Roche Diagnostics Corp.. v. Med. Automation Sys. Inc.
| Decision Date | 23 February 2011 |
| Docket Number | No. 1:10–cv–1718–SEB–DML.,1:10–cv–1718–SEB–DML. |
| Citation | 771 F.Supp.2d 936 |
| Parties | ROCHE DIAGNOSTICS CORPORATION, Plaintiff,v.MEDICAL AUTOMATION SYSTEMS, INC., Gregory A. Menke, and Kurt M. Wassenaar, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
OPINION TEXT STARTS HERE
Michael Rosiello, Scott E. Murray, T. Joseph Wendt, Barnes & Thornburg LLP, Indianapolis, IN, for Plaintiff.Andrew W. Hull, Daniel K. Burke, Hoover Hull LLP, Casey Cole Kannenberg, Wayne C. Turner, Bingham McHale LLP, Indianapolis, IN, John F. Cambria, Tiffany A. Buxton, Alston & Bird LLP, New York, NY, Charles F. Witthoefft, Hirschler Fleischer, P.C., Richmond, VA, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
This cause is before the Court on Plaintiff's Motion for Preliminary Injunction [Docket No. 9], filed on December 28, 2010. Plaintiff, Roche Diagnostics Corporation (“Roche”), seeks a preliminary injunction that would maintain the status quo pending arbitration of its substantive claims, to wit, that it fully and appropriately exercised its contractually binding right of first refusal to purchase Defendant Medical Automation Systems (“MAS”) with which right of first refusal MAS and the individual Defendants, Kurt M. Wassenaar and Gregory A. Menke,1 failed to comply or otherwise honor.
On January 11, 2011, prior to any hearing or ruling by the Court on the instant motion, Plaintiff filed a motion for a temporary restraining order (“TRO”), requesting immediate injunctive relief to prevent any of the Defendants from proceeding with the closing on a proposed merger of MAS with a third party by the name of Alere, Inc. (“Alere”) prior to the Court's consideration of the instant motion. A hearing on Plaintiff's motion for a temporary restraining order occurred on January 19, 2011, and, following that hearing, on January 28, 2011, the Court entered a TRO prohibiting Defendants from closing on their proposed merger with Alere for fourteen days. On February 14, 2011, the Court extended the TRO through the date of the hearing, February 17, 2011.
A hearing on the instant motion was held on February 17 and 18, 2011. On the first day of the hearing, the Court again extended the TRO through and including the date of the issuance of this ruling. Having considered the briefing, documentary and testimonial evidence, controlling legal authorities, and oral argument, and acting in accordance with the need for an expedited ruling, the Court hereby GRANTS IN PART and DENIES IN PART Plaintiff's motion for preliminary injunction.
Roche is an Indiana-based company active in the pharmaceutical and diagnostic fields. One segment of Roche's business is the sale to healthcare institutions of portable point-of-care devices for blood glucose testing and monitoring. In the mid–1990s, Roche partnered with MAS, a software provider, who developed the Remote Automated Laboratory Systems (“RALS”) software product line, which acts synchronistically with the blood glucose monitors sold by Roche. MAS typically grants Roche authority to enter into license agreements with healthcare institutions who are Roche customers and the healthcare institutions then execute license agreements with MAS for the RALS software, and Roche pays MAS for those licenses. The RALS software allows the data collected by the blood glucose monitor to be electronically transferred from the monitor to the healthcare institution's information system. In addition to delivering patient information, the RALS software also configures the blood glucose monitors, performs certain analysis on the patient data, and verifies operator certification on the point-of-care devices. These interlinkages between Roche's and MAS's product lines make them highly dependent on each other's success in the marketplace.
In 2006, MAS and Roche restructured and reorganized their commercial relationship by executing a number of documents, including a Co–Marketing and Distribution Agreement (“the Co–Marketing Agreement”). The Co–Marketing Agreement, effective January 1, 2006, grants Roche the right to market, sell distribute and/or offer MAS's RALS software line, including the products known as RALS–Plus, RALS–Lite, RALS–Notebook, Next Generation RALS–Plus, and RALS Glucose Module, including any future versions or enhancements or improvements thereto. The Co–Marketing Agreement grants Roche exclusive rights with respect to only one aspect of the RALS platform, that is, the RALS Glucose Model, including RALS–Lite and RALS-Notebook.
The initial term of the Co–Marketing Agreement ran from January 1, 2006 until December 31, 2010, when it expired. The Co–Marketing Agreement provided for automatic renewal periods unless either party gave notice of non-renewal. In the event of non-renewal, the Co–Marketing Agreement provided that it “shall continue from and after the end of the Initial Term, the Renewal Term, or the date of the Early Termination Notice (as applicable) for a 2–year wind-down period (the ‘Wind Down Term’).” Co–Marketing Agreement § 6.3 (emphasis in original). The Co–Marketing Agreement further provided that “[d]uring the Wind Down Term, the parties' respective rights and obligations under this Agreement shall continue in full force and effect, except as and to the extent specifically modified pursuant to Section 6.4 or Section 6.5 (as applicable).” Id. The only modification relevant to this litigation is that, upon expiration resulting from non-renewal, Roche's exclusive rights as to the RALS Glucose Module, as set forth in Section 2.1 of the Co–Marketing Agreement, converted to non-exclusive rights.
Article 11 of the Co–Marketing Agreement addresses the protection of the parties' confidential information and trade secrets. Specifically, Section 11.1 of the Co–Marketing Agreement provides in relevant part that:
Both MAS and Roche shall retain in confidence all Confidential Information received from the other prior to or during the term of this Agreement and will not, at any time during the term of this Agreement or after termination hereof, in any fashion, form or manner, either directly or indirectly, copy, reproduce, sell, assign, license, market, transfer, give, or otherwise disclose, divulge, release, or use for any purpose (other than in furtherance of the respective obligations and covenants contained in this Agreement) any Confidential Information received from the other party or an Affiliate of the other party.... Each party furthermore agrees to not use any Confidential Information disclosed by the other party or generated hereunder for any purpose other than the activities agreed to be performed by the parties hereunder, and to restrict access to such of its employees as are entrusted to carry out such activities.
Co–Marketing Agreement § 11.1. Section 11.2 of the Agreement provides:
Each party agrees not to make any copies in whole or in part of Confidential Information of the other party for any purpose other than the purposes set forth and agreed to be the parties hereunder, and will, at the termination of this Agreement, upon request by the disclosing party, return all Confidential Information received from the disclosing party, including any copies thereof, except that the receiving party may retain one (1) copy of each item of Confidential Information in its legal department (or with its outside legal counsel in the case of MAS) for use only in monitoring its compliance with obligations here undertaken.
Co–Marketing Agreement § 11.2. Section 14.2 of the Co–Marketing agreement states that the rights and obligations of the parties pursuant to Article 11 “survive any termination of this Agreement, and shall bind the parties and legal representatives, and successors.”
Section 13.2 of the Co–Marketing Agreement allows Roche the right to preempt the sale of MAS to a Roche “Competitor,” if Roche succeeds in matching the competitor's offer to purchase MAS. The right of first refusal provision in Section 13.2 of the Co–Marketing Agreement provides as follows:
MAS and the Controlling Shareholders hereby grant to Roche during the term of this Agreement a right of first refusal with respect to, and the right to match any offers that MAS and/or either of the Controlling Shareholders may receive involving, (a) the sale or transfer of all or substantially all of MAS's assets to a Competitor, or (b) the issuance, sale, or transfer of capital stock of MAS (or securities convertible into capital stock of MAS) that would result (directly or upon the conversion of any securities convertible into capital stock of MAS) in a Competitor owning a Controlling Interest (as defined below) of MAS. MAS and the Controlling Shareholders agree to notify Roche promptly in writing as to any pending offer from a Competitor to acquire all or substantially all of MAS's assets, or a Controlling Interest of MAS (or securities convertible into capital stock of MAS the conversion of which would result in a Competitor owning a [C]ontrolling Interest of MAS). Roche shall have sixty (60) days from the date on which it receives written notice from MAS to evaluate and respond with respect to any such offer. In the event that Roche chooses to exercise the right to match granted herein, it shall notify MAS in writing to that effect on or before the end of the sixty-day evaluation period. Roche's notice of the exercise of its right to match shall match both the price and terms of the pending offer, and MAS and/or the Controlling Shareholders (as applicable) shall accept such Roche offer. In the event that Roche declines to exercise its right to match, MAS shall be free to accept the pending offer. Notwithstanding any other provision of this Agreement, no transfer or issuance of shares of MAS's capital stock may be made by MAS or a Controlling Shareholder, unless the person or persons to whom such shares are...
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Roche Diagnostics Corp.. v. Med. Automation Sys. Inc.
...of the parties' contentions beyond the few words already written. Some of these details appear in the district court's opinion. 771 F.Supp.2d 936 (S.D.Ind.2011). It is enough for now that the district court concluded—and MAS does not deny—that Roche has a reasonable chance of prevailing in ......