De Simone v. VSL Pharm., Inc.

• Citation: 133 F.Supp.3d 776
• Decision Date: 23 September 2015
• Docket Number: Civil Action No. TDC–15–1356.
• Parties: Claudio DE SIMONE, Plaintiff/Counterclaim Defendant, v. VSL PHARMACEUTICALS, INC., and Sigma–Tau Pharmaceuticals, Inc., Defendants/Counterclaim Plaintiffs, v. Exegi Pharma, LLC, Danisco USA, Inc., and Mendes SA, Third–Party Defendants.
• Court: U.S. District Court — District of Maryland

133 F.Supp.3d 776

Claudio DE SIMONE, Plaintiff/Counterclaim Defendant,

v.VSL PHARMACEUTICALS, INC., and Sigma–Tau Pharmaceuticals, Inc., Defendants/Counterclaim Plaintiffs,

v.Exegi Pharma, LLC, Danisco USA, Inc., and Mendes SA, Third–Party Defendants.

Civil Action No. TDC–15–1356.

United States District Court, D. Maryland.

Signed Sept. 23, 2015.

Jeremy W. Schulman, Alexander Craig Vincent, Shulman Rogers Gandal Pordy and Ecker PA, Potomac, MD, for Plaintiff/Counterclaim Defendant.

Andrew D. Mathews, Douglas M. Nabhan, Harold E. Johnson, Lauren M. Wheeling, Turner A. Broughton, William P. Dickinson, III, Williams Mullen PC, Richmond, VA, James Philip Head, Williams Mullen PC, McLean, VA, Richard Thomas Matthews, Williams Mullen PC, Raleigh, NC, John Brian Cashmere, Williams Mullen, Tysons Corner, VA, Charles S. Fax, Rifkin Livingston Levitan and Silver LLC, Bethesda, MD, for Defendants/Counterclaim Plaintiffs.

Shari Ross Lahlou, Astor Heaven, Crowell and Moring LLP, Washington, DC, Jeremy W. Schulman, Shulman Rogers Gandal Pordy and Ecker PA, Potomac, MD, for Third–Party Defendants.

MEMORANDUM OPINION

THEODORE D. CHUANG

, District Judge.

At issue in this case is the ownership and use of various intellectual property related to the probiotic VSL# 3. That product was originally brought to the United States market through the collaboration of Plaintiff Claudio De Simone ("De Simone"), who patented the formulation, VSL Pharmaceuticals, Inc. ("VSL"), which sold the probiotic, and Sigma–Tau Pharmaceuticals, Inc. ("Sigma–Tau"), which marketed it. In 2014, after serving for over a decade as VSL's Chief Executive Officer ("CEO"), De Simone stepped down. The parting was not amicable. De Simone believes that his business partners were trying to misappropriate trade secrets related to VSL# 3, secrets he then took to ExeGi Pharma, LLC ("ExeGi") with the aim of launching a competing, generic version of VSL# 3. VSL and Sigma–Tau, for their part, believe that the trade secrets are, in fact, their property, and that it is De Simone who is misappropriating trade secrets.

In 2015, De Simone instructed the lone U.S. manufacturer of VSL# 3 to stop supplying VSL with the product. De Simone also filed suit in this Court seeking, among other things, a declaratory judgment that he owns the VSL# 3 trade secrets. VSL and Sigma–Tau filed counterclaims and, with the prospect of losing their supply of VSL# 3, also each filed a Motion for a Preliminary Injunction. ECF Nos. 55 and 61. On September 1, 2015, the Court heard oral argument on the Motions. For the reasons outlined below, the Motions for a Preliminary Injunction are GRANTED IN PART and DENIED IN PART.

BACKGROUND

In 1998, Plaintiff Claudio De Simone, a Professor of Gastroenterology and Immunology who has done extensive research in the field of probiotics, and two fellow researchers were granted United States Patent number 5,716,615 (the "615 Patent")

for "Dietary and Pharmaceutical Compositions Containing Lyophilized Lactic Bacteria, Their Preparation and Use," with that patent expiring on February 9, 2015. The 615 Patent was one of a number of patents De Simone secured based on his probiotic research. The 615 Patent consisted of a pharmaceutical combination of eight strains of pure lactic acid bacteria that can be used as treatment for a number of medical conditions, including various gastrointestinal disorders and hypercholesteremia, and was the basis for the probiotic now sold as VSL# 3. To produce the specific VSL# 3 product under the 615 Patent, De Simone also developed certain "know-how," a type of trade secret which in this instance consists of a unique biochemical profile, formulae, processes, data, and other technical and non-technical information necessary to make, develop, and use VSL# 3 (the "Know–How").

I. Establishment of VSL

In 1999, De Simone began discussing the possibility of developing his various patents for market with Claudio and Paolo Cavazza, owners of the Sigma–Tau Group, a large Italian pharmaceutical conglomerate. De Simone and the Cavazzas first agreed on a plan to try to bring the 615 Patent

to the U.S. market as a pharmaceutical drug. On November 30, 1999, De Simone and Sigma–Tau entered into an agreement (the "1999 Option Agreement") specifying that De Simone "co-owns the Patent and fully owns the Know–How" related to that patent, and that he was granting to Sigma–Tau "an exclusive option for an exclusive license related to his right on the Patent and on the Know–How" for the purpose of commercializing the 615 Patent in the United States as a drug. Resp. Opp'n Mot. Prelim. Inj. Ex. 1 ¶¶ A & B, 2.1, Appendix A (specifying the patent as U.S. Patent No. 5716615 ), ECF No. 76–7.¹ The "Know–How" consisted of "scientific, technical, and commercial information" available to De Simone that relates to the "promotion, manufacturing, and commercialization" of products deriving from the 615 Patent. Id. ¶ 1.4. De Simone specifically agreed "not to grant any other option, license and/or other rights on the Patent and the Know–How for the entire duration of this Agreement, neither directly nor through its Affiliates." Id. ¶ 2.1. The 1999 Option Agreement was to last until December 31, 2001.

In July 2000, De Simone and the Cavazzas entered into another business arrangement, this one to pursue bringing products arising from various patents held by De Simone to the U.S. market not as drugs, but as nutritional supplements

. To that end, on July 11, 2000, they incorporated VSL in Delaware. As a practical matter, De Simone, Claudio Cavazza, and Paolo Cavazza each owned one-third of the company. However, those ownership interests were routed through various holding companies. De Simone, Claudio Cavazza, and Paolo Cavazza arranged for three companies they individually owned—Mendes, SRL; Taufin International S.A.; and Sinaf S.A.; respectively—to establish collectively another company, CD International, of which each of the three companies owned one-third of the shares. CD International, in turn, established CD Investments, which was then granted 99.7 percent of VSL's shares. De Simone, Claudio Cavazza, and Paolo Cavazza each individually owned 0.1 percent of the shares. De Simone was installed as the CEO of VSL and was also appointed to its Board of Directors. The other two Directors, Mauro Bove and Antonio Nicolai, were appointed by the Cavazzas, and both had previously served as officers and directors of companies in the Sigma–Tau Group. Under VSL's by-laws, De Simone agreed that as long as he directly or indirectly owned 4.99 percent of the total voting stock of the company, he would transfer or offer to transfer to the company any intellectual property rights relating to "any inventions" made by him "since the incorporation of [VSL]" relating to "pharmaceutical nutritionals compositions and active principles." VSL Ans. & Countercl. Ex. 2 at 16–17, ECF No. 9–2.

Also on July 11, 2000, the parties executed a Collaboration Agreement ("2000 Collaboration Agreement") that established a commitment to transfer various intellectual property from De Simone to VSL following the incorporation of VSL. De Simone personally committed to transfer his rights to various patents specified in Annexes B and C to the agreement, with Annex B cataloging patents of which De Simone was the exclusive owner and Annex C cataloging those of which he was a co-owner. De Simone also committed, on behalf of his company Mendes SRL, to transfer Mendes's rights to the "patents, patent applications, and brands" detailed in Annex A. Notice of Corrected Exhibit Ex. 1 ¶ 2, ECF No. 94–1. The 615 Patent

was not included in any of the annexes. Included in Annex A, the intellectual property being transferred to VSL by Mendes, was the United States trademark "VSL# 3," which is listed as "Pending filing," as well as the European trademark "VSL# 3," listed with a filing number. Id., Annex A ¶ 9.

On September 18, 2000, the parties executed three additional agreements to carry out the commitments made in the Collaboration Agreement: (1) the De Simone—VSL Assignment, (2) the Mendes—VSL Assignment ("the Mendes Assignment"), and (3) the De Simone—VSL Option Agreement. The Assignments provided that the "Assignor"—De Simone or Mendes—had "sole and exclusive rights to the Transferred Property," which in turn was specified as "Intellectual Property, Proprietary Products, and the Proprietary Information." VSL Ans. & Countercl. Ex 4 at 4, ¶ 1.01, ECF No. 9–4. Those terms were then further defined. "Intellectual Property" was defined as "any intellectual property ... which relates to the subject matter set forth in Schedule I, including, without limitation, each and every (a) Patent or Patent Right; (b) trademark ... and the entire business or portion thereof to which the [trademark] pertain[s] as required by 15 U.S.C. § 1060

; and (c) other form or nature of proprietary or exclusionary right." Id. "Proprietary Information" was defined as "any trade secrets or confidential business information ... know-how, production processes and techniques ... described, comprised in or relating to the Intellectual Property or Proprietary Products and that is not in the public domain." Id. "Proprietary Products" include "compounds, reagents, assays and other materials arising out of or relating to the Proprietary Information, the Intellectual Property or the subject matter of Schedule I." Id. The agreements then provided that the Assignor "irrevocably assigns ... all right, title and interest" in the "Intellectual Property (including, without limitation, with respect to the Trademarks, together with the entire business of the Assignor to which the Trademarks pertain) and the Proprietary Information ... and all future rights to any Intellectual Property or Proprietary Information which is derived from or are based upon any of the Transferred Property." Id. ¶ 2.01(2).

Consistent with the terms of the 2000 Collaboration Agreement, none of the Assignments includes...