Baxter Healthcare Corp. v. HQ Specialty Pharma Corp.

• Decision Date: 26 January 2016
• Docket Number: Civil Action No. 13-6228 (JBS/KMW)
• Citation: 157 F.Supp.3d 407
• Parties: Baxter Healthcare Corporation, Baxter International Inc., and Baxter Healthcare S.A., Plaintiffs, v. HQ Specialty Pharma Corporation, Defendant.
• Court: U.S. District Court — District of New Jersey

157 F.Supp.3d 407

Baxter Healthcare Corporation, Baxter International Inc., and Baxter Healthcare S.A., Plaintiffs,

v.HQ Specialty Pharma Corporation, Defendant.

Civil Action No. 13-6228 (JBS/KMW)

United States District Court, D. New Jersey.

Signed January 26, 2016

Robert D. Rhoad, Esq., Brian M. Goldberg, Esq., DECHERT LLP, 902 Carnegie Center, Suite 500, Princeton, NJ 08540, and Kevin M. Flannery, Esq., Vincent A. Gallo, Esq., DECHERT LLP, Circa Centre, 2929 Arch Street, Philadelphia, PA 19104, for Plaintiffs.

Edward J. Dauber, Esq., Thomas Slocum, Esq., GREENBERG, DAUBER, EPSTEIN & TUCKER, PC, One Gateway Center, Suite 600, Newark, NJ 07102, and Richard D. Kelly, Esq., Stephen G. Baxter, Esq., Frank J. West, Esq., Tia D. Fenton, Esq., Lisa M. Mandrusiak, Esq., Katherine D. Cappaert, Esq., OBLON, MCCLELLAND, MAIER & NEUSTADT, L.L.P., 1940 Duke Street, Alexandria, VA 22314, for Defendant.

REDACTED OPINION

SIMANDLE

, Chief Judge.

Table of Contents

I. INTRODUCTION...411

II. BACKGROUND...413

A. Factual and Procedural Background ...413

1. Background to Esmolol

Hydrochloride and Baxter's Innovative Esmolol Research ...413

2. Mr. Owoo's Separation from Baxter ...415

3. Mr. Owoo's Initial Contact with HQ ...416

4. HQ's Development Agreement with Mr. Owoo's Welgrace Research Group ...417

5. HQ's Applications before the USPTO and FDA ...418

6. Litigation in this District ...418

III. STANDARD OF REVIEW ...419

IV. DISCUSSION...420

A. Baxter Cannot Establish a Prima Facie Case of Tortious Interference with Contractual or Business Relationships ...420

B. Admissible Evidence May Establish a Prima Facie Case of HQ's Misappropriation of Trade Secrets ...422

1. New Jersey's Trade Secrets Act, N.J.S.A. § 56:15-1, et seq.

, generally ...423

a. Genuine factual issues preclude a finding that Baxter's “trade secrets” constitute public information....424

b. Genuine factual issues exist on whether HQ had Reason to Know that Mr. Owoo obtained Baxter's claimed “trade secrets” by Improper Means....426

C. Admissible Evidence May Establish a Prima Facie Case for HQ's Unjust Enrichment and/or Unfair Competition Claims ...426

D. Admissible Evidence May Establish a Prima Facie Case for Baxter's claims for Correction of Inventorship and to Quiet Title to HQ's Patents ...427

V. CONCLUSION...427

I. INTRODUCTION

In this action Plaintiffs Baxter Healthcare Corporation, Baxter International Inc., and Baxter Healthcare S.A. (collectively, “Baxter”) assert three distinct series of claims arising out of Defendant HQ Specialty Pharma Corporation's (hereinafter, “HQ”) New Drug Application (hereinafter, “NDA”) for an esmolol premixed injectable bag product. First , Baxter alleges that the esmolol product claimed in HQ's NDA infringes the formulation patents¹ covering Baxter's injectable esmolol product, BREVIBLOC^®.² Second , Baxter asserts an array of state law claims for tortious interference, misappropriation of alleged trade secrets, unjust enrichment, and unfair competition, all of which it premises upon HQ's employment of George Owoo, a former (now deceased) Baxter scientist and one of the named inventors on Baxter's Patents.³ Third , and largely based upon the allegations underpinning its state law claims, Baxter seeks to designate Mr. Owoo as the sole inventor of the generic esmolol formulation embodied in HQ's esmolol patents (and its related NDA), and then to declare Baxter the true holder of the rights and interests protected by HQ's patents.⁴

This Court previously addressed the parties' cross-motions for summary judgment on the issue of patent infringement, see Baxter Healthcare Corp. v. HQ Specialty Pharma Corp. , 133 F.Supp.3d 692, 2015 WL 5646779 (D.N.J. Sept. 23, 2015)

, and now confronts HQ's motion for summary judgment on Baxter's state law tort and inventorship claims.⁵ Although dressed in different terms, the critical threads throughout each of these claims concern Baxter's positions that HQ (knowingly or otherwise) built its proposed esmolol formulation (and obtained its patents) upon confidential information secreted from Baxter by Mr. Owoo (especially, a formulation “discovered” by Baxter during a 2009 study involving Mr. Owoo), and otherwise developed this product by interfering with Baxter's contractual relationship with Mr. Owoo (specifically, his Employment and Severance Agreements).

Critically, the parties do not genuinely dispute that Mr. Owoo's esmolol proposal to HQ (now substantially embodied in HQ's proposed formulation) closely resembles a formulation documented in a prior Baxter esmolol study. Rather, in support of summary judgment, HQ takes the position that the factual record nowhere suggests that it played any role in any unlawful conduct relative to the unsolicited esmolol proposal Mr. Owoo brought to HQ on his own accord. (See HQ's Br. at 1, 4-8, 16-26.) In that way, HQ generally claims that it cannot be called to answer for Mr. Owoo's independent malfeasance, particularly because it allegedly engaged Mr. Owoo with the belief (1) that his proposal had no connection to any confidential Baxter information and (2) that he otherwise acted as a free agent unrestrained by any contractual obligations. (See, e.g. , id. at 24; see also HQ's Reply at 7-11.) HQ further submits that its formulation came from publicly-available sources (namely, the label for Baxter's own concentrated esmolol formulation from the 1980s), and not any information over which Baxter can legitimately claim trade secrecy protection. (HQ's Reply at 1-3; see also HQ's Br. at 1-4, 10-12, 24-25.)

Baxter advances the position, by contrast, that, in working with Mr. Owoo, HQ simply turned a blind eye to the obvious Baxter-centric underpinning for Mr. Owoo's proposal, in order to fast track an esmolol product through its development pipeline. Mr. Owoo was an expert on esmolol product formulations at Baxter, who left Baxter and almost immediately proposed the new esmolol product to HQ, which had no prior esmolol experience.

Indeed, because Mr. Owoo approached HQ with a “fully formed concept” for a “new” esmolol “bag product,” Baxter alleges that he necessarily relied upon his “extensive knowledge of Baxter's confidential information,” in order to place HQ on an expedited and unfair track to Food and Drug Administration (hereinafter, the “FDA”) approval (and to competing with BREVIBLOC^®). (Baxter's Opp'n at 1-3, 13-17, 23-30 (internal quotations omitted).) As a result, Baxter submits that the factual record plainly supports an inference that HQ had at least reason to know that Mr. Owoo based his “new” product proposal upon information gleaned during his tenure at Baxter (and while working on Baxter's own esmolol formulations). (See Baxter's Opp'n at 18-22.)

The factual record on the pending motion leaves little question that Mr. Owoo acted at best suspiciously and at worst unlawfully, in helping to develop rival esmolol formulations for both Baxter and HQ. Nevertheless, the claims at issue here call upon the Court to determine whether HQ acted unlawfully relative to its esmolol product development, by either encouraging Mr. Owoo's conduct or by engaging Mr. Owoo despite his conduct of which HQ knew or should have known. For purposes of this motion, the Court must consider whether the movant, HQ, is correct that the factual record is undisputed and that it can give rise to no reasonable inference of liability (or, triable issue of fact) on any or all of Baxter's state law claims.

For the reasons that follow, HQ's motion for summary judgment will be granted with respect to Baxter's tortious interference claims, but denied with respect to Baxter's remaining claims for misappropriation of trade secrets, unfair competition, unjust enrichment, and correction of inventorship.⁶

II. BACKGROUND⁷

A. Factual and Procedural Background

1. Background to Esmolol

Hydrochloride and Baxter's Innovative Esmolol Research

Esmolol

hydrochloride acts as “a short-acting cardioselective beta-blocker used in treating acute cardiac disorders related to [an individual's] heart rate.” (Clementi Rep. at ¶ 15; see also '094 Patent at 1:13–23.) In other words, medical professionals use esmolol hydrochloride products for “rapid [and short term] control of the ventricular heart rate” during “perioperative, postoperative, or other emergent circumstances.” (Clementi Rep. at ¶ 15.)

Baxter, a trailblazer in the esmolol industry, has “successfully commercialized various esmolol products under its BREVIBLOC^® trademark” for over thirty years.⁸ (Chaubal Dec. at ¶ 5; see also Baxter's Supp. SMF at ¶¶ 2-3, 97-100; Second Am. Compl. at ¶ 4.) Indeed, in the late 1980s, Baxter obtained FDA approval to market two BREVIBLOC^® products: (1) a “concentrated ampul product” containing esmolol

, propylene glycol, ethanol, and water (and required dilution to the appropriate dosage strength); and (2) a “10 mg/mL small volume vial product” containing esmolol, a buffering agent, and water. (Clementi Rep. at ¶¶ 17, 20; see also Baxter's Supp. SMF at ¶¶ 3-5.)

These early esmolol

formulations,⁹ however, suffered from “extreme susceptibility to hydrolytic degradation,”¹⁰ limited if any resilience to sterilization by autoclaving,¹¹ and dilution errors by end users (resulting in patients receiving too much of the drug).¹² ('540 Patent at 1:30-40; see also Chaubal Dec. at ¶¶ 7, 10-11; Clementi Rep. at ¶ 19.) In order to address these issues, Baxter “extensively” researched esmolol formulations through an array of scientists, including Mr. Owoo,¹³ with an eye towards developing a ready-to-use bag product (i.e., one that did not need to be diluted prior to administration) that could be terminally sterilized via autoclaving (as opposed to aseptic manufacturing).¹⁴ (Baxter's Supp. SMF at ¶¶ 14-18; see also Clementi Rep. at ¶¶ 21, 41; Chaubal Dec. at ¶¶ 10-11, 26.)

Through this research, Baxter claims to have solved these problems, and developed a ready-to-use aqueous esmolol

formulation capable of sterilization by autoclaving. ('094 Patent at 2:1-14; '540...