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Abaxis, Inc v. Cepheid

August 25, 2011

ABAXIS, INC.,
PLAINTIFF AND COUNTER-DEFENDANT,
v.
CEPHEID,
DEFENDANT AND COUNTER-CLAIMANT.



The opinion of the court was delivered by: Lucy H. Koh United States District Judge

ORDER GRANTING MOTION TO DISMISS INEQUITABLE CONDUCT COUNTERCLAIM

Currently before this Court is Plaintiff Abaxis, Inc.‟s motion to dismiss Defendant Cepheid‟s eighth and ninth defenses and ninth counterclaim. Dkt. No. 74 ("Mot."); see also Dkt. No. 82 ("Reply"). Cepheid opposes this motion. Dkt. No. 78 ("Opp‟n"). After reviewing the 21 parties‟ submissions, considering the relevant legal authorities, and hearing oral argument, the Court hereby GRANTS Abaxis‟s motion to dismiss.

I.BACKGROUND

In its first amended complaint ("FAC"), Abaxis alleges that Cepheid is infringing four of its patents and is in breach of a license agreement. Dkt. No. 24. Cepheid has denied liability.

Cepheid‟s initial answer alleged inequitable conduct during the prosecution of United States Patent Nos. 5,413,732 ("the ‟732 patent"), 5,624,597 ("the ‟597 patent"), 5,776,563 ("the ‟563 patent"), and 6,251,684 B1 ("the ‟684 patent") (collectively "the patents-in-suit")*fn1 . Dkt. No. 32. On March 22, 2011, this Court dismissed Cepheid‟s eighth defense and ninth counterclaim with leave to 3 amend. Dkt. No. 45. Cepheid filed an amended answer and counterclaims on April 12, 2011. Dkt. No. 50. Abaxis filed a motion to dismiss on April 26, 2011. Dkt. No. 51. On June 15, 2011, this Court granted Cepheid leave to further amend its answer and counterclaims in light of the recent Federal Circuit decision, Therasense, Inc. v. Becton, Dickinson & Co., Nos. 2008-1511, 2008- 1512, 2008-1513, 2008-1514 & 2008-1595, 2011 WL 2028255 (Fed. Cir. May 25, 2011). See Dkt. No. 67. Abaxis withdrew its motion to dismiss in anticipation of Cepheid‟s forthcoming 9 amendments on June 16, 2011. Dkt. No. 68. In its subsequent amended answer and third amended 10 counterclaims ("amended answer"), filed June 17, 2011, Cepheid raises ten defenses and asserts eleven counterclaims. Dkt. No. 72 ("Ans."). Abaxis filed the instant motion to dismiss on June 29, 2011. Dkt. No. 74.

Cepheid‟s eighth and ninth defenses and ninth counterclaim are at issue here. They allege that Abaxis engaged in inequitable conduct during the prosecution of the ‟732, ‟597 and ‟563 15 patents. Ans. 6-25. They also allege that the ‟684 patent is infected by the inequitable conduct 16 during the prosecution of the ‟732, ‟597 and ‟563 patents. Ans. 25-28. As a result, Cepheid seeks 17 judgment that the patents-in-suit are unenforceable. Ans. 33. Alternatively, Cepheid alleges that 18

Abaxis‟s claims are barred by the doctrine of unclean hands because of Abaxis‟s inequitable 19 conduct and are therefore unenforceable. Ans. 28, 33. 20

A.Abaxis's Alleged Failure to Disclose Material Prior Art

Cepheid‟s eighth defense contains allegations that Kevin L. Bastian, the attorney who prosecuted the ‟732, ‟597 and ‟563 patents for Abaxis, knowingly and intentionally failed to 23 disclose to the United States Patent & Trademark Office ("PTO") material prior art while 24 prosecuting these three patents.*fn2 Ans. ¶¶ 17, 39.*fn3 According to the amended answer, this material prior art was United States Patent No. 4,470,202 ("the Buxton Patent").*fn4 Id. ¶ 17. As described in 2 Cepheid‟s amended answer, the patents-in-suit "relate to the production of freeze-dried reagent 3 beads for pharmaceutical and diagnostic applications. The beads are formed by dispensing drops 4 of reagent solutions into a cryogenic liquid. The frozen drops are then lyophilized (i.e., freeze-5 dried), which is a process that drives off water molecules, leaving a dried, allegedly rapidly-6 dissolving bead." Id. ¶ 26. Cepheid claims that "Abaxis‟ purported advance over the prior art is 7 uniformity in bead production." Id. 8

Cepheid alleges that the Buxton Patent discloses "reagent spheres and a process of making reagent spheres that have both short dissolution times and uniformity." Id. ¶ 28. Specifically, 10 Cepheid alleges that the Buxton Patent‟s disclosures include: (1) "drop-wise dispensing of reagents for freezing;" (2) "use of [a] pump to dispense drops;" (3) "uniform size of spheres;" (4) "unit dosages;" (5) "fast dissolution;" and (6) a "chemical lattice." Id. ¶ 30. Cepheid‟s amended answer 13 provides four tables setting forth what Cepheid considers to be the "close overlap between the 14 Buxton teachings and the Patents-in-Suit" that would make the patents-in-suit "unpatentable due to 15 anticipation and/or obviousness in view of the Buxton patent." Id. ¶ 31, 33. In particular, Cepheid 16 considers the Buxton Patent‟s disclosure of "drop-wise dispensing of reagents into liquid for 17 freezing" to be but-for material*fn5 to the patents-in-suit and non-cumulative of other prior art 18 submitted to the PTO. Id. ¶ 32-33. 19

Cepheid claims that at least Kevin L. Bastian was aware of the but-for materiality of the Buxton Patent and failed to disclose the patent to the PTO during the prosecution of the patents-in-21 suit with the intent to deceive the PTO. Id. ¶ 39. Kevin L. Bastian, the same attorney who 22 prosecuted the ‟732, ‟597, and ‟563 patents, also prosecuted United States Patent No. 5,275,016 ("the ‟016 patent"). Id. ¶ 35. The ‟016 patent and the patents-in-suit share the same three 2 inventors: Steven N. Buhl, Bhaskar Bhayani, and Thuy N. Tang. Id. ¶ 34. Cepheid alleges that the 3 ‟016 patent "performs the methods claimed in the Patents-in-Suit and produces the reagent spheres 4 claimed in the Patents-in-Suit." Id. ¶ 37. According to the amended answer, on July 16, 1993, Mr. 5 Bastian received the International Search Report for the Patent Cooperation Treaty ("PCT") 6 counterpart of the ‟016 patent, which cited the Buxton Patent as a "document of particular 7 relevance" to some of the claims of the PCT application. Id. ¶ 43. Cepheid alleges that these 8 claims in the PCT counterpart of the ‟016 patent "closely parallel claims of the Patents-in-Suit." 9

Id. ¶ 44. On August 6, 1993, while prosecuting the ‟016 patent, Mr. Bastian submitted a 10 supplemental disclosure statement to the PTO. Id. ¶ 51. Cepheid alleges that this statement was accompanied by a copy of the Buxton Patent. Id. According to Cepheid‟s amended answer, "[t]he identical features of the Buxton patent which made it material to the ‟016 patent . . . also made the 13 Buxton patent but-for material to the ‟732, ‟597, and ‟563 patents." Id. ¶ 53.*fn6 Cepheid further alleges that Mr. Bastian made several statements to the PTO while prosecuting the patents-in-suit. According to Cepheid, these statements were made in order to 16 distinguish the patents-in-suit from prior art cited by the PTO. Id. ¶ 54, 58-64. Cepheid‟s amended 17 answer alleges that in making these statements, Mr. Bastian claimed that the patents-in-suit taught 18 features that were actually disclosed in the Buxton Patent. Id. Cepheid specifically claims that Mr. 19 Bastian knew these statements "were false in light of information contained in the Buxton patent, 20 which was not before the Examiners, and Mr. Bastian knowingly withheld this information." Id. ¶ 21 64. Cepheid argues that had the Buxton Patent been disclosed, "neither the ‟732, ‟597, nor ‟563 22 patents would have issued . . . because the claimed features allegedly missing from the prior art of 23 record were disclosed in the Buxton Patent." Id. ¶ 65. 24

B.Infectious Unenforceability of the ‟684 Patent

Cepheid also alleges that the Buxton Patent is material to the claims of the ‟684 patent and 26 non-cumulative of the prior art submitted to the PTO during the ...


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