreign countries with Doherty.  They agreed on a

tentative list of target countries, and Doherty sought out a

consultant in foreign patent law because he lacked sufficient

contacts and knowledge to file patents in most foreign countries.

     On December 9, 1991 Baxter displayed Russo's closed

suction tracheal catheter at the American Association of

Respiratory Care convention in Atlanta.  Baxter demonstrated the

catheter, incorporated it into a sales brochure and took some sales

leads on it.  Russo did not authorize any of those activities, and

he did not discover what Baxter had done until several days after

the convention. 

     Russo immediately told Doherty about Baxter's

unauthorized disclosure of his product at the convention (at that

point Russo did not know about the earlier bench trials and field

tests).  Without performing any research or consulting with his

foreign patent expert, Doherty advised Russo that Baxter's

disclosures at the convention had destroyed the novelty of his

invention and thus made it unpatentable in any foreign country

other than Canada or possibly Australia.  Doherty told Russo that

no foreign patent applications should even be filed, because he

believed that no patents could issue after Baxter's publication at

the Atlanta convention--or alternatively, that any patents that

might issue would be invalid and worthless.

     Doherty's legal advice was dead wrong.  Under the

European Patent Convention and the law of most industrialized

countries, an unauthorized disclosure of an invention does not

immediately destroy its novelty (and thus foreclose the inventor's

ability to patent the invention).  Instead, such an adverse

disclosure bars only patent applications made more than six months

after the date of the disclosure (Art. 55 of the Convention on the

Grant of European Patents, as printed in European Patent Convention(4th ed., Munich:  European Patent Office, 1987)).  That being so,

Doherty should instead have advised Russo that he could still apply

for foreign patents, because Baxter's actions at the Atlanta

convention would not by themselves have affected Russo's ability to

obtain such patents if applied for during the six-month window

period after December 9, 1991.

     What is critical to this litigation is that Russo relied

upon Doherty's flawed advice and decided not to seek patents

abroad.  As a consequence, Doherty did nothing more to prepare any

foreign patent applications.  

     On January 28, 1992 the PTO issued a patent to Russo on

his catheter.  That unquestionably barred Russo from obtaining any

foreign patents because that publication of the catheter--made

under the auspices of Russo himself, rather than by some

unauthorized third party--made it a part of the "state of the art,"

so that it was not a "new" invention for foreign patent purposes.

That destroyed the invention's eligibility for such patents

(European Patent Convention Art. 54).

                        Proceedings Below

     On October 19, 1994 Russo sued Baxter in the district

court alleging injury from Baxter's December 1991 publication of

the catheter at the Atlanta convention.  During discovery Russo

first learned that earlier--in 1990--Baxter had conducted the bench

trials and field tests on the catheter without any confidentiality

agreements.  Russo amended his complaint to encompass those earlier

activities and asserted that the initial disclosures (1) had

violated his rights under the Rhode Island Uniform Trade Secrets

Act, (2) had interfered with his prospective business relationships

and (3) had negligently injured him by rendering his device

unpatentable in foreign countries.  

     As stated at the outset of this opinion, when Russo

closed his proofs at trial, Baxter sought judgment as a matter of

law under Rule 50(a).  On May 29, 1997 the district court delivered

an oral opinion granting Baxter's motion on all three counts

because Russo had failed to establish that Baxter had either caused

his injury or disclosed his trade secret.  In addition, the

district court determined that the statute of limitations had run

on the trade secret count, that Russo had no prospective

contractual relationships--thus eliminating the second count--and

that Russo's claimed damages were purely speculative in any event. 

This appeal followed.

                            Causation   All of Russo's claims depend on his ability to establish

damages flowing from Baxter's actions--and that in turn depends on

the requisite causal nexus between Baxter's actions and Russo's

failure to obtain any valid foreign patents.  But it has already

been said that Russo never actually applied for the foreign patents

because of Doherty's bad advice--because Doherty wrongly counseled

Russo that Baxter's disclosure of his catheter at the 1991 Atlanta

convention had disqualified his invention for foreign patent

purposes.  That advice led the district court to conclude that

Doherty's "egregious legal malpractice" had acted as an independent

intervening cause that insulated Baxter from any liability for its

behavior at the Atlanta convention.  

     Russo now claims that the Baxter-sponsored bench trials

and field tests in 1990 had already caused the harm of which he

complains.  As Russo would have it, those tests--conducted over a

year before he consulted with Doherty--make his failure to apply

for patents in 1991 irrelevant, because he could not then have

taken advantage of the six-month grace period even if Doherty had

correctly understood foreign patent doctrine (as he did not). 

Russo is essentially contending that although Doherty's legal

analysis was wrong, his ultimate conclusion of no foreign

patentability was right because Baxter's disclosures had earlier--

in 1990--doomed Russo's ability to get the foreign patents.

     That argument founders on a fundamental point of law and

an equally fundamental point of logic.  As to the former, Russo

must show both causation in fact and proximate causation to recover

against Baxter.  Breach of a legal duty is a cause in fact of harm

if that harm would not have occurred but for the breach

(Restatement (Second) of Torts ("Restatement")  432(1)(1965)). 

Here Russo has not shown, because he cannot show, that he would

have obtained foreign patents but for Baxter's 1990 disclosures.  

     Whether Russo would indeed ever have obtained foreign

patents if it had not been for Baxter's unauthorized disclosures is

totally speculative--and it is rendered totally speculative by the

fact that Russo never applied for such patents (so that, for

example, it can never be known whether some wholly separate and

different reason would have caused rejection of the applications). 

And of course Russo's failure to apply for them was not ascribable

to Baxter, but was rather the consequence of Doherty having wrongly

advised Russo that any unauthorized disclosure by Baxter had

rendered his catheter unpatentable abroad. 

     Both as a matter of law and as a matter of logic, Russo

cannot separate the strands of causation by pointing to Baxter's

earlier disclosures via the 1990 bench trials and field trials,

while ignoring the import of the bad legal advice imparted to Russo

by Doherty.  To construct a hypothetical scenario in terms of that

earlier unauthorized disclosure, Russo is compelled to recognize

that it would not have made the slightest bit of difference if he

had been aware of it from the outset (rather than learning of it

via disclosure in this action):  Even an immediate consultation

with Doherty would have elicited the same wrong advice and would

have caused the same nonfiling of any foreign applications.  In

sum, Russo fails the "but for" precondition to recovery under any

permissible view of the facts. 

     Russo nonetheless disputes whether Doherty's advice

should shield Baxter from liability, arguing that even if Doherty's

conduct was an intervening force, it was not a superseding cause. 

Intervening forces insulate a party from liability only if they are

not foreseeable consequences of that party's original negligence

or, in other words, if they are not "a natural and probable

consequence of the initial tortfeasor's act" (Walsh v. IsraelCouture Post, No. 2274 V.F.W., 542 A.2d 1094, 1097 (R.I. 1988)). 

Russo argues that Doherty's bad advice is not a superseding cause

because it was a foreseeable consequence of Baxter's negligence.

     Any such determination of whether a third party's

intervening cause is also a superseding cause, so as to negate

proximate causation on the part of the primary tortfeasor, is

governed by traditional tort rules.  Restatement 442 sets forth

the relevant factors in such a determination:

       (a) the fact that its intervention brings

     about harm different in kind from that which

     would otherwise have resulted from the actor's

     negligence;



       (b) the fact that its operation or the

     consequences thereof appear after the event to

     be extraordinary rather than normal in view of

     the circumstances existing at the time of its

     operation;



       (c) the fact that the intervening force is

     operating independently of any situation

     created by the actor's negligence, or, on the

     other hand, is or is not a normal result of

     such a situation; 



       (d) the fact that the operation of the

     intervening force is due to a third person's

     act or to his failure to act;



       (e) the fact that the intervening force is

     due to an act of a third person which is

     wrongful toward the other and as such subjects

     the third person to liability to him;



       (f) the degree of culpability of a wrongful

     act of a third person which sets the

     intervening force in motion.



     In this instance it is really unnecessary to go beyond

the first factor.  Doherty's bad advice produced a harm radically

different from that ascribable to Baxter's actions alone.  After

all, it is really uncertain whether foreign patents would have

issued on the strength of Russo's claimed invention even in the

absence of Baxter's unauthorized disclosures--and that uncertainty

can never be resolved, because the foreign patent offices were

never given that opportunity.  By contrast, what is really certain

is that the reason that the opportunity was never given (and that

the opportunity would never have been given even in the context of

the original disclosures) was Doherty's wholly independent bad

legal advice.

     Although that alone would defeat Russo's attempted

distinction between intervening force and superseding cause, the

same conclusion is buttressed by the other Restatement factors. 

None of them suggests that the intervention of Doherty's wrong

advice was foreseeable in any appropriate sense of that term.  Not

only was Doherty an unrelated third party acting outside of

Baxter's control, but it can scarcely be found reasonably

foreseeable that his legal advice would fall to the level of

malpractice as it did.  Doherty admitted that he lacked expertise

in foreign patent law (his experience lay in domestic patent

issues).  Yet when presented with a question that depended upon

knowledge of patent law in numerous foreign jurisdictions, Doherty

counseled his client without troubling to conduct any research or

to consult with a more knowledgeable lawyer.  Not surprisingly,

that reckless approach yielded advice clearly contrary to

established foreign patent doctrine and misled Russo to believe

that he was barred from pursuing foreign patents when in fact he

was not.  

     Surely Doherty's legal advice was not only an independent

force, but was also an extraordinary rather than a normal event. 

It must be concluded that Russo fares no better in his effort to

pigeonhole Baxter's conduct through the use of labels such as "no-

superseding-cause" than he has done in the earlier analysis in this

opinion.  We conclude that the district court was justified in

concluding that Doherty's poor advice was an intervening force that

insulated Baxter from liability.

     That disposes of Russo's final causation argument.  In

sum, while resolving causation is generally within the jury's

domain, the fact "[t]hat causation is ordinarily a fact question

does not make it invariably a fact question" (Peckham v.

Continental Casualty Ins. Co., 895 F.2d 830, 837 (1st Cir. 1990)

(emphasis in original)).  Here Russo has not tendered the required

evidence that the injury of which he complains--the nonissuance of

foreign patents--would not have been suffered but for Baxter's

disclosures.  Hence he has not satisfied Katz's requirement that he

show "more than a mere scintilla" of evidence on causation, and it

was appropriate for the district court to have decided causation as

a matter of law.  And because the element of proximate cause is

essential to each of Russo's claims, that calls for the denial of

all three claims as a matter of law.

     Indeed, it is worth noting that in addition to negating

causation, Russo's failure to apply for foreign patents renders his

damages claims wholly speculative as well.  That inaction on his

part has made it impossible for Russo and Doherty to identify with

any specificity the countries in which they would have sought (and,

but for Baxter's conduct, would even presumptively have obtained)

patents and marketed the catheter.

     Relatedly, Russo could only ask a jury to guess to what

degree his invention would have been accepted commercially in those

markets or how he would have profited from that acceptance.  In

fact, the actual sales performance of Russo's device suggests that

his product would not be accepted in foreign markets.  No company

sells the catheter anywhere in the world, even though it could be

manufactured and sold abroad unencumbered by any patent

restrictions or obligations to pay royalties.  That total absence

from the market may reflect the flaws with the product identified

in Baxter's field trials.  Hence, lacking anything but sheer

speculation as to his asserted damages, Russo's claims would also

fail as a matter of law at that stage of analysis.  Conclusion

     In light of our determination on the causation issue,

which reaches all three of Russo's claims, there is no need to

revisit  in any detail any of the district court's additional

grounds for granting Baxter's Rule 50(a) motion.  We AFFIRM.