Chang v. Biosuccess Biotech Co.

• Decision Date: 29 December 2014
• Docket Number: LA CV14–04511 JAK ANx,LA CV14–04446 JAK ANx.,LA CV14–00310 JAK ANx,Nos. LA CV13–01340 JAK ANx,s. LA CV13–01340 JAK ANx
• Citation: 76 F.Supp.3d 1022
• Court: U.S. District Court — Central District of California
• Parties: Richard L. CHANG v. BIOSUCCESS BIOTECH CO., LTD., et al. Biosuccess Biotech Co. Ltd. v. Rich Pharmaceuticals Inc. et al. Richard Chang v. Zheng Tao Han et al. Ben Chang v. Biosuccess Biotech, Co. Ltd. et al.

76 F.Supp.3d 1022

Richard L. CHANG

v.BIOSUCCESS BIOTECH CO., LTD., et al.

Biosuccess Biotech Co. Ltd.

v.Rich Pharmaceuticals Inc. et al.

Richard Chang

v.Zheng Tao Han et al.

Ben Chang

v.Biosuccess Biotech, Co. Ltd. et al.

Nos. LA CV13–01340 JAK ANx

LA CV14–00310 JAK ANx

LA CV14–04511 JAK ANx

LA CV14–04446 JAK ANx.

United States District Court, C.D. California.

Signed Dec. 29, 2014.

Giacomo Anthony Russo, Christopher J. Sargent, Jack Russo, Entrepreneur Law Group LLP, Palo Alto, CA, for Richard L. Chang.

Enoch H. Liang, Lee Tran and Liang LLP, South San Francisco, CA, Heather F. Auyang, Lee Tran and Liang APLC, Lisa J. Chin, Kevin Bringuel, Lee Tran & Liang LLP, Los Angeles, CA, Jack Russo, Entrepreneur Law Group LLP, Palo Alto, CA, for Biosuccess Biotech Co., Ltd., et al.

Jack Russo, Christopher J. Sargent, Entrepreneur Law Group LLP, Palo Alto, CA, for Rich Pharmaceuticals Inc. et al.

Enoch H. Liang, Lisa Jennifer Chin, Lee Tran and Liang LLP, South San Francisco, CA, Heather F. Auyang, Lee Tran and Liang APLC, Heather Fai Auyang, Lee Tran Liang and Wang LLP, Los Angeles, CA, for Zheng Tao Han et al.

Jack Russo, Christopher J. Sargent, Christopher Joseph Sargent, Entrepreneur Law Group LLP, Palo Alto, CA, for Ben Chang.

(IN CHAMBERS) RULING RE MOTIONS SUBMITTED BY CHANG AND BIOSUCCESS PARTIES:

(1) MOTION TO DISMISS COMPLAINT FROM CONSOLIDATED CASE CV13–00310 JAK; OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT AND/OR PARTIAL SUMMARY JUDGMENT (Dkt. 205);

(2) MOTION TO DISMISS DEFENDANTS' COUNTERCLAIMS (Dkt. 240);

(3) MOTION TO DISMISS DEFENDANTS' FIRST AMENDED COUNTERCLAIMS (Dkt. 234);

(4) MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO TERMINATION (Dkt. 248);

(5) MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO PLAINTIFFS RICHARD CHANG AND BEN CHANG'S LABOR CODE CLAIMS (Dkt. 249);

(6) MOTION TO DISMISS RICHARD L. CHANG'S DECLARATORY RELIEF CLAIM IN HIS COMPLAINT RE INVENTORSHIP OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT (Dkt. 250);

(7) MOTION FOR SUMMARY JUDGMENT ON UNPAID MONIES DUE AND OWING (Dkt. 251)

(8) MOTION FOR SUMMARY JUDGMENT ON UNPAID WAGES (Dkt. 252);

(9) MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO BIOSUCCESS'S FIRST CAUSE OF ACTION FOR PATENT INFRINGEMENT (Dkt. 253);

(10) MOTION TO STRIKE UNAUTHENTICATED LETTER (Dkt. 279)

JOHN A. KRONSTADT, District Judge.

Andrea Keifer Deputy Clerk

I. Introduction

Four separate actions are pending involving some or all of the following parties: Biosuccess Biotech, Co., Ltd., a Cayman Islands corporation, Biosuccess Biotech, Co., Ltd., a Nevada Corporation (collectively “Biosuccess”); Zheng Tao Han (“Han”); and Chi–Ming Wu aka Fred Wu (“Wu”); Rich Pharmaceuticals, Inc. (“RPI”); Imagic, LLC (“Imagic”); Richard L. Chang Holdings LLC (“RLC Holdings”); Ben; and Richard. The claims in each action arise from the same business relationships, disputes and intellectual property. The adverse parties in these proceedings are former business partners who have now established competing businesses based on the same intellectual property.

On May 21, 2014, the Court consolidated two of the pending matters. Dkt. 198. On July 24, 2014, the Court consolidated the two others. Dkt. 213. The Court ordered the parties to re-file in the lead case as to consolidated proceedings, all motions that were pending at that time in any of the four actions. All of the motions were then set for hearing on September 15, 2014. Id. The parties complied and also brought other motions to be heard at that hearing.

At the September 15, 2014 hearing, the Court concluded that the more efficient means of addressing the numerous matters at issue was to issue a tentative, written order for review by the parties. On October 15, 2014, the Court issued its tentative order. Dkt. 372. On October 27, 2014, the Court conducted a hearing with respect to the tentative order, and heard arguments by counsel for the parties. Dkt. 378. The matter was taken under submission. By this Order, final rulings are made with respect to all of the matters at issue.

II. Factual Background

A. The '814 Patent and Assignment to Biosuccess

Richard Chang (“Richard”)¹ and Zheng Tao Han (“Han”) are co-inventors of U.S. Patent No. 6,063,814 (the “'814 Patent”), which was issued on May 16, 2000. Dkt. 116–3 at 3; Dkt. 278–3 ¶ 2. The '814 Patent concerns the use of phorbol esters, specifically, 12–O–tetradecanoylphorbol–13–acetate (“TPA”), which are used to treat diseases. Dkt. 116–3 at 3; Dkt. 278–3 ¶ 2. Richard alleges that he advanced all of the patent and processing fees needed to obtain the '814 Patent. Dkt. 278–3 ¶ 3. Richard also alleges that Han agreed orally that Richard would control the development of commercial uses for the '814 Patent. Id.

Richard, Han, and Wu formed Biosuccess in 2006. Dkt. 116–3 at 3. Richard and Han began discussing the assignment of the '814 Patent to Biosuccess in August 2006. Dkt. 116–4 at 4. The two signed an agreement with Biosuccess in October 2006 assigning their respective rights and interests in the '814 Patent to Biosuccess (the “October 2006 Agreement”). Dkt. 278–3, Ex. 2. The October 2006 Agreement provided that, at the outset, $1 Million would be paid to Richard and Han as reimbursement for their efforts in connection with the research and development of TPA. That Agreement also provided for another payment of $1 Million to them by February 28, 2007. Dkt. 278–3, Ex. 2 § 3.1. Further, the October 2006 Agreement provided that the two would collectively receive an annual payment of $250,000 in “consulting fees.” Dkt. 253–4 at 2. Richard alleges that $250,000 was paid to him under the October 2006 Agreement. Dkt. 278–3 ¶ 6.

B. Biosuccess as a Company

Richard held the title of Chief Science Officer of Biosuccess and, beginning in 2006, became a member of its Board of Directors. Dkt. 280–1, Ex. A & B. Wu has been the CEO and Chairmen of the Board of Biosuccess since 2006. Dkt. 270–3 ¶ 2. Han has been a director and officer of Biosuccess since 2006. Dkt. 270–2 ¶ 4. Ben Chang (“Ben”), who is Richard's son, began working with Biosuccess in 2006. He served in various roles, including President and Chief Operating Officer. Dkt. 277–2 ¶ 8. The parties dispute the amount of annual compensation promised to Ben when he began working for Biosuccess. Dkt. 281–2 at 1.

The business plan of Biosuccess is “to bring drugs based on TPA to market to treat various diseases, starting with acute myelogenous leukemia

(“AML”) for patients who were refractory to standard therapy, and moving onwards to other diseases like HIV/AIDS and treating the side effects of stroke and other diseases.” Dkt. 116–4 ¶ 4. Biosuccess alleges that it has “developed and compiled valuable research and business data considered trade secrets, as well as other confidential information” related to its research of TPA and AML. Dkt. 203 ¶ 17. Biosuccess alleges that its trade-secret information is contained in various documents and electronic files, and that it “takes great care to maintain the secrecy of its trade-secret and other confidential and proprietary information, and to prevent their disclosure to persons outside [Biosuccess], including requiring employees to sign a non-disclosure agreement and abide by the Employee Handbook.” Id. ¶ 18. Both Richard and Ben allegedly had access to these trade secrets and confidential business information. Id.

Biosuccess has been involved with two clinical studies. Each involved the use of its trade secrets and other information involving TPA and the '814 Patent. Id. ¶ 19. Biosuccess has not yet obtained approval of the Food and Drug Administration (“FDA”) for any medication related to the '814 Patent. Dkt. 205–2.

C. The Alleged Suspension of Biosuccess Operations

Among the disputed matters in these proceedings is whether, in mid–2007, the principals of Biosuccess, including Wu, Han, and Richard, agreed to forgo compensation on an interim basis due to the condition of the financial markets and litigation against the company that was pending in Taiwan. Dkt. 270–3 ¶ 5. Richard denies that he agreed to suspend his salary. Dkt. 277–4 ¶ 5. Biosuccess contends that the company was inactive between late 2007 until mid–2011. Id. ¶¶ 14–16. It is also alleged that, in November 2007, Biosuccess sent a letter to Ben stating that his salary would be reduced due to this inactivity. Id. Ex. K. It is also alleged that in June 2011, Biosuccess renewed its operations after receiving investments from certain third parties. Dkt. 249–1, Ex. I ¶¶ 15–16.

In September 2011, Biosuccess, Richard, and Han allegedly entered into a new assignment agreement with respect to the '814 Patent (the “September 2011 Agreement”). Dkt. 270–3 ¶ 6. It is also alleged that, in conjunction with that Agreement, Richard and Han agreed to forgo unpaid compensation in exchange for being able to retain what had been paid to them collectively pursuant to the October 2006 Agreement. Id.

There is a dispute as to whether the September 2011 Agreement was backdated to August 2006 at the time that it was signed by some or all of the parties. Id. The September 2011 Agreement provides for the payment of $250,000 in consulting fees “or market compatible compensation” to Han and Richard collectively. Dkt. 278–3, Ex. 1 § 3.1. The parties now dispute whether the October 2006 Agreement or the September 2011 Agreement controls the assignment of the '814 Patent.

D. Termination of Ben and Richard by Biosuccess; Establishment of RPI

On January 10, 2013, Richard sent a letter to Wu in which he requested certain Biosuccess corporate records. Dkt. 252–4 ¶ 14. On January 18, 2013, Ben and Richard were terminated by Biosuccess. Dkt. 281–2 at 4; Dkt. 280–2 at 4. The parties dispute whether Biosuccess owed any wages to Ben or Richard at the time each was terminated.

Following his termination by Biosuccess, Ben founded RPI and became its CEO. Dkt. 245–3, ¶ 2. In June 2013, Richard assigned certain rights in the ' 814 Patent to RPI. Dkt. 64 ¶ 14. Ben alleges that the rights Richard assigned to RPI “are not conflicting with anything that...