Biosynexus, Inc. v Glaxo Group Ltd.

[*1] Biosynexus, Inc. v Glaxo Group Ltd. 2006 NY Slip Op 51682(U) [13 Misc 3d 1204(A)] Decided on September 6, 2006 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 6, 2006
Supreme Court, New York County

Biosynexus, Inc., Plaintiffs,

against

Glaxo Group Limited and MedImmune, Inc., Defendants.



604485/05



APPEARANCES:

For Plaintiff:

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(Barry R. Ostrager, Esq.,

Noah M. Liebowitz, Esq., and

Robert A. Bourque, Esq.)

For Defendant Glaxo Group Ltd:

Skadden, Arps, Slate, Meaghor & Flom LLP

Four Times Square

New York, New York 10036-6522

(Jay B. Kasner, Esq. and

Scott D. Musoff, Esq.)

For Defendant MedImmune, Inc:

Dewey Ballantine LLP

1301 Avenue of the Americas

New York, New York 10019-6092

(Henry J. Ricardo, Esq.)

Bernard J. Fried, J.

In this action, Plaintiff, Biosynexus, Inc. ("Bio"), alleges that it entered into a Collaborative [*2]Development Licensing Agreement ("CDA") with Defendant Glaxo Group Limited ("Glaxo"). The CDA grants to Glaxo certain rights to Bio's intellectual property, including the rights to some of Bio's confidential know how. The intellectual property at stake here involves the rights to certain mono-clonal antibody technology ("the technology" or "BYSX-A110") that promises to be a safe, effective, and therefore valuable, treatment for staphylococcal infections in humans. Although the CDA allows Glaxo to enter into further sub-licenses of the technology, the agreement precludes Glaxo from assigning to another its rights under the CDA. In motion sequence No.001, Bio requested a preliminary injunction on the grounds that Glaxo breached the CDA by improperly assigning its rights, including rights to the technology, to Defendant MedImmune, Inc. ("Med") in an agreement executed on August 26, 2006 ("Glaxo-Med agreement"). Bio sought to enjoin Glaxo from transferring to Med any of Bio's confidential information. In my decision of March 14, 2006, I granted a preliminary injunction against Glaxo and Med, finding that the transfer of rights in the Glaxo-Med agreement qualifies as an improper assignment.

In motion sequence #004, Glaxo moves to vacate the preliminary injunction on the grounds of unclean hands, arguing that, during the hearing on the preliminary injunction, Bio concealed material information that, if known to me then, would have resulted in a different outcome. Glaxo alleges that Bio did not develop all of the technology itself; rather, it licensed some of the technology from the Jackson Foundation ("Foundation"). Through the CDA, this technology and Bio's know-how was then licensed to Glaxo. Thus, the CDA itself is actually a sub-license of the Foundation license. The Foundation license placed certain restrictions on Bio's right to grant sub-licenses, restrictions which require sub-licensees to comply with the terms of the Foundation license. In the CDA and in sworn statements made during the prior hearing, Bio represented that it was not in breach of its duties under the Foundation license. But, according to Glaxo, Bio concealed the existence of a claim made by the Foundation in December 2005 that the terms of the CDA did not comply with the sub-licensing restrictions required by the Foundation license, and, therefore, Bio was in breach of the Foundation license. Glaxo argues that Bio cannot seek an equitable remedy such as the preliminary injunction while it remains in breach of the Foundation license.

Bio contends that Glaxo's argument twists the true nature of the Foundation's claim. The Foundation has not filed suit against Bio for breach of contract and is not a party to this action. Bio received notice from the Foundation regarding the sub-licensing restrictions in the Foundation license, but Bio claims that the Foundation simply gave notice that it was reserving its rights regarding a "potential" claim. Furthermore, before the application for the preliminary injunction, Glaxo knew about both the terms of the Foundation license and the Foundation's claim. Bio alleges that the Foundation requests only that the CDA be modified by adding "a single sentence."

In addition, Bio argues that Glaxo, a former shareholder of Bio, cannot assert a claim for unclean hands because it failed to notify the court that, when QVT, a non-party, acquired Bio in 2005, Glaxo indemnified QVT for "among other things, any breach by [Bio] of the . . . representation that [Bio] is not in breach of the Jackson [Foundation] Agreement or the CDA." (Bio Memo at p.3).

Relevant to the resolution of this motion are several affidavits and documents submitted by the parties, affidavits and documents which show that Glaxo had knowledge of the terms and conditions of the Jackson license in 2002, when Bio and Glaxo executed the CDA. Also, in December 2005 the Foundation contacted Bio to make its claim that the CDA does not fully comply with the sub-licensing provisions of the Foundation license. During the January 2006 settlement [*3]negotiations between Bio, Glaxo and Med regarding the possibility of amending the CDA, Dr. Scher, Chief Executive Officer of Bio, raised the issue of the Foundation's claim. Bio and Glaxo negotiated over proposed amendments to the CDA, and some of these proposed amendments addressed the sub-licensing requirements set forth in the Foundation license.

Some of the documents submitted on this motion bolster Bio's argument that the Glaxo-Med agreement was intended to be an assignment of Glaxo's rights under the CDA. A March 19, 2004 letter from Med's CEO to the President and General Manager of Glaxo states that "[Med] proposes to acquire all of [Glaxo's] rights to and interest in the BSYX-A110 and other anti-staphylococcal vaccine and antibody programs subject to current collaboration with Biosynexus." In the same letter, Med claims that it "would assume all of GSK's financial and technical obligations including any future milestone/equity payments to BioSynexus as well as all research, clinical development, process development, manufacturing, and commercialization responsibilities." (Ostrager Affidavit of July 20, 2006, Ex O). The deposition of Edward Mathers, a senior vice-president at Med, reveals that in March 2004 Med executives met with Glaxo to discuss the possibility of "acquir[ing] the rights and interests of [Glaxo's] relationship with [Bio]." (Ostrager Affidavit of July 20, 2006, Ex. F, at 63-64).

On a motion to vacate a preliminary injunction which raises new facts or a change in circumstances, "the question is whether upon all facts disclosed by the pleadings and affidavits, the court would have granted the injunction in the first instance." (Lawrence v. Lawrence, 172 N.Y.S. 146, 147 [NY Sup. Ct. 1918]; see Dutchess Sanitation Service, Inc. v. Town of Plattekill, 51 NY2d 670, 673-74 [1980]; Nature's Best Group, Inc. v. CPC International, Inc., No. 1025397 [NY Sup. Ct., Dec. 14, 2000]).

Invoking the doctrine of unclean hands, Glaxo argues that the Foundation claim constitutes new facts or a change in circumstances and seeks to vacate the preliminary injunction. However, the affidavits and documents submitted on this motion show that both parties, at the time of the application for the preliminary junction, had already known of the Foundation claim. Dr. Scher, the Chief Executive Officer of Bio, states in his affidavit that he raised the Foundation issue with Glaxo during their negotiations during January 2006. And, the proposed amendments to the CDA contained provisions that addressed the sub-licensing restrictions set forth in the Foundation license, the same restrictions that form the basis for the Foundation's claim.

Even before this litigation began, Glaxo knew that Bio's rights to a portion of the intellectual property derived from the Foundation license and knew that the Foundation license placed certain restrictions on sub-licenses. It had received a copy of the Foundation license in 2002, while performing due diligence for CDA. At that time Glaxo knew that Bio had an on-going obligation under the Foundation license to ensure that any sub-licenses conformed with the terms of the license. Later, in 2005, Glaxo indemnified QVT for any breach of Bio's representation that it was in compliance with the Foundation license.

Although the existence of the Foundation's claim was not discussed during the hearing on the preliminary injunction, and is an aspect of this case that is new to me, both Bio and Glaxo already knew of that claim and the relevant terms of the Foundation license. Thus, the failure of either party to raise this claim during the previous hearing does not change my decision to grant the injunction. Glaxo's motion to vacate the preliminary injunction is denied. [*4]

Accordingly, it is

ORDERED that the motion to vacate (motion sequence #004) is denied.

Dated: ____________

ENTER:

_________________________

J.S.C.