Gensetix, Inc. v. Baylor Coll. of Med.
| Decision Date | 10 December 2018 |
| Docket Number | Civil Action No. 4:17-CV-1025 |
| Citation | 354 F.Supp.3d 759 |
| Parties | GENSETIX, INC., Plaintiff, v. BAYLOR COLLEGE OF MEDICINE, Diakonos Research, Ltd, & William K. Decker, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Christopher Bruno, Schiff Hardin LLP, Washington, DC, Donald Kreger, Imron T. Aly, Schiff Hardin LLP, Chicago, IL, Parvathi Kota, Paul J. Skiermont, Sarah Elizabeth Spires, Skiermont Derby LLP, Dallas, TX, Peter Elton Mims, Vinson & Elkins, Houston, TX, Olin (Trey) Ray Hebert, III, Vinson & Elkins L.L.P., Austin, TX, for Plaintiff.
Paul Richard Morico, Elizabeth Durham Flannery, Amy Pharr Hefley, Lindsay Volpenhein Cutie, Baker Botts LLP, Gordon T. Arnold, Arnold, Knobloch & Saunders, LLP, Murray J. Fogler, Robin Finney O'Neil, Fogler, Brar, Ford, O'Neil & Gray, LLP, Houston, TX, Jeffrey Gritton, Baker Botts LLP, Austin, TX, for Defendants.
Before the Court is Involuntary Plaintiff The Board of Regents of the University of Texas System's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) [Doc. No. 62]. Plaintiff Gensetix opposes this motion [Doc. Nos. 45, 63], and Defendants Baylor College of Medicine [Doc. Nos. 53, 65] and Diakonos [Doc. No. 55] have filed their own responses. Each party has briefed whether this Court has jurisdiction over The Board of Regents of the University of Texas System ("UT") as an involuntary plaintiff pursuant to the Eleventh Amendment, whether UT could be properly joined under Federal Rule of Civil Procedure 19, and whether Gensetix could have standing to sue for patent infringement without UT as a plaintiff.1
For the reasons set forth below, the Court hereby GRANTS UT's Motion to Dismiss [Doc. No. 62]. The related portions of Defendant Baylor College of Medicine's Supplemental Reply in Support of its Motion to Dismiss Gensetix's First Amended Complaint [Doc. No. 65] and Defendant Diakonos' Motion to Dismiss Gensetix's First Amended Complaint [Doc. No. 55] are also GRANTED . Furthermore, the Court finds that the Federal Rule of Civil Procedure 19(b) factors weigh in favor of dismissal and declines to exercise supplemental jurisdiction over Gensetix's state law claims. Accordingly, this case is hereby DISMISSED without prejudice.
Plaintiff Gensetix is an exclusive licensee of United States Patent Nos. 8,728,806 and 9,333,248. [Doc. No. 26 at 1]. Plaintiff alleges that Defendant Professor William Decker invented methods of modifying patients' immune systems to kill cancer
cells during Professor Decker's tenure at The University of Texas MD Anderson Cancer Center. Id. Although Professor Decker is the named inventor on the patents, the methods were invented in the scope of Professor Decker's employment with MD Anderson, thus UT retained title to the patents-in-suit. Id. at 4, 2. According to Plaintiff's First Amended Complaint, in September 2008, UT granted Alex Mirrow an exclusive license to commercialize the patented method. Id. at 5. In January 2014, Mr. Mirrow assigned his rights in the licensed method to Gensetix ("License Agreement" or "L.A.").Id. Then, in June 2014, UT confirmed the assignment, and Gensetix and UT signed an amendment to the original agreement ("Amendment"). Id.
Plaintiff alleges that although Decker left UT and retained no rights in the patents, he continues to practice the patented technology at Baylor College of Medicine ("BCM"). Id. at 6. Plaintiff points to several abstracts Decker published in 2013 and 2014 and alleges that they describe Decker's use of the patented methods. Id. at 6-7. In early 2014, Gensetix claims that it reached out to Decker and BCM seeking to assert its patent rights and to acquire any intellectual property rights Decker and BCM claimed to own based on improvements or new discoveries from their use of the '806 and '248 patent ed methods. Id. at 7-8. Gensetix alleges that BCM was receptive to the idea of assigning these rights; accordingly, Gensetix sought financial backing from Fannin Innovation. Id. at 8-9. As negotiations were moving forward with BCM, Plaintiff claims that Decker secretly interfered with the negotiations by approaching BCM and disparaging Plaintiff and by independently soliciting Defendant Diakonos to enter a licensing agreement that cut Plaintiff out of the deal completely. Id. at 9.
Plaintiff alleges that it was unaware of Decker's interfering activities at the time when Decker sought funding from Gensetix to continue research. Id. at 11. Gensetix paid Decker, but eventually in June 2015, BCM informed Gensetix that it was no longer interested in the assignment negotiations. Id. at 12. Gensetix claims that it lost its financial agreement with Fannin Innovation as a result. Id. at 10. BCM eventually assigned rights for any developments allegedly based on the '806 and '248 patent ed methods to Diakonos. Id. at 13. Diakonos offered to sublicense the '806 and '248 patents from Gensetix, but Gensetix declined. Id.
Gensetix filed the present suit naming UT as an involuntary plaintiff. [Doc. Nos. 26 at 17; 63 at 1]. Gensetix alleges that Decker, BCM, and Diakonos ("Defendants") continue to practice, improve, and infringe on the '806 and '248 patent ed methods. [Doc. No. 26 at 17]. Further, Plaintiff claims that Defendants interfered with its contracts with UT and committed civil conspiracy. Id. at 26, 39-40. With regard to Defendant Decker, Plaintiff claims that he breached his contract with Gensetix, tortiously interfered with its deals with BCM and Fannin Innovation, and is subject to promissory estoppel for the "handshake agreement" between Decker and Gensetix. Id. at 35-39. Gensetix seeks injunctive relief, damages, and a declaratory judgment. Id. at 41-42.
The Court now turns to the parties' arguments regarding the Eleventh Amendment, standing, and joinder under Federal Rule of Civil Procedure 19(a).
UT, an arm of the State of Texas,2 asserts immunity from suit under the Eleventh Amendment and argues that this immunity deprives this Court of subject matter jurisdiction. [Doc. No. 62 at 2]. Accordingly, UT moves to dismiss under 12(b)(1). Plaintiff Gensetix argues that Eleventh Amendment sovereign immunity does not apply where no claims have been asserted against UT.
Dismissal of an action is appropriate whenever the court lacks subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1), 12(h)(3). The party asserting jurisdiction bears the burden of overcoming the presumption that the cause falls outside the court's limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994).
Contrary to the parties' arguments, the Eleventh Amendment does not necessarily deprive federal courts of subject matter jurisdiction. See Idaho v. Coeur d'Alene Tribe of Idaho , 521 U.S. 261, 267, 117 S.Ct. 2028, 138 L.Ed.2d 438 (1997) ; Tegic Comm. Corp. v. Board of Regents of the Univ. of Texas Sys. , 458 F.3d 1335, 1340 (Fed. Cir. 2006). The Eleventh Amendment confers waivable immunity upon sovereign entities "rather than a nonwaivable limit on the Federal Judiciary's subject-matter jurisdiction." Idaho , 521 U.S. at 267, 117 S.Ct. 2028. Therefore, the Eleventh Amendment does not altogether disqualify federal courts from hearing suits brought against states because states can waive their immunity and "allow a federal court to hear and decide a case commenced" against it. Id.
Thus, more accurately, the issue in this case is whether the Eleventh Amendment prevents UT from being joined as an involuntary plaintiff in a patent suit.
Plaintiff argues that the Eleventh Amendment does not bar this brand of joinder. [Doc. No. 63]. Plaintiff cites Independent Wireless Telegraph Co. v. Radio Corporation of America , for the proposition that "if there is no other way of securing justice to the exclusive licensee," the licensee may join the licensor "as a coplaintiff without his consent." 269 U.S. 459, 472, 46 S.Ct. 166, 70 L.Ed. 357 (1926). In Independent Wireless , Radio Corporation of America sued Independent Wireless for patent infringement. 269 U.S. at 472, 46 S.Ct. 166. The district court found that De Forest Company was the owner and Radio Corporation was an exclusive licensee of the patent-in-suit. Id. at 463, 46 S.Ct. 166. Since De Forest owned the patent, the court held it was an indispensable party. Id. The district court then dismissed the bill, stating that De Forest had not and could not be properly joined for want of jurisdiction. Id. at 460, 46 S.Ct. 166. The Circuit Court of Appeals reversed the dismissal, and the Supreme Court affirmed that decision. Id. The Supreme Court held that "if there is no other way of securing justice to the exclusive licensee, the latter may make the owner without the jurisdiction a coplaintiff without his consent in the bill against the infringer." Id. at 472, 46 S.Ct. 166. Thus, the Court held, dismissal was improper where De Forest Company could be joined as an involuntary coplaintiff even where it was "beyond the reach of process." Id. at 473, 46 S.Ct. 166.
Plaintiff also cites Regents of the University of California v. Eli Lilly & Co. , which held that "the Eleventh Amendment applies to suits ‘against’ a state, not suits by a state" and that where the suit does not involve any actual claims against the state, the state is not in the position of a defendant. 119 F.3d 1559, 1564-65 (Fed. Cir. 1997). The court in Regents further explained that the Supreme Court has never construed the Eleventh Amendment as applying to suits in which a state is a plaintiff because the Amendment is meant to protect the state from claims for damages asserted against it, not by it. Id. at 1564.
In Regents , the patent owner, the University of California ("UC"), voluntarily joined its licensee in a suit against Eli Lilly & Co. for patent infringement. Id. After plaintiffs brought suit in the Northern District of California,...
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Gensetix, Inc. v. Bd. of Regents of the Univ. of Tex. Sys.
...of Texas determined that the Eleventh Amendment barred joinder of UT as an involuntary plaintiff. Gensetix, Inc. v. Baylor Coll. of Med. , 354 F. Supp. 3d 759, 766 (S.D. Tex. 2018). The court also concluded that, under Rule 19(b), the suit could not proceed in UT's absence. Id. at 773–74. A......