November 30, 2022

Volume XII, Number 334

Advertisement

November 30, 2022

Subscribe to Latest Legal News and Analysis

November 29, 2022

Subscribe to Latest Legal News and Analysis

November 28, 2022

Subscribe to Latest Legal News and Analysis
Advertisement

And the Band Played On: Reviewing Rule 54(b) Partial Summary Judgment Based on Who Did What to Whom and When

In a case where the cast of characters on both sides of the v. evolved during the lead-up to the litigation as the litigants negotiated third-party deals and formed new entities, the US Court of Appeals for the First Circuit (characterizing the matter as the “entrepreneurial equivalent of musical chairs”) affirmed a dismissal of a trade secret claim against a foreign defendant but not against the related US entity, and found that the case qualified under Rule 54(b) for the “narrow exception” to the finality rule. Amyndas Pharmaceutical, SA v. Zealand Pharma A/S, Case No. 21-1781 (1st Cir. Sept. 2, 2022) (Barron, Selya, Kayatta, JJ.)

Amyndas is a Greek company with a US affiliate. It is a biotechnology firm that researches and develops therapeutics targeting a part of the immune system known as the complement system. One area of Amyndas’s research deals with “complement inhibitors.”

Amyndas’s research yielded compstatin, a peptide that selectively inhibits the C3 protein (which plays a role in activating the complement system). Amyndas also developed a related peptide (AMY-101) that targets that protein. Amyndas owns trade secrets and confidential information related to this work.

Zealand Pharma, a Danish biotechnology firm, contacted Amyndas about a potential partnership for the development of complement-related therapeutics. The firms entered into a confidential disclosure agreement (CDA) regarding information-sharing “for the purposes of evaluating a possible business/services relationship between the parties and their respective Affiliates.” Amyndas started giving Zealand Pharma access to confidential information (including confidential information about AMY-101). The firms also entered into a second CDA—with added protections—for “the evaluation or formation of a possible business and/or services and/or collaborative relationship.”

Both CDAs included an identical “Governing Law” provision stipulating that the CDAs would “be interpreted and governed by the laws of the country (applicable state) in which the defendant resides” and a forum-selection clause stipulating that “any dispute arising out of th[e CDA] shall be settled in the first instance by the venue of the defendant.”

Zealand Pharma also began its own research program focused on complement therapeutics. It did not inform Amyndas of this initiative. Although negotiations continued, the firms ultimately decided not to collaborate. Amyndas later terminated its information-sharing relationship with Zealand Pharma.

Zealand Pharma later formed Zealand US, a Delaware corporation. Without Amyndas’s knowledge or consent, Zealand Pharma also filed two European patent applications for compstatin analogues and later an international patent application designating the United States and claiming priority to the earlier  EU applications.

After the international applications were published, Amyndas learned that they described “compstatin analogues that are capable of binding to C3 protein and inhibiting complement activation,” which had been the focus of Amyndas’s research and a subject of Amyndas’s confidential information-sharing with Zealand Pharma.

The other defendant, Alexion, is an established player in the complement therapeutics field and a proprietor of Soliris, a complement inhibitor that targets a protein in the complement system. Soliris is approved by the US Food and Drug Administration (FDA) and previously was the only FDA-approved and clinically available complement-specific therapeutic on the market. Alexion’s patent on Soliris was set to shortly expire, and Alexion was facing commercial pressure to bring new complement-based drugs to market. Alexion expressed interest in forming a partnership with Amyndas. The two companies signed a CDA limiting the use of exchanged confidential information to the “exploration of one or more potential business arrangements and/or potential arrangements of research, development, and commercialization of drug candidates relating to Amyndas’ complement inhibitors.” Alexion requested and received certain confidential information about Amyndas’s complement therapeutic research, including details about Amyndas’s intellectual property, planned clinical trials, platform and collaboration network.

Unbeknownst to Amyndas (while it was in discussions with Zealand), Alexion and Zealand Pharma had been discussing the above collaboration during the same timeframe and issued a joint press release announcing a joint venture to develop complement therapeutics.

Amyndas sued Zealand Pharma, Zealand US and Alexion in the US District Court for the District of Massachusetts, alleging that the Zealand defendants breached the CDAs, misappropriated trade secrets and other confidential information, and conspired with Alexion to use those misappropriated materials in producing competing complement therapeutic products. The complaint against Alexion similarly alleged trade secret misappropriation, tortious interference with contractual relations, unfair competition, breach of contract and unjust enrichment. The complaint then tied all the defendants together by asserting conspiracy claims.

Alexion answered the complaint, but the Zealand defendants moved to dismiss. The district court dismissed Amyndas’s claims against both Zealand defendants. As to Zealand Pharma, the court ruled that the forum-selection clause in the CDAs required that all claims against that defendant be brought in Denmark. As to Zealand US (which had not itself executed a CDA with Amyndas), the district court ruled that the complaint failed to state a claim upon which relief could be granted. The court noted that the complaint largely referred to “Zealand” as a single entity and did not make clear whether and how Zealand US was involved, but because Zealand US was not formed until after the CDA came into force, the “claims stated against ‘Zealand’ as a combined entity [we]re not sufficient to put Defendants on notice as to which claims pertain to Zealand [US].”

Amyndas moved for reconsideration or, in the alternative, leave to amend the complaint. In its proposed amended complaint, Amyndas carefully distinguished between the two Zealand entities and pleaded its claims against them as discrete counts. Furthermore, the proposed amended complaint alleged additional facts supporting the claim that Zealand US was involved in the continuing exploitation of Amyndas’s trade secrets, including allegations that Zealand US bore ongoing responsibility for the Alexion partnership and was participating in efforts to obtain regulatory approval for therapeutics derived from Amyndas’s trade secrets. The proposed amended complaint also alleged that Zealand US was a corporate alter ego of Zealand Pharma and that the two were operated as a single business.

The district court denied Amyndas’s motion, refusing reconsideration and denying Amyndas’s request to file an amended complaint. The court indicated that the proposed amended complaint would be futile but undertook no analysis of any specific allegations against Zealand US. Instead, it simply noted that the “proposed additional factual allegations” did not “plausibly allege a basis to conclude either that the Court should disregard the Zealand defendants’ separate legal identities, or that Amyndas has stated claims directly against Zealand US.”

Amyndas appealed. At the same time, Amyndas moved the district court for entry of a partial final judgment under Fed. R. Civ. P. 54(b). Zealand Pharma and Zealand US opposed, but the court entered a partial final judgment. The district court determined that this case fit within the narrow confines of Rule 54(b) and entered a partial final judgment dismissing Amyndas’s claims against Zealand Pharma and Zealand US but retaining jurisdiction over Amyndas’s claims against Alexion and staying further proceedings pending the disposition of this appeal.

Under 28 U.S.C. § 1291, an appellate court’s jurisdiction over an appeal is ordinarily limited to “final decisions” of the district court. This finality principle typically requires a final disposition of all claims in an action that have been brought by or against all of the parties. However, Rule 54(b) carves out an exception whereby a district court can issue a partial final judgment that is immediately appealable as to particular claims or parties when those claims or parties can be sufficiently separated from other claims or parties in the case.

The First Circuit affirmed the entry of the partial final judgment and dismissal of Zealand Pharma. Amyndas argued that the term “venue of the defendant” in the CDA denoted multiple locations as applied to Zealand Pharma—including locations where Zealand Pharma and its affiliates have a presence (such as both Denmark and Massachusetts). As against the Danish entity, the Court rejected the argument, noting that applying the federal venue statute to the definition “would inevitably lead to the conclusion that Zealand Pharma potentially could be sued in virtually any jurisdiction. But such a conclusion would undercut the certainty that forum-selection clauses are meant to confer and would render the clause largely superfluous.” With regard to Amyndas’s argument tying the US and Danish entities for venue purposes, the Court noted that at the time the CDA was signed, there was only one Zealand entity, in Demark, and that was the venue agreed to in the event Zealand was named as a defendant.

The First Circuit also rejected Amyndas’ argument that it should not be forced to litigate in Denmark based on convenience as well as unfavorable trade secret law and restrictive litigation rules: “When the CDAs were first negotiated and signed, Zealand Pharma was based in Denmark and Zealand US did not exist. It would have been obvious to Amyndas at that time that if it wound up suing Zealand Pharma, it would be obliged to do so in Denmark, using whatever trade secret protections and discovery procedures were available under Danish law. Put bluntly, the content and contours of Danish trade secret law and the potential limitations on discovery were clearly foreseeable to Amyndas from the start.”

Finally, the First Circuit reversed the district court’s denial of Amyndas’ motion to amend the complaint, noting that such leave should be liberally granted under Rule 15(a) and that the proposed amended complaint incorporated new information not available to Amyndas when it drafted its original complaint and found that the allegations plausibly supported a cause of action against the US entity.

© 2022 McDermott Will & EmeryNational Law Review, Volume XII, Number 279
Advertisement
Advertisement
Advertisement

About this Author

Paul Devinsky, Intellectual Property Attorney
Partner

Paul Devinsky is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  He focuses his practice on patent, trademark and copyright litigation and counseling, as well as on trade secret litigation and counseling, and on licensing and transactional matters and post-issuance PTO proceedings such as reissues, reexaminations and interferences.

202-756-8369
Advertisement
Advertisement
Advertisement