E-Alert Case Updates

Trade Secret Claims Related to Misuse of Information Provided under Information Sharing Agreements “Arose Under” the Agreements and Were Therefore Subject to Forum Selection Clauses

Glycobiosciences v. Innocutis Holdings, LLC, et al.
(May 24, 2016) United States District Court for the District of Columbia
by Matthew J. McCloskey, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2012cv1901-139

In a recent decision, the United States District Court for the District of Columbia concluded that trade secrets claims based off of information provided as a result of certain agreements “arose under” the agreements and were therefore subject to the forum selection clauses contained therein. The Court also concluded that the District of Columbia Consumer Protection Procedures Act (“CPPA”) did not apply in this case, as the parties did not have a consumer-merchant relationship.

This case arose from a patent dispute between, among other parties, Glycobiosciences (“Glyco”), a Canadian company, and Fidia Farmaceutici S.P.A. (“Fidia”), an Italian company. In 2003, Fidia notified Glyco that it believed one of Glyco’s products was covered by a patent owned by Fidia. Glyco disputed Fidia’s assertion, and in a subsequent lawsuit, a European court sided with Glyco. Subsequently, Fidia began to look into whether it could purchase the patent that was determined to actually cover Glyco’s product. In the course of the subsequent negotiations, in 2006, Glyco and Fidia signed an information sharing agreement (the “2006 Agreement”) under which Fidia agreed not to disclose or to use otherwise secret information about Glyco’s product that Fidia obtained solely for the purpose of evaluating the proposed transaction. The 2006 Agreement contained a clause stating: “[t]his Agreement shall be governed in all respects by the laws of Italy and in case of dispute the competent forum shall be that of Padua, Italy.”

Fidia later decided not to buy the patent pertaining to Glyco’s product. Instead, in 2010, it inquired with Glyco as to whether it could manufacture Glyco’s product. In the course of the subsequent negotiation, the parties signed another information sharing agreement (the “2010 Agreement”) and again agreed not to disclose or to use otherwise secret information about Glyco’s product except to evaluate the proposed business relationship. The 2010 Agreement contained a clause stating: “[T]his Agreement shall be construed under and governed by the laws of U.K. In case of disputes the competent court shall be that of London, U.K.” Ultimately, Fidia decided not to manufacture Glyco’s product.

In 2015, Glyco filed a lawsuit in the United States District Court for the District of Columbia against Fidia alleging that Fidia never intended to purchase the patent to Glyco’s product or to manufacture the product, but instead sought secret information related to the product. In pertinent part, Glyco set forth causes of action for: (1) misappropriation of trade secrets; (2) unlawful trade practices; (3) common law unfair competition; and (4) unjust enrichment. Fidia moved to dismiss these claims on the ground that the forum selection clauses contained in the 2006 and 2010 Agreements required the claims to be filed in Padua, Italy, or London, U.K. Fidia also moved to dismiss Glyco’s claim of unlawful trade practices for failure to state a claim.

Judge Randolph D. Moss granted, in part, Fidia’s motion based on the forum selection clause. First, the Court considered Glyco’s argument that the claims at issue did not “arise under” the Agreements at issue. The Court concluded that the misappropriation of trade secrets claim clearly did arise under the Agreements, as Glyco alleged that Fidia came into possession of the trade secrets only after it signed the Agreements. Similarly, the unfair competition and unjust enrichment claims were also premised on the allegation that Fidia entered into the Agreements in bad faith to obtain trade secrets. These three (3) claims were thus inextricably intertwined with the subject matter of the Agreements, and therefore subject to the forum selection clauses. With respect to the unlawful trade practices claim, however, the Court noted that these agreements stemmed from the allegation that Fidia misrepresented the ownership of patents held by Glyco and disparaged the goods and service and business of Glyco. Accordingly, the claim did not “arise under” the contract, and was not governed by the forum selection clauses.

The Court then considered whether the forum selection clauses were mandatory. Although Glyco argued that the clauses simply set forth two forums that would be “competent,” the Court instead focused on the verb, “shall,” and the definite article, “the.” Because the clauses stated that “the forum,” i.e., one single forum, “shall be” the designated places, the Court construed the clauses to mean that the appropriate places to bring the lawsuit are solely the two delineated forums. The Court therefore dismissed Glyco’s claims other than the unlawful trade practices claim.

The Court then turned to Fidia’s motion to dismiss Glyco’s claim of unlawful trade practices for failure to state a claim. In that regard, the Court noted that the claim was brought under the CPPA, which prohibits a person from misrepresenting “a material fact which has a tendency to mislead” or to “fail to state a material fact if such failure tends to mislead.” Notwithstanding Glyco’s allegations, the Court emphasized that the CPPA “was designed to police trade practices arising only out of consumer-merchant relationships.” Howard v. Riggs Nat. Bank, 432 A.2d 701, 709 (D.C. 1981) (emphasis added). Here, there was no consumer-merchant relationship. Instead, the parties were rival businesses and sophisticated entities. Accordingly, the CPPA had no application in this case, and the Court grant Fidia’s motion to dismiss Glyco’s claim.