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GEN-PROBE, INC. v. AMOCO CORP.

April 24, 1996

GEN-PROBE, INC., Plaintiff,
v.
AMOCO CORPORATION, INC., et al., Defendants.



The opinion of the court was delivered by: JONES

 I. INTRODUCTION

 On November 17, 1995, Plaintiff Gen-Probe, Inc. ("Gen-Probe") filed an amended complaint naming as Defendants Amoco Corporation ("AC"), Amoco Technology Company ("ATC"), Gene-Trak Systems, Inc. ("Gene-Trak"), Gene-Trak Systems Industrial Diagnostics Corp. ("GTSID"), and Vysis, Inc. ("Vysis") (collectively, "Amoco"); *fn1" the Center for Neurologic Study, Richard A. Smith, and Ivor Royston (collectively, "CNS"); and The Regents of the University of California and Eric Stanbridge (collectively, the "Regents"). All defendants are charged with unfair competition, conspiracy to commit unfair competition, and violation of the Cartwright Act (Cal. Bus. & Prof. Code §§ 16700-16804). Amoco is charged with directly infringing, contributory infringing, and inducing the infringement of, U.S. Patents Nos. 4,851,330 (the "'330 patent") and 5,288,611 (the "'611 patent"). *fn2" CNS and the Regents are charged with inducement of Amoco's infringement.

 Before the Court are Plaintiff's Motion to Expedite and Consolidate Discovery, Defendants Amoco and Regents' Motions to Stay, and Defendants CNS, Amoco, and Regents' Motions to Dismiss. *fn3" For the reasons stated below, the Court denies the Plaintiff's discovery motion; grants the motions to stay; grants CNS' motion to dismiss; and grants in part the Regents and Amoco's motions to dismiss.

 II. RELATED LITIGATION

 Gen-Probe's claims are based at least in part upon ATC's funding of CNS and the Regents' lawsuits, in which CNS and the Regents seek to establish an interest in Gen-Probe's patents. See First Amended Complaint P 20 ("The Acts of unfair competition include . . . Amoco . . . carrying out a pattern of inducing others to sue Gen-Probe . . .").

 On December 14, 1993, CNS filed Civil Action No. 671765 in Superior Court, County of San Diego, claiming ownership rights in the Gen-Probe patents because the invention was allegedly reduced to practice by Dr. Kohne under a government grant naming CNS as the beneficiary. The case is currently pending before Superior Court Judge Jeffrey T. Miller.

 On October 7, 1993, the Regents filed Civil Action 93-1539 [hereinafter "Regents v. Kohne"] in this Court, seeking a declaration of co-inventorship and conversion damages. The Regents claim that collaboration between Dr. Stanbridge and Dr. Kohne (Dr. Kohne is the inventor and assignor to Gen-Probe of the '330 and '611 patents) was so significant that the invention behind the patents in suit should be considered jointly conceived. The case is currently pending before this Court with a trial date of May 14, 1996.

 III. GEN-PROBE'S MOTION TO EXPEDITE AND CONSOLIDATE DISCOVERY

 Gen-Probe argues that it needs information on Amoco's arrangements with CNS and Regents to prepare an unclean hands defense in the upcoming Regents trial. The Court rejects this argument for several reasons.

 First, any time pressures Gen-Probe faces were brought about by its own delays. Gen-Probe attempts to blame others for its predicament, pointing to the very recent substitution of an equitable claim for restitution in the Regents case, following the dismissal of the conversion claim. However, it is well-established that equitable defenses such as unclean hands may be asserted against legal claims in general, Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 227 Cal. App. 2d 675, 728-29, 39 Cal. Rptr. 64 (1st Dist. 1964), and that unclean hands may be asserted against conversion in particular, Unilogic, Inc. v. Burroughs Corp., 10 Cal. App. 4th 612, 621-23 (6th Dist. 1992). If Gen-Probe only now realized that it could assert this defense, it has only itself to blame.

 Second, the doctrine of unclean hands would not even apply to the Regents case. The doctrine of unclean hands rests on the maxim that "he who comes into equity must come with clean hands." Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir. 1985). However, it is "not every wrongful act nor even every fraud which prevents a suitor in equity from obtaining relief. The misconduct which brings the clean hands doctrine into operation must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants." Fibreboard Paper Products Corp., 227 Cal. App. 2d at 728-29. The misconduct Gen-Probe complains of is the Regents' filing of its lawsuit with Amoco funding. Putting aside the rather serious question whether the filing of a lawsuit could be considered unclean hands, cf. Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1132, 270 Cal. Rptr. 1, 791 P.2d 587 (Cal. 1990) (discussing "policy of encouraging free access to the courts"), it is apparent that the Regents' subsequent decision to file a lawsuit has no bearing whatsoever upon "the transaction concerning which the complaint [was] made," i.e., Dr. Kohne's failure to name Dr. Stanbridge as a co-inventor of the patents in suit, his exclusive license to Gen-Probe, and the profits Gen-Probe enjoyed from the invention. For the doctrine of unclean hands to apply, Gen-Probe would have to prove misconduct by the Regents during one of the transactions forming the basis for the Regents' complaint. See John Norton Pomeroy, Equity Jurisprudence § 399 at 95-97 (Spencer W. Symons ed., 5th ed. 1941) ("The dirt on his hands must be his bad conduct in the transaction complained of."). Gen-Probe's allegations of misconduct do not relate to these transactions. The doctrine therefore would have no application to that case.

 The Court also rejects Gen-Probe's arguments in favor of consolidating discovery, for three reasons. First, Judge Miller in the CNS case has rejected Gen-Probe's proposed amendment of its complaint to raise in that case the issues it seeks to raise in this action. Second, the Regents case is in a far more advanced procedural posture than this case. Third, most of the common discovery relates to allegations that this Court finds fail to state a viable claim. Thus even were the Court convinced it possessed the power to do so, it would decline to consolidate discovery in these cases, two federal and one state: comity and efficiency both weigh against consolidation.

 The Court therefore denies Gen-Probe's motion in its entirety.

 IV. MOTIONS TO DISMISS

 A. Standard for Rule 12(b)(6) Dismissal

 A motion under Rule 12(b)(6) tests whether the allegations of the complaint satisfy the requirement of Rule 8(a), which calls for a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). The Rules do not require an elaborate recitation of every fact a plaintiff may ultimately rely upon at trial, but only a statement sufficient to "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). The complaint should be liberally construed in favor of the plaintiff, and its factual allegations taken as true. Oscar v. Univ. Students Co-Operative Ass'n, 965 F.2d 783, 785 (9th Cir.), cert. denied, 506 U.S. 1020, 113 S. Ct. 655, 121 L. Ed. 2d 581 (1992).

 Generally, matters outside the pleadings should not be considered. Fed. R. Civ. P. 12(b). However, documents referred to in the complaint and forming a basis for the plaintiff's claims may be considered. Venture Associates v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th Cir. 1993).

 B. Regents' Motion to Dismiss

 1. Eleventh Amendment Immunity

 The Regents of the University of California claim immunity from suit under the Eleventh Amendment, which has been construed to bar federal courts from hearing any claim against a state or an "arm of the state." State Highway Comm'n v. Utah Constr. Co., 278 U.S. 194, 199, 73 L. Ed. 262, 49 S. Ct. 104 (1929). Whether a state entity is an arm of the state is determined by the application of a five factor test: "(1) whether a money judgment would be satisfied out of state funds, (2) whether the entity performs central governmental functions, (3) whether the entity may sue or be sued, (4) whether the entity has power to take property in its own name or only the name of the state, and (5) the corporate status of the entity." Doe v. Lawrence Livermore Nat. Lab., 65 F.3d 771, 774 (9th Cir. 1995) (citation omitted).

 The first factor is the most significant. Doe, 65 F.3d at 774. In Doe, the Ninth Circuit carved a new "indemnification" exception to Eleventh Amendment immunity by holding that although balance of the factors weighs in favor of immunity when the state treasury must pay judgment on the claim, the balance weighs against immunity when another entity must pay judgment on the claim because of an indemnification agreement. Id. at 774-76. *fn4" The Doe exception requires a contract obligating another party to pay the precise claim at issue. Section 2.7d of the Regents' "Exclusive License Agreement" with ATC provides ATC the option of financing the Regents' litigation "to secure legal title" to the '611 and '330 patents in return for exclusivity on the license option to those patents set forth in section 2.7a. Section 18.1 provides that ATC will indemnify the Regents for "any and all claims . . . resulting from or arising out of exercise of this license or any sublicense."

 The Regents, in their supplemental brief on the impact of the license agreement, assert that section 2.7d does not obligate ATC to pay the costs of Gen-Probe's claims against the Regents. ATC can pay the Regents' costs in the Regents v. Kohne lawsuit in return for exclusivity on a license option, but ATC is not obligated to indemnify the Regents for claims arising out of that lawsuit. Gen-Probe's contrary interpretation of this provision cannot control over the interpretation put forth by the party to the contract that would have the right to enforce the provision. *fn5"

 Section 18.1, however, may apply to Gen-Probe's inducement of infringement claims. Section 18.1 obligates the Regents to indemnify Amoco for "any and all claims . . . resulting from or arising out of exercise of this license or any sublicense." The license granted in the agreement is to "any subject matter claimed in or covered by . . . [pending U.S. patent applications, serial nos. 191,852 and 707,725] by Eric Stanbridge and Ulf Gobel and assigned to The Regents." License Agreement, § 1.1; see also id. at § 2.1. Gen-Probe alleges that the Stanbridge/Gobel applications infringe the '330 patent. Opp. at 5. Because ATC would be obligated to pay the Regents' liabilities arising out of its licensing the Stanbridge/Gobel applications, the Regents does not have Eleventh Amendment immunity as to the two inducement of patent infringement claims. *fn6"

 However, the Regents is immune from all other claims. Gen-Probe argues that because the Regents sued it in federal court in Regents v. Kohne, it should be deemed to have waived immunity in this case, citing Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931 (Fed. Cir. 1993), cert. denied, 510 U.S. 1140, 127 L. Ed. 2d 434, 114 S. Ct. 1126 (1994). Genetech was an application of the rule that filing suit in federal court constitutes consent to a full adjudication of that controversy. Id. at 947. Gen-Probe's state law claims do not arise from the transactions underlying the Regents' claim for co-inventorship in Regents v. Kohne, *fn7" and therefore do not constitute the same controversy.

 Accordingly, only the inducement of infringement claims are not barred by Eleventh Amendment immunity, and only as against the Regents of the University of California, not Dr. Stanbridge. *fn8"

 2. Motion to Dismiss under Rule 12(b)(6)

 The Regents also argue that the complaint fails to adequately allege inducement. However, as noted above, the license agreement between the ATC and the Regents grants ATC the right to immediately begin producing products covered by the Stanbridge/Gobel patent application. Gen-Probe has alleged that this application infringes the '330 patent. These facts, if proven, could establish inducement. The inducement counts therefore may not be dismissed.

 C. CNS' Motion to Dismiss

 1. Motion to Dismiss Federal Claims Under ...


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