Inguran, LLC v. Abs Global, Inc., 17-cv-446-wmc

CourtUnited States District Courts. 7th Circuit. Western District of Wisconsin
Writing for the CourtWILLIAM M. CONLEY District Judge
Decision Date28 September 2018
Docket Number17-cv-446-wmc

and CYTONOME/ST, LLC, Plaintiffs,
and PREMIUM GENETICS (UK) LTD, Defendants.



September 28, 2018


Defendant ABS Global, Inc. ("ABS") is one of just a few, large "bull studs" that sell "straws" of bull semen for use in artificial insemination. Inguran, LLC ("ST") provides semen-processing services ("sorting") to ABS and other bull studs to create "sexed semen straws," which consist primarily of either male or female sperm cells. Successful semen sorting is a relatively new breeding technology with substantial economic value for beef producers, who prefer male calves, and dairy farmers, who prefer female calves.

In this lawsuit, plaintiffs ST, XY, LLC ("XY"), and Cytonome/ST, LLC ("Cytonome") bring claims for patent infringement, breach of contract, and misappropriation of trade secrets under both the Defend Trade Secrets Act and state law. Among other things, plaintiffs seek injunctive relief against defendants ABS, Genus plc ("Genus"), and Premium Genetics (UK) LTD ("Premium Genetics"). Before the court is defendants' motion to dismiss plaintiffs' claims for breach of contract and misappropriation of trade secrets (dkt. #33), which will be denied without prejudice.

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ABS and ST entered their first sorting contract in 2006 and later reached another agreement in 2012. In an earlier lawsuit before this court involving the same parties, ABS alleged that ST engaged in monopolistic practices in the sorting market. See ABS Global, Inc. v. Inguran, LLC d/b/a Sexing Technologies, No. 14-cv-503 (W.D. Wis.) ("ABS I"). Specifically, ABS argued that ST maintained a monopoly by forcing the inclusion of anticompetitive terms in their contracts with bull studs, including the 2012 agreement between ABS and ST, as well as acquiring patents for the purpose of excluding others from the sex-sorting market. ST asserted counterclaims against ABS and its parent company, Genus. Finally, ST's subsidiary, XY, intervened and asserted its own counterclaims.

On August 1, 2016, ABS I proceeded to a jury trial, which turned in part on evidence that a former XY employee, Kathy Mean, brought confidential XY sorting protocols to ABS when she began work there. ST and XY alleged that Mean's disclosure breached the confidentiality provisions of their 2012 Agreement with ABS and misappropriated their trade secrets. Ultimately, ABS prevailed on its monopolization claim, while ST and XY prevailed on their claims for breach of contract and misappropriation of trade secrets.

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B. The Present Lawsuit

The present lawsuit was filed more than three years after ABS I was filed. This time, ST, XY, and Cytonome brought suit against ABS, Genus, and Premium Genetics for patent infringement, misappropriation of trade secrets under the Defend Trade Secrets Act and state law, and breach of the confidentiality provisions of the 2012 agreement between ST and ABS.2 As the remedies for these alleged wrongs, plaintiffs ST, XY and Cytonome seek various forms of monetary relief; Cytonome seeks an injunction against ABS and Genus's use of its patents; XY seeks an injunction against Premium Genetics' use of XY's trade secrets; and ST seeks an injunction against ABS's use or disclosure of ST's confidential information. In addition to disputing plaintiffs' claims, defendants assert counterclaims for breach of contract (alleging quality problems with various straws received) and seek a litany of declaratory judgments related to plaintiffs' patent infringement claims.3

The crux of ST's breach of contract claim is its allegation that ABS breached the confidentiality provision of the 2012 Agreement by improperly disclosing information wrongfully taken by Kathy Mean to Premium Genetics, which then incorporated that information into a patent application. (Compl. (dkt. #1) ¶¶ 80-81.) ST further alleges that both ABS and Premium Genetics are legally responsible for "allow[ing] the patent office to publish" the specific application (id. at ¶¶ 66, 84), which "diminished or eliminated the economic value of the portions of ST's Confidential Information that were

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disclosed." (Id. at ¶ 86.) The application at issue is U.S. Patent Application No. 14/308,499 ("the '499 application"), which was filed on June 18, 2014, and subsequently published on April 30, 2015. (Id. at ¶ 66). The ABS I trial did not take place until July 2016, more than a year after this publication.


In its motion to dismiss, defendants ABS and Genus argue that XY's claims for misappropriation of trade secrets and ST's claim for breach of contract are precluded by the judgment in ABS I, as the facts alleged could have been raised in that lawsuit. Defendants also argue that Premium Genetics, as a party in privity with Genus and ABS, should benefit from this same claim preclusion. Alternatively, Premium Genetics argues that it is not subject to the personal jurisdiction of this court.

To survive a motion to dismiss, a complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). To make this determination, the court must "constru[e] the complaint in the light most favorable to the plaintiff, accepting as true all well-pleaded facts alleged, and drawing all possible inferences in [the plaintiff's] favor." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009). This standard applies to determinations of whether a claim is precluded by a prior judgment as well. See, e.g., Lietha v. Bank of Am., N.A., No. 14-cv-442, 2015 WL 1457428, at *2 (W.D. Wis. Mar. 30, 2015) (construing a motion to dismiss on preclusion grounds as a motion for judgment on the pleadings under Rule 12(c), which "is determined by the same standard applied to a motion for failure to state a claim").

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I. Claim Preclusion

The preclusive effect of this court's judgment on the state law claims in ABS I is governed by federal common law, which adopts as the "federally prescribed rule of decision, the law that would be applied by state courts in the State" in which the federal court sits. Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001). In this case, "Wisconsin's interpretation of res judicata, which is virtually identical" to the federal approach. Leaf v. Supreme Court of State of Wis., 979 F.2d 589, 600 (7th Cir. 1992).

Under Wisconsin and federal law, claim preclusion has three elements: "(1) an identity between the parties or their privies in the prior and present suits; (2) an identity between the causes of action in the two suits; and, (3) a final judgment on the merits in a court of competent jurisdiction." Menard, Inc. v. Liteway Lighting Prod., 2005 WI 98, ¶ 26, 282 Wis. 2d 582, 596, 698 N.W.2d 738, 745 (2005); accord Adams v. City of Indianapolis, 742 F.3d 720, 735-36 (7th Cir. 2014). Claim preclusion renders a final judgment "conclusive in all subsequent actions between the same parties or their privies as to all matters which were litigated or which might have been litigated in the former proceedings." Menard, Inc., 698 N.W.2d at 745 (brackets omitted; emphasis in original).

With the exceptions of Cytonome and Premium Genetics, the preclusive effect of ABS I turns solely on "an identity between the causes of action in the two suits," since the parties and the court are otherwise the same. A "transactional approach" is utilized to determine whether two suits involve the same claim. N. States Power Co. v. Bugher, 189 Wis. 2d 541, 553, 525 N.W.2d 723, 728 (1995); Car Carriers v. Ford Motor Co., 789 F.2d 589, 593-94 (7th Cir. 1986). The transactional approach "views claims under a pragmatic

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standard that focuses on whether the two causes of action arise out of the same common set of material facts." Menard, 698 N.W.2d at 747. "[I]f the same set of facts is essential to both claims," Jones v. Int'l Ass'n of Bridge Structural Ornamental & Reinforcing Iron Workers, 864 F. Supp. 2d 760, 771 (E.D. Wis. 2012), then the two suits arise out of the same transaction or "series of connected events," and the earlier judgment has preclusive effect. Parungao v. Cmty. Health Sys., Inc., 858 F.3d 452, 458 (7th Cir. 2017). So it is under this approach that the court will judge the parties' claim preclusion arguments.

A. ST's Breach of Contract Claims

Defendants argue that ST's breach of contract claim is precluded under the transactional approach because, as in ABS I, ST again alleges that ABS breached the parties' 2012 contract by improperly using and disclosing ST's confidential information. And, once again, the...

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