Boston Scientific Corporation v. BioCardia, Inc.

Background

The order addressed motions in three related cases. BioCardia sent Boston Scientific Corporation and Surbhi Sarna a demand letter concerning an intellectual-property dispute. BioCardia believed Boston Scientific had acquired patents when it purchased nVision, a company founded by Sarna. BioCardia alleged that Sarna had access to its trade secrets, obtained patents based on those secrets, and later founded nVision to develop the inventions.

Boston Scientific and Fortis Advisors, a representative for nVision’s former securityholders, then filed a declaratory-relief action against BioCardia. BioCardia asserted counterclaims for correction of inventorship, breach of contract, and misappropriation of trade secrets under California law, naming Boston Scientific, Fortis, and Sarna.

BioCardia later learned that nVision—not Boston Scientific—held the intellectual property at issue. It filed a second lawsuit against nVision and later added 19 former shareholders. The court denied BioCardia’s request to consolidate the second case with the first, finding that the second lawsuit was an impermissible effort to circumvent the scheduling order in the first case and noting possible claim-splitting concerns.

BioCardia then filed a third lawsuit through its wholly owned subsidiary, BioCardia Lifesciences. The opinion states that Sarna had been employed by BioCardia Lifesciences and that the alleged trade secrets belonged to that subsidiary, not BioCardia. BioCardia also filed motions seeking to substitute BioCardia Lifesciences as plaintiff in the first two cases, but later withdrew those motions. BioCardia agreed that the first two cases should be dismissed because it did not own the relevant intellectual property and was not a party to the contract allegedly breached by Sarna.

Standing and Rule 12(b)(6)

The remaining dispute concerned whether the first two cases should be dismissed for lack of constitutional standing under Rule 12(b)(1) or for failure to state a claim under Rule 12(b)(6). The court held that Rule 12(b)(6) was the correct basis.

First, the court held that BioCardia had Article III standing. BioCardia and BioCardia Lifesciences had a parent-subsidiary relationship, and BioCardia’s financial interests could be directly affected by an injury to its wholly owned subsidiary. A declaration from Peter Altman, the chief executive officer of both companies, stated that the companies operated as a single company with consolidated financial statements and that BioCardia’s financial interests were affected by the alleged conduct.

The court discussed a Ninth Circuit decision suggesting that a parent corporation could lack Article III standing based on financial injury to a wholly owned subsidiary. It concluded that the statement was not controlling because it was unnecessary to that decision’s result, the decision did not address a relevant Supreme Court case, and the cited authorities concerned prudential standing rather than constitutional standing. The court also noted that the Supreme Court has generally treated prudential-standing questions as issues concerning whether a plaintiff can state a claim, rather than as jurisdictional questions.

Second, the court held that BioCardia would have standing even under the contrary approach because the identity of the proper party was intertwined with the merits of the claims. To prevail on correction-of-inventorship claims, BioCardia would need to show that it was an inventor or assignee and retained ownership rights. To prevail on the contract claim, it would need to show that it had a contract with Sarna. To prevail on the trade-secret claim, it would need to show an ownership interest in the trade secrets. Because those facts were part of the claims’ elements, the court treated the issue as a merits-related failure to state a claim rather than a jurisdictional defect.

Disposition

The court granted the motions to dismiss under Rule 12(b)(6) in the first two cases. Because BioCardia conceded that it could not establish ownership of the intellectual property or a contractual relationship with Sarna, the court dismissed the claims without leave to amend. The court stated that judgment would be entered in those two cases after adjudication of the sanctions motions. The order did not dismiss the third case; instead, it noted that a case-management conference was scheduled for April 14, 2021.

Judge Vince Chhabria signed the order on March 11, 2021.