United States, et al v. Cytogel Pharma, LLC, No. 2:2016cv13987 - Document 398 (E.D. La. 2018)

Court Description: ORDER AND REASONS: IT IS ORDERED that the 270 Motion for Partial Summary Judgment on Count 1 of the Complaint, be and hereby is DENIED. IT IS FURTHER ORDERED that the 276 Motion for Partial Summary Judgment on the Consulting Agreement, be and h ereby is DENIED. IT IS FURTHER ORDERED that the Contingent 273 Motion for Judgment as a Matter of Law on Counts 1 and 2 of the Complaint and Counts 1 and 14 of Cytogel Pharma, LLC's Second Amended and Restated Counterclaims, be and hereby is DENIED as to Count 1 of the Complaint and Count 1 of Defendant's Second Amended and Restated Counterclaims and DENIED WITHOUT PREJUDICE as to Count 2 of the Complaint and Count 14 of Defendant's Second Amended and Restated Counterclaims, as set forth herein. Signed by Judge Susie Morgan on 10/29/2018. (jls)

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United States, et al v. Cytogel Pharma, LLC Doc. 398 U N ITED S TATES D ISTRICT COU RT EASTERN D ISTRICT OF LOU ISIAN A TH E U N ITED S TATES an d TH E AD MIN ISTRATORS OF TH E TU LAN E ED U CATION AL FU N D , Plain tiffs CIVIL D OCKET VERSU S N O. 16 -13 9 8 7 CYTOGEL PH ARMA, LLC, D e fe n d an t SECTION : “E”( 1) ORD ER AN D REAS ON S Before the Court are a Motion for Partial Sum m ary J udgm ent on Count 1 of the Com plaint, filed by Plaintiffs the Adm inistrators of the Tulane Educational Fund (“Tulane”) and the United States of Am erica, 1 and a Motion for Partial Sum m ary J udgm ent on the Consulting Agreem ent, filed by Defendant Cytogel Pharm a, LLC. 2 The m otions are opposed. 3 For the reasons that follow, the m otions are D EN IED . The Court also D EN IES Tulane, Dr. Zadina, and the United States’ Contingent Motion for J udgm ent as a Matter of Law on Counts 1 and 2 of the Com plaint and Counts 1 and 14 of Cytogel’s Second Am ended and Restated Counterclaim s. 4 BACKGROU N D 5 In the 1990 s, Dr. Zadina and his colleagues at Tulane University researched an d developed opioid com pounds related to endom orphins, which are opioid peptides found naturally in the hum an body. 6 Based on their research, Tulane obtained two patents, U.S. 1 R. Doc. 270 . R. Doc. 276. 3 R. Docs. 30 7, 319, 325. 4 R. Doc. 273. This m otion is contingent on the Court’s grantin g either Dr. Zadin a’s Motion for Partial Sum m ary J udgm ent on Counts 1, 4, 5, 9, 10 , 12, and 14 of Cytogel’s Second Am ended and Restated Counterclaim s, R. Doc. 223, or Plaintiffs’ instant Motion for Partial Sum m ary J udgm ent on Count 1 of the Com plaint, R. Doc. 270 . The Court denied Dr. Zadin a’s m otion on Septem ber 17, 20 18 , R. Doc. 295, and denies Plaintiffs’ m otion herein . 5 The facts in this section are undisputed unless noted otherwise. 6 R. Doc. 1 at 4– 5, ¶ 14– 16; R. Doc. 220 at 9, ¶ 16. 2 1 Dockets.Justia.com Patent Nos. 5,885,958 (“the ’958 Patent”) and 6,30 3,578 (“the ’578 Patent”), claim ing these com pounds. 7 On Decem ber 1, 20 0 3, Tulane licensed the patents to Cytogel. 8 After Tulane and Cytogel signed the Licensing Agreem ent, Dr. Zadina, who was an em ployee of Tulane and the Departm ent of Veterans Affairs (“VA”), began perform ing consulting work for Cytogel. 9 On Novem ber 1, 20 0 6, Cytogel and Dr. Zadina executed a contract entitled “Consulting Agreem ent.”10 Dr. Zadina agreed to “provide advice an d consultation on topics related to the developm ent of opioid com pounds for clinical application.”11 The Consulting Agreem ent included the following provision relating to ownership of intellectual property: 8. . . . Consultant acknowledges that any inventions, processes, m ethods, techniques, form ulae, com pounds, designs, im provem ents, writings, tradenam es, tradem arks, copyrights, patents, trade secrets and other intellectual properties that m ay result or em erge from m aterials or inform ation provided by Cytogel, its em ployees or other consultants, or on the prem ises of Cytogel, or as a result of the consulting process, shall rem ain the sole an d exclusive property of and for the benefit of Cytogel. 12 Dr. Zadina advised Cytogel on the developm ent of Cyt-10 10 , a synthetic opioid peptide covered by the ’958 and ’587 Patents, 13 for com m ercial use as an analgesic. 14 Cytogel alleges Dr. Zadina accessed confidential data and inform ation relating to Cyt10 10 an d used this inform ation to further his own secret work on the developm ent of com pounds that would com pete directly with Cyt-10 10 . 15 7 R. Doc. 1 at 5– 6, ¶ 17– 19; R. Doc. 220 at 9, ¶ 16. R. Doc. 1 at 6, ¶ 20 ; R. Doc. 220 at 9, ¶ 17. 9 R. Doc. 1 at 6– 9, ¶ 24– 36; R. Doc. 220 at 10 , ¶ 19. 10 R. Doc. 223-3. 11 R. Doc. 223-3 at 2, ¶ 1. 12 Id. at 3– 4, ¶ 7– 8 . 13 The parties’ filin gs do not clarify whether Cyt-10 10 is covered by the ’958 Patent or both the ’958 and ’587 Patents. 14 R. Doc. 1 at 5, 6, ¶ 16, 20 – 21; R. Doc. 220 at 13, ¶ 32. 15 Id. at 22, ¶ 61. 8 2 From Septem ber 8, 20 10 onward, Cytogel “disengaged from ” Dr. Zadina. 16 On August 22, 20 12, Dr. Zadina and his colleague at Tulane Dr. Laszlo Hackler form ally assigned to Tulane and the VA their ownership rights to a patent application they filed for a group of synthetic opioid com pounds. 17 On May 6, 20 14, the resulting patent, U.S. Patent No. 8 ,716,436 B2 (“the ’436 Patent”), issued. 18 Cytogel alleges the com pound claim ed in the ’436 Patent is a “m odified version of Cyt-10 10 an d plainly design ed to com pete with [Cyt-10 10 ] as a potential pharm aceutical treatm ent.”19 On August 19, 20 16, the United States and Tulane filed suit against Cytogel. 20 Count 1 of the Com plaint is for a declaratory judgm ent of ownership of the ’436 Patent, and Count 2 of the Com plaint is for a declaratory judgm ent of inventorship of the ’436 Patent. 21 On Septem ber 7, 20 16, Cytogel filed thirteen counterclaim s again st Plaintiffs Tulane and the United States, joining Dr. Zadina as Counterclaim -Defendant. 22 On J uly 23, 20 18 , Cytogel filed its Second Am ended and Restated Counterclaim s, which included a fourteenth counterclaim . 23 Plaintiffs filed the instant Motion for Partial Sum m ary J udgm ent on Count 1 of the Com plaint on Septem ber 10 , 20 18. 24 They argue that, as a m atter of law, the Consulting Agreem ent does not assign the ’436 Patent to Cytogel. 25 They also assert the invention of the ’436 Patent predates the Consulting Agreem ent. 26 Cytogel opposes. 27 16 R. Doc. 233-1 at 9, ¶ 19; R. Doc. 285 at 7, ¶ 19. R. Doc. 1 at 12, ¶ 47; R. Doc. 220 at 20 , ¶ 55. 18 R. Doc. 233-1 at 9, ¶ 20 ; R. Doc. 285 at 7, ¶ 20 . 19 R. Doc. 220 at 23, ¶ 64. 20 R. Doc. 1. 21 Id. On Septem ber 20 , 20 18, the Court dism issed without prejudice the portion s of Count 2 regardin g pending patent application s and ordered a separate trial for Count 2 of the Com plaint and Count 14 of Cytogel’s Second Am ended and Restated Counterclaim s. R. Doc. 298. 22 R. Doc. 6. 23 R. Doc. 220 . 24 R. Doc. 270 . 25 R. Doc. 270 -3 at 4– 7. 26 Id. at 7– 8 . 27 R. Doc. 30 7. 17 3 Cytogel filed the instant Motion for Partial Sum m ary J udgm ent on the Consulting Agreem ent on Septem ber 10 , 20 18. 28 This m otion is effectively a cross-m otion to Plaintiffs’ m otion. Cytogel argues that, as a m atter of law, the Consulting Agreem ent autom atically assigns the ’436 Patent to Cytogel. 29 The Tulane, Dr. Zadina, an d the United States oppose. 30 SU MMARY J U D GMEN T STAN D ARD Sum m ary judgm ent is appropriate only “if the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law.”31 “An issue is m aterial if its resolution could affect the outcom e of the action.”32 When assessing whether a m aterial factual dispute exists, the Court considers “all of the eviden ce in the record but refrain[s] from m aking credibility determ inations or weighing the eviden ce.”33 All reasonable inferen ces are drawn in favor of the non-m oving party. 34 There is no genuine issue of m aterial fact if, even viewing the evidence in the light m ost favorable to the non-m oving party, no reasonable trier of fact could find for the nonm oving party, thus entitling the m oving party to judgm ent as a m atter of law. 35 “[A] party seeking sum m ary judgm ent always bears the initial responsibility of inform ing the district court of the basis for its m otion, and identifying those portions of [the record] which it believes dem on strate the absence of a genuine issue of m aterial fact.” To satisfy Rule 56’s burden of production, the m oving party m ust do one of two things: 28 R. Doc. 276. R. Doc. 276-1 at 3– 8. 30 R. Doc. 319 (Un ited States’ opposition); R. Doc. 325 (Tulane and Dr. Zadina’s opposition). 31 F ED . R. CIV. P. 56; see also Celotex, 477 U.S. at 322– 23. 32 DIRECTV, Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 20 0 5). 33 Delta & Pine Land Co. v. N ationw ide Agribusiness Ins. Co., 530 F.3d 395, 398 – 99 (5th Cir. 20 0 8); see also Reeves v. Sanderson Plum bing Prods., Inc., 530 U.S. 133, 150 – 51 (20 0 0 ). 34 Little v. Liquid Air Corp., 37 F.3d 10 69, 10 75 (5th Cir. 1994). 35 Hibernia N at. Bank v . Carner, 997 F.2d 94, 98 (5th Cir. 1993) (citing Am oco Prod. Co. v . Horw ell Energy , Inc., 969 F.2d 146, 147– 48 (5th Cir. 1992)). 29 4 “the m oving party m ay subm it affirm ative evidence that negates an essential elem ent of the nonm oving party’s claim ” or “the m oving party m ay dem onstrate to the Court that the nonm oving party’s eviden ce is insufficient to establish an essen tial elem ent of the nonm oving party’s claim .” If the m oving party fails to carry this burden, the m otion m ust be denied. If the m oving party successfully carries this burden, the burden of production then shifts to the non-m oving party to direct the Court’s attention to som ething in the pleadings or other evidence in the record setting forth specific facts sufficient to establish that a genuine issue of m aterial fact does indeed exist. 36 If the dispositive issue is one on which the non-m oving party will bear the burden of persuasion at trial, the m oving party m ay satisfy its burden of production by either (1) subm itting affirm ative evidence that negates an essential elem ent of the non-m ovant’s claim , or (2) affirm atively dem onstrating that there is no eviden ce in the record to establish an essential elem ent of the non-m ovant’s claim . 37 If the m ovant fails to affirm atively show the absence of evidence in the record, its m otion for sum m ary judgm ent m ust be denied. 38 Thus, the non-m oving party m ay defeat a m otion for sum m ary judgm ent by “calling the Court’s attention to supporting evidence already in the record that was overlooked or ignored by the m oving party.”39 “[U]nsubstantiated assertions are not com petent sum m ary judgm ent evidence. The party opposing sum m ary judgm ent is required to identify specific evidence in the record and to articulate the precise m anner in which that eviden ce supports his or her claim . ‘Rule 56 does not im pose 36 Celotex, 477 U.S. at 322– 24. Id. at 331– 32 (Bren nan, J ., dissentin g). 38 See id. at 332. 39 Id. at 332– 33. The burden would then shift back to the m ovant to dem onstrate the inadequacy of the evidence relied upon by the non-m ovant. Once attacked, “the burden of production shifts to the non m oving party, who m ust either (1) rehabilitate the evidence attacked in the m ovin g party’s papers, (2) produce additional evidence showin g the existence of a genuin e issue for trial as provided in Rule 56(e), or (3) subm it an affidavit explain in g why further discovery is necessary as provided in Rule 56(f).” Id. at 332– 33, 333 n .3. 37 5 upon the district court a duty to sift through the record in search of evidence to support a party’s opposition to sum m ary judgm ent.’”40 LAW AN D AN ALYSIS I. Ge n u in e is s u e s o f m ate rial fa ct e xis t re gard in g D r. Zad in a a n d Cyto ge l’s in te n t as to th e in te lle ctu a l p ro p e rty p ro vis io n o f th e Co n s u ltin g Agre e m e n t. The content of the Consulting Agreem en t is undisputed. The Consulting Agreem ent states Dr. Zadin a “acknowledges that any inventions, processes, m ethods, techniques, form ulae, com pounds, designs, im provem ents, writings, tradenam es, tradem arks, copyrights, patents, trade secrets and other intellectual properties that m ay result or em erge from m aterials or inform ation provided by Cytogel, its em ployees or other consultants, or on the prem ises of Cytogel, or as a result of the consulting process, shall rem ain the sole and exclusive property of and for the benefit of Cytogel.”41 Plaintiffs argue that, because the contract uses the word “rem ain,” the contract does not transfer intellectual property from Dr. Zadina to Cytogel. 42 The parties dispute their intent when agreeing to the intellectual property provision of the Consulting Agreem ent. Cytogel alleges both it and Dr. Zadina intended the provision to be “an intellectual property transfer provision.”43 Plaintiffs state it was “intended to be an ‘intellectual property provision,’ . . . [and does not] indicate[] that it would effectuate transfer or assignm ent of intellectual property rights.”44 “Although state law governs the interpretation of contracts generally, the question of whether a patent assignm ent clause creates an autom atic assignm ent or m erely an 40 Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citing Celotex, 477 U.S. at 324; Forsy th v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994) an d quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 90 9, 915– 16 & n .7 (5th Cir. 1992)). 41 Id. at 3– 4, ¶ 7– 8 . 42 R. Doc. 75-1 at 20 . 43 R. Doc. 30 7-1 at 8, ¶ 10 . 44 R. Doc. 357-1 at 11– 12, ¶ 10 . 6 obligation to assign is . . . a m atter of federal law.”45 “Under federal law, contract interpretation ‘dovetails precisely with general principles of contract law,’ and ‘under both bodies of law, the judicial task in construing a contract is to give effect to the m utual intentions of the parties.’”46 Whether the assignm ent is autom atic “depen ds on the contractual language.”47 A contract that “expressly grants rights in future inventions” transfers legal title autom atically, while a contract that “obligate[s] the inventor to grant rights in the future, by contrast, ‘m ay vest the prom isee with equitable rights in those inventions once m ade,’ but do not by them selves ‘vest legal title to patents on the inventions in the prom isee.’”48 Courts have held contracts to constitute autom atic assignm ents when they provide an inventor “agrees to grant and does hereby grant”49 patent rights or “hereby conveys, transfers, and assigns”50 patent rights. Courts have held contracts to be agreem ents to assign when they provide “all rights ... will be assigned by”51 an inventor or provide an inventor “agree[s] to assign”52 patent rights. An agreem ent to assign does not constitute a transfer of legal title, but “m ay vest the prom isee with equitable rights in those inventions once m ade.”53 45 DDB Techs., L.L.C. v. M LB Advanced Media, L.P., 517 F.3d 1284, 1290 (Fed. Cir. 20 0 8) (citing Speedplay , Inc. v . Bebop, Inc., 211 F.3d 1245, 1253 (Fed.Cir.20 0 0 ); Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1580 – 81 (Fed.Cir.1991)). 46 Hanak v. Talon Ins. Agency , Ltd., 470 F. Supp. 2d 695, 70 6 (E.D. Tex. 20 0 6) (citing N RM Corp. v . Hercules, Inc., 758 F.2d 676, 681 (D.C.Cir.1985); Bridas S.A.P.I. C. v. Governm ent of Turkm enistan, 345 F.3d 347, 355 (5th Cir.20 0 3), cert. denied, 541 U.S. 937 (20 0 4)); cf. N orfolk S. Ry . Co. v. Kirby , 543 U.S. 14, 31– 32, 125 S. Ct. 385, 397, 160 L. Ed. 2d 283 (20 0 4) (holdin g federal contract interpretation requires contracts be interpreted “by their term s and consisten t with the intent of the parties”). 47 Id. 48 Id. (citing Arachnid, 939 F.2d at 1581). 49 Film tec Corp. v . Allied-Signal Inc., 939 F.2d 1568 , 1573 (Fed. Cir. 1991). 50 Speedplay , 211 F.3d at 1253. 51 Arachnid, 939 F.2d at 1581. 52 Bd. of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Sy s., Inc., 583 F.3d 832, 842 (Fed. Cir. 20 0 9), aff'd, 563 U.S. 776, 131 S. Ct. 2188 , 180 L. Ed. 2d 1 (20 11). 53 Arachnid, 939 F.2d at 1581 (em phasis in original). 7 The Consulting Agreem ent in this case provides the “patents . . . that m ay result or em erge from m aterials or inform ation provided by Cytogel . . . shall rem ain the sole and exclusive property of and for the benefit of Cytogel.” 54 Cytogel cites Poly zen, Inc. v. Radiady ne, LLC, 55 which is the only case of which the Court is aware in terpreting whether a contract providing a patent “will rem ain ” or “shall rem ain” the property of an em ployer constitutes an autom atic assignm ent or an agreem ent to assign. In Poly zen, a district court stated that “‘will rem ain’ arguably falls into a grey zone between the strong operative language of ‘does hereby grant,’ which unam biguously creates a present interest, and the future-focused language of ‘will be assigned,’ which creates only an equitable interest and not legal title.”56 The court concluded the contract “create[d] a present legal interest in [the em ployer] in an exclusive licen se [because] “[w]ill rem ain ” suggests that the [invention] always has been and continues to be the property of [the em ployer]; there was no additional right that needed to be assigned when the . . . patent application was filed and when the . . . paten t issued.”57 Plaintiffs and Defendant dispute the intent of the parties to the Consulting Agreem ent. The parties disagree on whether the provision was m eant to be an autom atic intellectual property transfer provision or to create only an equitable interest, not legal title, in intellectual property resulting or em erging from Dr. Zadina’s work for Cytogel. 58 Interpreting the contract under gen eral prin ciples of contract law, the Court finds the Consulting Agreem ent’s intellectual property provision am biguous. “Intent is an issue of 54 Id. at 3– 4, ¶ 7– 8 . No. 5:11-CV-662-D, 20 16 WL 5360 576 (E.D.N.C. Sept. 23, 20 16), appeal dism issed, No. 20 17-1174, 20 16 WL 10 567947 (Fed. Cir. Dec. 20 , 20 16), and aff'd, 726 F. App'x 819 (Fed. Cir. 20 18). 56 Id. at *7. 57 Id. 58 R. Doc. 30 7-1 at 8, ¶ 10 ; R. Doc. 357-1 at 11– 12, ¶ 10 . 55 8 fact which is to be inferred from all of the surrounding circum stances.”59 There are genuine issues of m aterial fact as to Cytogel and Dr. Zadina’s intent with respect to the intellectual property provision of the Consulting Agreem ent. As a result, the Court denies both parties’ m otions for sum m ary judgm ent. II. Ge n u in e is s u e s o f m a te rial fa ct e xis t re gard in g th e d a te o f in ve n tio n o f th e ’4 3 6 Pate n t. The facts regarding the date of invention of the ’436 Patent are disputed. Plaintiffs argue that, because the invention of the ’436 Patent predates the Consulting Agreem ent, the Consulting Agreem ent cannot, as a m atter of law, assign the ’436 Patent to Cytogel. 60 Cytogel’s Second Am ended and Restated Counterclaim s are replete with factual allegations that Dr. Zadin a relied on inform ation he learned from Cytogel after the Consulting Agreem ent becam e effective on Novem ber 1, 20 0 6 to develop the ’436 Patent. 61 Plaintiffs present a portion of the testim ony of Dr. Stephen Davies, who testified that the date of invention of the ’436 Patent was in 20 0 5, based on inform ation in his expert report. 62 Cytogel adm its Dr. Davies testified the date of invention was in 20 0 5, but argue Dr. Davies m erely based this on Dr. Zadina’s testim ony, which is contradicted by other eviden ce. 63 Cytogel alleges the first tim e Dr. Zadin a “estim ated that he invented the ’436 com pounds in 20 0 5 or 20 0 6” was at his deposition in 20 18. 64 Plaintiffs dispute this fact. 65 Because genuine issues of m aterial fact as to the date of invention of the ’436 Patent exist, Plaintiffs are not entitled to judgm ent as a m atter of law. 59 Fleniken v . Entergy Corp., 790 So. 2d 64, 73 (La. App. 1 Cir. 2/ 16/ 0 1), w rit denied, 793 So. 2d 1250 (La. 6/ 15/ 0 1), and w rit denied, 793 So. 2d 1252 (La. 6/ 15/ 0 1). 60 R. Doc. 270 -3 at 7– 8. 61 R. Doc. 220 at 13– 26, ¶ 32– 71. 62 R. Doc. 270 -4 at 4, ¶ 13. 63 R. Doc. 30 7-1 at 6, ¶ 13. 64 Id. at 9, ¶ 18. 65 R. Doc. 357-1 at 15, ¶ 18 . 9 CON CLU SION For the foregoing reasons, IT IS ORD ERED that the Motion for Partial Sum m ary J udgm ent on Count 1 of the Com plaint, filed by Plaintiffs the Adm inistrators of the Tulane Educational Fund and the United States of Am erica, be and hereby is D EN IED . 66 IT IS FU RTH ER ORD ERED that the Motion for Partial Sum m ary J udgm ent on the Consulting Agreem ent, filed by Defendant Cytogel Pharm a, LLC, be and hereby is D EN IED . 67 IT IS FU RTH ER ORD ERED that the Contingent Motion for J udgm ent as a Matter of Law on Counts 1 and 2 of the Com plaint and Counts 1 and 14 of Cytogel Pharm a, LLC’s Second Am ended and Restated Counterclaim s, filed by Plaintiffs the Adm inistrators of the Tulane Educational Fund and the United States of Am erica and Counterclaim -Defendant Dr. J am es E. Zadin a, be and hereby is D EN IED as to Count 1 of the Com plaint and Count 1 of Defendant’s Second Am ended and Restated Counterclaim s and D EN IED W ITH OU T PREJ U D ICE as to Count 2 of the Com plaint and Count 14 of Defendant’s Second Am ended and Restated Counterclaim s. 68 N e w Orle a n s , Lo u is ian a, th is 2 9 th d ay o f Octo be r, 2 0 18 . ________________________________ SU SIE MORGAN U N ITED S TATES D ISTRICT J U D GE 66 R. Doc. 270 . R. Doc. 276. 68 R. Doc. 273. 67 10

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