Opinion
Case No. CV 02-4770 MRP.
December 15, 2004
MEMORANDUM OF DECISION RE: Defendant's Motion for Summary Judgment
On September 20, 2004, Defendants Tyco Health Care Group, L.P. and Mallinckrodt, Inc. ("Tyco") filed a Motion for Summary Judgment ("Motion"). On November 16, 2004, this Court heard oral argument and took the Motion under submission.
BACKGROUND
Plaintiff Masimo Corporation ("Masimo") brings this antitrust action against Tyco Healthcare Group, L.P. and Mallinckrodt, Inc. (collectively "Tyco") alleging that Masimo "has been effectively shut out of a substantial portion of the market for pulse oximetry sensors and patient cables" through Tyco's use of "exclusive dealing arrangements," "strong-arm" tactics, and other "anti-competitive agreements" with hospital group purchasing organizations ("GPOs"), hospitals, Integrated Health Networks ("IHNs") and original equipment manufacturers ("OEMs") in violation of Sections 1 and 2 of the Sherman Antitrust Act, and Section 3 of the Clayton Act. Complaint at ¶¶ 17, 18, 24.
The trial of the antitrust action follows a six-week jury trial during which various allegations of patent infringement were litigated by Masimo and Nellcor. In that case Masimo claimed its patented motion-tolerant oximeter technology was infringed by Nellcor's motion-tolerant oximeter technology. The jury found for Masimo on its claims for patent infringement and awarded damages based on Masimo's lost profits resulting from the infringement.
Tyco brings this Motion on the grounds that during the damages phase of the patent trial, Masimo advanced certain factual positions which Tyco claims are inconsistent with and negate Masimo's antitrust claims in this case. Specifically, Tyco claims that (1) factual positions taken by Masimo in the patent case are so inconsistent with positions taken in the antitrust case that Masimo's antitrust claims should be judicially estopped and (2) in the alternative, that unequivocal testimony presented by Masimo at the patent trial negates essential elements of Masimo's antitrust claims warranting summary judgment against it.
This is Tyco's second motion for summary judgment. See Memorandum of Decision filed on June 10, 2004.
LEGAL STANDARD FOR SUMMARY JUDGMENT
Summary judgment is appropriate when the evidence submitted shows that "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c)); Celotex Corp. v. Catrett, 477 U.S. 317, 322-26 (1986). A defendant moving for summary judgment satisfies the initial burden of production by providing evidence negating any essential element of the nonmovants' claims or by showing ". . . that there is an absence of evidence to support the non-moving party's case." Id. at 325; Nissan Fire Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-05 (9th Cir. 2000). Once the moving party carries its burden of production, the non-moving party must come forward with specific facts to support its claims. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Nissan Fire Marine, 210 F.3d at 1103. If the nonmoving party fails to produce sufficient evidence to create a genuine issue of material fact, the moving party must prevail on the motion for summary judgment. Celotex Corp., 477 U.S. at 322; Nissan Fire Marine, 210 F.3d at 1103. But if the nonmoving party produces "enough evidence to create a genuine issue of material fact, the nonmoving party defeats the motion." Nissan Fire Marine, 210 F.3d at 1103.
ANALYSIS
I. TYCO'S JUDICIAL ESTOPPEL ARGUMENT
"Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions, precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position." Rissetto v. Plumbers Steamfitters Local 343, 94. F.3d 597, 600 (9th Cir. 1996). The doctrine bars "a party from making a factual assertion in a legal proceeding which directly contradicts an earlier assertion made in the same proceeding or a prior one." Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990). The doctrine "applies to a party's stated position whether it is an expression of intention, a statement of fact, or a legal assertion." Wagner v. Prof'l Eng'rs in Cal. Gov't, 354 F.3d 1036, 1044 (9th Cir. 2003).
In New Hampshire v. Maine, 532 U.S. 742, 750 (2001), the Supreme Court noted that "the circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle." The underlying purpose of the doctrine is the protection of judicial integrity. Id. at 751. The doctrine is equitable in nature and is invoked by a court in its discretion. Id. at 750. "Nevertheless, several factors typically inform the decision whether to apply the doctrine in a particular case." Id. These factors are (1) whether the party is asserting a position that is clearly inconsistent with a position taken in prior litigation; (2) whether the party succeeded in persuading a court to accept the party's earlier position; and (3) whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped. Id.
Tyco argues that Masimo advanced factual positions in the patent case that are wholly inconsistent with Masimo's antitrust claims, and therefore Masimo's antitrust claims should be judicially estopped. Tyco Mem. at 15. First, Tyco argues that during the patent case Masimo took the position that it did not compete in the "conventional" oximeter market (i.e., oximeter products that do not include motion-tolerant technology). Id. at 13. Tyco contends that this position should preclude Masimo from now claiming it suffered antitrust injury in a market in which it stated earlier that it did not compete. Id. at 14. Second, Tyco argues that during the patent case Masimo took the position that patent infringement was the sole reason Masimo lost sales in the motion-tolerant segment of the market. Id. Tyco contends that this position should preclude Masimo from now claiming there were other reasons (i.e., anti-competitive behavior) it lost sales in the motion-tolerant segment. Id.
Masimo disputes the merits of Tyco's judicial estoppel and summary judgment arguments. Masimo also argues Tyco waived its right to make a judicial estoppel argument by failing to assert it once the allegedly inconsistent positions became apparent. Opp. at 15. Masimo has not made a persuasive showing in support of this position. The Court finds no reason to find any waiver by Tyco and accordingly analyzes Tyco's arguments below.
A. SHOULD MASIMO BE JUDICIALLY ESTOPPED FROM MAKING ANTITRUST CLAIMS WITH RESPECT TO THE CONVENTIONAL OXIMETER MARKET?
During the damages phase of the patent case Masimo argued in support of its lost profits claim that customers of motion-tolerant products would not purchase conventional oximeters as an alternative. In support of this position Mr. Kiani, Masimo's CEO, and Mr. Mosher, Masimo's President of Sales, both testified that they were not aware of losing any sales to conventional oximeters. Transcript at 2912:6-8 and Transcript at 2971:16-19. Further, and more significantly, Masimo's trial counsel argued to the jury that "there's two markets and to say they compete head to head, conventional with motion, is wrong." Transcript at 3797:4-16 (emphasis added). Mr. Kiani testified further:
Q. Do you consider any of the sales by Nellcor, or any other company for that matter, that does not read through motion as a lost sale to Masimo?
A. No.
Q. Why?
A. We are competing for the market that wants the high performance pulse oximeters that read through motion. So markets where the customers don't care, we are not addressing, we're not going after that with our sales force.
Transcript at 2921:16-24.
Tyco argues that because Masimo claimed: (1) there were two separate markets for conventional and motion-tolerant oximeters, (2) that Masimo never lost a sale to a conventional oximeter and (3) that Masimo did not consider a sale of a conventional oximeter by Nellcor or other manufacturers as a lost sale, Masimo took the factual position that it did not compete in the conventional market. Without having competed in the conventional market, Tyco argues, it is inconsistent for Masimo to now claim it suffered antitrust damages in that market. Tyco Mem. at 13.
The testimony Tyco cites in support of its argument was offered in the damages phase of the patent trial and as such was focused on the time period from July 2001 to the present (the date of infringement going forward). Any position Masimo may have taken in the patent case must be viewed as limited to that time period unless otherwise indicated in the testimony. The Court concludes that Masimo arguably took no position as to whether it competed in the conventional market pre-July 2001.
Because the Court has denied this summary judgment motion in its entirety it does not need to decide at this time whether July 2001 (the date of infringement) or February 1999 (the first use of motion-tolerant technology by Nellcor), as Tyco argues, is the starting point of the time period in question during the damages phase of the patent case. The Court uses July 2001 for convenience.
As to the post-July 2001 conventional market, the Court notes that the cited testimony appears inconsistent with the position that Masimo competed against conventional oximeters during the post-July 2001 period. The Court, however, is unwilling to conclude that the testimony is so clearly inconsistent that Masimo should be prevented from putting on its case. The Court therefore declines to exercise its equitable power of judicial estoppel to prevent Masimo from making antitrust claims with respect to this portion of the market. However, Masimo is responsible for the testimony of its principal witnesses and Masimo will have to live with this testimony in the antitrust case. The patent testimony will be admissible, but the Court will wait to decide on the manner in which it will be used in the antitrust case.
B. SHOULD MASIMO BE JUDICIALLY ESTOPPED FROM MAKING ANTITRUST CLAIMS WITH RESPECT TO THE MOTION-TOLERANT OXIMETER MARKET?
During the damages phase of the patent case Masimo argued in support of its lost profits claim that but for Nellcor's infringement Masimo would have captured 80% of Nellcor's sales of motion-tolerant oximeter products. Transcript at 3057:24 — 3058:8. Tyco argues that in its testimony Masimo took the factual position that the sole reason Masimo lost sales in the motion-tolerant oximeter market was Nellcor's infringement. Tyco Mem. at 14. Tyco therefore contends that Masimo should be judicially estopped from now claiming that it lost sales in this same market because of Tyco's anti-competitive behavior. Id. The Court disagrees.
Masimo's damages expert, Mr. Wagner, testified "in the but for world, but for Nellcor competing with their 04 and 05 [motion-tolerant] technology against Masimo's next generation products, they would have made significantly more sales. In fact, [Masimo] would have made 80 percent of Nellcor's sales because they would have been the only competitor that had true read-through-motion technology in this market place." Transcript at 3057:24-3058:8. This "but for" analysis is not necessarily inconsistent with Masimo's claims of antitrust injury.
It is possible that Tyco simultaneously engaged in anti-competitive conduct and infringed Masimo's patents. But for Tyco's infringement, Masimo would have been the only provider of motion-tolerant oximeters and this position in the market could have been strong enough to overcome Tyco's alleged anti-competitive conduct and allow Masimo to capture 80% of Nellcor's sales. The "but for" position does not negate the possibility that there was anti-competitive "conduct". It merely argues that if Tyco had not infringed (i.e., Masimo had the only motion-tolerant technology) there would have been limited, if any, anti-competitive "effect". In ruling on this Motion, the Court must look at a world where both Masimo and Tyco were selling motion-tolerant products. In this world Masimo did not have a natural monopoly on motion-tolerant technology and therefore anti-competitive "conduct" could have resulted in anti-competitive "effect".
The problem therefore is not necessarily one of inconsistent positions, but rather of potentially duplicative damages. If, as was the case, Masimo was credited in the patent case for 80% of Tyco's motion-tolerant sales, how much more can it get in that market on account of its antitrust injury? The problem of duplicative damages cannot be solved until a damages verdict, if any, is awarded in the antitrust case. The Court is cognizant of this problem and will consider equitable set-off, should the need arise. The Court finds that Masimo's positions with respect to the motion-tolerant part of the market are not necessarily inconsistent with its antitrust claims and that the application of the extreme penalty of judicial estoppel is not warranted.
II. TYCO'S ARGUMENT THAT EVIDENCE ADDUCED AT THE PATENT TRIAL NEGATE ELEMENTS OF MASIMO'S ANTITRUST CLAIMS
Tyco argues, apart form judicial estoppel, that the factual positions taken by Masimo in the patent case negate necessary elements of Masimo's antitrust claims. Tyco Mem. at 20. Tyco argues that no reasonable fact finder could conclude, in the face of the factual testimony and argument discussed in the previous section, that Masimo suffered antitrust injury. Id. at 21. This Court again disagrees and finds that there arguably are genuine issues of material fact which require a trial. FED R. CIV. P. 56. Assuming that all of the testimony in the patent case is admissible in the antitrust case, there still will be genuine issues of fact as to whether Masimo competed in the conventional market and lost sales in the motion-tolerant market for reasons other than Nellcor's infringement. In view of the testimony already given, proof of these facts will not be a simple task, but the possibility of doing it cannot be foreclosed at this point. Tyco's motion for summary judgment is therefore DENIED.
CONCLUSION
For the foregoing reasons, the Court DENIES Tyco's Motion for Summary Judgment. The Court, however, notes that it is unwilling to permit Masimo to proceed as if its prior statements had never been made. It will permit Masimo to put on its case — a case predicated on the existence of one market which includes both conventional and motion-tolerant products. However, Tyco will also be permitted to put on its case and to use Masimo's prior testimony subject to appropriate rulings by the Court.IT IS SO ORDERED.