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Pulse Health LLC v. Akers Biosciences, Inc.

United States District Court, D. Oregon

June 21, 2018

PULSE HEALTH LLC, an Oregon Limited Liability Company, Plaintiff,
v.
AKERS BIOSCIENCES, INC., a New Jersey Corporation, Defendant.

          DAVID H. ANGELI KRISTEN L. TRANETZKI ANGELI LAW GROUP LLC, ADAM K. YOWELL MICHAEL D. ROUNDS SHERLI FRANK BROWNSTEIN HYATT FARBER SHRECK, LLP ATTORNEYS FOR PLAINTIFF

          JENNIFER WAGNER STOLL STOLL BERNE LOKTING & SCHLACHTER PC, ANTHONY J. DIMARINO EMMETT S. COLLAZO A.J. DIMARINO, P.C. ATTORNEYS FOR DEFENDANT

          OPINION & ORDER

          MARCO A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE

         Plaintiff Pulse Health brings this breach of contract action against Defendant Akers Biosciences, Inc. Defendant moves for summary judgment on Plaintiff's claim for breach of contract. For the reasons that follow, the Court denies Defendant's motion.

         BACKGROUND

         Plaintiff Pulse Health LLC is an Oregon Limited Liability Company. Am. Compl. ¶ 1, ECF 40. In 2008, Plaintiff was developing the Free Radical Enzymatic Device (“FRED”), which sought to detect the range of aldehydes in human breath. DiMarino Decl. Ex. F (Marsh Dep.) 12:24-14:3, ECF 58-6. Plaintiff also developed a device called “Revelar, ” which also sought to detect aldehydes in human breath. Id. at 14:24-15:8, 17:12-24. Approximately 4.5 to 5 million Revelar devices were sold in the United States for a period of six to nine months in 2010 and 2011, but Plaintiff removed the product from the market due to consistency issues. Rounds Decl. Marsh Dep. 30:17-32:10, ECF 64; DiMarino Decl. Ex. J (Marsh 2016 Decl.) ¶ 16, ECF 58-10.

         Defendant Akers Biosciences, Inc., is a New Jersey corporation. Am. Compl. ¶ 2. Defendant is in the business of developing and selling “diagnostic products and devices that are designed to deliver various health information test results with laboratory-level accuracy, but with cheaper and faster results.” Def. Mot. Summ. J. (“Def. Mot.”) 4, ECF 57 (citing DiMarino Decl. Ex. H (Akers Decl.) ¶¶ 5, ECF 58-8). Defendant's products include the Vivo and OxiChek products. DiMarino Decl. Ex. I (Akers Dep.) at 106:8-19, ECF 58-9; Am. Compl. ¶¶ 19, 21.

         I. The Parties' Agreements

         The parties entered into a Technology and Development Agreement (“TD Agreement”) around September 14, 2007, and a Technology Transfer Agreement (“TT Agreement”) around December 31, 2008. Am. Compl. Exs. 1, 2. According to Plaintiff, the purpose of the TD agreement was for Defendant to “design and develop ‘New Versions' of its existing free radical test product in order for it to be used in combination with [Plaintiff's] hand-held FRED product.” Id. at ¶ 11, Ex. 1 at 1. The TT Agreement terminated the TD Agreement and required Plaintiff to pay Defendant a sum of $3, 000, 000. Id. at Ex. 2 ¶ 4. In exchange for this payment, Defendant agreed to “complete research, development, and testing for the ‘Free Radical Technology'” and “assigned all intellectual property rights of any kind in the ‘Assigned Technology' to [Plaintiff].” Id. at ¶ 13 (citing TT Agreement at ¶¶ 1.5, 2.1, and Schedules 1.5 and 2.5). “Assigned Technology” included “all Technology now or hereafter owned or controlled by [Defendant] which relates in any way to non-invasive exhaled breath testing, including without limitation the Technology described in Schedule 1.5 . . . .” Id. at Ex. 2 ¶ 1.5. Schedule 1.5, in turn, describes the Assigned Technology as: “(a) The Free Radical Breath Condensate Technology . . . .” and (2) “all breath tubes, reagents, measurement devices, and all methods pertaining to the design, formulation and manufacturing of same, together with all . . . know-how . . . pertaining to the same.” Id. at Ex. 2 at 18. According to Plaintiff, Defendant unsuccessfully attempted to develop a reagent to test for aldehydes under these agreements. DiMarino Ex. J (Marsh 2016 Decl.) ¶ 9.

         On April 8, 2011, the parties entered into an Assignment, License and Settlement Agreement (“Settlement Agreement”) that terminated all prior agreements. Am. Compl. Ex. 3 at § 11.1. The Settlement Agreement transferred to Defendant all of its rights in the Assigned Technology and, in exchange, relieved Plaintiff of its remaining payment obligations under the TT agreement: “In consideration of the assignment set forth in Section 2.1, ABI agrees to release and forever discharge Pulse from any obligation to pay the remaining balance of $2.325 million owing to ABI under the Technology Transfer Agreement.” Id. at § 2.2. Particularly relevant to this cause of action, the Settlement Agreement also gave Plaintiff:

[A]n exclusive, worldwide, transferable, sublicensable, fully paid-up, perpetual license under the Assigned Technology and ABI Patents to: (a) make, have, made, use, sell, offer for sale, import and otherwise distribute and dispose of products that use or incorporate any Assigned Technology in the field of Aldehyde Tests as defined in Section 1.3; and (b) to practice any methods, processes and procedures included within, and otherwise commercially exploit, such Technology in the field of Aldehyde Tests as defined in Section 1.3.

Id. at § 3.4. Defendant also “acknowledge[d] and agree[d] that it has no right or license to use any Assigned Technology or to practice the ABI Patents in the field of Aldehyde Breath Tests.” Id. at § 3.4.2. The Settlement Agreement defines “Aldehyde Tests” as:

[T]ests that qualitatively or quantitatively detect the presence of aldehydes in human exhaled breath or breath condensate for detection of free radical damage, cell damage or cell death, oxidative stress (including weight loss and BMI correlations), and interventions to mitigate oxidative stress (including diet, exercise, supplementation and stress relief). For avoidance of doubt, Aldehyde Tests do not include Alcohol Breath tests, Ketone Breath Tests, or Pulmo Breath Tests.

Id. at § 1.3. The Settlement Agreement defines “Assigned Technology” as “all Technology assigned by ABI to Pulse under the Technology Transfer Agreement.” Id. at § 1.5.

         Defendant also agreed that Plaintiff “has the unlimited right to use and otherwise commercially exploit all Technology developed by [Plaintiff], including any modifications, improvements, or additions to the Assigned Technology, and that [Defendant] has no rights with respect to such Technology.” Id. at § 5. Technology includes:

inventions, processes, designs, copyrights, trade secrets, know-how, trademarks, domain names, development, improvements, tests, software, and intellectual property rights of any nature whatsoever, including without limitation any applications or registrations of the foregoing, any rights arising from registration of any of the foregoing, and any right to sue for past or future infringement of the foregoing.

Id. at § 1.7.

         II. Defendant's Vivo and OxiChek Devices

         Between 2012 and 2015, Defendant developed its “Vivo” and “OxiChek” devices. Vivo is a “reagent and reader” created by Defendant for two of Plaintiff's former employees. DiMarino Decl. Ex J (Marsh 2016 Decl.) ¶ 17; Rounds Decl. Akers Dep. 94:25-95:13, 97:23- 98:4. Defendant's witnesses admit that the “Vivo reagent measured aldehydes in exhaled breath.” Rounds Decl. Akers Dep. 101:9-25; id. at Feldman Dep. 17:11-14. Defendant sold approximately 25 Vivo products to Plaintiff's former employees in 2012, id. at Akers Dep. 101:9-25, and sold the remaining inventory of Vivo reagents to a distributor in India in 2015 for $55, 000, id. at Akers Dep.140:21-141:7; id. at Exs. 8, 9 at 1.

         The parties disagree on whether the purpose of the OxiChek device is to use the Assigned Technology to test for aldehydes exhaled in human breath. The device consists of a cartridge that the user breathes into and a reader that receives the cartridge to provide health data to the user. DiMarino Decl. Ex. N at 3, ECF 58-14. The reagent used in the test is contained in a small glass ampule inside the cartridge that the user breaks to release the reagent. Id. Defendant's BreathScan Lync Reader “analyzes the reagent in the cartridge and sends the results to the Akers Wellness App.” Def. Mot. 6.

         Defendant contends that OxiChek tests for “indicators of oxidative stress in exhaled breath—specifically hydrogen peroxide and superoxide.” Id. at 6 (citing Ex. N at 2 (OxiChek product insert)). Defendant alleges that Plaintiff “has no evidence that ABI sells a product that tests for aldehydes in human breath” and that Plaintiff's “witnesses and documents confirm that [Plaintiff's] own testing of [Defendant's] OxiChek product show that OxiChek does not test for aldehydes in exhaled human breath. Id. at 9 (emphasis in original) (citing DiMarino Decl. Ex. F (Marsh Dep.) 97:14-98:13, ECF 58-6; id. at Ex. L at 26, ECF 58-12). Defendant argues that its marketing materials that state otherwise were a mistake that was corrected after Defendant discovered the error. DiMarino Decl. Ex. I (Akers Dep.) 120:5-133:18.

         Plaintiff, by contrast, alleges that the OxiChek and FRED/Revelar reagents have chemically identical core compounds. Compare Hahon Decl. Ex. 5 at 1 and Ex. 6 at 1 with Rounds Decl. Ex. 10 at 1 and Ex. 11 at 4. Both reagents use a “Schiff test.” Rounds Decl. Ramanujachary Dep. 33:10-35.25; id. at Akers Dep. 35:5-36:18. Plaintiff admits that there are some minor chemical differences between the OxiChek and FRED/Revelar reagents. Compare Hahon Decl. Ex. 5 at 1 and Ex. 6 at 1 with Rounds Decl. Ex. 10 at 1 and Ex. 11 at 4. Defendant also repeatedly tested the OxiChek device to determine whether it could test aldehydes, Rounds Decl. Exs.12, 13; id. at Cougan Dep. 30:25-31:5, 37:14-19, and the initial product insert, an early press release, a power point presentation to a future distributor, and sell sheets all market the OxiChek device as capable of measuring aldehydes in addition to oxides and superoxides. Id. at Exs. 14-19. Plaintiff emphasizes that only one test was conducted to determine whether OxiChek could accurately measure hydrogen peroxide, and it was conducted after the litigation was filed 2016. Id. at Ex. 12 at 26-27; id. at Cougan Dep. 58:8-23. Plaintiff also suggests that the Defendant and its expert disagree on how the reagent causes a reaction with hydrogen peroxide. Compare DiMarino Decl. Ex. D ¶ 5, ECF 58-4 with Rounds Decl. Ex. 21 ¶ 28.

         The parties also disagree on whether Defendant's OxiChek device and Plaintiff's FRED/Revelar devices contain Plaintiff's Technology as defined in the agreement. Both parties agree that these devices are colorimeters, Def. Mot. 6, but Defendant contends that this is technology that has been available for over a century and was not used in any new or innovative way by Plaintiff's FRED/Revelar products, DiMarino Decl. Ex. D (Def Resp. Pl. Interrog. No. 10) at 8. Defendant admits some “generic” similarities between the devices. Def. Mot. 10-11 (citing DiMarino Decl. Ex. M (Carlsen Dep.) 21:1-23:6, ECF 58-13). Defendant also contends that the components of the two devices are different in key ways: (1) the circuit boards and schematic design are different; (2) the optical chamber, LED, diodes, switches, and gates are different; and (3) the OxiChek provides a readout to a mobile device via Bluetooth rather than a LCD readout. DiMarino Decl. Ex. D (Def. Resp. Pl. Interrog. 10) at 8. Plaintiff's witness also testified that the devices do not have “identical components, manufacturer kind of thing” and had breath cartridges that appear different “in appearance, ” different light sensors, and “different microcontrollers” that “could be similar, ” though he could not know for sure without the program code from the OxiChek.” DiMarino Decl. Ex. M (Carlsen Dep.) 20:2-21:7, 25:5-12, 29:9-30:22.

         Plaintiff contends that these devices contain the same technology: both use (1) an LED to illuminate the reagent, (2) an optical sensor to read the light of the reagent, (3) a switch to activate the reader; and (4) electronic components called NAND gates. Id. at 20:2-21:22, 22:4- 23:12; Rounds Decl. Daniel Dep. 31:2-33:14, 36:15-37:17, 56:5-12, 67:6-12. The same electronics designer also designed the electronics and circuit board for both devices. Rounds Decl. Daniel Dep. 21:5-23:14; id. at Akers Dep. 152:2-153:7.

         III. Procedural History

         Plaintiff filed this case on September 30, 2016, bringing three claims against Defendant: (1) False advertising under the Lanham Act; (2) Unlawful Trade Practices under Or. Rev. Stat. 646.608; and (3) Breach of Contract. Compl., ECF 1. Defendant moved to transfer venue and dismiss this case for lack of personal jurisdiction and failure to state a claim under Federal Rule of Civil Procedure 12. Def. Mot. Dismiss, ECF 18. The Court granted Defendant's motion in part, finding that Plaintiff could not state a claim under the Lanham Act or Or. Rev. Stat. 646.608. Opinion & Order, ECF 36. The Court denied Defendant's motion to transfer venue and determined that it has personal jurisdiction over the Defendant. Opinion & Order, ECF 36. The Court, accordingly, allowed Plaintiff's breach of contract claim to proceed. Id. Plaintiff filed an Amended Complaint on April 28, 2017, alleging only breach of contract. Am. Compl., ECF 40. Defendant now moves for summary judgment and dismissal of Plaintiff's Amended Complaint. Def. Mot. 1. Oral Argument on Defendant's motion was held on May 29, 2018.

         STANDARDS

         Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial responsibility of informing the court of the basis of its motion and identifying those portions of “‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ' which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting former Fed.R.Civ.P. 56(c)).

         Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present “specific facts” showing a “genuine issue for trial.” Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the pleadings and designate facts ...


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