Vertellus Holdings LLC v. W.R. Grace & Co.-Conn.

• Decision Date: 11 August 2021
• Docket Number: CIVIL SAG-18-3298
• Court: U.S. District Court — District of Maryland
• Parties: VERTELLUS HOLDINGS LLC, et al., Plaintiffs, v. W.R. GRACE &CO.-CONN., Defendant.

VERTELLUS HOLDINGS LLC, et al., Plaintiffs, v. W.R. GRACE &CO.-CONN., Defendant.

CIVIL No. SAG-18-3298

United States District Court, D. Maryland

August 11, 2021

MEMORANDUM OPINION

Stephanie A. Gallagher United States District Judge

Vertellus Holdings LLC, Vertellus Integrated Pyridines LLC, Vertellus LLC, Vertellus Specialty Chemical (Nantong) Co., Ltd., and Vertellus Shanghai Trading Co., Ltd. (collectively “Vertellus”), a chemical manufacturer, filed this lawsuit against one of its suppliers, W.R. Grace &Co.-Conn. (“Grace”), alleging misappropriation of trade secrets, breach of contract correction of inventorship for two patents, and various related state law claims.^[1] ECF 1. Grace filed a counterclaim alleging bad faith assertion of trade secret misappropriation. ECF 27. Grace now moves for summary judgment on all counts. ECF 150. In the event that the Court does not grant its motion in its entirety, Grace also seeks a declaration that Vertellus is not entitled to certain damages. Id. Vertellus opposes Grace's motion and moves for partial summary judgment on its breach of contract and correction of inventorship claims and on Grace's counterclaim. ECF 155. Grace filed an opposition to Vertellus's cross motion, ECF 161, and Vertellus filed a reply, ECF 166.

Also pending are five motions that request the Court exclude testimony of three of Vertellus's witnesses, ECF 167 through 169, and two of Grace's witnesses, ECF 171 and 173. These motions are now fully briefed. ECF 176, 177, 179 180, 183, 189, 191, 193, 194, and 195. The Court has considered the parties' motions, oppositions, replies and exhibits attached thereto. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2021). For the reasons explained below, the Court will GRANT IN PART and DENY IN PART Grace's motion for summary judgment and GRANT IN PART and DENY IN PART Vertellus's cross-motion for summary judgment. The Court will GRANT IN PART and DENY IN PART Grace's motions to exclude Dr. Colin McAteer's, Dr. Enrique Iglesia's, and Dr. Patrick Kennedy's testimony. Finally, the Court will DENY Vertellus's motion to exclude Dr. Wolfgang Holderich's testimony and GRANT Vertellus's motion to exclude Dr. Meyer's testimony.

I. FACTUAL BACKGROUND

Vertellus and Grace have a decades-long business relationship. Vertellus manufactures chemical compounds called pyridines. Grace produces catalysts, substances which speed up or otherwise optimize chemical reactions and are frequently used in pyridine manufacturing. Grace has supplied Vertellus, and its predecessor company, Reilly Industries, Inc., with catalysts to use in its pyridine synthesis reactions. Vertellus claims that certain information about the catalysts it purchased from Grace constitutes Vertellus's confidential and trade secret information. Vertellus accuses Grace of using this alleged confidential and trade secret information to create and sell catalysts to other Grace customers-Vertellus's competitors-in violation of confidentiality agreements and trade secret protection laws. Vertellus also contends that Grace wrongfully disclosed Vertellus's confidential and trade secret information in public patent filings and that Vertellus's former researcher, Dr. Colin McAteer, should be credited as a co-inventor of Grace's patents.

A. The Parties' Confidentiality Obligations

Throughout Vertellus and Grace's business relationship, the companies have taken measures to protect their proprietary information. The record contains three written confidentiality agreements. First, the parties entered into an initial “Non-Disclosure and Non-Use” agreement on May 14, 1997. ECF 151-3. The 1997 agreement was extended multiple times, but ultimately terminated on May 13, 2002. Id. Second, the parties entered into a “Confidentiality Agreement” on October 23, 2003. ECF 150-6. The 2003 agreement protected disclosures made between October 23, 2003, and October 22, 2006. Id. at 11-12. Third, another “Confidentiality Agreement” became effective on November 10, 2008. ECF 150-14. This 2008 agreement governed disclosures made until November 9, 2016. Id.

B. The ZSM-5 Catalysts Grace Sold to Vertellus

Grace is in the business of producing catalysts, including catalysts used in pyridine production. Vertellus's business is pyridine production, which involves the use of catalysts. Though Grace and Vertellus have unique production and testing capabilities, they both have researchers concerned with the formulation or optimization of catalysts. See, e.g., ECF 155-11 at 107-08 (discussing Grace's understanding of the “catalyst side” of pyridine and picoline production).

This dispute involves a particular type of catalyst called “Zeolite Socony Mobil 5” or “ZSM-5” catalysts.^[2] ZSM-5 catalysts generally consist of ZSM-5 zeolites (a type of mineral) and a binder such as alumina, silica, or clay. Some ZSM-5 catalysts are “promoted” with metal ions. ZSM-5 catalysts may also be “stabilized” with phosphorous. Between 2008 and 2016, Vertellus purchased three different ZSM-5 catalysts from Grace: (1) DAVICAT ® ZL [XXXXX] (2) DAVICAT ® ZL [XXXXX] and (3) DAVICAT ® ZL [XXXXX].^[3] As detailed further below, Grace offered these materials to Vertellus in response to specific requests, primarily from one of Vertellus's internal researchers, Dr. Colin McAteer.

1. [XXXXX]

Dr. McAteer, a chemist who was employed by Vertellus for almost thirty years, led Vertellus's efforts to optimize the use of catalysts in pyridine production. ECF 155-13 ¶¶ 3-6; ECF 155-15 ¶¶ 1-3. As far back as March, 2003, Dr. McAteer had discussions with Grace about the possibility of Grace and Vertellus developing a zinc-loaded, [XXXXX] ZSM-5 catalyst. ECF 151-4 at 3 (noting that the catalyst “would be developed between Reilly and Grace”). Years later, in September, 2007, Dr. McAteer again met with Grace representatives and discussed Vertellus's interest in a zinc-loaded, [XXXXX] ZSM-5 catalyst. ECF 151-9. In an internal document, Grace noted after the meeting that it needed to “analyze the market potential and estimate the cost” of fulfilling Vertellus's request. Id. at 4. Grace also noted it should “investigate whether there are any other Davicat products that can be recommended.” Id. In contemporaneous internal emails, Grace further debated whether they could provide a sample catalyst to Vertellus. ECF 151-8. One Grace official noted that Grace had a sample “on the shelf” that “matches quite well what Vertellus discussed.” Id. at 3. Neil Smith, one of Grace's business directors, stated, “We don't want to make any special samples, ” but there was “no problem with sending samples of off-the shelf commercial products.” Id. at 1.

In early 2008, Grace agreed to provide Vertellus with a [XXXXX] ZSM-5 catalyst sample. ECF 155-13 at 7 (remarking on January 21, 2008, “Looks like Grace are now prepared to make us some [XXXXX] MFI samples (after 5+ years of indecision on the subject!)”). In February, 2008, Grace sent Vertellus a ten-pound sample of a ZSM-5 catalyst that it referred to as “[XXXXX]” ECF 151-2 ¶ 6.

As requested by Dr. McAteer, [XXXXX] is a ZSM-5 catalyst [XXXXX] ECF 151-2 ¶ 4. Grace did not initially produce [XXXXX] for use in pyridine manufacturing, but for use in a different kind of chemical reaction. ECF 151-2 ¶ 4; ECF 151-6 at 5 (describing [XXXXX] as ZSM-5 catalyst that was already in Grace's inventory in July, 2005); ECF 155-2 (noting [XXXXX] was produced in a “pilot scale production” but “did not work as an [XXXXX]'). However, as early as 2005, Grace had sent samples of [XXXXX] to other pyridine manufacturers. Specifically, in May, 2005 [XXXXX], a [XXXXX] pyridine manufacturer inquired with Grace about whether Grace could provide a [XXXXX] ZSM-5 catalyst [XXXXX] ECF 151-5 at 7. Weeks later, Grace sent a five-kilogram sample to [XXXXX] ECF 151-6 (noting the material was already in Grace's inventory and referred to as [XXXXX]”). Grace also supplied samples of a ZSM-5 catalyst to [XXXXX] and [XXXXX] pyridine-manufacturers in 2007. ECF 151-7; ECF 151-8; ECF 151-2 ¶¶ 7-8 (explaining that the ZSM-5 catalyst samples sent to [XXXXX], [XXXXX] and [XXXXX] were all the same material that was “manufactured in a single batch” at one Grace facility).

In the fall of 2008, based on promising test results with the [XXXXX] sample, Vertellus engaged in discussions with Grace to purchase enough of the catalyst to run a commercial trial of the material that would be called “DAVICAT ZL [XXXXX].” ECF 156-2; ECF 155-22 at 1; see also ECF 151-2 ¶ 9 (stating the [XXXXX] catalyst was renamed “[XXXXX]” when sold to Vertellus). In September, Dr. McAteer sent Grace a draft “specification” for the catalyst. ECF 155-22 at 2. In December, 2008, the parties met and finalized the specification for ECF 156-2. At the meeting, Vertellus's representative, Linda Hicks, asked if Grace would only sell to Vertellus. Id. Grace's Ed Laughlin told her, “DAVICAT ® [XXXXX] is defined by its specifications and those are unique to Vertellus.” Id. He further stated that Grace “would not sell ‘DAVICAT ® ZL [XXXXX] to others.” Id.

Although Grace had assured Vertellus that it would not sell [XXXXX] to anyone else, Grace did attempt to market similar products to other potential customers. In December, 2008, the same month that Vertellus placed its first large order of [XXXXX] Grace tried to sell other pyridine producers a ZSM-5 catalyst that “would have a different spec and name to that offered to Vertellus” but “would work equally well.” ECF 156-3 (stating that the ZSM-5 catalyst is “our [Grace's] catalyst” but that Grace “worked with VERTELLUS with it” and that Vertellus did not want Grace “using them as a sales aid to sell our catalysts to their competitors”). Initially, as reflected in a January, 2009 internal email,...