De Simone v. VSL Pharm., Inc.

• Decision Date: 09 October 2018
• Docket Number: Civil Action No. TDC-15-1356
• Citation: 352 F.Supp.3d 471
• Parties: Claudio DE SIMONE and ExeGi Pharma, LLC, Plaintiffs/Counterclaim Defendants, v. VSL PHARMACEUTICALS, INC., Leadiant Biosciences, Inc., and Alfasigma USA, Inc., Defendants/Counterclaim Plaintiffs, v. Danisco USA, Inc., Counterclaim Defendant.
• Court: U.S. District Court — District of Maryland

352 F.Supp.3d 471

Claudio DE SIMONE and ExeGi Pharma, LLC, Plaintiffs/Counterclaim Defendants,

v.VSL PHARMACEUTICALS, INC., Leadiant Biosciences, Inc., and Alfasigma USA, Inc., Defendants/Counterclaim Plaintiffs,

v.Danisco USA, Inc., Counterclaim Defendant.

Civil Action No. TDC-15-1356

United States District Court, D. Maryland.

Signed October 9, 2018

Jeremy W. Schulman, Jeffrey Samuel Gavenman, Koushik Bhattacharya, Schulman Bhattacharya, LLC, Bethesda, MD, for Plaintiffs/Counterclaim Defendants.

Andrew D. Mathews, Pro Hac Vice, Douglas Michael Nabhan, Pro Hac Vice, Harold E. Johnson, Pro Hac Vice, Lauren M. Wheeling, Pro Hac Vice, Turner A. Broughton, Pro Hac Vice, Williams Mullen PC, Richmond, VA, James Philip Head, Williams Mullen PC, McLean, VA, Richard Thomas Matthews, Pro Hac Vice, Williams Mullen PC, Raleigh, NC, William P Dickinson, III, Pro Hac Vice, Kaleo Legal, Virginia Beach, VA, John Brian Cashmere, Williams Mullen, Tysons Corner, VA, Brian Lawrence Schwalb, Venable LLP, Washington, DC, Charles S. Fax, Rifkin Livingston Levitan and Silver LLC, Bethesda, MD, Liesel Johanna Schopler, Rifkin Weiner Livingston Levitan and Silver LLC, Annapolis, MD, Turner A Broughton, Williams Mullen PC, Richmond, VA, Erinn M. Maguire, Robert Scott Brennen, Miles and Stockbridge PC, Baltimore, MD, Julianne Barlizo, Pro Hac Vice, Lydia Ferrarese, Pro Hac Vice, Mark A Weissman, Pro Hac Vice, Brian T. Carr, Pro Hac Vice, Herzfeld and Rubin PC, New York, NY, Turner A Broughton, Williams Mullen PC, Richmond, VA, for Defendants/Counterclaim Plaintiffs.

Shari Ross Lahlou, Astor Heaven, Crowell & Moring LLP, Washington, DC, for Counterclaim Defendant.

MEMORANDUM OPINION

THEODORE D. CHUANG, United States District JudgePlaintiffs and Counterclaim Defendants Claudio De Simone and ExeGi Pharma, LLC ("ExeGi") (collectively, "the De Simone Parties") have filed a Motion for Summary Judgment seeking summary judgment on all of their claims and all counterclaims asserted by Defendants and Counterclaim Plaintiffs VSL Pharmaceuticals, Inc. ("VSL"), Leadiant Biosciences, Inc. ("Leadiant") and Alfasigma USA, Inc. ("Alfasigma") (collectively, "the VSL Parties"). The VSL Parties, in turn, have filed a consolidated Cross Motion for Partial Summary Judgment. Having reviewed the submitted materials, the Court finds no hearing necessary. See D. Md. Local R. 105.6. For the reasons set forth below, the De Simone Parties' Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART, and the VSL Parties' Cross Motion for Partial Summary Judgment is GRANTED IN PART and DENIED IN PART.

This case centers on disputes among the parties relating to the formulation used in a probiotic known by the tradename VSL# 3 and the "Know-How," developed by De Simone, consisting of a unique biochemical profile, formulae, processes, data, and other technical and non-technical information. Broadly speaking, the parties disagree on which party owns the Know-How; whether De Simone, as the Chief Executive Officer ("CEO") of VSL, breached a fiduciary duty as he departed the company to launch Visbiome, a probiotic using the same formulation then found in VSL# 3 ("the De Simone Formulation"); whether De Simone and his new company, ExeGi, infringed the VSL# 3 trademark owned by VSL while launching and marketing Visbiome; and whether either side has engaged in false advertising as each seeks to market the competing probiotics.

Relevant factual background is set forth in the Court's September 23, 2015 Memorandum Opinion on the First Motion for a Preliminary Injunction, De Simone v. VSL Pharm., Inc. , 133 F.Supp.3d 776, 780-88 (D. Md. 2015), and the June 20, 2016 Memorandum Opinion on the Second Motion for a Preliminary Injunction, De Simone v. VSL Pharm., Inc. , No. TDC-15-1356, 2016 WL 3466033 at *1-12 (D. Md. June 20, 2016). Additional facts and procedural history are provided below as necessary.

DISCUSSION

Following the Court's ruling on the parties' Motions to Dismiss, the remaining claims generally consist of: (1) claims relating to the ownership of the Know-How; (2) claims relating to the alleged breach of fiduciary duty owed to VSL by De Simone; (3) claims relating to sales of VSL# 3 by VSL between 2014 and 2016, after De Simone resigned from VSL; and (4) trademark infringement and false advertising claims under the Lanham Act, 15 U.S.C. §§ 1051 – 1141n (2012). The De Simone Parties seek summary judgment on all claims asserted by all parties in this case. The VSL Parties seek summary judgment on the following claims relating to the ownership of the Know-How, the alleged breach of fiduciary duty, the 2014-2016 sales of VSL# 3, and ExeGi's claim of false advertising: Counts I, III, IV, V, and VI of the De Simone Parties' currently operative Complaint ("the Complaint"); Counts I, IV, and XXVIII of VSL's currently operative Counterclaim ("the VSL Counterclaim"); Counts I and II of Leadiant's currently operative Counterclaim ("the Leadiant Counterclaim"); and Counts III and IV of Alfasigma's currently operative Counterclaim ("the Alfasigma Counterclaim"). The VSL Parties seek partial summary judgment on the following claims relating to the alleged breach of fiduciary duty, trademark infringement, and false advertising, consisting of: VSL's Counts XXI and XXII; Leadiant's Counts IV, V, VI, VII, and VIII; and Alfasigma's Counts I and II.

I. Legal Standard

Under Federal Rule of Civil Procedure 56, the Court grants summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In assessing the Motion, the Court must believe the evidence of the non-moving party, view the facts in the light most favorable to the nonmoving party, and draw all justifiable inferences in its favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The nonmoving party has the burden to show a genuine dispute on a material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "A material fact is one that might affect the outcome of the suit under the governing law." Spriggs v. Diamond Auto Glass , 242 F.3d 179, 183 (4th Cir. 2001) (quoting Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ). A dispute of material fact is only "genuine" if sufficient evidence favoring the nonmoving party exists for the trier of fact to return a verdict for that party. Anderson , 477 U.S. at 248–19, 106 S.Ct. 2505.

"When faced with cross-motions for summary judgment, the court must review each motion separately on its own merits ‘to determine whether either of the parties deserves judgment as a matter of law.’ " Rossignol v. Voorhaar , 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip Morris, Inc. v. Harshbarger , 122 F.3d 58, 62 n.4 (1st Cir. 1997) ).

II. The Know-How Claims

A. Prior Rulings

As part of the First Motion for a Preliminary Injunction, VSL asserted that the Know-How associated with the De Simone Formulation is a trade secret and that VSL owns that secret. VSL traced its claim of ownership to the Mendes Assignment, a September 2000 agreement between VSL and Mendes SRL ("Mendes"), a company owned by De Simone. The Mendes Assignment was signed by De Simone on behalf of Mendes and VSL Chief Financial Officer Antonio Nicolai on behalf of VSL. That agreement transferred to VSL the trademark rights for the term "VSL# 3." It also transferred "any and all rights to any intellectual property owned or licensed by [Mendes] and which relates to" the VSL# 3 trademark, as well as "proprietary information," including "trade secrets" and "know-how" relating to the VSL# 3 trademark. De Simone , 133 F.Supp.3d at 790.

In adjudicating whether VSL was likely to succeed on its claims of ownership of the Know-How, the Court found that the language of the Mendes Assignment was ambiguous because it did not "clearly establish that the Know-How relates to the VSL# 3 trademark," such that extrinsic evidence of the parties' intent needed to be considered. Id. Evaluating the available extrinsic evidence, the Court found that other agreements between the parties provided "specific evidence" that the Mendes Assignment did not transfer the Know-How to VSL. Id. at 792. In particular, the 1999 Option Agreement between De Simone and Sigma-Tau Pharmaceuticals, Inc., ("Sigma-Tau"), Leadiant's predecessor-in-interest, explicitly stated that De Simone had granted to Sigma-Tau an option for an exclusive license relating to the Know-How and thus demonstrated that when De Simone wished to convey rights in the Know-How, he did so expressly, rather than by implication. Id. at 792–93. The 1999 Option Agreement also established that as of November 1999, De Simone himself, not Mendes, continued to own the Know-How. Id. The Court found that because the Assignment transferred only intellectual property owned or licensed by Mendes, the Know-How could be included in the sweep of the Mendes Assignment only if there were evidence that in the brief period between the 1999 Option Agreement and the 2000 Mendes Assignment, De Simone had conveyed the Know-How to Mendes. Id. No such evidence was presented to the Court on that Motion. Id. at 793.

The Court also found that the 2001 Patent License Agreement, in which De Simone granted to VSL a license to the patent underlying the De Simone Formulation ("the 615 Patent"), contradicted VSL's broad characterization of the intellectual property transferred through the Mendes Assignment. Id. As the Court noted, if VSL's reading of the intended scope of the Mendes Assignment were correct, the patent would have been swept up in it, leaving the parties with no need the following year for De Simone to agree to license the patent to VSL. Id. at 792–93. Other, later agreements referenced by the parties did not warrant a...