Allegedly false inventorship/ownership claim could be false advertising

Parallel Synthesis Technologies, Inc. v. DeRisi, 2014 WL 4748611, No. 5:13-cv-05968 (N.D. Cal. Sept. 23, 2014) (magistrate judge)
Plaintiff Parallel, allegedly “seduced by the potential for a long-term partnership,” shared its proprietary Parallume assay with DeRisi, a professor of biochemistry and biophysics at the University of California, San Francisco. DeRisi allegedly plotted with former Parallel employee Baxter simply to take Parallume.  Parallel sued DeRisi, Baxter, UCSF, the UC Board of Regents, individual members of the Board, and the interim Chancellor of UCSF.
According to the complaint: Parallume allegedly “enables researchers to identify the components of a particular mixture of nucleic acids and protein-antibody pairs,” allegedly saving costs and increasing speed over the alternatives.  Parallume includes both physical components and protocols, and Parallel has related patent applications pending. Baxter was a senior scientist with access to Parallume research and materials.  DeRisi allegedly contacted Parallel in 2008; he was an old friend of Baxter’s and he expressed interest in using Parallume in his own research.  He wanted to use Parallel as a subcontractor for a grant, and said he had a large financial backer and that he intended to work with Parallume to develop disease surveillance technology.  Parallel employees, including Baxter, met with DeRisi’s team multiple times.  Parallel provided Parallume beads for a grant “pre-proposal,” and DiRisi told Parallel that “this grant, if successful, will be mutually beneficial.” Parallel then supplied additional Parallume samples in confidence and a letter of reference to assist with the proposal.  Then DiRisi ended contact, submitted the proposal, and received a $1 million grant.
Meanwhile, Baxter gave notice of his intent to leave Parallel.  He became an independent contractor for Parallel and began conducting research in DeRisi’s UCSF lab. However, Baxter allegedly shared Parallel confidential information with DeRisi, plagiarized Parallel’s confidential work, and did not report DeRisi’s true intentions.  The plagiarism allegedly occurred in a journal article by Baxter and DeRisi, which “teaches the use of combinations of multiple rare earth downconverter emitter materials to spectrally encode beads in order to multiplex biological assays in a ratiometric manner.”  Those materials were the Parallume beads Parallel had supplied in confidence, but the article said that the underlying research was supported by the Keck Foundation.  Parallel offered to settle the resulting dispute if they retracted the paper, but UCSF refused.  DeRisi and UCSF began to offer commercial licenses to use Parallume-derived technology as described in the paper.
Parallel alleged breach of fiduciary duty, fraud, false advertising, misappropriation of trade secrets, and related claims.
The court found that the complaint stated a claim for breach of duty of loyalty as to Baxter stemming from the alleged collusion and plagiarism; both as an employee and as an independent contractor, Baxter owed a duty of loyalty to Parallel.  Likewise, the complaint stated a claim for aiding and abetting the breach by DeRisi, since it sufficiently alleged that DeRisi knew or had reason to know that Baxter was in breach of his duty of loyalty by sharing Parallel’s confidential information for the period when he was a Parallel employee, but not for the period when he was an independent contractor.  Fraud claims also survived as to the claim that Parallel wouldn’t have shared its materials if not for misrepresentations that it would be included in the grant and future projects, but not as to alleged misrepresentations about DeRisi’s large private financial backer.  And trade secret claims survived despite the allegations about Parallel’s pursuit of patents, which require disclosure.  Parallel alleged that its applications didn’t disclose the specific technology at issue here, which was enough at this stage.
Lanham Act false advertising: Baxter and DeRisi argued that they didn’t compete with Parallel. But they allegedly “advertise for and sell licenses for the same Parallume technology.”  That was sufficiently direct, as long as the complaint alleged commercial injury based upon a misrepresentation about a product.  Parallel adequately pled that this licensing of Parallume technology, and their claim that they and not Parallel are inventors and owners of the technology, harmed or likely would harm Parallel’s own sales by discrediting its claims.  (Note that this is exactly the false advertising claim that Dastar says should survive.) 

However, UCSF, the Board of Regents, the individual regents, and the interim chancellor were all entitled to sovereign immunity.  A Lanham Act false advertising claim doesn’t protect a property interest, the hallmark of which is a right to exclude, even if the claim is based on allegedly false statements about the plaintiff’s products.  (Funny, then, that trademark dilution is conceived of as a property right.)  In addition, injunctive relief might be available against the state official who authorized the licensing of Parallume technology, but not the named defendants under Ex Parte Young.

Parallel’s state law false advertising claim against Bater and DeRisi also survived.  Defendants argued that they weren’t in any position to provide relief, since UCSF and not Baxter and DeRisi controls the information posted on UCSF’s website including offers to license the technology.  But USCF allegedly posted these claims based on assertions made in the published paper, and so if Baxter and DeRisi could be enjoined from claiming ownership or inventorship of Parallume technology and compelled to retract the claims in their paper, Parallel might get relief. 

Advertisements
This entry was posted in dastar, http://schemas.google.com/blogger/2008/kind#post, standing. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s