G. Jang v. Boston Scientific SciMed Inc
2013 U.S. App. LEXIS 18459
| 3rd Cir. | 2013Background
- Dr. G. David Jang assigned coronary-stent patents (including U.S. Patent No. 5,922,021) to Boston Scientific (BSC/Scimed) in 2002 in exchange for upfront payments and contingent earn-outs tied to “Net Sales” and certain infringement recoveries under § 7.3(c).
- § 7.3(c) required that “any recovery of damages” in an infringement suit or settlement be used to pay Scimed’s legal costs, with the balance counted as Net Sales and subject to payment to Jang (excluding special/punitive damages).
- Cordis sued BSC and BSC counterclaimed for infringement of the Jang patent; separate juries found mutual infringement and billions in damages for each side. On the eve of the damages trial, BSC and Cordis settled: BSC paid a net cash amount to Cordis and the parties exchanged perpetual, fully paid-up licenses (including licenses to Jang’s patents).
- BSC took the position that it had no “recovery of damages” to share with Jang (because settlement resulted in a net payment by BSC and included non-monetary license exchanges); Jang sued for breach of contract (§ 7.3(c)), breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, equitable lien, and later sought to add a § 9.4 (anti-assignment) claim.
- The district court granted judgment on the pleadings for BSC and denied leave to amend; the Third Circuit reversed in part and remanded, holding Jang plausibly alleged (1) the cash offset was a “recovery of damages” under § 7.3(c) and (2) a viable implied-covenant claim that BSC structured the settlement to evade the Agreement’s purpose.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the cash offset in the Cordis settlement is a “recovery of damages” under § 7.3(c) | Jang: offset is the functional equivalent of a cash recovery and thus triggers § 7.3(c) (entitling him to his share). | BSC: no actual monetary recovery received; settlement produced a net payment by BSC, so § 7.3(c) is not triggered. | Reversed dismissal: offset can be a monetary gain/recovery; ambiguity (whether recovery on Jang claims counts when suit netted to payment) presents material factual issue; case remanded. |
| Whether non‑monetary benefits (licenses) recovered in settlement are covered by § 7.3(c) | Jang: parties didn’t contemplate non‑monetary settlements; § 7.3(c) ambiguous and should include value of licenses. | BSC: § 7.3(c) plainly addresses monetary recoveries only; licenses are not “damages.” | Affirmed for licenses: § 7.3(c) unambiguously covers monetary recoveries; contract cannot be rewritten to add non‑monetary recoveries. |
| Whether BSC breached the implied covenant of good faith and fair dealing by structuring the settlement to avoid paying Jang | Jang: BSC intentionally arranged non‑monetary settlement/offset to defeat the Agreement’s purpose and his justified expectations. | BSC: Had contractual control over litigation and settlement; no breach of covenant where conduct aligns with contract language. | Reversed dismissal: plausible allegation that BSC circumvented the contract’s purpose; implied‑covenant claim survives pleading stage. |
| Whether district court abused discretion by refusing to consider/allow § 9.4 (anti‑assignment) claim amendment after judgment | Jang: alleged facts and later briefing raised a § 9.4 breach (licensing patents to Cordis); asked for leave to amend. | BSC: claim not pled; amendment attempted after judgment and would prejudice BSC. | Affirmed denial as to that procedural ruling: complaint did not adequately plead § 9.4; district court did not abuse discretion in denying post‑judgment leave to amend (but Jang may later move to amend on remand). |
Key Cases Cited
- Seaco Ins. Co. v. Barbosa, 435 Mass. 772 (Mass. 2002) (contract interpretation is a question of law unless language is ambiguous)
- Citizens Bank of Md. v. Strumpf, 516 U.S. 16 (U.S. 1995) (right of setoff treats discharge by setoff as equivalent to payment in money)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (complaint must plead more than labels and conclusions to survive dismissal)
- Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451 (Mass. 1991) (Massachusetts recognizes implied covenant of good faith and fair dealing)
- Krapf v. Krapf, 439 Mass. 97 (Mass. 2003) (examples of implied‑covenant breaches when party evades contractual purpose)