W.L. Gore & Assocs., Inc. v. GI Dynamics, Inc.

• Decision Date: 30 May 2012
• Docket Number: No. CV–10–8088–PCT–GMS.,CV–10–8088–PCT–GMS.
• Citation: 872 F.Supp.2d 883
• Court: U.S. District Court — District of Arizona
• Parties: W.L. GORE & ASSOCIATES, INC., Plaintiff/Counter–Defendant, v. GI DYNAMICS, INC., Defendant/Counter–Claimant.

872 F.Supp.2d 883

W.L. GORE & ASSOCIATES, INC., Plaintiff/Counter–Defendant,

v.GI DYNAMICS, INC., Defendant/Counter–Claimant.

No. CV–10–8088–PCT–GMS.

United States District Court,

D. Arizona.

May 30, 2012.

Paul L. Navarro, Arturo J. Gonzalez, Harold J. McElhinny, Mark W. Danis, Wynne Cathcart Erickson, Morrison & Foerster LLP, San Francisco, CA, Helen Perry Grimwood, Newton Douglas Grimwood, Grimwood Law Firm PLC, Phoenix, AZ, for Plaintiff/Counter–Defendant.

Eric A Haskell, Michael V. Dowd, Charlotte Marie Petilla, Claire Laporte, Dean Richlin, Marco J Quina, Foley Hoag LLP, Boston, MA, Andrew Mark Federhar, Fennemore Craig PC, Phoenix, AZ, for Defendant/Counter–Claimant.

ORDER

G. MURRAY SNOW, District Judge.

Pending before the Court is a Motion for Summary Judgment on Defendant/Counter–Claimant GI Dynamics, Inc.'s (“GID”) Counterclaims filed by Plaintiff/Counter–Defendant W.L. Gore & Associates, Inc. (“Gore”). (Doc. 119). For the reasons stated below, the motion is granted in part and denied in part.

BACKGROUND

Gore's Medical Division is in the business of developing, manufacturing and marketing a variety of implantable medical devices incorporating expanded polytetrafluorothylene (ePTFE). GID is a medical device company that develops proprietary devices and methods for treatment of obesity and diabetes using stomach and intestinal sleeves. This dispute between Gore and GID stems from their efforts to develop an intestinal sleeve device anchored in the gastro-intestinal tract that would treat patients suffering from morbid obesity and/or Type II diabetes.

The parties' relationship began around December of 2002, when the president of GID's predecessor company initiated discussions with Gore regarding developing materials for its intestinal sleeve device. In 2003 and 2004, the parties entered a number of agreements, including two Confidential Disclosure Agreements (“2003 CDA” and “2004 CDA”), a Material Transfer Agreement (“MTA”), and a Supply Agreement. During the course of the parties' relationship, GID kept Gore informed on the status of the development of its sleeve. This included a slideshow demonstrating to Gore how the sleeve would be inserted and anchored. (Doc. 123–9, Ex. 74).

In 2005, representatives from the two companies met to discuss Gore's possible acquisition of GID. During the discussions, GID presented further information on the development of its sleeve, along with information on clinical trials GID had been conducting. (Doc. 124–1, Ex. 78). After the presentation, GID gave Gore a sleeve and delivery system to examine. (Doc. 124–6, Ex. 100). The acquisition discussions eventually fell through.

In 2006, Gore established its own internal team to begin development of a Gore intestinal sleeve to compete with the GID sleeve. Currently, both products remain in development and await approval for commercial use in the United States. Gore's internal timeline projects a commercial release date in the second quarter of 2016. (Doc. 124–13, Ex. 160). Robert Crane, GID's Chief Financial Officer, estimates that GID's device will be available for commercial release in the United States sometime between 2015 and 2017. (Doc. 123–8, Ex. 64 at 28:8–16).

Much of the dispute in the complaint concerns the various agreements between Gore and GID regarding intellectual property rights relating to the development of the intestinal sleeves. Gore's amended complaint alleges that Gore has a shared interest in the development of the device, and that Gore personnel should be declared co-inventors of various patents filed by GID. (Doc. 65). GID has filed counterclaims alleging that the presentations GID made to Gore contained trade secrets, and that Gore misappropriated those trade secrets in pursuing its own development of an intestinal sleeve. In addition, GID's counterclaim includes claims of Breach of Confidence, Unjust Enrichment, Misrepresentation, and violations of Mass. Gen. Laws Ch. 93A. (Doc. 72).

Neither party has moved for summary judgment on the claims in the original complaint, and the Court need not interpret the CDAs, the MTA, or the Supply Agreement in order to resolve this motion. Gore has filed for summary judgment on GID's counterclaims, alleging principally that GID cannot show that it was damaged by Gore's alleged misappropriation. Further, Gore claims that the Arizona Uniform Trade Secret Act, Arizona Revised Statutes (“A.R.S.”) §§ 44–401–07, preempts GID's counterclaims for Breach of Confidence, Unjust Enrichment, Misrepresentation, and violations of Massachusetts law. Next, Gore contends that even were the other claims not preempted, they would fail on the merits. Finally, Gore contends that should its motion fail, the Court must nevertheless dismiss misappropriation claims associated with certain trade secrets.

ANALYSIS

I. Legal Standard

Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Substantive law determines which facts are material and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion,” including identifying portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Once the moving party has detailed the basis for its motion, the party opposing summary judgment “may not rest upon the mere allegations or denials of [the party's] pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial.” Fed. R. Civ. P. 56(e); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir.1995); Taylor v. List, 880 F.2d 1040, 1045 (9th Cir.1989). “A fact issue is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ ” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir.2002) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). Thus, the nonmoving party must show that the genuine factual issues “ ‘can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.

’ ” Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987) (quoting Anderson, 477 U.S. at 250, 106 S.Ct. 2505; emphasis in original). “[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249, 106 S.Ct. 2505.

A principal purpose of summary judgment is “to isolate and dispose of factually unsupported claims.” Celotex, 477 U.S. at 323–24, 106 S.Ct. 2548. Summary judgment is appropriate against a party who “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Id. at 322, 106 S.Ct. 2548;see Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir.1994). The moving party need not disprove matters on which the opponent has the burden of proof at trial. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.

II. Discussion

Gore contends that GID has not shown that it was proximately damaged by Gore's alleged use of its trade secrets. (Doc. 119 at 5–6). Alternately, it argues that GID has not presented competent evidence that it was damaged at all. ( Id. at 7–13). Gore next claims that the non-AUTSA claims are pre-empted, and that those claims would fail on the merits in any event. ( Id. at 14–21). Finally, it argues that even if summary judgment is not merited, individual claims based on particular trade secrets must be dismissed. ( Id. at 21–27). These issues will be discussed in turn.

A. Trade Secrets Claim

Arizona has adopted a version of the Uniform Trade Secrets Act (“AUTSA”), under which plaintiffs may recover damages for misappropriation of a trade secret. A.R.S. §§ 44–401–07. A plaintiff may seek to recover “both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.” A.R.S. § 44–403(A). The statute provides that “[i]n lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty.” Id. The reasonable royalty theory is derived from patent law, and is “based not on the infringer's profit, but on the royalty to which a willing licensor and a willing licensee would have agreed” at the time of the misappropriation. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed.Cir.2009) (quoting Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1159 (6th Cir.1978)). Damages are “an essential element of ... [a] misappropriation of trade secret ... claim[ ],” and a claim fails as a matter of law without a cognizable theory of proximately caused damages. Firetrace USA, LLC v. Jesclard, 800 F.Supp.2d 1042, 1054 n. 5 (D.Ariz.2010).

“Damages are typically measured by any direct injury which a plaintiff can prove, as well as any lost profits which the plaintiff would have earned but for the infringement.” Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1407 (9th Cir.1993). Damages that are “speculative, remote or uncertain may not form the basis of a judgment.” Soilworks, LLC v. Midwest Inds. Supply, Inc., 575 F.Supp.2d 1118, 1128 (D.A...