United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS AND HOLDING IN
ABEYANCE MOTION TO STAY COUNTERCLAIM
WILLIAM ALSUP, UNITED STATES DISTRICT JUDGE
in this patent infringement action moves to dismiss
defendants' antitrust counterclaim and also moves to
stay, sever, or bifurcate the counterclaim. The motion to
dismiss is Granted and the motion to stay is Held in
an action by plaintiff Maquet Cardiovascular LLC against its
former employee, Dr. Albert Chin, and his recently-founded
company, Saphena Medical, Inc. The initial complaint filed in
December 2016 asserted claims for patent infringement and
breach of contract. In February 2017, Maquet amended the
complaint to add claims for false advertising in violation of
the Lanham Act and for correction of inventorship. Saphena
and Dr. Chin then answered and counterclaimed, accusing
Maquet of various forms of anticompetitive conduct.
following is taken from the well-pled allegations of the
counterclaim (Dkt. No. 44).
is a “multinational industry giant in the field of
surgical equipment” that has operated for over 175
years. It is based in Germany and part of Getinge Group, a
“massive global conglomerate” that markets
medical equipment and systems worldwide (id. ¶
43). Among other things, Maquet sells products designed for
endoscopic vessel harvesting (“EVH”) procedures.
Its customers consist primarily of large groups of hospitals
(id. ¶ 70).
Chin is an “inventor, engineer, and trained surgeon,
who has worked in the conception and development of surgical
instruments . . . for more than 20 years” (id.
¶ 21). Dr. Chin spent twenty years of his career at
Guidant Corporation, where he designed surgical and
intravascular instruments (id. ¶ 23). In 2008,
Maquet acquired Guidant and Dr. Chin became Chief Innovation
Officer at Maquet (id. ¶ 24).
2009, Dr. Chin left Maquet and founded Pavilion Medical
Innovations, LLC, an “incubator for innovative medical
device companies.” Saphena, founded in 2013 by Dr. Chin
and non-party Mike Glennon, is one such company (id.
¶ 25). Saphena's sole product is Venapax, a device
designed for EVH procedures (id. ¶¶ 11,
26). Such devices are used to harvest blood vessels for
subsequent use as graft material in, e.g., coronary
artery bypass graft (“CABG”) surgery by cutting
the vessels and sealing them off from surrounding branch
competes with Vasoview, Maquet's own line of EVH products
that originated with a device designed by Dr. Chin at Guidant
in 1995 (id. ¶¶ 23, 44). Maquet launched
its latest Vasoview device, HemoPro 2, in 2010 (id.
¶ 45). In a contemporaneous press release, Maquet
claimed HemoPro 2 “utilizes next-generation HEMOPRO
cut-and-seal technology to reduce thermal spread and to
achieve optimal conduit quality for coronary artery bypass
graft (CABG) surgery patients” (Dkt. No. 44-13). In
February 2017, Maquet's own website contained a
one-paragraph overview of HemoPro 2 that described it as
“the latest generation of VASOVIEW simultaneous
cut-and-seal technology” for EVH (Dkt. No. 44-14).
overview also claimed HemoPro 2 “virtually eliminates
thermal spread and helps harvesters safely acquire
high-quality conduits for [CABG] surgery.” An asterisk
at the end of the foregoing sentence traced to small print at
the end of the overview, which stated, “Thermal spread
is defined as the extent (length) of thermal injury of the
vessel extending laterally outward from the edge of the
HEMOPRO 2 Jaws at the location of the interaction between the
Jaws and the vessel” (ibid.). Minimization of
thermal spread is important for EVH procedures because the
cauterization process required to cut and seal blood vessels
can damage the cells of the vessel to be harvested. When the
harvested vessel is subsequently used as graft material,
excessive damage can cause the graft to fail (Dkt. No. 44
August 2014, Maquet executives Michael McCartin, Philip
Freed, and Peter Hinchliffe met with Saphena for a
demonstration of Venapax's features and benefits.
Although Maquet indicated during the meeting that it was
“very impressed” and “very intrigued”
with Venapax, it did not further discuss
“acquisition” with Saphena thereafter (it is
unclear whether the counterclaim means
“acquisition” of Venapax or of Saphena)
(id. ¶¶ 67-68).
contracts with its customers offer significant discounts or
rebates when customers purchase all their EVH products from
Maquet for a certain period of time, up to four years. Maquet
also offers further discounts and promotions when customers
buy “bundles” of devices and accessories. In
addition, Maquet offers its customers incentive rebates on
overall prices for maintaining exclusive commitment to Maquet
products (id. ¶¶ 70-76). Maquet's
customers who benefit from its contract discounts,
promotions, and rebates include large groups of hospitals
with member hospitals in California and Massachusetts
(id. ¶¶ 80-81). Maquet currently
“controls” approximately 85 percent of the market
for EVH products (id. ¶ 13).
business practices have caused difficulties for Saphena. For
example, in January 2017, a “potential customer”
hospital in Georgia rebuffed Saphena's attempt to pitch
Venapax to its physician's assistants because
“purchasing any Venapax devices could result in both a
loss of rebates associated with their agreement [with Maquet]
and substantial increases in [prices for] their purchase of
other Maquet products (not just EVH devices), not only for
them, but [also for] other hospitals on the agreement as
well.” Similarly, “another large group of
hospitals, whose members include several California
hospitals, recently informed Saphena that they could only use
EVH equipment that is already part of its fixed, bundled
cardiac artery bypass grafting payment system” from
Maquet (id. ¶¶ 78-79).
on the foregoing allegations, Saphena and Dr. Chin assert
counterclaims against Maquet for (1) below-cost sales in
violation of California law, (2) tortious interference with
prospective business relationships, (3) unfair competition in
violation of California law, (4) loss leaders in violation of
California law, (5) false advertising in violation of the
Lanham Act, (6) attempted monopolization in violation of
Section 2 of the Sherman Act, and (7) unfair competition in
violation of Massachusetts law.
moves to dismiss all counterclaims under Rule 12(b)(6).
Additionally, Maquet moves to stay, sever, or bifurcate the
counterclaims as this litigation progresses. This order
follows full briefing and oral argument.
Motion to Dismiss.
survive a motion to dismiss, defendants' counterclaim
must plead “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). A claim has facial
plausibility when the party asserting it pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). When ruling on a motion to dismiss, a court may
generally consider only allegations in the pleadings,
attached exhibits, and matters properly subject to judicial
notice. The court accepts factual allegations in the
complaint (or counterclaim) as true and construes the
pleadings in the light most favorable to the nonmoving party.
Manzarek v. St. Paul Fire & Marine Ins. Co., 519
F.3d 1025, 1030-31 (9th Cir. 2008). Conclusory allegations or
“formulaic recitation of the elements” of a
claim, however, are not entitled to the presumption of truth.
Iqbal, 556 U.S. at 681.
initial matter, Maquet contends Dr. Chin lacks standing to
assert the counterclaims because they do not allege that he
suffered any injury (Dkt. No. 62 at 22). Defendants do not
deny this. Indeed, they offer in their opposition brief to
“stipulate that, going forward, all seven of their
Counterclaims will be pursued by Defendant Saphena
alone” (Dkt. No. 66 at 21). This order therefore
discusses the counterclaims only as asserted by Saphena.
17043 of the California Business and Professions Code states,
“It is unlawful for any person engaged in business
within this State to sell any article or product at less than
the cost thereof to such vendor, or to give away any article
or product, for the purpose of injuring competitors or
destroying competition.” Saphena claims Maquet sells
certain Vasoview EVH systems “below its fully allocated
costs of producing and distributing those products” in
violation of this provision (Dkt. No. 44 ¶ 88).
Saphena alleges that Maquet “purchases [its] Vasoview
EVH systems from its corporate parent for a cost of up to
$750.” Saphena also alleges that Maquet sells certain
Vasoview EVH systems to customers for less than $750 as a
result of various discounts, promotions, and rebates. For
example, some Maquet customers can purchase the Vasoview 6
EVH System “for as little as $650.” Thus, Saphena
contends, Maquet violates Section 17043 because it
“must sell its Vasoview EVH systems at above $750 in
order to realize any margin.” Saphena further alleges
that “Maquet's predatory pricing scheme is being
conducted for ...