Oakwood Labs. LLC v. Thanoo

• Citation: 999 F.3d 892
• Decision Date: 08 June 2021
• Docket Number: No. 19-3707,19-3707
• Parties: OAKWOOD LABORATORIES LLC, Appellant v. Dr. Bagavathikanun THANOO; AuroMedics Pharma LLC; Aurobindo Pharma U.S.A. Inc.; Aurobindo Pharma Ltd.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

999 F.3d 892

OAKWOOD LABORATORIES LLC, Appellant

v.Dr. Bagavathikanun THANOO; AuroMedics Pharma LLC; Aurobindo Pharma U.S.A. Inc.; Aurobindo Pharma Ltd.

No. 19-3707

United States Court of Appeals, Third Circuit.

Argued November 17, 2020

Filed: June 8, 2021

Michael J. Barrie [ARGUED], Kevin M. Capuzzi, Benesch Friedlander Coplan & Aronoff LLP, 1313 North Market Street – Suite 1201, Wilmington, DE 19801, Counsel for Appellant

Jonathan D. Janow [ARGUED], Chance Lyman, Buchanan Ingersoll & Rooney, 1700 K Street NW – Suite 300, Washington, DC 20006, Counsel for Appellees

Before: JORDAN, KRAUSE, and RESTREPO, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

In 2017, Oakwood Laboratories, L.L.C. ("Oakwood") sued its former Vice President of Product Development, Dr. Bagavathikanun Thanoo, as well as Dr. Thanoo's current employer, Aurobindo Pharma U.S.A., Inc. ("Aurobindo USA"), the parent of that company, Aurobindo Pharma Ltd. ("Aurobindo"), and a sister company, AuroMedics Pharma LLC ("AuroMedics") (collectively, "the Defendants"), asserting claims of trade secret misappropriation, breach of contract, and tortious interference with contractual relations. More than two years and four iterations of its complaint later, Oakwood was unable to get past the pleading stage of litigation. The District Court dismissed each version of the complaint for failure to state a claim.

After each dismissal, Oakwood endeavored to address the problems the District Court perceived. Those efforts culminated in a Third Amended Complaint (generally referenced herein simply as the "Complaint") so factually detailed that, on appeal, we conclude it easily meets the pleading requirements of the Federal Rules of Civil Procedure and pertinent substantive law. We will, therefore, vacate the District Court's dismissal and remand the case for further proceedings. In doing so, we endeavor to clarify the requirements for pleading a trade secret misappropriation claim under the Defend Trade Secrets Act, 18 U.S.C. § 1836(b) ("DTSA").

I. BACKGROUND

A. Factual Background¹

According to its Complaint, "Oakwood is a technology-based specialty pharmaceutical company focused on hard-to-develop generic and quasi-generic, sustained-release, and small molecule injectable drugs," including "the research and development of sustained release injectable drugs involving microsphere systems (collectively, the ‘Oakwood Products’)."² (App. at 208, ¶ 17.) It "has devoted extensive time, money, and other resources to the research, design, and development of the Oakwood Products it manufactures[,]" including its processes for manufacturing, testing, research, quality assurance, and regulatory compliance. (App. at 209, ¶ 18.) Those processes "are not generally known outside Oakwood's organization, and Oakwood takes steps reasonable under the circumstances to keep such information confidential," such as requiring non-disclosure agreements ("NDAs") with its scientists, vendors, suppliers, and business partners prior to sharing information, as well as advising its employees "that such information must be held confidential, password protecting electronically stored information, and reasonably controlling access to such information." (App. at 209, ¶ 19.)

Accordingly, when Oakwood hired Dr. Thanoo in 1997 as its Senior Scientist "principally responsible for the development of the Oakwood Products" (App. at 212, ¶ 28), it required him to sign an NDA and related inventions agreement "[a]s a condition of [his] employment and to protect Oakwood from misuse and/or disclosure of proprietary information[.]" (App. at 210, ¶ 23.) As Senior Scientist and later as Vice President of Product Development, Dr. Thanoo "directly designed Oakwood's microsphere process technology" and "had extensive involvement in and knowledge of the design, development, and implementation of the Oakwood Products." (App. at 212-13, ¶ 28.) He "spent more than 80% of his tenure with Oakwood working on [what the company calls] the Microsphere Project" (App. at 218, ¶ 36), a project focused on "the design, research and development, and test methods for leuprolide and octreotide sustained released products, and other products, that rely on microsphere process technology[.]"³ (App. at 212-13, ¶ 28 (footnote omitted); see also App. at 213-17, ¶¶ 29-30.) The Microsphere Project forms the basis of Oakwood's trade secrets claim.

Oakwood had invested more than $130 million, two decades, and the efforts of dozens of full-time employees in its Microsphere Project. By the fall of 2013, it had developed three lead product candidates based on that work. (App. at 219, ¶ 45.) All three of those products, which we will refer to as the "Leuprolide

Products," are bioequivalent to a valuable brand-name drug called Lupron Depot ®. (App. at 212 n.1, 219, ¶ 45.) At the time, there were "no approved generic versions of [Lupron Depot ] in the US due to the high level of difficulty in developing and manufacturing such specialized products." (App. at 219, ¶ 45.)

Around the same time, Aurobindo "sought out Oakwood" to discuss an opportunity to collaborate on the Microsphere Project.⁴ (App. at 219, ¶ 43.) Aurobindo is a vertically integrated pharmaceutical company known for manufacturing active pharmaceutical ingredients. The companies "discussed a business venture in which Aurobindo USA would sell an [active pharmaceutical ingredient] to Oakwood for its Microsphere Project." (App. at 219, ¶ 44.) Aurobindo informed Oakwood during their discussions that "it had no prior experience with peptide based microsphere products." (App. at 220, ¶ 47.) As part of those discussions, Aurobindo and AuroMedics – Aurobindo's subsidiary in "the injectable business" (App. at 229, ¶ 77.a) – acquired some of Oakwood's trade secret information, information that both Aurobindo and AuroMedics contracted in a confidentiality agreement to keep "secret and confidential" and to use only for non-competitive purposes.⁵ (App. at 221, ¶ 52.) Much of that information was contained in what is referred to as the "Leuprolide Memo," "a 27-page memorandum explaining the [L]euprolide [P]roducts" involved in the Microsphere Project. (App. at 220, ¶ 50.) Among other things, the memo revealed

Oakwood's development of the microsphere-based [L]euprolide [P]roducts, including the specific ingredients of the formula used to develop the ... [Leuprolide

Products], Oakwood's strategic plan to obtain regulatory approval of the Leuprolide Products, the results of its clinical trials of the Leuprolide Products and the alterations Oakwood made to the formula following its analysis of the clinical trial results, Oakwood's strategy to continue to refine the Leuprolide Products formula, the forecasted costs

associated with launching the Leuprolide

Products, and the manufacturing process for the Leuprolide Products.

(App. at 221, ¶ 51.)

Aurobindo's CEO also "visited Oakwood's headquarters [in November 2013] ... to discuss Aurobindo's and Aurobindo USA's capabilities[,]" during which he spoke with Dr. Thanoo. (App. at 220, ¶ 46.) Two days later, Aurobindo's CEO "connected via email Dr. Thanoo and ... [the] Vice President of Aurobindo, noting that the two were old friends and ‘batch mate[s] at Madras University.’ " (App. at 220, ¶ 48 (alteration in original).) Ultimately, however, after "having materially explored a business relationship with Oakwood," (App. at 222, ¶ 57), "Aurobindo informed Oakwood that it was not interested in pursuing the Microsphere Project and the Leuprolide Products with Oakwood due to financial considerations." (App. at 222, ¶ 56.)

But talks evidently continued with Dr. Thanoo, because within about six months, in April 2014, Aurobindo USA hired him. According to Oakwood, the Aurobindo companies used him to misappropriate Oakwood's trade secrets relating to microsphere products. Dr. Thanoo had assured Oakwood that he "was going to Aurobindo USA to develop standard generic injectable drugs" and "that his work ... would not include microsphere system technology." (App. at 222, ¶ 59.) To the contrary, though, his work at Aurobindo USA does in fact include microsphere technology.

"Within months" of Aurobindo USA hiring Dr. Thanoo, AuroMedics had "formed a group in the United States to develop microsphere technology" and, more specifically, microsphere-based injectable products that Oakwood alleges are "substantially similar to and competitive with Oakwood's Microsphere Project using Oakwood's trade secret information[.]" (App. at 224-25, 231, ¶¶ 64-65, 82; see also App. at 672.) By May 2015, Aurobindo's managing director and AuroMedics's CEO were telling the companies’ investors that AuroMedics was "currently working on" four microsphere products⁶ and expected it would begin submitting abbreviated new drug applications to the Food and Drug Administration ("FDA") for "these products probably end of calendar 2016 beginning 2017" and would obtain its "first [FDA] approval ... sometime in calendar year 2018 with the first product followed closely by the other three products." (App. at 225, ¶ 65; see also App. at 284.)

Besides boasting of a short development period for its new products, AuroMedics said that, by the end of the fiscal year, it expected to have invested about $6 million in the microsphere products, for an "addressable market" of "$3 billion in the US." (App. at 224-25, ¶¶ 64-65.) According to Oakwood, that $6 million investment is remarkably small for the scientific advances claimed, especially since Aurobindo, Aurobindo USA, and AuroMedics had no prior experience developing, manufacturing, or selling microsphere technology before hiring Dr. Thanoo. (App. at 226, ¶¶ 67-69.) Oakwood further asserts that, without prior experience and given the more difficult nature of developing specialized microsphere products compared to other products, "the Microsphere Project is not something that could have been replicated in one-to-four years ... absent misappropriation of Oakwood's...