Concat Lp v. Unilever, Plc

• Decision Date: 07 September 2004
• Docket Number: No. C 04-1396 SI.,C 04-1396 SI.
• Citation: 350 F.Supp.2d 796
• Parties: CONCAT LP and Chelator, LLC, Plaintiffs, v. UNILEVER, PLC, Unilever N.V., Unilever U.K. Central Resources Ltd., Unilever United States, Inc., and Conopco, Inc., Defendants.
• Court: U.S. District Court — Northern District of California

350 F.Supp.2d 796

CONCAT LP and Chelator, LLC, Plaintiffs, v. UNILEVER, PLC, Unilever N.V., Unilever U.K. Central Resources Ltd., Unilever United States, Inc., and Conopco, Inc., Defendants.

No. C 04-1396 SI.

United States District Court, N.D. California.

September 7, 2004.

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Henry M. Heines, April Elizabeth Abele, Paul W. Vapnek, Townsend & Townsend & Crew LLP, San Francisco, CA, for Plaintiffs.

Jason A. Lief, Kenneth L. Waggoner, Michael B. Green, Morgan Lewis & Bockius, LLP, Franklin Brockway Gowdy, Brobeck, Phleger & Harrison LLP, San Francisco, CA, Stephen B. Judlowe, Morgan Lewis & Bockius LLP, New York, NY, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO STAY PENDING ARBITRATION, DENYING DEFENDANTS' MOTION TO DISMISS, AND GRANTING PLAINTIFFS' MOTION TO DISQUALIFY DEFENDANTS' COUNSEL

ILLSTON, District Judge.

On July 2, 2004, this Court heard argument on the following motions: defendants' motion to stay this litigation pending arbitration or, in the alternative, to dismiss the complaint on grounds of forum non conveniens, lack of in personam jurisdiction, and/or failure to join indispensable parties; and plaintiff's motion to disqualify defendants' counsel. Having carefully considered the argument of counsel and the papers submitted, the Court hereby GRANTS defendants' motion to stay the action pending arbitration; DENIES defendants' motion in the alternative to dismiss; and GRANTS plaintiffs' motion to disqualify counsel.

BACKGROUND

The dispute in this case is about intellectual property rights concerning a group of chemical compounds and methods of using those compounds in the formulation of deodorants. The compounds in question are chelators. Chelators have the active property of combining with metal ions to form further compounds, known as chelates. Due to their metal-binding properties, chelators tend to inhibit chemical reactions. NIH Unified Medical Language System, U.S. National Medical Library, http://ghr.nlm.nih.gov/ghr/glossary/chelator> (last visited July 1, 2004).

Plaintiff Concat LP is a California Limited Partnership whose partners are members of the Winchell family. Compl. at ¶ 1; Declaration of Dr. H.S. Winchell, ¶ 2. During most of the period covered by this dispute, the managing partner was Dr. H.S. Winchell. Winchell Decl. at ¶¶ 1-2. The current managing partner is a corporation owned by Dr. Winchell's children. Id. at ¶ 2. Concat's business includes the design and development of chelators and their applications. Compl. at ¶ 16. Between 1981 and 2001, Concat supported all research and development at Israel Resources Corporation, Ltd. ("IRC"), a private company organized under the law of Israel. IRC assigned all intellectual property rights arising from this research to Concat. Compl. at ¶ 3; Winchell Decl. at ¶ 3. In June, 1996, Concat filed an international patent application covering a number of inventions, including methods of using chelators to prevent bacterial and fungal growth on human body surfaces. Compl. at ¶ 18. On September 10, 2001, Concat assigned all of its then current intellectual property rights to Chelator, LLC, a Delaware limited liability company with its principal place of business in Concord, California. In return, Concat received all Chelator stock issued at that time. Id. at ¶¶ 2, 4. IRC then sold all of its assets, including intellectual property rights, to Complexx R & D services, a private company organized in Israel and wholly owned by Chelator. Id. at ¶ 5.

Defendants Conopco, Unilever UK and Unilever U.S. are subsidiaries of Unilever PLC, and Unilever N.V., which are organized under the laws of the U.K. and the Netherlands, respectively, but which operate as a single company and have a single board of directors. Compl. at ¶¶ 7-12. Unilever is a major international producer of consumer goods, including toiletries. Id. In August, 1996, Dr. Winchell of Concat and the then president of IRC, Dr. Haim Zaklad, contacted Unilever regarding a possible joint development of Concat's compounds for use in deodorants. Compl. at ¶ 19. On December 12, 1996, a Letter of Understanding was executed between IRC and Unilever U.K. Central Resources Ltd., acting on behalf of its Unilever Research Port Sunlight Laboratory ("Port Sunlight"), located in Wirral, U.K. Id.; Decl. of Paul W. Vapnek in Supp. of Pls.' Mot. to Stay or Dismiss, Ex. 5. The 1996 Letter of Understanding was followed by a "Secrecy Agreement," executed in June, 1997, between IRC and the Unilever Research and Engineering Environmental Safety Laboratory ("ESL"), later renamed the Unilever Research SEAC Toxicology Unit ("SEAC"), located in Bedford, U.K. Compl. at ¶ 22; Decl. of Jason Lief in Supp. of Defs.' Mot. to Stay or Dismiss, Ex. B. The scope of the 1997 Secrecy Agreement, which includes an arbitration clause, is a matter in dispute. See Lief Decl., Ex. B at ¶ 5. Pursuant to the 1996 Letter of Understanding, IRC provided Unilever with samples of two compounds for evaluation, the more important of which was designated 3MP/IRC011 ("3MP") or Deofix. Compl. at ¶¶ 19-20. Testing and evaluation of the 3MP compound continued for the next several years, during which period the parties conducted extensive discussions and exchanged scientific data. Id. at ¶¶ 21-44. Beginning in May, 1998, Drs. Winchell and Zaklad met and corresponded regularly with Drs. Michael Lowry and Stephen Makin of the Port Sunlight Deodorant Research Group. Compl. at ¶¶ 24-44. On February 1, 1999, the IRC and Port Sunlight entered a further "Confidentiality Agreement." Id. at ¶ 28; Vapnek Decl. in Supp. of Pls.' Mot. to Stay or Dismiss, Ex. 11.

Beginning in January, 2001, Unilever filed a series of U.S. patent applications under the titles: "Deodorant Products," "Anti-Microbial Compositions," and "Anti-Microbial Antiperspirant Products," all naming Dr. Makin as an inventor. Compl. at ¶¶ 47-52. The "Deodorant Products" application issued in January, 2003, as U.S. Patent Number 6,503,490 B2 ("the '490 patent"). Id. at ¶ 47. In April, 2002, Unilever announced a "breakthrough" deodorant technology employing a chemical that inhibits the growth of bacteria by binding the nutrient iron in sweat. Id. at ¶ 45. In September, 2002, Drs. Makin and Lowry presented a scientific conference paper entitled "Iron Sequestration on Skin: A New Route to Improved Deodorancy." Id. at ¶ 46. Plaintiffs allege that these patent applications and publications are based on data that Unilever obtained from IRS/Concat. Id. at ¶¶ 47-50. Plaintiffs further allege that Unilever has marketed deodorants containing plaintiffs' intellectual property. Id. at ¶ 54; Winchell Decl. at ¶ 17.

On June 4, 2003, Chelator was awarded U.S. Patent No. 6, 583, 182 B1 ("the '181 patent"), which claims the use of chelating agents to inhibit bacterial and fungal growth. Winchell Decl. at ¶ 16. The inventors of the ' 181 patent include Drs. Winchell and Zaklad. Id.

In late June, 2003, Dr. Winchell and his wife approached W. Scott Thomas, Esq. of the Personal Law Practice Group of the San Francisco office of Morgan, Lewis & Bockius LLP ("Morgan, Lewis") for assistance with planning his estate. Winchell Decl. at ¶ 4; Decl. of W. Scott Thomas in Supp. of Defs.' Opp'n to Pls.' Mot. to Disqualify at ¶ 2. Morgan, Lewis are counsel to Unilever in this dispute. It is undisputed that the Winchells provided Thomas with a list of their and their children's business interests, including their partnership interests in Concat, and Concat's interests in Chelator. Winchell Decl. at ¶ 5; Thomas Decl. at ¶¶ 2-3. Thomas used this information to run a conflict of interest search in Morgan, Lewis's client database. Although Unilever was already an established client of Morgan, Lewis, the search produced a negative result, since no dispute between Unilever and Concat/Chelator existed at that time. Winchell Decl. at ¶ 5; Thomas Decl. at ¶ 5. On July 2, 2003, Thomas sent the Winchells a client-attorney engagement letter, which they executed on July 22 and 23. Winchell Decl., Ex. 1. The engagement letter included the following disclaimer:

Morgan, Lewis & Bockius is a large law firm, and we represent many other companies and individuals. It is possible that some of our present or future clients will have disputes or other dealings with you during the time that we represent you. Accordingly, as a condition of our undertaking of this matter for you, you agree that Morgan, Lewis & Bockius may continue to represent, or may undertake in the future to represent, existing or new clients in any matter, including litigation, that is not substantially related to our work for you, even if the interests of such clients in those other matters are directly adverse to you. Further, you agree in light of its general consent to such unrelated conflicting representations, Morgan, Lewis & Bockius will not be required to notify you of each such representation as it arises. We agree, however, that your prospective consent to conflicting representations contained in the preceding sentence shall not apply in any instance where, as the result of our representation of you, we have obtained confidential information of a non-public nature that, if known to another client of ours, could be used to your material disadvantage in a matter in which we represent, or in the future are asked to undertake representation of, that client.

Id. at p. 2. Also on July 2, 2003, Dr. Winchell sent Thomas by email a summary of his business interests, which included an initial description of the intellectual property of Concat and Chelator. Winchell Decl. at ¶ 7; Thomas Decl. at ¶ 3. This disclosure was preceded by the following caveat in bold letters:

THE FOLLOWING INFORMATION IS CONFIDENTIAL AND PROPRIETARY. CONCAT/CHELATOR MAY BE IRREPARABLY HARMED SHOULD THE STATUS OF DEVELOPMENT AND TESTING OF OUR AGENTS BE DISCLOSED TO THOSE DEVELOPING COMPETING TECHNOLOGY, OR THOSE CURRENTLY...