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SLR Partners, LLC v. B. Braun Medical Inc.

October 23, 2009

SLR PARTNERS, LLC AND ROZI MEDICAL DEVICES LIMITED, PLAINTIFFS,
v.
B. BRAUN MEDICAL INC., DEFENDANT.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS Doc. No. 9

Plaintiffs SLR Partners, LLC and Rozi Medical Devices Limited (collectively, "SLR") own United States Patent No. 5,006,114 (the "'114 patent") for technology that facilitates sterile, needleless injections into intravenous lines. In 1992, SLR approached B. Braun Medical Inc. ("Braun") about a joint effort to develop the '114 patent into a commercial product.*fn1 To that end, the parties entered an exclusive licensing agreement.

Nearly one year after entering the license agreement, SLR hired ViR Engineering ("ViR") to develop commercially viable designs based on the '114 patent at SLR's expense. ViR developed five designs that were ultimately presented to Braun by SLR. Braun then began funding ViR's work.

Unbeknownst to SLR, Braun began developing ViR's plans into a commercial product called the UltraSite valve. In 1995, Braun obtained United States Patent No. 5,439,451 (the "'451 patent") on the UltraSite valve, naming four ViR engineers as the inventors. Two years later, in 1997, SLR learned about the development of the UltraSite valve and the '451 patent. SLR terminated the license agreement.

In 1998, Braun sought a declaratory judgment that Braun, and not SLR, owned the '451 patent. SLR counterclaimed for conversion, possession of personal property, fraud, and misappropriation of trade secrets. SLR prevailed at trial and won damages based upon past and future sales of the UltraSite valve, as well as punitive damages. At a subsequent equitable trial, the court gave SLR the option of owning the '451 patent and foregoing future damages. SLR elected to own the '451 patent, but this ruling was ultimately struck down by the Ninth Circuit. The parties then settled, with SLR receiving approximately $26 million (slightly more than the trial court initially awarded) and Braun maintaining ownership of the '451 patent.

SLR now sues Braun for patent infringement, alleging that the UltraSite valve infringes the '114 patent. Braun moves to dismiss under Federal Rule of Civil Procedure 12(b)(6) on three grounds: claim preclusion, issue preclusion, and a release of claims provision contained in the parties' prior settlement agreement. For the reasons stated below, the court grants Braun's motion to dismiss on claim preclusion grounds.

I. LEGAL STANDARDS

A motion to dismiss on claim preclusion grounds is appropriate under Federal Rule of Civil Procedure 12(b)(6) when there is no dispute of material fact. Scott v. Kuhlman, 746 F.2d 1377, 1378 (9th Cir. 1984). The court can take notice of judicial documents to determine the extent of prior litigation. Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006).

"Claim preclusion, or res judicata, applies where: (1) the same parties, or their privies, were involved in the prior litigation, (2) the prior litigation involved the same claim or cause of action as the later suit, and (3) the prior litigation was terminated by a final judgment on the merits." Cent.

Delta Water Agency v. United States, 306 F.3d 938, 952 (9th Cir. 2002).*fn2 To determine whether the prior and current claims are the same, the court considers:

(1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same rights; and (4) whether the two suits arise out of the same transactional nucleus of facts.

A.V. Costantini v. Trans Worlds Airlines, 681 F.2d 1199, 1201-02 (9th Cir. 1982). Of these factors, the fourth is the most important. Cent. Delta Water Agency, 306 F.3d at 952. It is irrelevant whether the plaintiff asserted the same grounds for recovery or arguments in the prior action; rather, it only matters whether the plaintiff could have asserted them. United States v. Barajas, 147 F.3d 905, 909 (9th Cir. 1998).

II. DISCUSSION

The parties do not dispute that the first and third elements of claim preclusion are established. Both the prior and current cases involve the same parties or their privies, and the prior case ended with a final judgment on the merits. Therefore, the court need only determine whether the prior case-with its causes of action for conversion, possession of personal property, fraud, ...


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