Sioux Biochemical, Inc. v. Cargill, Inc.
| Decision Date | 11 April 2005 |
| Docket Number | No. C 04-4106-MWB.,C 04-4106-MWB. |
| Citation | 410 F.Supp.2d 785 |
| Parties | SIOUX BIOCHEMICAL, INC., Plaintiff, v. CARGILL, INC., Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Edmund J. Sease, R. Scott Johnson, Wendy K. Marsh, McKee, Voorhees & Sease, PLC, Des Moines, IA, for Plaintiff.
Chad R. Anderson, Kimberly J. Walker, Faegre & Benson, Des Moines, IA, Jonathan W. Dettmann, Lee M. Pulju, William L. Roberts, Faegre & Benson LLP, Minneapolis, MN, for Defendant.
In this action for breach of contract, misappropriation of trade secrets and intellectual property, conversion of intellectual property, correction of inventorship of a patent, and fraudulent misrepresentation, arising from a dispute over the defendant's use of the plaintiff's allegedly secret process for manufacturing chondroitin sulfate, the defendant has moved to dismiss half of the plaintiff's claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure or, in the alternative, to strike a common-law misappropriation claim as redundant of a similar statutory claim. Although the plaintiff concedes that its claim for correction of inventorship of a patent should be dismissed, it stands firm on the viability of the rest of the challenged claims. Thus, the court must determine whether or not the defendant should be required to answer three of the four challenged claims.
On a motion to dismiss, the factual background to the parties' dispute is necessarily taken from the plaintiff's complaint, treating well-pleaded facts as true. See, e.g., Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (). In this diversity action, plaintiff Sioux Biochemical, Inc., alleges that defendant Cargill, Inc., contacted Sioux Biochemical in 1997 or 1998 to discuss Sioux Biochemical's process for manufacturing chondroitin sulfate (Sioux Biochemical's CS Process). The parties entered into a Confidentiality Agreement on February 20, 1998, after which Sioux Biochemical disclosed its CS process to Cargill. The parties entered into a second Confidentiality Agreement on August 17, 1998. Both Confidentiality Agreements prohibited Cargill from using Sioux Biochemical's CS process, except for purposes of evaluating it, or revealing it to any third party without Sioux Biochemical's written permission. The second Confidentiality Agreement remains in force.
Subsequently, on October 1, 1998, Cargill entered into a worldwide, limited, co-exclusive license with Sioux Biochemical to manufacture chondroitin sulfate in accordance with Sioux Biochemical's CS Process. However, on or about July 24, 2002, Cargill informed Sioux Biochemical that it was no longer using Sioux Biochemical's CS Process, because it had developed a new process for the production of chondroitin sulfate. Based on these representations, Sioux Biochemical and Cargill entered into a General Release dated July 24, 2002, whereby Sioux Biochemical discharged Cargill from any further obligations under the October 1, 1998, License Agreement, so long as Cargill was not using Sioux Biochemical's CS Process, and contingent upon confirmation by either Sioux Biochemical directly or by an independent third party that the technology being used by Cargill to manufacture chondroitin sulfate was not Sioux Biochemical's CS Process.
On or about December 8, 2003, more than a year after entering into the General Release, Sioux Biochemical conducted an on-site inspection of Cargill's chondroitin sulfate manufacturing facility. In the course of that inspection, Sioux Biochemical alleges that it confirmed that Cargill was still using Sioux Biochemical's CS Process. At about the same time, Cargill notified Sioux Biochemical that it had filed its own application for a United States patent on a method for manufacturing chondroitin sulfate naming only Cargill employees as the inventors. Cargill provided Sioux Biochemical with a copy of the patent application, U.S. Serial No. 10/704,866. The United States Patent and Trademark Office (PTO) published Cargill's patent application on July 29, 2004.
On March 5, 2004, Sioux Biochemical notified Cargill by letter that it considered Cargill to be still bound by the terms of the October 1, 1998, License Agreement, because Cargill was still using Sioux Biochemical's CS Process. In that letter, Sioux Biochemical also challenged Cargill's right to file a patent application on a method for manufacturing chondroitin sulfate, because Sioux Biochemical asserted that the technology involved in the patent application belongs to Sioux Biochemical. By letter dated March 10, 2004, Cargill disputed Sioux Biochemical's assertions in its March 5, 2004, letter. Cargill contended that Sioux Biochemical's CS Process was already in the public domain prior to its disclosure to Cargill and that, consequently, Cargill did not have to honor the terms of the October 1, 1998, License Agreement. However, Cargill also asserted that it was not using Sioux Biochemical's CS Process, so that it could use and attempt to patent its own chondroitin sulfate manufacturing process. On June 4, 2004, Sioux Biochemical filed a protest against Cargill's patent application with the PTO, but that protest has not yet been resolved.
Subsequently, on October 19, 2004, Sioux Biochemical also filed this lawsuit.
In its October 19, 2004, Complaint, Sioux Biochemical asserts eight claims against Cargill arising from the parties' dispute over use of Sioux Biochemical's CS Process. In Count I of its Complaint, Sioux Biochemical alleges breach by Cargill of the October 1, 1998, License Agreement by using Sioux Biochemical's CS Process and selling product produced using that process without compensating Sioux Biochemical. In Count II, Sioux Biochemical alleges breach by Cargill of the February 20, 1998, Confidentiality Agreement, and in Count III, Sioux Biochemical alleges breach by Cargill of the August 17, 1998, Confidentiality Agreement. In Count IV, Sioux Biochemical alleges misappropriation of trade secrets by Cargill in violation of IOWA CODE CH. 550. In Count V, Sioux Biochemical alleges fraudulent misrepresentation by Cargill, based on Cargill's allegedly false representations to Sioux Biochemical prior to the signing of the July 24, 2004, General Release that Cargill was no longer using Sioux Biochemical's CS Process and allegedly false representations to Sioux Biochemical and in Cargill's patent application that Cargill employees invented Sioux Biochemical's CS Process and the chondroitin sulfate product resulting from that process. In Count VI, Sioux Biochemical seeks "correction of inventorship" of the CS Process disclosed in Cargill's patent application pursuant to 35 U.S.C. § 116 and 35 U.S.C. § 256. In Count VII, Sioux Biochemical alleges conversion of intellectual property by Cargill based on Cargill's allegedly secret conversion of Sioux Biochemical's CS Process to Cargill's own use in a manner that made Sioux Biochemical's CS Process part of the public domain. Finally, in Count VIII, Sioux Biochemical alleges common-law misappropriation of Sioux Biochemical's CS Process. Sioux Biochemical seeks injunctive relief, compensatory and punitive damages, double damages and attorney fees pursuant to IOWA CODE CH. 550, an order directing the Director of the PTO to correct inventorship and ownership of Cargill's pending patent application and ordering Cargill to abandon that patent application or assign it to Sioux Biochemical, attorney fees, expenses, and costs.
Cargill was granted an extension of time to answer Sioux Biochemical's Complaint. However, on December 10, 2004, instead of answering Sioux Biochemical's Complaint, Cargill filed its Partial Motion [sic] To Dismiss Pursuant To Rule 12(b)(6) Or, In The Alternative, To Strike Pursuant To Rule 12(f) (docket no. 9), which is now before the court. The motion asserts that Counts V through VIII of Sioux Biochemical's Complaint, the non-contractual and non-statutory claims, fail to state claims upon which relief...
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